SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A INFORMATION
PROXY
STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES
EXCHANGE ACT OF 1934
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Filed
by the Registrant
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x
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Filed
by a Party other than the Registrant
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Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
For Use of the Commission Only (As Permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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Soliciting
Material Pursuant to § 240.14a-12
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RXELITE,
INC.
(Name
of
Registrant as Specified In Its Charter)
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
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Payment
of Filing Fee (Check the appropriate
box):
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No
fee required
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction applies:
N/A
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(2)
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Aggregate
number of securities to which transaction applies:
N/A
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
N/A
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(5)
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Total
fee paid:
N/A
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Fee
paid previously with preliminary materials.
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its filing.
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(1)
Amount
Previously Paid:
N/A
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(2)
Form,
Schedule or Registration Statement No.:
N/A
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(3)
Filing
Party:
N/A
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(4)
Date
Filed:
N/A
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RXELITE,
INC.
1401
NORTH MAIN STREET, SUITE 200
MERIDIAN,
IDAHO 83642
TELEPHONE:
(208) 288-5550
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
The
annual meeting of the stockholders of RxElite, Inc., will be held on Wednesday,
June 4, 2008, at 10:00 a.m. at the Hilton Newark Airport, 1170 Spring Street,
Elizabeth, New Jersey 07201 for the purposes of:
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Electing
seven directors to hold office until the next annual meeting of
stockholders;
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Approving
a
reverse stock split of 1share for up to each 20 shares of common
stock
issued and outstanding, with the final ratio to be determined by
the Board
of Directors at the time of the reverse split
;
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Considering
and voting upon a proposal to approve and adopt the 2007 Incentive
Stock
Plan;
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Considering
and voting upon a proposal to ratify HJ & Associates, LLC as the
Company’s independent registered public accounting firm for the fiscal
year ending December 31, 2008; and
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Transacting
such other business as may properly come before the
meeting.
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Stockholders
of record at the close of business on April 10, 2008, are entitled to attend
and
vote at the meeting. A list of all stockholders entitled to vote at the annual
meeting, arranged in alphabetical order and showing the address of and number
of
shares held by each stockholder, will be open at the principal office of
RxElite, Inc., during usual business hours, for the examination by any
stockholder for any purpose germane to the annual meeting for 10 days prior
to
the date thereof.
A
copy of
RxElite’s Annual Report on Form 10-KSB for fiscal year ended December 31, 2007,
accompanies this notice and proxy statement.
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By
Order of the Board of Directors
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May
12, 2008
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/s/
Peter W. Williams
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Chairman
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WHETHER
OR NOT YOU INTEND TO BE PRESENT AT THE MEETING, PLEASE MARK, SIGN, DATE AND
RETURN THE ACCOMPANYING PROXY CARD PROMPTLY. A RETURN ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE.
RXELITE,
INC.
1401
NORTH MAIN STREET, SUITE 200
MERIDIAN,
IDAHO 83642
TELEPHONE:
(208) 288-5550
PROXY
STATEMENT FOR THE COMPANY’S
ANNUAL
MEETING OF STOCKHOLDERS
TO
BE HELD ON JUNE 4, 2008
SOLICITATION
OF PROXIES
The
enclosed proxy is solicited by the Board of Directors of RxElite, Inc. (the
“Company”), for use at the annual meeting of the Company’s stockholders to be
held at the Hilton Newark Airport, 1170 Spring Street, Elizabeth, New Jersey
07201 on June 4, 2008, at 10:00 a.m. and at any adjournments thereof. Whether
or
not you expect to attend the meeting in person, please return your executed
proxy in the enclosed envelope and the shares represented thereby will be voted
in accordance with your wishes. This proxy statement and the enclosed form
of
proxy are being first mailed to stockholders on or about May 12,
2008.
REVOCABILITY
OF PROXY AND SOLICITATION
Any
stockholder executing a proxy that is solicited hereby has the power to revoke
it prior to the voting of the proxy. Revocation may be made by attending the
annual meeting and voting the shares of stock in person, or by delivering to
the
Secretary of the Company at the principal office of the Company prior to the
annual meeting a written notice of revocation or a later-dated, properly
executed proxy. Solicitation of proxies may be made by directors, officers
and
other employees of the Company by personal interview, telephone, facsimile
transmittal or electronic communications. No additional compensation will be
paid for any such services. This solicitation of proxies is being made by the
Company and the Company will bear all costs associated with the mailing of
this
proxy statement and the solicitation of proxies.
RECORD
DATE
Stockholders
of record at the close of business on April 10, 2008 will be entitled to attend
and vote at the meeting.
ACTION
TO BE TAKEN UNDER PROXY
Unless
otherwise directed by the giver of the proxy, the persons named in the enclosed
form of proxy, namely, Peter Williams and Jonathan Houssian, or either one
of
them who acts, will vote:
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FOR
the election of the persons named herein as nominees for directors
of the
Company, for a term expiring at the 2009 annual meeting of stockholders
(or until successors are duly elected and qualified);
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FOR
approval of a reverse stock split of 1 share for up to each 20 shares
of
common stock issued and outstanding, with the final ratio to be determined
by the Board of Directors at the time of the reverse split (the “Reverse
Split”);
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FOR
adoption of the 2007 Incentive Stock Plan;
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FOR
ratification of HJ & Associates, LLC as the Company’s independent
registered public accounting firm for the year ending December 31,
2008;
and
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According
to their judgment, on the transaction of such matters or other business
as
may properly come before the meeting or any adjournments
thereof.
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Should
any nominee named herein for election as a director become unavailable for
any
reason, it is intended that the persons named in the proxy will vote for the
election of such other person in his stead as may be designated by the Board
of
Directors. The Board of Directors is not aware of any reason that might cause
the nominees to be unavailable.
WHO
IS ENTITLED TO VOTE; VOTE REQUIRED; QUORUM
As
of
April 10, 2008, there were 116,315,303 shares of Common Stock issued and
outstanding, which constitute all of the outstanding capital stock of the
Company. Stockholders are entitled to one vote for each share of Common Stock
held by them.
A
majority of the outstanding shares (58,157,652 shares), present in person or
represented by proxy, will constitute a quorum at the meeting. For purposes
of
the quorum and the discussion below regarding the vote necessary to take
stockholder action, stockholders of record who are present at the annual meeting
in person or by proxy and who abstain, including brokers holding customers’
shares of record who cause abstentions to be recorded at the meeting, are
considered stockholders who are present and entitled to vote and are counted
towards the quorum.
Brokers
holding shares of record for customers generally are not entitled to vote on
“non-routine” matters, unless they receive voting instructions from their
customers. As used herein, “uninstructed shares” means shares held by a broker
who has not received such instructions from its customers on a proposal. A
“broker non-vote” occurs when a nominee holding uninstructed shares for a
beneficial owner does not vote on a particular proposal because the nominee
does
not have discretionary voting power with respect to that non-routine matter.
In
connection with the treatment of abstentions and broker non-votes, since our
proposals at this meeting are considered “routine” matters, brokers are entitled
to vote uninstructed shares with respect to these proposals.
Under
Delaware state law and provisions of the Company’s Certificate of Incorporation
and By-Laws, as amended, the vote required for the election of directors is
a
plurality of the votes of the issued and outstanding shares of Common Stock
present in person or represented by proxy at the annual meeting of stockholders
and entitled to vote on the election of directors. The vote required to approve
the Reverse Split is a majority of our issued and outstanding shares of Common
Stock. Voting on all other matters requires the affirmative vote of a majority
of the shares cast at the meeting.
Abstentions
from voting and broker non-votes will operate as neither a vote for nor a vote
against the nominees for director. Abstentions from voting and broker non-votes
will have the effect of a no vote for the Reverse Split proposal. Votes on
all
matters will be counted by duly appointed inspectors of election, whose
responsibilities are to ascertain the number of shares outstanding and the
voting power of each, determine the number of shares represented at the meeting
and the validity of proxies and ballots, count all votes and report the results
to the Company.
QUESTIONS
AND ANSWERS ABOUT THESE PROXY MATERIALS
Why
am I receiving this proxy statement?
This
proxy statement describes the proposals on which our Board of Directors would
like you, as a stockholder, to vote at the annual meeting of the stockholders
of
the Company, which will take place on June 4, 2008, at 10 a.m. local time at
the
Hilton Newark Airport, 1170 Spring Street, Elizabeth, New Jersey 07201. It
also
gives you information on the proposals so that you can make an informed
decision. We intend to mail this proxy statement and accompanying Proxy Card
on
or about May 12, 2008, to all stockholders of record entitled to vote at the
annual meeting.
In
this
proxy statement, we refer to RxElite, Inc. as the “Company”, “we”, “us” or
“our.”
Who
can vote at the annual meeting of stockholders?
Stockholders
who owned shares of Common Stock of the Company, par value $0.001 per share
(“Common Stock”), on April 10, 2008, may attend and vote at the annual meeting.
Each share is entitled to one vote. There were 116,315,303 shares of Common
Stock outstanding on April 10, 2008. All shares of Common Stock shall vote
together as a single class. Information about the stockholdings of our directors
and executive officers is contained in the section of this proxy statement
entitled “Security Ownership of Management” on page ten (10) of this proxy
statement.
What
is the Proxy Card?
The
Proxy
Card enables you to appoint Peter W. Williams, Chairman of the Board of
Directors, and/or Jonathan Houssian, Chief Executive Officer of the Company,
as
your representative at the annual meeting. By completing and returning the
Proxy
Card, you are authorizing these persons to vote your shares at the annual
meeting in accordance with your instructions on the Proxy Card. This way, your
shares will be voted whether or not you attend the annual meeting. Even if
you
plan to attend the annual meeting, we think that it is a good idea to complete
and return your Proxy Card before the annual meeting date just in case your
plans change. If a proposal comes up for vote at the annual meeting that is
not
on the Proxy Card, the proxies will vote your shares, under your proxy,
according to their best judgment.
What
am I voting on?
You
are
being asked to vote on these specific matters:
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the
election of members to our Board of Directors;
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to
approve a 20 to 1 Reverse Split of our issued and outstanding Common
Stock;
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a
proposal to adopt and approve the 2007 Incentive Stock Plan; and
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the
ratification of HJ & Associates, LLC as our independent registered
public accounting firm for the fiscal year ending December 31,
2008.
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We
will
also consider other matters or transact any other business that properly comes
before the annual meeting.
How
does the Board of Directors recommend that I vote?
Our
Board
of Directors unanimously recommends that the stockholders vote “
FOR
”:
the
nominees for director;
to
approve a Reverse Split of 1 share for up to each 20 shares issued and
outstanding, with the final
ratio
to
be determined by the Board of Directors at the time of the reverse
split;
the
proposal to adopt the 2007 Incentive Stock Plan; and
the
ratification of HJ & Associates, LLC as our independent registered public
accounting firm for the fiscal year ending December 31, 2008.
What
is the difference between holding shares as a stockholder of record and as
a
beneficial owner?
Most
of
our stockholders hold their shares in an account at a brokerage firm, bank
or
other nominee holder, rather than holding share certificates in their own name.
As summarized below, there are some distinctions between shares held of record
and those owned beneficially.
Stockholder
of Record
If
on
April 10, 2008, your shares were registered directly in your name with our
transfer agent, Empire Transfer Agency, you are a stockholder of record who
may
vote at the annual meeting, and we are sending these proxy materials directly
to
you. As the stockholder of record, you have the right to direct the voting
of
your shares by returning the enclosed Proxy Card to us or to vote in person
at
the annual meeting. Whether or not you plan to attend the annual meeting, please
complete, date, sign and return the enclosed Proxy Card to ensure that your
vote
is counted.
Beneficial
Owner
If
on
April 10, 2008, your shares were held in an account at a brokerage firm or
at a
bank or other nominee holder, you are considered the beneficial owner of shares
held “in street name,” and these proxy materials are being forwarded to you by
your broker or nominee who is considered the stockholder of record for purposes
of voting at the annual meeting. As the beneficial owner, you have the right
to
direct your broker on how to vote your shares and to attend the annual meeting.
However, since you are not the stockholder of record, you may not vote these
shares in person at the annual meeting unless you receive a valid proxy from
your brokerage firm, bank or other nominee holder. To obtain a valid proxy,
you
must make a special request of your brokerage firm, bank or other nominee
holder. If you do not make this request, you can still vote by using the voting
instruction card enclosed with this proxy statement; however, you will not
be
able to vote in person at the annual meeting.
How
do I Vote?
(1)
You
may
vote by mail.
You
may
vote by mail by completing, signing and dating your Proxy Card and returning
it
in the enclosed, postage-paid and addressed envelope. If we receive your Proxy
Card prior to the annual meeting and if you mark your voting instructions on
the
Proxy Card, your shares will be voted:
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as
you instruct, and
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according
to the best judgment of the proxies if a proposal comes up for a
vote at
the annual meeting that is not on the Proxy Card.
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If
you return a signed card, but do not provide voting instructions,
your
shares will be voted:
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for
the seven (7) nominees to the board, all of whom are presently serving
on
the board;
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for
a Reverse Split of 1 share for up to each 20 shares issued and
outstanding, with the final ratio to be determined by the Board of
Directors at the time of the reverse split;
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for
the proposal to adopt and approve the 2007 Incentive Stock
Plan;
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to
approve the ratification of the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2008;
and
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according
to the best judgment of either Peter Williams or Jonathan Houssian,
if a
proposal or other item of business properly is brought before the
annual
meeting that is not on the Proxy Card.
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(2)
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You
may vote in person at the annual
meeting.
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We
will
pass out written ballots to anyone who wants to vote at the annual meeting.
However, if you hold your shares in street name, you must bring to the annual
meeting a valid proxy from the broker, bank or other nominee holding your shares
that confirms your beneficial ownership of the shares and gives you the right
to
vote your shares. Holding shares in street name means you hold them through
a
brokerage firm, bank or other nominee, and therefore the shares are not held
in
your individual name. We encourage you to examine your Proxy Card closely to
make sure you are voting all of your shares in the Company.
What
does it mean if I receive more than one Proxy Card?
You
may
have multiple accounts at the transfer agent and/or with brokerage firms. Please
sign and return all Proxy Cards to ensure that all of your shares are
voted.
What
if I change my mind after I return my Proxy Card?
You
may
revoke your proxy and change your vote at any time before the polls close at
the
annual meeting. You may do this by:
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sending
a written notice to the Secretary of the Company (Shannon Stith)
stating
that you would like to revoke your proxy of a particular date;
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signing
another Proxy Card with a later date and returning it before the
polls
close at the annual meeting; or
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attending
the annual meeting and voting in
person.
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Please
note, however, that if your shares are held of record by a brokerage firm,
bank
or other nominee, you must instruct your broker, bank or other nominee that
you
wish to change your vote by following the procedures on the voting form provided
to you by the broker, bank or other nominee. If your shares are held in street
name, and you wish to attend the annual meeting and vote at the annual meeting,
you must bring to the annual meeting a legal proxy from the broker, bank or
other nominee holding your shares, confirming your beneficial ownership of
the
shares and giving you the right to vote your shares.
Will
my shares be voted if I do not sign and return my Proxy
Card?
If
your
shares are held in street name or in your name and you do not sign and return
your Proxy Card, your shares will not be voted unless you vote in person at
the
annual meeting.
How
are votes counted?
You
may
vote “for,” “against,” or “abstain” on each of the election of directors, the
Reverse Split, the proposal to approve the 2007 Incentive Stock Plan and the
ratification of the Company’s independent registered public accounting
firm.
How
many votes are required to elect the nominated persons to the Board of
Directors?
The
affirmative vote of a plurality of the votes cast at the meeting by the holders
of shares of Common Stock entitled to vote in the election are required to
elect
each director.
How
many votes are required to approve the Reverse Split?
The
approval of the 20 to 1 reverse split will require the affirmative vote of
at
least a majority of the Company’s outstanding shares of Common Stock. As of
April 10, 2008, we have 116,315,303 shares issued and outstanding; therefore,
the affirmative vote of at least 58,157,652 shares is required to authorize
the
Reverse Split. Further, any abstentions, “broker non-votes” (shares held by
brokers or nominees as to which they have no discretionary authority to vote
on
a particular matter and have received no instructions from the beneficial owners
or persons entitled to vote thereon), or other limited proxies will have the
effect of a vote against the Reverse Split
.
How
many votes are required to approve the 2007 Incentive Stock
Plan?
The
affirmative vote of a majority of the votes cast at the meeting by the holders
of shares of Common Stock entitled to vote are required to approve the 2007
Incentive Stock Plan proposal.
How
many votes are required to ratify the Company’s independent public
accountants?
The
affirmative vote of a majority of the votes cast at the annual meeting by the
holders of shares of Common Stock entitled to vote are required to ratify HJ
& Associates, LLC as the Company’s independent registered public accounting
firm for the year ending December 31, 2008.
How
many votes are required to approve other matters that may come before the
stockholders at the annual meeting?
An
affirmative vote of a majority of the votes cast at the annual meeting is
required for approval of all other items being submitted to the stockholders
for
their consideration.
What
happens if I don’t indicate how to vote my proxy?
If
you
just sign your Proxy Card without providing further instructions, your shares
will be counted as a “for” vote for the nominees for director on the Proxy Card,
“for” the proposal to allow the reverse split on the basis of up to 1 for each
20 issued and outstanding shares, “for” the proposal to adopt the 2007 Incentive
Stock Plan, and “for” vote for the ratification of HJ & Associates, LLC as
the Company’s independent registered public accounting firm for the fiscal year
ending December 31, 2008.
Is
my vote kept confidential?
Proxies,
ballots and voting tabulations identifying stockholders are kept confidential
and will not be disclosed except as may be necessary to meet legal
requirements.
Where
do I find the voting results of the annual meeting?
We
will
announce voting results at the annual meeting and also in our periodic report
with the SEC following the meeting.
Who
can help answer my questions?
You
can
contact our corporate headquarters, at RxElite, 1404 N. Main St., Ste. 200,
Meridian ID 83642 or by sending a letter to Ms. Shannon Stith, Secretary, with
any questions about proposals described in this proxy statement or how to
execute your vote.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information with respect to the beneficial ownership
of our Common Stock as of April 10, 2008 by:
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each
person or entity known by us to beneficially own more than 5% of
our
Common Stock;
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each
of our directors;
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each
of the executive officers; and
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all
of our directors and executive officers as a
group.
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The
percentages of Common Stock beneficially owned are reported on the basis of
regulations of the Securities and Exchange Commission governing the
determination of beneficial ownership of securities. Under the rules of the
Securities and Exchange Commission, a person is deemed to be a beneficial owner
of a security if that person has or shares voting power, which includes the
power to vote or to direct the voting of the security, or investment power,
which includes the power to dispose of or to direct the disposition of the
security. Unless otherwise indicated, each of the stockholders named in the
table below has sole voting and investment power with respect to such shares
of
our Common Stock. Except as otherwise indicated, the address of each of the
stockholders listed below is: c/o 1404 N. Main Street, Suite 200, Meridian,
Idaho 83642. Shares of our Common Stock subject to options, warrants, or other
rights currently exercisable or exercisable within 60 days of April 10, 2008,
are deemed to be beneficially owned and outstanding for computing the share
ownership and percentage of the stockholder holding such options and warrants,
but are not deemed outstanding for computing the percentage of any other
stockholder
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Beneficial
Owner
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Shares
Beneficially
Owned
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Percent
of
Class
(1)
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Daniel
Chen
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10,018,257
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(2
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8.51
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%
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Jonathan
Houssian
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8,162,188
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(3
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6.96
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%
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Tiburon
LLC
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7,656,564
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(3
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6.52
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%
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Mark
Auerbach
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474,999
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(4
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*
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Peter
W. Williams
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62,501
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(5
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*
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Earl
Sullivan
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1,503,785
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(6
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1.29
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%
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David
Rector
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-
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-
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Arie
Gutman
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18,832,383
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(7
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16.16
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%
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Frank
Leo
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-
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-
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CastlerRigg
Master Investments, Ltd.
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33,564,199
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(8
)
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28.86
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%
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Directors
and Executive Officers as a group (10 persons)
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39,054,113
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32.60
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%
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*
Indicates beneficial ownership of less than 1% of the total outstanding Common
Stock.
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(1)
|
Based
on 116,315,303 shares of our Common Stock outstanding on April 10,
2008.
|
|
|
|
|
(2)
|
Includes
(i) 1,002,807 shares issuable upon exercise of currently exercisable
warrants and (ii) 436,000 shares issuable upon exercise of currently
exercisable stock options.
|
|
|
|
|
(3)
|
Includes
(i) 505,624 shares issuable upon exercise of currently exercisable
stock
options and (ii) 7,129,653 shares held by Tiburon LLC and (iii) 532,905
shares issuable upon exercise of currently exercisable warrants held
by
Tiburon LLC. Jonathan Houssian, the managing member of Tiburon LLC,
exercises sole voting and dispositive power with respect to the shares
held by Tiburon LLC. Mr. Houssian disclaims beneficial ownership
with
respect to such shares.
|
|
|
|
|
(4)
|
Represents
(i) 316,667 shares held by Susan Auerbach and (ii) 158,333 shares
issuable
upon exercise of currently exercisable warrants held by Susan Auerbach.
Susan Auerbach is the wife of Mark Auerbach and exercises sole voting
and
dispositive power with the respect to shares held by her. Mr. Auerbach
disclaims beneficial ownership with respect to such
shares.
|
|
|
|
|
(5)
|
Includes
20,833 shares issuable upon exercise of currently exercisable warrants.
All shares are held as tenants in common by Mr. Williams and members
of
his family in which Mr. Williams has a 20% beneficial
ownership.
|
|
|
|
|
(6)
|
Includes
462,789 shares issuable upon exercise of currently exercisable
warrants.
|
|
|
|
|
(7)
|
Includes
200,000 shares issuable upon exercise of currently exercisable
warrants.
|
|
|
|
|
(8)
|
Includes
18,646,777 shares issuable upon exercise of currently exercisable
warrants
and 9,323,389 shares upon the conversion of a convertible note.
|
SECTION
16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires our executive officers and directors, and
persons who beneficially own more than ten percent of our equity securities
to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission. Based solely on our review of copies of such reports and
representations from our executive officers and directors, we believe that
our
executive officers and directors complied with all Section 16(a) filing
requirements during the year ended December 31, 2007 except for one filing
on
Form 4 for option grants made to each of Jonathan Houssian, Earl Sullivan
and Daniel Chen on Decmber 31, 2007 which was not timely filed.
PROPOSAL
NO. 1
ELECTION
OF DIRECTORS
INFORMATION
ABOUT THE NOMINEES
Our
By-laws currently specify that the number of Directors shall be at least one
and
no more than 10 persons, unless otherwise determined by a vote of the majority
of the Board of Directors. Our Board of Directors currently consists of seven
persons and all of them have been nominated by the Company to stand for
election. Our By-laws provide that any vacancies on the Board of Directors
may
be filled by the remaining members of the Board of Directors. Proxies solicited
by the Company for the election of Directors cannot be voted for a greater
number of persons than the number of nominees named in the proxy.
The
following table and biographical information shows for each nominee for director
his age, his principal occupation for at least the last five years, his present
position with the Company, the year in which he was first elected or appointed
as director (each serving continuously since first elected or appointed except
as set forth in the footnotes hereto), and his directorships with other
companies whose securities are registered with the Securities and Exchange
Commission (“SEC”). Each Director is elected or nominated to the Board of
Directors until the following annual meeting of stockholders and until his
successor has been elected and qualified or until the Director’s resignation or
removal.
|
Name
|
|
Age
|
|
Position
with RxElite
|
|
Jonathan
Houssian
|
|
38
|
|
President,
Chief Executive Officer, Treasurer and Director
|
|
Peter
W. Williams
|
|
71
|
|
Chairman
of the Board
|
|
Daniel
Chen
|
|
40
|
|
Director
|
|
Mark
Auerbach
|
|
69
|
|
Director
|
|
David
Rector
|
|
59
|
|
Director
|
|
Arie
Gutman, Ph.D.
|
|
54
|
|
Director,
President of Finetech Pharmaceutical
|
|
Frank
Leo
|
|
52
|
|
Director
|
Jonathan
Houssian.
(Nominee)
Mr. Houssian has served as our President and as a Director since July 13, 2007.
Mr. Houssian has also served as our Chief Executive Officer since October 11,
2007, and as our Secretary from July 13, 2007 until February 7, 2008. Mr.
Houssian also held the title of Chief Financial Officer from July 13, 2007
to
April 25, 2008. Mr. Houssian founded RxElite Holdings Inc. in December 2000
and
has served as its President since that time. Mr. Houssian has a strong
background in entrepreneurial growth, sales and finance. Prior to forming
RxElite Holdings Inc., Mr. Houssian co-founded Sisbro LLC a family investment
office for a high net worth family based in Idaho, in March 1998 and served
as
its Chief Executive Officer,. As the Chief Executive Officer of Sisbro LLC,
Mr.
Houssian launched, and was the managing partner of four investment partnerships
with over $50 million in invested assets and directed over $20 million of
venture capital investments focused in healthcare companies. He sat on the
Board
of Directors and was involved in developing and implementing strategy of several
rapidly growing healthcare companies.
Peter
W. Williams.
(Nominee) Mr. Williams has served as a Director since July 13, 2007, and became
our Chairman on September 20, 2007. For more than five years prior to his
retirement from the law firm of Clifford Chance Rogers & Wells in 2002, Mr.
Williams was a Senior Partner at the firm and its predecessor Rogers &
Wells. He remained as a Consultant to the firm until 2003, when he became a
Senior Counsel to the firm of Winston & Strawn LLP. Since leaving Winston
& Strawn in 2006, Mr. Williams has been an independent Consultant and
International Advisor including serving as Director and Chairman of the
Corporate Governance and Nominating Committee and a member of the Audit
Committee of the Board of Directors at Par Pharmaceuticals (NYSE:PRX); serving
as a member of the International Advisory Committee of RWE/Thames Water until
2006; and serving as a Director and Chairman of the Independent General Partners
of The Special Situations Funds.
Daniel
Chen.
(Nominee)
Daniel
Chen.
Mr.
Chen
has served as a director since July 13, 2007. From November 2003 to September
2007, Mr. Chen served as the chairman, chief executive officer and treasurer
of
RxElite Holdings Inc. Upon its merger and becoming public on July 13, 2007,
Mr.
Chen served as our chairman, chief executive officer and treasurer from July
2007 to September 2007, as our chief financial officer from August 2007 to
September 2007, and continues to serve as a consultant advisor to the company.
Mr. Chen brings broad experience and a strong background with both drug and
medical device companies. Prior to joining RxElite Holdings Inc., Mr. Chen
was
the chief executive officer of Cendian Pharmaceuticals, Ltd., a generic drugs
company, which later became part of RxElite Holdings Inc. in a merger
transaction. Prior to Cendian, Mr. Chen served as vice president, marketing
and
business development at LifeSpan Biosciences, and prior thereto, held various
domestic and international positions at ALARIS Medical Systems and was a
management consultant in the pharmaceutical practice at A.T. Kearney.
Mark
Auerbach
(Nominee)
Mr. Auerbach has served as a Director since July 13, 2007. Mr. Auerbach was
a
board member at Par Pharmaceuticals (NYSE:PRX), a specialty pharmaceutical
company, from 1990 to September 2006, with his last position as its Executive
Chairman of the Board. Currently, he serves as Chairman of the Board at
Neuro-Hitech, Inc. (NASD: NHPI), a biopharmaceutical company, and as a Director
and Chairman of the Audit Committee at Optimer Pharmaceuticals (NASD:OPTR).
Mr.
Auerbach was a partner and a Chief Financial Officer of Central Lewmar LP,
a
national fine paper merchant with sales of approximately $700M, from 1992 to
2005.
David
Rector
(Nominee)
Mr. Rector has served as a Director since September 24, 2007. Since 1985, Mr.
Rector has been the Principal of The David Stephen Group, which provides
enterprise consulting services to emerging and developing companies in a variety
of industries. In addition, from 2004 until 2005, Mr. Rector was the President
and Chief Executive Officer of Nanoscience Technologies, Inc., a development
stage company engaged in the development of DNA nanotechnology, and from 2005
until 2006, Mr. Rector served as its Chief Operating Officer. From 1983 until
1985, Mr. Rector served as President and General Manager of Sunset Designs,
Inc., a domestic and international manufacturer and marketer of consumer product
craft kits, and a wholly-owned subsidiary of Reckitt & Coleman N.A. From
1982 until 1983, Mr. Rector served as National Accounts & International
Manager of Sunset Designs, Inc. and from 1980 until 1982, Mr. Rector served
as
Sunset Designs, Inc.’s Marketing Manager. From 1972 until 1980, Mr. Rector
served in various roles in both the financial and product marketing departments
of Crown Zellerbach Corporation, a multi-billion dollar pulp and paper industry
corporation. Mr. Rector also serves as a Director of Superior Galleries, Inc.,
Nanoscience Technologies, Inc., CallKey International, Inc. and Senesco
Technologies, Inc. Mr. Rector received a Bachelor of Science degree in
business/finance from Murray State University in 1969.
Arie
Gutman
.
(Nominee) Dr. Gutman has served as a Director since February 7, 2008. In 1991,
Dr. Gutman founded FineTech Laboratories Ltd, and served as its Chief Executive
Officer and President. He continues to serve as President of our FineTech
Pharmaceutical Ltd. subsidiary. In 2001, FineTech merged with International
Specialty Products (“ISP”), and Dr. Gutman was appointed President and Chief
Executive Officer of ISP-FineTech. In 2002, ISP-FineTech was acquired by Par
Pharmaceutical and Dr. Gutman was appointed a Director of Par. In 2006, FineTech
was divested from Par and Dr. Gutman again became the sole Owner of FineTech.
In
connection with the FineTech Acquisition in January 2008, Dr. Gutman was
appointed President of FineTech Pharmaceutical. Dr. Gutman has been a visiting
Professor at various universities in the United States, the United Kingdom,
Germany and Japan and has a Ph.D from Cambridge University.
Frank
Leo
(Nominee)
Mr. Leo has served as a Director since February 13, 2008. From January 2007
to
December 2007 Mr. Leo was the Chief Executive Officer of Morton Grove
Pharmaceuticals and from April 2004 to December 2006 Mr. Leo provided health
care and pharmaceutical executive consulting services. From September 1998
to
April 2004, Mr. Leo was a group President with Cardinal Health, Inc. and a
member of its Operating Committee with responsibilities for its sterile drug
manufacturing businesses and contract product development companies. During
his
tenure at Cardinal, Mr. Leo was instrumental in assisting in the development
of
Cardinal Health’s overall strategy for the creation of its pharmaceutical
technology and services segment and led the start up of its global generic
initiative. Previously, Mr. Leo was Chief Operating Officer for Automatic Liquid
Packaging and prior thereto, over a 16-year period Mr. Leo served in a variety
of roles and along with his team created a highly valued contract sterile drug
business that was subsequently sold to Cardinal Health. Mr. Leo has extensive
experience and expertise in both drug and medical device products and has worked
with private equity firms in identifying unique investment opportunities and
has
broad experience in managing companies and helping them create a strategic
vision.
Recommendation
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE
NOMINEES.
Compensation
of Directors
The
following table summarizes the compensation paid to our non-employee directors
during the fiscal year ended December 31, 2007:
Director
Compensation
|
Name
|
|
Fees
Earned
or Paid in
Cash
|
|
Option
Awards (1)
|
|
Total
|
|
|
Peter
W. Williams
|
|
$
|
17,625
|
|
$
|
200,000
|
(2)
|
$
|
217,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
Auerbach
|
|
$
|
15,125
|
|
$
|
200,000
|
(2)
|
$
|
215,125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Rector
|
|
$
|
15,250
|
|
$
|
338,289
|
(3)
|
$
|
353,539
|
|
|
(1)
|
Based
upon the aggregate grant date fair value calculated in accordance
with
SFAS 123R and using a Black-Scholes-Merton valuation model.
|
|
|
|
|
(2)
|
On
July 13, 2007, we granted a ten-year option to purchase 400,000 shares
of
our Common Stock at an exercise price of $0.60 per share to each
of
Messrs. Williams and Auerbach. Such options vest in four equal annual
installments commencing on the first anniversary from the date of
grant.
|
|
|
|
|
(3)
|
On
October 11, 2007, we granted a ten-year option to purchase 400,000
shares
of our Common Stock at an exercise price of $0.60 per share to Mr.
Rector.
Such option vests in four equal annual installments commencing on
the
first anniversary from the date of
grant.
|
Effective
October 11, 2007, the Board adopted a compensation plan to pay its non-employee
directors annual fees as follows:
|
Annual
Fee
|
|
$
|
25,000
|
|
|
|
|
|
|
|
|
Board
Meeting Fee
|
|
$
|
1,500
*
|
|
|
|
|
|
|
|
|
Committee
Meeting Fee
|
|
$
|
1,000
*
|
|
|
|
|
|
|
|
|
Chairman
of the Board
|
|
$
|
15,000
|
|
|
|
|
|
|
|
|
Audit
Committee Chair
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
Compensation
Committee Chair
|
|
$
|
7,500
|
|
|
|
|
|
|
|
|
Nominating
and Corporate
|
|
|
|
|
|
Governance
Chair
|
|
$
|
5,000
|
|
|
|
|
|
|
|
|
Committee
Fee
|
|
$
|
1,500
|
|
*
for any
meeting held by telephonic conference call, the payment will be reduced by
$750
for Board meetings and $500 for Committee meetings.
Directors
cannot receive more than $2,000 in compensation for any single day on which
meetings of the Board of any Committee are held.
In
addition to the foregoing fees, David Rector was appointed as
“
lead director
”
in January 2008,
and is entitled to receive a fee of $10,000 per month for these board
services.
Board
of Directors and Committees
On
October 11, 2007, our Board of Directors formed an Audit Committee, an Executive
Committee, a Compensation Committee and a Nominating and Corporate Governance
Committee. Each member of our committees is “independent” as such term is
defined under and required by the federal securities laws. Although we are
not
listed on the American Stock Exchange, our Directors whom we consider to be
independent would qualify as such under the rules of the American Stock
Exchange. The Chairman of the Board, Mr. Peter Williams, serves as an ex-officio
member of each Committee.
Audit
Committee.
The
Audit Committee of the Board of Directors is currently comprised of Mark
Auerbach, David Rector, Frank Leo and Peter W. Williams, each of whom is an
independent Director. Mr. Auerbach is a qualified financial expert as defined
in
Item 407(d)(5)(ii) of Regulation S-B and serves as Chairman of the Audit
Committee. The Audit Committee’s duties are to recommend to our Board of
Directors the engagement of independent auditors to audit our financial
statements and to review our accounting and auditing principles. The Audit
Committee reviews the scope, timing and fees for the annual audit and the
results of audit examinations performed by the internal auditors and independent
public accountants, including their recommendations to improve the system of
accounting and internal controls. The Audit Committee will at all times be
composed exclusively of directors who are, in the opinion of our Board of
Directors, free from any relationship that would interfere with the exercise
of
independent judgment as a committee member and who possess an understanding
of
financial statements and generally accepted accounting principles.
Compensation
Committee.
The
Compensation Committee of the Board of Directors is currently comprised of
Mark
Auerbach and David Rector. Mr. Rector serves as Chairman of the Compensation
Committee. The Compensation Committee reviews and approves our salary and
benefits policies, including compensation of executive officers. The
Compensation Committee also administers our Incentive Stock Plans and recommends
and approves grants of awards under such plan. See Proposal 2.
Nominating
and Corporate Governance Committee
.
We
established a Nominating and Corporate Governance Committee of the Board of
Directors, currently comprised of Peter W. Williams and David Rector. Mr.
Williams serves as Chairman of the Nominating and Corporate Governance
Committee. The Nominating and Corporate Governance Committee considers and
makes
recommendations on matters related to the practices, policies and procedures
of
the board and takes a leadership role in shaping our corporate governance.
As
part of its duties, the Committee assesses the size, structure and composition
of the board and board committees, coordinates evaluation of board performance
and reviews board compensation. The Committee also screens for candidates
considered for election to the board. In this capacity it concerns itself with
the composition of the board with respect to depth of experience, balance of
professional interests, required expertise and other factors. The Committee
evaluates prospective nominees identified on its own initiative or referred
to
it by other board members, management, stockholders or external sources and
all
self-nominated candidates. The Committee uses the same criteria for evaluating
candidates nominated by stockholders and self-nominated candidates as it does
for those proposed by other board members, management and search
companies.
Executive
Committee
.
We
established an Executive Committee of the Board of Directors, currently
comprised of Peter W. Williams and Mark Auerbach. Mr. Williams serves as the
Chairman of the Executive Committee. The Executive Committee considers and
exercises sole decision making power related to the matters that would normally
be brought before the Board of Directors when the members of the Board of
Directors are unable to be in session. Notwithstanding the foregoing, the role
of the Executive committee is limited to the making of recommendations to the
full Board of Directors in connection with the buying or selling of stock by
the
Company, mergers and acquisitions, changes in operating budgets and the
incurrence of debt outside of the ordinary course of business.
On
February 7, 2008, our Board of Directors formed a Strategic Planning
Committee.
Strategic
Planning Committee.
We
established a Strategic Planning Committee comprised of officers and directors
which reports to the Board of Directors. This Committee is currently comprised
of Frank Leo, David Rector, Jonathan Houssian, Earl Sullivan, and Rick
Schindewolf. Mr. Leo serves as the Chairman of the Strategic Planning Committee.
The Strategic Planning Committee was established to create a strategic plan
and
mission statement of the Company.
Our
website is located at www.rxelite.com and a copy of
our Audit Committee Charter, our Code of Ethics and the Nominating and
Corporate Governance Committee Charter can be located on our website, as well
as
additional information about the Company.
Meetings
of the Board and Committees
During
the year ended December 31, 2007, the Board of Director held 10 meetings and
acted by written consent on no occasions. No Director attended fewer than 75%
of
the meetings held during the year. All of our directors participated in all
of
the meetings of the Board of Directors during the year ended December 31,
2007.
During
the year ended December 31, 2007, the Audit Committee held no meetings and
acted
by written consent on no occasions.
During
the year ended December 31, 2007, the Nominating and Corporate Governance
Committee held no meetings and acted by written consent on no occasions.
During
the year ended December 31, 2007, the Compensation Committee no meetings and
acted by written consent on no occasions.
Code
of Ethics
A
copy of
the Code of Ethics for our non-employee directors, employees and management,
including our Principal Financial Officer and Chief Executive Officer, is
available on the Investors/Corporate Governance section of our website,
www.rxelite.com/corp_gov.php.
DIRECTOR
NOMINATIONS
The
Nominating and Corporate Governance Committee of the Board of Directors is
responsible for identifying and selecting qualified candidates for election
to
the Board of Directors prior to each annual meeting of the stockholders. A
copy
of the Nominating and Corporate Governance Committee Charter is available on
the
Investors section of our web site, www. rxelite.com/corp_gov.php. In addition,
stockholders who wish to recommend a candidate for election to the Board of
Directors may submit such recommendation to the Chairman of the Committee.
Any
recommendation must include name, contact information, background, experience
and other pertinent information on the proposed candidate. The standards for
considering nominees to the Board are included in the Nominating and Corporate
Governance Committee Charter. The Committee is willing to consider candidates
recommended by stockholders pursuant to its policies. In identifying and
evaluating nominees for Director, the Committee considers each candidate’s
qualities, experience, background and skills, as well as other factors, such
as
the individual’s ethics, integrity and values which the candidate may bring to
the Board of Directors. Any stockholder who desires the Committee to consider
one or more candidates for nomination as a Director should either by personal
delivery or by United States mail, postage prepaid, deliver a written
recommendation addressed to the Chairman, RxElite, Inc., Nominating and
Corporate Governance Committee, 1404 N. Main St., Ste. 200, Meridian ID, 83642,
not later than (i) with respect to an election to be held at the 2009 annual
meeting of stockholders, February 4, 2009; and (ii) with respect to an election
to be held at a special meeting of stockholders for the election of directors,
the close of business on the tenth day following the date on which notice of
such meeting is first given to stockholders. Each written recommendation should
set forth: (a) the name and address of the stockholder making the recommendation
and of the person or persons recommended; (b) the consent of such person(s)
to
serve as a director(s) of the Company if nominated and elected; and (c)
description of how the person(s) satisfy the criteria for consideration as
a
candidate referred to above.
Policy
Regarding Attendance at Annual Meetings of Stockholders
The
Board
has adopted a policy which states that each Director is expected to attend
annual meetings of its stockholders. We did not have an annual meeting of
stockholders during 2007.
COMMUNICATION
WITH DIRECTORS
The
Company has established procedures for stockholders or other interested parties
to communicate directly with the Board of Directors. Such parties can contact
the Board of Directors by mail at: RxElite, Inc. Board of Directors, Attention:
Peter Williams. All communications made by this means will be received by the
Chairman of the Board.
COMPENSATION
AND COMMITTEE INTERLOCKS
AND
INSIDER PARTICIPATION
No
current member of the Compensation Committee is now an officer or an employee
of
the Company or any of its subsidiaries.
Notwithstanding
anything to the contrary set forth in any of the Company’s previous filings
under the Securities Act of 1933, as amended, or the Securities Exchange Act
of
1934, as amended, that might incorporate by reference future filings, including
this Proxy Statement, in whole or in part, the following Audit Committee Report
and Accounting Fees shall not be incorporated by reference into any such
filings.
AUDIT
COMMITTEE REPORT
The
Audit
Committee was comprised of three independent directors (as defined under Part
1,
Section 121 of the American Stock Exchange Company Guide) for the year ended
December 31, 2007. The Audit Committee operates under a written charter adopted
by the Board of Directors on April 25, 2008.
We
have
reviewed and discussed with management the Company’s audited consolidated
financial statements as of and for the fiscal year ended December 31, 2007,
as
well as the quarterly unaudited financial statements.
We
have
reviewed and discussed with management and HJ & Associates, LLC, our
independent registered accounting firm, the quality and the acceptability of
the
Company’s financial reporting and internal controls.
We
have
discussed with
HJ
&
Associates, LLC
,
the
overall scope and plans for their audit as well as the results of their
examinations, their evaluations of the Company’s internal controls, and the
overall quality of the Company’s financial reporting.
We
have
discussed with management and HJ & Associates, LLC, such other matters as
required to be discussed with the Audit Committee under Statement on Auditing
Standards No. 61 and other auditing standards generally accepted in the United
States, the corporate governance standards of the American Stock Exchange and
the Audit Committee’s Charter.
We
have
received and reviewed the written disclosures and the letter from HJ &
Associates, LLC, required by Independence Standard No. 1 of the Independence
Standards Board, and have discussed with HJ & Associates, LLC, their
independence from management and the Company, including the impact of permitted
non-audit related services approved by the Committee to be performed by HJ
&
Associates, LLC.
Based
on
the reviews and discussions referred to above, we recommended to the Board
of
Directors that the financial statements referred to above be included in the
Company’s Annual Report on Form 10-KSB for the fiscal year ended December 31,
2007 and be filed with the Securities and Exchange Commission.
|
April
24, 2008
|
Mark
Auerbach, Audit Committee Chairman
Peter
W. Williams
David
Rector
|
MANAGEMENT
The
persons who are serving as executive officers of the Company as of May 4, 2008
are Jonathan Houssian, Chief Executive Officer, President and Chief Financial
Officer, Earl Sullivan, Chief Operating Officer, Shannon Stith, Vice President
of Finance and Principal Financial Officer, and Rick Schindewolf, Senior Vice
President of Business Development.
The
following table and biographical information shows for each of our Executive
Officers continuing in office his age, his principal occupation for at least
the
last five years, his present position with the Company, and his Directorships
with other companies whose securities are registered with the SEC.
|
Name
|
|
Age
|
|
Position
with RxElite
|
|
Jonathan
Houssian
|
|
38
|
|
President,
Chief Executive Officer, Treasurer and Director
|
|
Earl
Sullivan
|
|
36
|
|
Chief
Operating Officer
|
|
Rick
Schindewolf
|
|
46
|
|
Senior
Vice President
of
New Business Development
|
|
Shannon
Stith
|
|
28
|
|
Vice
President of Finance, Principal Financial Officer and
Secretary
|
Please
see the biography for Mr. Houssian at page 11 above
.
Earl
Sullivan.
Mr.
Sullivan has served as our Chief Operating Officer since October 11, 2007 and
from July 13, 2007 to October 11, 2007, Mr. Sullivan served as our Executive
Vice President of Operations. Mr. Sullivan has been the Executive Vice President
of RxElite Holdings Inc. since May 2002. Mr. Sullivan brings over 10 years
of
operations experience and has a track record for success in outsourcing
partnerships, operational system development and developing early growth
companies into mature platforms. Prior to joining RxElite Holdings Inc.,
Mr. Sullivan was employed at Green Mountain Energy as its Director of Operations
where he built and managed the Midwest region through a period of high growth.
Prior to Green Mountain Energy, he joined Express-Med in September 1997, where
he held increasingly senior roles including General Manager, and helped to
build
the company from a start-up to over $100M in sales. Mr. Sullivan is an active
member in ISPE (International Society of Pharmaceutical Engineers) and PDA
(Parenteral Drug Association), as well as participating on several boards for
entrepreneurial ventures.
Rick
Schindewolf
.
Mr.
Schindewolf has served as our Senior Vice President of new business development
since January 21, 2008, where he oversees the business development of FineTech
Pharmaceutical. From 1997 to 2008, Mr. Schindewolf was employed at Automated
Liquid Packaging, a privately-held contract sterile drug business, which later
became Cardinal Health, Inc.'s Woodstock sterile products operations in 1999
as
a result of an acquisition. At Cardinal Health, Inc. (NYSE:CAH), Mr. Schindewolf
was responsible for the strategic direction, growth, and profitability of
Cardinal Health's Blow-Fill-Seal Technology division. From June 1996 to October
1997, Mr. Schindewolf served as Division Controller, Diagnostics Division at
Fischer Scientific, where he was responsible for financial controls. From 1990
to 1994, Mr. Schindewolf was employed at Baxter Healthcare
in
the
areas of sterile manufacturing operations, as well as accounting
department.
Shannon
M. Stith
.
Ms.
Stith has served as our Vice President of Finance and Principal Financial
Officer since January 11, 2008 and as our Secretary since February 7, 2008.
Ms.
Stith served as Vice President and Chief Financial Officer at PCS
Edventures!.com, Inc. (PCSV.OB) from August 2005 through January 2008. From
March 2005 until August 2005, Ms. Stith was a chief accountant for Washington
Group International in the financial reporting department-internal reporting.
From May 2001 until February 2004, Ms. Stith was a Paralegal and Controller
with
Dykas, Shaver & Nipper LLP. Ms. Stith graduated from Boise State University
with a Bachelor of Business Administration in Finance and a Masters of Business
Administration in 2002 and 2003, respectively.
EXECUTIVE
COMPENSATION
The
following table summarizes the compensation paid by us for services rendered
during the years ended December 31, 2007 and 2006 to each person who,
during 2007, served as our Chief Executive Officer and each of our two other
most highly compensated executive officers for the fiscal year ended December
31, 2007. We refer to these officers collectively as “Named Executive
Officers”.
Summary
Compensation Table
|
Name
and Principal Position
|
|
Year
|
|
Salary
|
|
Bonus
|
|
Option
Awards (1)
|
|
All
Other Compensation
|
|
Total
|
|
|
Daniel
Chen (2)
|
|
|
2007
|
|
$
|
251,367
|
|
$
|
125,000
|
|
$
|
189,000
|
|
$
|
24,013
|
(3)
|
$
|
589,380
|
|
|
Chief
Executive Officer,
Treasurer
and
Director
|
|
|
2006
|
|
$
|
176,400
|
|
$
|
35,000
|
|
|
-
|
|
$
|
3,180
|
(4)
|
$
|
214,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan
Houssian
|
|
|
2007
|
|
$
|
243,866
|
|
$
|
62,500
|
|
$
|
216,014
|
|
$
|
3,180
|
(4)
|
$
|
525,560
|
|
|
President,
Chief Executive Officer, Chief Financial Officer and
Director
|
|
|
2006
|
|
$
|
176,400
|
|
$
|
35,000
|
|
|
-
|
|
$
|
3,180
|
(4)
|
$
|
214,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earl
Sullivan
|
|
|
2007
|
|
$
|
188,867
|
|
$
|
42,750
|
|
$
|
144,984
|
|
$
|
1,326
|
(4)
|
$
|
377,927
|
|
|
Chief
Operating Officer
|
|
|
2006
|
|
$
|
146,800
|
|
$
|
20,000
|
|
|
-
|
|
$
|
249,278
|
(5)
|
$
|
416,078
|
|
|
(1)
|
Based
upon the aggregate grant date fair value calculated in accordance
with FAS
No. 123(R), Share Based Payment. Our policy and assumptions made
in
valuation of share based payments are contained in Note 17 to our
December
31, 2007 financial statements.
|
|
|
|
|
(2)
|
Mr.
Chen ceased performing the duties of Chief Executive Officer and
Treasurer on September 21, 2007.
|
|
|
|
|
(3)
|
Consists
of compensation payable to Mr. Chen in connection with his
resignation as Chief Executive Officer and Treasurer on September 31,
2007.
|
|
|
|
|
(4)
|
Represents
life insurance premiums paid by us on behalf of Messrs. Chen, Houssian
and
Sullivan. The beneficiary of the policies is the
Company.
|
|
|
|
|
(5)
|
Consists
of life insurance premiums of $253 per year and a gain of $249,025
as a
result of the reduction of the exercise price of a warrant held by
Mr.
Sullivan to purchase 528,007 shares of our Common Stock at a price
of
$0.474 per share to a price of $0.00237 per share. 132,004 shares
subject
to the warrant remained unexercised and unvested as of December 31,
2006.
We valued the adjustment to the warrant exercise price according
to
Statement of Financial Accounting Standards No. 123 (revised 2004),
Share
Based Payments (SFAS 123R) using the Black-Scholes method. SFAS 123R
requires all stock-based awards, including employee stock options,
to be
recognized in the income statement based on their fair values. The
dollar
amount represents the total compensation expense for stock option
awards
to be recognized in our financial statements over the requisite service
period in accordance with SFAS 123R. For information regarding our
valuation of option awards, refer to Note 17 to our Consolidated
Financial
Statements.
|
Mr.
Houssian was appointed as Chief Executive Officer and Chief Financial Officer
effective September 21, 2007.
Ms.
Stith, our Vice President of Finance and Principal Financial Officer, was not
with the Company during the fiscal year ended December 31, 2007. Mr.
Schindewolf, our Senior Vice President, also was not with the Company during
the
fiscal year ended December 31, 2007
Outstanding
Equity Awards at Fiscal Year-End
The
following table provides information with regard to equity awards granted to
each named executive officer that were outstanding as of December 31,
2007.
|
|
|
Option
awards
|
|
|
Name
|
|
Number
of Securities Underlying Unexercised Options
Unexercisable
|
|
Option
Exercise
Price
|
|
Option
Expiration Date
|
|
|
Daniel
Chen
|
|
|
436,000
|
|
$
|
0.66
|
|
|
07/05/2012
|
|
|
|
|
|
552,432
|
|
$
|
0.85
|
|
|
10/29/2009
|
|
|
|
|
|
450,375
|
|
$
|
0.60
|
|
|
10/29/2009
|
|
|
|
|
|
32,895
|
|
$
|
0.76
|
|
|
12/31/2009
|
|
|
Jonathan
Houssian
|
|
|
505,624
|
|
$
|
0.66
|
|
|
07/05/2012
|
|
|
|
|
|
32,895
|
|
$
|
0.76
|
|
|
12/31/2009
|
|
|
Earl
Sullivan
|
|
|
132,004
|
|
$
|
0.00237
|
|
|
11/04/2010
|
|
|
|
|
|
259,825
|
|
$
|
0.60
|
|
|
07/05/2017
|
|
|
|
|
|
70,960
|
|
$
|
0.85
|
|
|
10/29/2009
|
|
|
|
|
|
25,000
|
|
$
|
0.76
|
|
|
12/31/2009
|
|
2007
Option Exercises and Stock Vested Table
The
Named
Executive Officers did not exercise any option awards and did not have any
stock
awards vest during the year ended December 31, 2007.
Pension
Benefits and Deferred Compensation Plans
The
Company does not provide pension benefits or deferred compensation plans.
Employment
Agreements and Change-in-Control Agreements
Effective
as of November 1, 2003, RxElite Holdings Inc. entered into an Employment
Agreement with Jonathan Houssian, pursuant to which Mr. Houssian is employed
as
President of RxElite Holdings Inc. The Employment Agreement was amended and
restated as of January 4, 2006 and November 27, 2006. The current term of the
Agreement expires on December 31, 2010, but will be automatically renewed for
additional five-year periods until RxElite Holdings Inc. gives Mr. Houssian
written notice of its intent not to renew at least 60 days prior to the end
of
the then current term. Mr. Houssian’s present base salary is $250,000 per annum.
If Mr. Houssian’s employment is terminated under certain circumstances, he will
be entitled to severance and the continuation of benefits for the greater of
24
months and the balance of the term. If RxElite Holdings Inc. experiences a
change of control after which Mr. Houssian’s Employment Agreement is not fully
reaffirmed by the succeeding entity, Mr. Houssian will continue to receive
(i)
benefits for the greater of 24 months and the balance of the term and (ii)
the
sum of (x) a lump sum cash payment of his severance payment as if the Employment
Agreement is terminated without cause as of the date of the change of control
plus (y) a lump sum cash payment of Mr. Houssian’s salary and bonuses (which
bonuses shall not be less than 20% of base salary) through the balance of the
term.
Effective
as of November 1, 2003, RxElite Holdings Inc. entered into an employment
agreement with Earl Sullivan, pursuant to which Mr. Sullivan is employed as
Executive Vice President of Operations of RxElite Holdings Inc. The Employment
Agreement was amended and restated as of January 4, 2006 and November 27, 2006.
The current term of the Agreement expired on December 31, 2007, but will be
automatically renewed for additional two-year periods. Mr. Sullivan’s present
base salary is $190,000 per annum. If Mr. Sullivan’s employment is terminated
under certain circumstances, he will be entitled to severance and the
continuation of benefits for the greater of 12 months and the balance of the
term. If RxElite Holdings Inc. experiences a change of control after which
Mr.
Sullivan’s Employment Agreement is not fully reaffirmed by the succeeding
entity, Mr. Sullivan will continue to receive (i) benefits for the greater
of 24
months and the balance of the term and (ii) the sum of (x) a lump sum cash
payment of his severance payment as if the Employment Agreement is terminated
without cause as of the date of the change of control plus (y) a lump sum cash
payment of Mr. Sullivan’s salary and bonuses (which bonuses shall not be less
than 20% of the base salary) through the balance of the term.
In
connection with the FineTech Acquisition, on January 4, 2008, we entered into
an
Employment Agreement with Dr. Arie L. Gutman, the sole Owner of FineTech,
engaging Dr. Gutman to serve as President of FineTech Pharmaceutical.
The
initial term of the Employment Agreement is three years and may be extended
by
mutual agreement. Pursuant to the Employment Agreement, Dr. Gutman is entitled
to receive an annual base salary of $190,000, which may be increased annually
as
determined by our Board of Directors, and a bonus of up to 30% of his base
salary, to be determined by the board in its sole discretion. Dr. Gutman is
eligible for grants of options, restricted stock and/or other awards under
our
2007 Incentive Stock Plan, which options shall immediately vest if Dr. Gutman’s
employment is terminated without “cause” or upon a “change of control” (as
defined in the Employment Agreement). We may terminate Dr. Gutman’s employment
for “cause” 30 days after we notify Dr. Gutman of the cause, provided that such
cause has not been remedied during such 30 days period. We may also terminate
Dr. Gutman’s employment without “cause” at any time upon 30 days prior written
notice. If Dr. Gutman’s employment is terminated without cause, then (i) any
unvested stock options held by Dr. Gutman will immediately vest, (ii) we will
be
obligated to continue to pay Dr. Gutman his then current annual base salary
for
a period of twelve months and to reimburse Dr. Gutman for the costs of obtaining
benefits comparable to those that he received while employed by us, until twelve
months following his termination or, if sooner, until such time as Dr. Gutman
obtains other employment that provides comparable benefits. Dr. Gutman may
voluntarily terminate his employment upon 270 days prior written notice, if
such
termination occurs during the initial three year term, or upon 60 days notice,
if such termination occurs thereafter. Upon our receipt of any such notice
of
voluntary termination by Dr. Gutman, we may accelerate the resignation to an
earlier date. Under the Employment Agreement, Dr. Gutman is prohibited from
competing with us and with FineTech Pharmaceutical during the term of employment
and for one year after any termination of his employment.
Effective
as of January 21, 2008, RxElite Holdings Inc. entered into a five-year
employment agreement with Rick Schindewolf, which was amended on February 11,
2008, pursuant to which Mr. Schindewolf is employed as our Senior Vice President
of new business development at an annual base salary of $185,000, subject to
increases at our Board of Director’s discretion. Mr. Schindewolf is entitled to
receive (i) during 2008, 5% of EBITDA generated from new contracts or products,
exclusive of contracts and products transferred to us in connection with the
FineTech Acquisition, (ii) 3% of any EBITDA created on new product deals or
other transactions originated by us or Mr. Schindewolf and (iii) 1.5% of any
EBITDA created from deals that were under discussion prior to January 21, 2008
and that were being negotiated with Mr. Schindewolf’s prior employer. Pursuant
to the Employment Agreement, as amended, Mr. Schindewolf was granted an option
to purchase up to 250,000 shares of our Common Stock at an exercise price of
$0.87 per share. Such option vests as to 50% of the shares subject to the option
on February 1, 2009 and 50% thereafter in four equal quarterly installments.
If
Mr. Schindewolf’s Employment Agreement is terminated without “cause” (as defined
in the Employment Agreement) during the first three years of its term, Mr.
Schindewolf is entitled to receive one year of continued base salary, the
vesting of all unvested stock options and continued benefits for up to 12
months. If Mr. Schindewolf’s Employment Agreement is terminated without “cause”
thereafter, Mr. Schindewolf will be entitled to receive six months of continued
base salary, the immediate vesting of all stock options (which will also occur
upon change of control) and continued benefits for up to six months. The
Employment Agreement also stipulates that Mr. Schindewolf shall refrain from
competing with us or soliciting employees from us for a period of one year from
the date of termination of employment.
On
January 11, 2008, we entered into a three-year employment agreement with Shannon
M. Stith, which was amended on February 11, 2008, pursuant to which Ms. Stith
is
employed as our vice president of finance and principal financial officer.
Ms.
Stith’s present base salary is $105,000 per annum, which will increase to
$120,000 upon Ms. Stith’s successful completion of the CPA exam in Idaho. In
addition, Ms. Stith is entitled to (i) a discretionary bonus of up to 20% of
her
base salary, (ii) a $5,000 signing bonus and (iii) an option to purchase up
to
75,000 shares of our Common Stock at $0.58 per share. Such option vests as
to
50% of the shares subject to the option on February 1, 2009 and 50% thereafter
in four equal quarterly installments. If Ms. Stith’s employment is terminated
without “cause” (as defined in the Employment Agreement) Ms. Stith will be
entitled to receive one year of continued base salary and benefits and the
immediate vesting of all stock options (which will also occur upon change of
control). The Employment Agreement also stipulates that Ms. Stith shall refrain
from competing with us for a period of one year from the date of termination
of
employment.
Effective
as of November 5, 2003, RxElite Holdings Inc. entered into an Employment
Agreement with Daniel Chen. The Employment Agreement was amended and restated
as
of January 4, 2006 and November 27, 2006. On January 16, 2008, we entered into
a
Departure Agreement and general release with Daniel Chen, effective as of
December 14, 2007, to terminate Mr. Chen’s existing Employment Agreement
(subject to certain continuing non-competition obligations) and to engage Mr.
Chen as an at-will Consultant. Pursuant to the Departure Agreement we have
agreed to pay Mr. Chen (i) in installments in accordance with regularly
scheduled payroll, his salary of $250,000 per annum and medical and dental
insurance premiums, until December 31, 2010, (ii) a 2007 bonus of $125,000,
and
(iii) four weeks of accrued and unused vacation and/or sick days in the amount
of $20,833, which foregoing terms are consistent with the terms of termination
under Mr. Chen’s Employment Agreement. We and Mr. Chen also granted each other
full general releases of any and all claims related to Mr. Chen’s employment
with us or RxElite Holdings Inc.
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
On
June
30, 2002, we issued a Promissory Note with a principal amount of $120,000 to
William and Helen Houssian, the parents of Jonathan Houssian, our President
and
Chief Executive Officer and a member of our Board of Directors. The promissory
note was payable beginning on June 1, 2002, in three hundred sixty (360) monthly
payments of $2,500 per month with an interest rate of 25%. The promissory
note allowed for pre-payment at double the amount currently owed at
any time plus any missed installments. This note was paid in full in July
2007.
On
December 31, 2007, the holder of our senior secured Convertible Note
(CastlerRigg Master Investments, Ltd) entered into a Put Agreement with Tiburon
LLC, an Idaho limited liability company. Jonathan Houssian, our President and
Chief Executive Officer, is the sole managing member of Tiburon LLC. Pursuant
to
the Put Agreement, upon an event of default under the Convertible Note, the
noteholder may compel Tiburon LLC to purchase up to $10,500,000 principal amount
of the Note at the greater of (i) up to 125% of the sum of the outstanding
principal, interest and late fees, depending on the nature of the default or
(ii) the product of (a) the number of shares into which the Note (including
all
principal, interest and late fees) may be converted and (b) the product of
(1)
150% and (2) the highest closing sale price of our Common Stock beginning
on the date immediately preceding the event of default and ending on the date
the noteholder delivers its redemption notice for such event of default. This
right of the noteholder is valid until the earlier of (i) the maturity date
of
the Note and (ii) the date that we satisfy our quarterly debt to EBITDA ratio
minimums for two consecutive fiscal quarters, all as more
specifically described in the Note.
Tiburon
LLC’s obligations under the Put Agreement are secured by a pledge by Tiburon LLC
to the noteholder of 6,879,653 shares of our Common Stock pursuant to a Pledge
Agreement, dated as of December 31, 2007, between Tiburon LLC and the
noteholder. To the extent Tiburon LLC fails to satisfy its obligations under
the
Put Agreement, the noteholder’s sole remedies against Tiburon LLC are pursuant
to the Pledge Agreement.
On
January 18, 2008, we entered into a Letter Agreement with the Castlerigg Master
Investments, Ltd., a beneficial owner of at least 5% of our Common Stock,
pursuant to which we amended certain terms of the Convertible Note and the
Series A Warrant and Series B Warrant issued by us on December 31, 2007.
Pursuant to the Letter Agreement, the Consolidated EBITDA (as defined in the
Convertible Note) thresholds contained in the Convertible Note for the fiscal
quarter ending March 31, 2008 were lowered by $500,000 and the value of up
to
1,000,000 shares of Common Stock that may be issued to consultants during the
fiscal quarter ending March 31, 2008 was added to our Consolidated EBITDA for
such fiscal quarter. In addition, the definition of “Excluded Securities” with
respect to anti-dilution price protection in both the Convertible Note and
the
Series A Warrant and Series B Warrant was expanded to include the issuance
of up
to 1,000,000 shares of Common Stock that may be issued to consultants during
the
fiscal quarter ending March 31, 2008.
In
consideration for Dr. Gutman’s non-competition undertaking and assignment of
royalty rights in connection with the FineTech Acquisition, on January 22,
2008,
we issued 18,632,383 shares of our Common Stock to Dr. Gutman, one of our
directors. We also entered into a Registration Rights Agreement, dated January
4, 2008, with Dr. Gutman, pursuant to which we granted Dr. Gutman the right
to
demand that we register and maintain the effectiveness of up to two registration
statements (or more, under certain circumstances) and “piggy-back” registration
rights with respect to the shares of our Common Stock he received, commencing
on
January 4, 2010.
PROPOSAL
NO. 2
PROPOSAL
TO APPROVE A REVERSE SPLIT
OF
OUR ISSUED AND OUTSTANDING COMMON STOCK
The
Board
of Directors, believing it to be in the best interests of the Company and its
stockholders, has approved a reverse split of 1 share for up to each 20 issued
and outstanding shares, with the final ratio to be determined by the Board
of
Directors at the time of the Reverse Split. The Reverse Split will not affect
the amount of our authorized shares. We will effect the Reverse Split by
amending our Certificate of Incorporation.
Reverse
Split
We
are
requesting shareholder approval to grant the Board of Directors the authority
to
effect the Reverse Split for the following reasons:
(1)
the
Board of Directors believes a higher stock price may help generate investor
interest in the Company;
(2)
the
Board of Directors believes this action may attract additional investment in
the
Company;
(3)
the
Board of Directors anticipates that the Company will seek to obtain a listing
of
its Common Stock on an exchange such as Nasdaq or the American Stock Exchange
and a higher stock price is a prerequisite to any such listing being approved
by
such exchange.
On
April
25, 2008, the Company's Common Stock closed at $0.27 per share. In approving
the
resolution seeking shareholder approval of the Reverse Split, the Company's
Board of Directors considered that the Company's Common Stock may not appeal
to
brokerage firms that are reluctant to recommend lower priced securities to
their
clients. Investors may also be dissuaded from purchasing lower priced stocks
because the brokerage commissions, as a percentage of the total transaction,
tend to be higher for such stocks. Moreover, the analysts at many brokerage
firms do not monitor the trading activity or otherwise provide coverage of
lower
priced stocks.
Accordingly,
the Board of Directors has unanimously adopted a resolution seeking shareholder
approval to amend our Certificate of Incorporation to effect the Reverse
Split.
THERE
ARE
RISKS ASSOCIATED WITH THE REVERSE SPLIT, INCLUDING THAT THE REVERSE SPLIT MAY
NOT RESULT IN AN INCREASE IN THE PER SHARE PRICE OF THE COMPANY'S COMMON STOCK,
THAT ANY INCREASE MAY NOT BE PROPORTIONAL TO THE SPLIT RATIO, OR THAT ANY
INCREASE IN THE PER SHARE PRICE OF THE COMMON STOCK WILL NOT BE
SUSTAINED.
The
Company cannot predict whether the Reverse Split will increase the market and
trading prices for the Common Stock. The history of similar reverse stock splits
for companies in like circumstances to ours is varied. There can be no assurance
that:
·
the market price per share of the
Common Stock after the Reverse Split will rise in proportion to the reduction
in
the number of shares of the Company's Common Stock outstanding before the
Reverse Split; or
·
the Reverse Split will result in a
per share price that will attract brokers and investors who do not trade in
lower priced stocks.
The
market price of the Company's Common Stock will also be based on the Company's
performance and other factors, some of which are unrelated to the number of
shares outstanding. If the Reverse Split is effected and the market price of
the
Company's Common Stock declines, the percentage decline as an absolute number
and as a percentage of the Company's overall market capitalization may be
greater than would occur in the absence of the Reverse Split. Furthermore,
the
liquidity of the Common Stock could be adversely affected by the reduced number
of shares that would be outstanding after the Reverse Split.
As
of
April 10, 2008, a total of 116,315,303 shares of the Company's currently
authorized shares of Common Stock are issued and outstanding. On the date the
Reverse Split takes effect, there will be approximately 5,815,765 shares
outstanding (subject to adjustments in lieu of fractional shares), and an
additional 194,184,235 shares authorized but unissued. The Reverse Split would
enable the Company, without further shareholder approval, to reserve and issue
shares in connection with any additional sales of equity or debt securities
convertible into equity. In addition, we will have outstanding options and
warrants and other convertible securities convertible into an aggregate of
48,807,089 shares prior to taking effect for the Reverse Split and representing
an aggregate of 2,440,354 shares after the Reverse Split.
The
Board
of Directors has not authorized a corresponding reduction in the Company’s
authorized Common Stock. Therefore, to the extent the Company issues additional
Common Stock or other securities convertible into Common Stock, you will
experience voting dilution in your holdings of the Company.
As
of the
date hereof, there are no plans to use the additional authorized shares of
Common Stock to acquire businesses or assets or to raise additional capital,
other than with respect to our prior existing commitments. However, the Company
is always considering expanding its business through the acquisition of
operating businesses or assets, and is also considering obtaining additional
capital and there is no guarantee that we will not issue shares of our Common
Stock in the future in order to raise capital or acquire a business or asset
or
to satisfy our working capital requirements. The shares of authorized, but
unissued Common Stock will be available from time to time for corporate purposes
including raising additional capital, acquisitions of companies or assets,
for
strategic transactions, and sales of Common Stock or securities convertible
into
Common Stock. Although, the Company does not have any present intention to
issue
shares of Common Stock, except as noted above, the Company may in the future
raise funds through the issuance of Common Stock when conditions are favorable,
even if the Company does not have an immediate need for additional capital
at
such time. The Company believes that the availability of the additional shares
will provide the Company with the flexibility to meet business needs as they
arise, to take advantage of favorable opportunities and to respond to a changing
corporate environment. If the Company issues additional shares, the ownership
interests of holders of the Company's Common Stock may be diluted.
Principal
Effect of the Reverse Split
The
Reverse Split will be effected simultaneously for all of the Company's Common
Stock and the exchange ratio will be the same for all of the issued Common
Stock. The Reverse Split will affect all of the stockholders uniformly and
will
not affect any stockholder's percentage ownership interests in the Company
(except for the immaterial change due to the rounding). All shares of issued
Common Stock will remain fully paid and nonassessable.
The
amendment to our Certificate of Incorporation will not change the terms of
the
Common Stock. After the Reverse Split, the shares of common stock will have
the
same voting rights and rights to dividends and distributions and will be
identical in all other respects to the Common Stock now authorized. Each
stockholder’s percentage ownership of the new Common Stock will not be altered
except for the effect of eliminating fractional shares. The Common Stock issued
pursuant to the Reverse Split will remain fully paid and non-assessable. The
Reverse Split is not intended as, and will not have the effect of, a “going
private transaction” covered by Rule 13e-3 under the Securities Exchange Act of
1934. Following the reverse split, the Company will continue to be subject
to
the periodic reporting requirements of the Securities Exchange Act of 1934.
Our
authorized shares of Common Stock shall remain unchanged and be 200,000,000
shares. In addition, the par value shall remain unchanged at $0.001 par value
per share.
Dilution
Our
current investors will experience substantial dilution if the Reverse Split
is
effected and we satisfy our obligations to issue additional shares.
Currently
there are 116,315,303 shares of our Common Stock outstanding held by our current
stockholders, comprising 58% of our authorized shares. Upon effecting a 1 for
20
share Reverse Split, our current stockholders will own 33% of our authorized
shares. In addition, upon the issuance of the total amount of shares issuable
under various options, warrants and other convertible securities which are
issued and outstanding, our current stockholders will then hold 4% of our
then-outstanding shares of Common Stock
Procedure
for Effecting the Reverse Split and Exchange of Stock
Certificates
The
Company will file an amendment to its Certificate of Incorporation with the
Secretary of State of the State of Delaware at such time as the Board of
Directors has determined the appropriate ratio and effective time for the
Reverse Split (the “Split Effective Date”). The form of Amendment to the
Certificate of Incorporation is attached as Appendix “A” to this Proxy
Statement. The Reverse Split will become effective on the Split Effective Date.
Beginning on the Split Effective Date, each certificate representing old shares
will be deemed for all corporate purposes to evidence ownership of new
shares.
As
soon
as practicable after the Split Effective Date, stockholders will be notified
that the Reverse Split has been effected. The Reverse Split will take place
on
the Split Effective Date without any action on the part of the holders of the
Common Stock and without regard to current certificates representing shares
of
Common Stock being physically surrendered for certificates representing the
number of shares of Common Stock each shareholder is entitled to receive as
a
result of the Reverse Split.
Effect
on Certificated Shares
If
you
hold any of your shares in certificate form, you will receive a transmittal
letter from our transfer agent as soon as practicable after the effective date
of the Reverse Split. The letter of transmittal will contain instructions on
how
to surrender your certificate(s) representing your pre-Reverse Split shares
to
the transfer agent.
Any
old
shares submitted for transfer, whether pursuant to a sale or other disposition,
or otherwise, will automatically be exchanged for new shares.
STOCKHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY
CERTIFICATE(S) UNLESS REQUESTED TO DO SO
.
WE
WILL BE OBTAINING A NEW CUSIP NUMBER FOR OUR COMMON STOCK TO RELFECT THE REVERSE
SPLIT.
Fractional
Shares
There
shall be no fractional shares issued. A holder of record of Common Stock on
the
Split Effective Date who would otherwise be entitled to a fraction of a share
shall have the number of new shares to which they are entitled rounded to the
nearest number of whole shares. No stockholder will receive cash in lieu of
fractional shares.
Effect
on Outstanding Warrants and Options and other Convertible Securities
The
exercise price on all of our outstanding options and warrants and other
Convertible Securities shall be proportionately adjusted to account for the
Reverse Split. Further, the number of shares which may be obtained upon exercise
or conversion of such securities will be similarly adjusted. The Reverse Split
will not affect the number of our authorized shares of Common Stock. We have
outstanding options and warrants and other convertible securities convertible
into an aggregate of 48,807,089 shares prior to taking effect for the Reverse
Split which will represent an aggregate of 2,440,354 shares after the Reverse
Split.
Potential
Anti-Takeover Effect
Although
the reduction in the issued and outstanding shares of Common Stock as a result
of the Reverse Split and the increased proportion of authorized shares of Common
Stock that may be issued could, under certain circumstances, have an
anti-takeover effect, the Reverse Split proposal is not being proposed in
response to any effort of which the Company is aware of to accumulate shares
of
the Company's Common Stock or to obtain control of the Company, nor is it part
of a plan by management to recommend a series of similar amendments to the
Board
of Directors and stockholders.
Accounting
Matters
The
Reverse Split will not affect total stockholders' equity on the Company's
Balance Sheet. However, because the par value of the Company's Common Stock
will
remain unchanged on the Split Effective Date, the components that make up total
stockholders' equity will change by offsetting amounts. The stated capital
component will be reduced to an amount to reflect the 20 to 1 Reverse Split
and
the additional paid-in capital component will be increased with the amount
by
which the stated capital is reduced. The per share net income or loss and net
book value of the Company's Common Stock will be increased because there will
be
fewer shares of the Company's Common Stock outstanding. Prior periods' per
share
amounts will be restated in future filings to reflect the Reverse Split. We
do
not anticipate any other accounting consequences would arise as a result of
the
Reverse
Split.
Federal
Income Tax Consequences
The
following is a summary of certain material federal income tax consequences
of
the Reverse Split and does not purport to be a complete discussion of all of
the
possible federal income tax consequences of the Reverse Split and is included
for general information only. Further, it does not address any state, local
or
foreign income or other tax consequences. For example, the state and local
tax
consequences of the Reverse Split may vary significantly as to each shareholder,
depending upon the state in which such shareholder resides. Also, it does not
address the tax consequences to holders that are subject to special tax rules,
such as banks, insurance companies, regulated investment companies, personal
holding companies, foreign entities, nonresident alien individuals,
broker-dealers and tax-exempt entities. The discussion is based on the
provisions of the United States federal income tax law as of the date hereof,
which is subject to change retroactively as well as prospectively. This summary
also assumes that the old shares were, and the new shares will be, held as
a
“capital asset,” as defined in the Internal Revenue Code of 1986, as amended
(the “Code”) (generally, property held for investment). The tax treatment of a
shareholder may vary depending upon the particular facts and circumstances
of
such shareholder. Each shareholder is urged to consult with such shareholder's
own tax advisor with respect to the tax consequences of the Reverse
Split.
No
gain
or loss should be recognized by a shareholder upon such shareholder's exchange
of old shares for new shares pursuant to the Reverse Split. The aggregate tax
basis of the new shares received in the Reverse Split (including any fraction
of
a new share deemed to have been received) will be the same as the shareholder's
aggregate tax basis in the old shares exchanged therefore. The shareholder's
holding period for the new shares will include the period during which the
shareholder held the old shares surrendered in the Reverse Split.
The
Company's view regarding the tax consequence of the Reverse Split is not binding
on the Internal Revenue Service or the courts. Accordingly, each shareholder
should consult with such shareholder's own tax advisor with respect to all
of
the potential tax consequences to such shareholder of the Reverse
Split.
Odd
Lots
The
reverse
stock
split
may
increase the number of stockholders of the Company who own “odd lots” of less
than 100 shares of our Common Stock. Brokerage commission and other costs of
transactions in odd lots are generally higher than the costs of transactions
of
more than 100 shares of Common Stock.
Interests
of Directors and Officers
Any
Common Stock or securities convertible into Common Stock held by our officers
and directors will be effected in the same manner as any shares or securities
held by all of our stockholders. As a group our executive officers and directors
own an aggregate of 35,734,821 shares of Common Stock, or 31% of the outstanding
shares and after giving effect to a Reverse Split of 20 for 1, will own an
aggregate of 1,786,741 shares of Common Stock or 31% of the outstanding shares.
In addition, our officers and directors own an aggregate of 5,327,187 options
and warrants on a pre-split basis which will then represent an aggregate of
266,359 shares on a post 20 for 1 Reverse Split basis.
Effect
On Our Employees
If
you
are an employee, the number of shares reserved for issuance under existing
award
will be reduced proportionately based on the Reverse Split. In addition, the
number of shares issuable upon the exercise of options and the exercise price
for such options will be adjusted based on the Reverse Split.
Dissenter's
Rights
Under
Delaware Law, our stockholders do not have any dissenters' or appraisal rights
with respect to the approval of the amendment of our Amended and Restated
Certificate of Incorporation to effect the reverse stock split, and the Company
does not intend to independently provide stockholders with any such
right.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL NO. 2 TO ENACT A REVERSE
SPLIT OF OUR ISSUED AND OUTSTANDING COMMON STOCK ON THE BASIS OF UP TO 1 SHARE
FOR EVERY 20 SHARES OF ISSUED AND OUTSTANDING SHARES OF COMMON STOCK, WITH
THE
FINAL RATIO TO BE DETERMINED BY THE BOARD OF DIRECTORS.
PROPOSAL
NO. 3
THE
INCENTIVE STOCK PLAN PROPOSAL
Background
We
are
requesting that stockholders vote in favor of adopting the 2007 Incentive Stock
Plan (the "Incentive Plan"). The Board of the Company has approved the Incentive
Plan, subject to approval by our stockholders at the meeting. The Incentive
Plan
will be utilized to provide for stock based compensation awards to our officers,
directors and employees and consultants to the Company.
The
purposes of our Incentive Plan are to create incentives designed to motivate
our
employees to contribute significantly toward our growth and profitability,
to
provide our executives, directors and other employees, and persons who, by
their
position, ability and diligence, are able to make important contributions to
our
growth and profitability, with an incentive to assist us in achieving our
long-term corporate objectives, to attract and retain executives and other
employees of outstanding competence, and to provide such persons with an
opportunity to acquire an equity interest in our Company.
We
may
grant incentive and non-qualified stock options, stock appreciation rights
and
restricted stock awards or collectively, awards, to our officers and key
employees, and those of our subsidiaries. In addition, the Incentive Plan
authorizes the grant of non-qualified stock options and restricted stock awards
to our directors and to any consultants who by their position, ability and
diligence are able to make important contributions to our future growth and
profitability. Generally, all classes of our employees are eligible to
participate in our Incentive Plan.
The
following is a summary of the material provisions of our Incentive Plan and
is
qualified in its entirety by reference to the complete text of our Incentive
Plan, a copy of which is attached to this Proxy Statement as Appendix B.
Stock
Subject to the 2007 Incentive Plan
We
have
reserved a maximum of 14,873,892 shares for issuance upon the exercise of awards
to be granted pursuant to our Incentive Plan. Each share issued under an option
or under a restricted stock award will be counted against this limit. Shares
to
be delivered at the time a stock option is exercised or at the time a restricted
stock award is made may be available from authorized but unissued shares or
from
stock previously issued but which we have reacquired and hold in our treasury.
The number of reserved shares will be reduced to reflect the Reverse Split
ratio
as described in Proposal No. 2, assuming it is approved by
stockholders.
On
July
6, 2007, RxElite Holdings Inc. approved the issuance to employees of RxElite
Holdings Inc. of options to purchase a total of 2,302,850 shares of RxElite
Holdings, Inc.’s Common Stock, which option grants were assumed by us in
connection with our July 13, 2007 reverse merger and were converted in 2,302,850
options to purchase our Common Stock. The options vest over a period of four
years and are exercisable for a period of ten years at $0.60 per share.
In
addition, on July 13, 2007, the Board of Directors approved the issuance of
400,000 options to our non employee directors, Peter Williams and Mark Auerbach
and made a similar approval of 400,000 options to Mr. David Rector who joined
our Board on September 24, 2007. On October 11, 2007, the Board adopted
resolutions that new directors would receive similar option grants upon joining
the Board. The options vest in 1/4
th
increments, commencing one year after the date of grant. With respect to the
initial grant of 400,000 to each of Messrs. Williams, Auerbach and Rector,
the
exercise price was $0.60 per share. On February 8, 2008, Mr. Leo joined the
Board of Directors and received 400,000 options with an exercise price of $0.49
per share. These option grants are intended to be granted under the Incentive
Plan, assuming it is approved, however, the options will be granted regardless
of whether the Incentive Plan is approved by stockholders.
As
of May
1, 2008, we have outstanding an aggregate of 5,114,499 options under the
Incentive Plan, subject to shareholder approval. The options have exercise
prices ranging from $0.00237 to $0.87 per share.
In
the
event of any change in our outstanding shares by reason of any reorganization,
recapitalization, stock split, stock dividend, combination of shares, asset
acquisition, consolidation, issuance of rights or other similar transactions,
the number of shares which may be issued upon exercise of outstanding options,
and the exercise price of options previously granted under our Incentive Plan,
will be proportionally adjusted to prevent any enlargement or dilution of the
rights of holders of previously granted options as may be appropriate to reflect
any such transaction or event.
The
following table sets forth for our Chief Executive Officer and for our other
Named Executives, as well as directors and employees the options or other awards
which have been granted or will be granted under the proposed Incentive
Plan.
|
NEW
PLAN BENEFITS
|
|
|
|
|
|
Plan
Name
|
|
|
|
|
|
Name
and Position
|
|
Dollar
Value ($) (1)
|
|
Number
of Units
|
|
|
Chief
Executive Officer Jonathan Houssian
|
|
|
358,712
|
(2)
|
|
538,513
|
|
|
Chief
Operating Officer Earl Sullivan
|
|
|
235,524
|
(3)
|
|
487,789
|
|
|
Principal
Financial Officer Shannon Stith
|
|
|
43,500
|
(4)
|
|
75,000
|
|
|
Vice
President of Business Development Rick Schindewolf
|
|
|
217,500
|
(5)
|
|
250,000
|
|
|
Executive
Group
|
|
|
855,236
|
|
|
1,351,302
|
|
|
Non-Executive
Director Group
|
|
|
2,240,844
|
|
|
3,450,869
|
|
|
Non-Executive
Officer Employee Group
|
|
|
1,381,710
|
|
|
2,302,850
|
|
|
(1)
|
Based
upon the exercise price of the options multiplied by the number of
shares
in the option grant.
|
|
(2)
|
Based
upon an exercise price of $0.66 per share for 505,624 shares and
$0.76 per
share for 32,895 shares.
|
|
(3)
|
Based
upon an exercise price of $0.00237 per share for 132,004 shares,
$0.60 per
share for 259,825 shares, $0.85 per share for 70,960 shares, and
$0.76 per
share for 25,000 shares.
|
|
(4)
|
Based
upon an exercise price of $0.58 per
share.
|
|
(5)
|
Based
upon an exercise price of $0.87 per
share.
|
Administration
Our
Board
has established a Compensation Committee that, among other duties, administers
the Incentive Plan. The Compensation Committee (sometimes referred to as
the "Administrator") is composed of two members of the Board, both of whom
are "non-employee directors" within the meaning of Rule 16b-3(b)(3) of the
Securities Exchange Act of 1934, as amended. Members of our Compensation
Committee serve at the pleasure of our Board. The members of the Committee
are
Mark Auerbach and David Rector. In connection with the administration of our
Incentive Plan, the
Compensation
Committee, with respect to awards to be made to any person who is not one of
our
directors, will:
|
|
·
|
determine
which employees and other persons will be granted awards under our
Incentive Plan;
|
|
|
·
|
grant
the awards to those selected to participate;
|
|
|
·
|
determine
the exercise price for options; and
|
|
|
·
|
prescribe
any limitations, restrictions and conditions upon any awards, including
the vesting conditions of awards.
|
With
respect to stock options or restricted stock awards to be made to any of our
directors, the Compensation Committee will make recommendations to our Board
of
Directors as to:
|
|
·
|
which
of such persons should be granted stock options, restricted stock
awards,
or stock appreciation rights;
|
|
|
·
|
the
terms of proposed grants of awards to those selected by our Board
of
Directors to participate;
|
|
|
·
|
the
exercise price for options; and
|
|
|
·
|
any
limitations, restrictions and conditions upon any awards.
|
Any
grant
of
awards to any of directors under our Incentive Plan must be approved by our
Board of Directors.
In
addition, the Compensation Committee will:
|
|
·
|
interpret
our Incentive Plan; and
|
|
|
·
|
make
all other determinations and take all other action that may be necessary
or advisable to implement and administer our Incentive Plan.
|
Types
of Awards
Our
Incentive Plan permits the Compensation Committee sometimes referred to as
the
Administrator, to grant the following types of awards.
Stock
Options.
Stock
options are contractual rights entitling an optionee who has been granted a
stock option to purchase a stated number of shares of our Common Stock at an
exercise price per share determined at the date of the grant. Options are
evidenced by stock option agreements with the respective optionees. The exercise
price for each stock option granted under our Incentive Plan will be determined
by our Board of Directors or the Administrator at the time of the
grant, but will not be less than fair market value of our Common Stock
as determined by reference to the closing price of our Common
Stock on the trading day prior to the date of the grant. Our Board of
Directors or the Administrator will also determine the
duration of each option; however, no option may be exercisable more than ten
years after the date the option is granted. Within the foregoing limitations,
the Board of Directors or the Administrator may, in its discretion,
impose limitations on exercise of all or some options granted under our
Incentive Plan, such as specifying minimum periods of time after grant during
which options may not be exercised. Options granted under our Incentive Plan
will vest at rates specified in the Option Agreement at the time of grant;
however, all options granted under our Incentive Plan will vest upon the
occurrence of a change of control, as defined in the Incentive Plan. Our
Incentive Plan also contains provisions for our Board of Directors or the
Administrator to provide in the participants' option award agreements for
accelerating the right of an individual employee to exercise his or her stock
option or restricted stock award in the event of retirement or other termination
of employment. No cash consideration is payable to us in exchange for the grant
of options.
Our
Incentive Plan provides that the stock options may either be Incentive Stock
Options within the meaning of Section 422 of the Internal Revenue Code of
1986, as amended, or Non-Qualified Options, which are stock options other than
Incentive Stock Options within the meaning of Sections 422 of the Code.
Incentive Stock Options may be granted only to our employees or employees of
our
subsidiaries, and must be granted at a per share option price not less than
the
fair market value of our Common Stock on the trading date one day prior to
the
date the Incentive Stock Option is granted. In the case of an Incentive Stock
Option granted to a stockholder who owns shares of our outstanding stock of
all
classes representing more that 10% of the total combined voting power of all
of
our outstanding stock of all classes entitled to vote in the election of
directors, the per share option price must be not less than 110% of the fair
market value of one of our shares on the date the Incentive Stock Option is
granted and the term of such option may not exceed five years. As required
by
the Code, the aggregate fair market value, determined at the time an Incentive
Stock Option is granted, of the shares underlying Incentive Stock
Options that may be exercised by an optionee during any calendar year under
our
Incentive Plan may not exceed $100,000.
The
exercise price for Non-Qualified Options may not be less than the fair market
value of our shares on the trading day i
mmediately
prior to the date
the Non-Qualified Option is granted. Non-Qualified
Options are not subject to any of the restrictions described above with respect
to Incentive Stock Options.
The
exercise price of stock options may be paid in cash, in whole shares, in a
combination of cash and our shares, on a cashless basis, or in such other form
of consideration as our Board of Directors or the Administrator may determine,
equal in value to the exercise price. In no event may a stock option be
exercised after the expiration of its stated term.
Stock
Appreciation Rights.
A
stock appreciation right permits the grantee to receive an amount (in cash,
Common Stock, or a combination thereof) equal to the number of stock
appreciation rights exercised by the grantee multiplied by the excess of the
fair market value of our shares on the exercise date over the stock appreciation
rights' exercise price. Stock appreciation rights may or may not be granted
in
connection with the grant of an option. The exercise price of stock appreciation
rights granted under the Incentive Plan will be determined by the Board of
Directors or a committee of the Board; provided, however, that such exercise
price cannot be less than the fair market value of a share on a date the stock
appreciation right is granted (subject to adjustments). A stock appreciation
right may be exercised in whole or in such installments and at such times as
determined by the Board of Directors or the Administrator.
Restricted
Stock.
Restricted
shares of our Common Stock may be granted under our Incentive Plan subject
to
such terms and conditions, including forfeiture and vesting provisions, and
restrictions against sale, transfer or other disposition as the Board of
Directors or the Administrator may determine to be appropriate at the time
of
making the award. In addition, the Board of Directors or a committee of the
Board may direct that share certificates representing restricted stock be
inscribed with a legend as to the restrictions on sale, transfer or other
disposition, and may direct that the certificates, along with a stock power
signed in blank by the grantee, be delivered to and held by us until such
restrictions lapse. The Board of Directors or the Administrator, in its
discretion, may provide in the Award Agreement for a modification or
acceleration of shares of restricted stock in the event of permanent disability,
retirement or other termination of employment or business relationship with
the
grantee.
Transferability
Unless
determined otherwise by the Administrator, awards are not transferable other
than by will or by the laws of descent and distribution. Restricted stock awards
are not transferable during the restriction period.
Merger
or Asset Sale
The
terms
of the Incentive Plan provide that in the event of a merger of the Company
with
or into another corporation, or the sale of substantially all of the assets
of
the Company, each outstanding award shall be assumed or an equivalent option
or
right substituted by the successor corporation or a parent or subsidiary of
the
successor corporation; In the event that the successor corporation refuses
to
assume or substitute for the award, the holder of an award will fully vest
in
and have the right to exercise all of his or her outstanding award, and all
restrictions on restricted stock will lapse. Notwithstanding the general
provisions of the Incentive Plan, in connection with the grant of any award,
the
Administrator shall have the right to provide for different treatment or rights,
including the termination of an award, upon a merger of the Company or a sale
of
assets by the Company.
Termination
of Employment/Relationship
Awards
granted under our Incentive Plan that have not vested will generally terminate
immediately upon the grantee's termination of employment or business
relationship with us or any of our subsidiaries for any reason other than
retirement with our consent, disability or death. The Administrator may
determine at the time of the grant that an award should contain provisions
permitting the grantee to exercise the stock options for any stated period
after
such termination, or for any period the Administrator determines to be advisable
after the grantee's employment or business relationship with us terminates
by
reason of retirement, disability, death or termination without cause. In the
absence of a specific term in an award, awards will terminate no more than
3
months after termination of the optionee's employment, twelve months after
termination of the optionee's employment due to disability and 12 months after
termination of the optionee's employment due to death.
Dilution,
Substitution or Assumption of Awards
As
described above, our Incentive Plan will provide protection against dilution
in
the event of stock splits, recapitalizations, asset acquisitions,
consolidations, reorganizations or similar transactions. New award rights may,
but need not, be substituted for the awards granted under our Incentive Plan,
or
our obligations with respect to awards outstanding under our Incentive Plan
may,
but need not, be assumed by another corporation in connection with any asset
acquisition, consolidation, acquisition, separation,
reorganization,
sale or distribution of assets, liquidation or like occurrence in which we
are
involved. In the event that our Incentive Plan is assumed, the stock issuable
with respect to awards previously granted under our Incentive Plan shall
thereafter include the stock of the corporation granting such new option rights
or assuming our obligations under the Incentive Plan.
Amendment
of the Incentive Plan
Our
Board
may amend our Incentive Plan at any time. However, without stockholder approval,
our Incentive Plan may not be amended in a manner that would:
|
|
·
|
increase
the number of shares that may be issued under our Incentive Plan;
|
|
|
·
|
materially
modify the requirements for eligibility for participation in our
Incentive
Plan;
|
|
|
·
|
materially
increase the benefits to participants provided by our Incentive Plan;
or
|
|
|
·
|
otherwise
disqualify our Incentive Plan for coverage under Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended.
|
Awards
previously granted under our Incentive Plan may not be impaired or affected
by
any amendment of our Incentive Plan, without the consent of the affected
grantees.
Accounting
Treatment
Under
generally accepted accounting principles with respect to the financial
accounting treatment of stock options used to compensate employees, upon the
grant of stock options under our Incentive Plan, the fair value of the options
will be measured on the date of grant prior and this amount will be recognized
as a compensation expense ratably over the vesting period. Stock appreciation
rights granted under the Incentive Plan must be settled in shares. Therefore,
stock appreciation rights granted under the Incentive Plan will receive the
same
accounting treatment as options. The cash we receive upon the exercise of stock
options will be reflected as an increase in our capital. No additional
compensation expense will be recognized at the time stock options are exercised,
although the issuance of shares upon exercise may reduce basic earnings per
share, as more shares would then be outstanding.
When
we
make a grant of restricted stock, the fair value of the restricted stock
award on the trading day immediately prior to the date of grant will
be determined and this amount will be recognized over the vesting period of
the
award. The fair value of a restricted stock award is equal to the fair market
value of our shares on the trading day immediately prior to the date of grant.
Due
to
consideration of the accounting treatment of stock options and restricted stock
awards by various regulatory bodies, it is possible that the present accounting
treatment may change.
Tax
Treatment
The
following is a brief description of the federal income tax consequences, under
existing law, with respect to awards that may be granted under our Incentive
Plan.
Incentive
Stock Options.
An
optionee will not realize any taxable income upon the grant or the exercise
of
an Incentive Stock Option. However, the amount by which the fair market value
of
the shares covered by the Incentive Stock Option (on the date of exercise)
exceeds the option price paid will be an item of tax preference to which the
alternative minimum tax may apply, depending on each optionee's individual
circumstances. If the optionee does not dispose of our shares acquired by
exercising an Incentive Stock Option within two years from the date of the
grant
of the Incentive Stock Option or within one year after the shares are
transferred to the optionee, when the optionee later sells or otherwise disposes
of the shares, any amount realized by the optionee in excess of the option
price
will be taxed as a long-term capital gain and any loss will be recognized as
a
long-term capital
loss.
We
generally will not be entitled to an income tax deduction with respect to the
grant or exercise of an Incentive Stock Option.
If
any of
our shares acquired upon exercise of an Incentive Stock Option are resold or
disposed of before the expiration of the prescribed holding periods, the
optionee would realize ordinary income, instead of capital gain. The amount
of
the ordinary income realized would be equal to the lesser of (i) the excess
of the fair market value of the stock on the exercise date over the option
price; or (ii) in the case of a taxable sale or exchange, the amount of the
gain realized. Any additional gain would be either long-term or short-term
capital gain, depending on whether the applicable capital gain holding period
has been satisfied. In the event of a premature disposition of shares of stock
acquired by exercising an Incentive Stock Option, we would be entitled to a
deduction equal to the amount of ordinary income realized by the optionee.
Non-Qualified
Options.
An
optionee will not realize any taxable income upon the grant of a Non-Qualified
Option. At the time the optionee exercises the Non-Qualified Option, the amount
by which the fair market value at the time of exercise of the shares covered
by
the Non-Qualified Option exceeds the option price paid upon exercise will
constitute ordinary income to the optionee in the year of such exercise. We
will
be entitled to a corresponding income tax deduction in the year of exercise
equal to the ordinary income recognized by the optionee. If the optionee
thereafter sells such shares, the difference between any amount realized on
the
sale and the fair market value of the shares at the time of exercise will be
taxed to the optionee as capital gain or loss, short-or long-term depending
on
the length of time the stock was held by the optionee before sale.
Stock
Appreciation Rights.
A
participant realizes no taxable income and we are not entitled to a deduction
when a stock appreciation right is granted. Upon exercising a stock appreciation
right, a participant will realize ordinary income in an amount equal to the
fair
market value of the shares received minus any amount paid for the shares, and
we
will be entitled to a corresponding deduction. A participant's tax basis in
the
shares received upon exercise of a stock appreciation right will be equal to
the
fair market value of such shares on the exercise date, and the participant's
holding period for such shares will begin at that time. Upon sale of the shares
received upon exercise of a stock appreciation right, the participant will
realize short-term or long-term capital gain or loss, depending upon whether
the
shares have been held for more than one year. The amount of such gain or loss
will be equal to the difference between the amount realized in connection with
the sale of the shares, and the participant's tax basis in such shares.
Restricted
Stock Awards.
A
recipient of restricted stock generally will not recognize any taxable income
until the shares of restricted stock become freely transferable or are no longer
subject to a substantial risk of forfeiture. At that time, the excess of the
fair market value of the restricted stock over the amount, if any, paid for
the
restricted stock is taxable to the recipient as ordinary income. If a recipient
of restricted stock subsequently sells the shares, he or she generally will
realize capital gain or loss in the year of such sale in an amount equal to
the
difference between the net proceeds from the sale and the price paid for the
stock, if any, plus the amount previously included in income as ordinary income
with respect to such restricted shares.
A
recipient has the opportunity, within certain limits, to fix the amount and
timing of the taxable income attributable to a grant of restricted stock.
Section 83(b) of the Code permits a recipient of restricted stock, which is
not yet required to be included in taxable income, to elect, within 30 days
of the award of restricted stock, to include in income immediately the
difference between the fair market value of the shares of restricted stock
at
the date of the award and the amount paid for the restricted stock, if any.
The
election permits the recipient of restricted stock to fix the amount of income
that must be recognized by virtue of the restricted stock grant. We will be
entitled to a deduction in the year the recipient is required (or elects) to
recognize income by virtue of receipt of restricted stock, equal to the amount
of taxable income recognized by the recipient.
Section 162(m)
of the Code.
Section 162(m)
of the Code precludes a public corporation from taking a deduction for annual
compensation in excess of $1.0 million paid to its Chief Executive Officer
or any of its four other highest-paid officers. However, compensation that
qualifies under Section 162(m) of the Code as "performance-based" is
specifically exempt from the deduction limit. Based on Section 162(m) of
the Code and the regulations thereunder, our ability to deduct compensation
income generated in connection with the exercise of stock options or stock
appreciation rights granted under the Incentive Plan should not be limited
by
Section 162(m) of the Code. Further, we believe that compensation income
generated in connection with performance awards granted under the Incentive
Plan
should not be limited by Section 162(m) of the Code. The Incentive Plan has
been designed to provide flexibility with respect to whether restricted stock
awards or performance bonuses will qualify as performance-based compensation
under Section 162(m) of the Code and, therefore, be exempt from the
deduction limit. If the vesting restrictions relating to any such award are
based solely upon the satisfaction of one of the performance goals set forth
in
the Incentive Plan, then we believe that the compensation expense relating
to
such an award will be deductible by us if the awards become vested. However,
compensation expense deductions relating to such awards will be subject to
the
Section 162(m) deduction limitation if such awards become vested based upon
any other criteria set forth in such award (such as the occurrence of a change
in control or vesting based upon continued employment with us).
Certain
Awards Deferring or Accelerating the Receipt of Compensation.
Section 409A
of the Internal Revenue Code, enacted as part of the American Jobs Creation
Act
of 2004, imposes certain new requirements applicable to "nonqualified deferred
compensation plans." If a nonqualified deferred compensation plan subject to
Section 409A fails to meet, or is not operated in accordance with, these
new requirements, then all compensation deferred under the plan may become
immediately taxable. Stock appreciation rights and deferred stock awards which
may be granted under the plan may constitute deferred compensation subject
to
the Section 409A requirements. It is our intention that any award agreement
governing awards subject to Section 409A will comply with these new rules.
Required
Vote
Approval
of our Incentive Plan will require the affirmative vote of a majority of the
votes cast at the annual meeting. Assuming the presence of a quorum, the failure
to vote will have no effect on the outcome of the vote.
Recommendation
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR"
THE
INCENTIVE PLAN PROPOSAL.
PROPOSAL
NO. 4
RATIFICATION
OF THE APPOINTMENT OF HJ & ASSOCIATES, LLC
AS
THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
FOR
THE FISCAL YEAR ENDING DECEMBER 31, 2008
The
Company’s stockholders are being asked to ratify the Board of Directors’
appointment of HJ & Associates, LLC as the Company’s independent registered
public accounting firm for fiscal year 2008.
In
the
event that the ratification of this selection is not approved by a majority
of
the votes cast by holders of shares of Common Stock voting at the 2008 annual
stockholders meeting in person or by proxy, management will review its future
selection of the Company’s independent registered public accounting
firm.
Information
regarding our change in accounting firm is contained in our Form 10-KSB, which
was filed with the Securities and Exchange Commission on March 19, 2008, and
is
incorporated by reference herein.
A
representative of HJ & Associates, LLC is expected to be present at the 2008
annual stockholders meeting and will have an opportunity to make a statement
if
he or she desires to do so. It is also expected that such representative will
be
available to respond to appropriate questions.
Audit
Fees
The
aggregate fees billed for professional services rendered by our principal
accountant, HJ & Associates, LLC for the audit of our annual financial
statements, review of financial statements included in our quarterly reports
and
other fees that are normally provided by the accountant in connection with
statutory and regulatory filings or engagements for the fiscal year ended
December 31, 2007 were $106,546 and $0 for the fiscal year ended December 31,
2006. . HJ & Associates, LLC was engaged as our principal accountant
effective July 16, 2007, and their services included auditing the financial
statements contained in their report on Form 10-KSB for the fiscal year ended
December 31, 2007. Prior to July 16, 2007, the independent principal accountant
for RxElite, Inc. was Li & Company, PC. We completed our reverse merger on
July 13, 2007 with RxElite Holdings Inc. and in accordance with applicable
SEC
rules, because (i) the former stockholders of RxElite owned a majority of the
outstanding shares of our common stock and (ii) our primary business unit became
the business previously conducted by RxElite Holdings Inc., the surviving
company for accounting purposes was RxElite Holdings Inc. Prior to the merger,
RxElite Holdings Inc. was a private company and did not file reports with the
SEC.
Audit
Related Fees
The
aggregate fees billed for other related services, delivery of registration
statement consents and due diligence provided by our principal accountant,
HJ
& Associates, LLC, that are reasonably related to the performance of the
audit or review of our financial statements for the years ended December 31,
2007 and 2006 was $0 and $0.
Tax
Fees
The
aggregate fees billed for professional services rendered by our principal
accountant, HJ & Associates, LLC, for tax compliance, tax advice and tax
planning during the years ended December 31, 2007 and 2006 was $0 and $0.
All
Other Fees
The
aggregate fees billed for professional services rendered by our principal
accountant, HJ & Associates, LLC, for all other services during the years
ended December 31, 2007 and 2006 was $0 and $0.
Audit
Committee
Our
Audit
Committee, approved, in advance, all work performed by our principal accountant,
HJ & Associates, LLC.
Change
in Accountants
Effective
as of July 13, 2007, we dismissed Li & Company, PC as our independent
accountants. Li & Company, PC had previously been engaged as the principal
accountant to audit our financial statements. The reason for the dismissal
of Li
& Company, PC is that, following the consummation of the our reverse merger
on July 13, 2007 with RxElite Holdings Inc. (i) the former stockholders of
RxElite owned a majority of the outstanding shares of our common stock and
(ii)
our primary business unit became the business previously conducted by RxElite
Holdings Inc. The independent registered public accountant of RxElite Holdings
Inc. was the firm of HJ & Associates, LLC. We believed that it is in our
best interest to have HJ & Associates, LLC continue to work with our
business, and we therefore retained HJ & Associates, LLC as our new
independent registered accounting firm, effective as of July 16, 2007.
The
report of Li & Company, PC on our September 30, 2006, financial statements
did not contain an adverse opinion or disclaimer of opinion, nor was it
qualified or modified as to uncertainty, audit scope or accounting principles,
except that the report was qualified as to our ability to continue as a going
concern. The decision to change accountants was approved by our Board of
Directors on July 13, 2007.
During
our two most recent fiscal years and the subsequent interim period from January
10, 2007 (the date of engagement of Li & Company, PC), through the original
date of dismissal on July 13, 2007, there were no disagreements with Li &
Company, PC on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure which disagreement(s),
if
not resolved to the satisfaction of Li & Company, PC, would have caused it
to make reference to the matter in connection with its reports.
As
of
July 16, 2007, HJ & Associates, LLC was engaged as our new independent
registered public accountants. The appointment of HJ & Associates, LLC was
approved by our Board of Directors. During our two most recent fiscal years
and
the subsequent interim period through July 16, 2007 (the date of engagement
of
HJ & Associates, LLC), we did not consult HJ & Associates, LLC regarding
either: (i) the application of accounting principles to a specific completed
or
contemplated transaction, or the type of audit opinion that might be rendered
on
the Company’s financial statements; or (ii) any matter that was the subject of a
disagreement as defined in Item 304(a)(1)(iv) of Regulation S-B.
Required
Vote
The
affirmative vote of the majority of the shares present in person or represented
by proxy at the annual meeting is required for ratification of the appointment
of HJ & Associates, LLC as the Company’s independent registered public
accounting firm for the fiscal year ending December 31, 2008.
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE APPOINTMENT
OF
HJ & ASSOCIATES LLC
AS THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL
YEAR ENDING DECEMBER 31, 2008.
ANNUAL
REPORT
A
copy of
the Company’s Annual Report on Form 10-KSB for fiscal year ended December 31,
2007 accompanies this notice.
FUTURE
PROPOSALS OF SECURITY HOLDERS
All
proposals of security holders intended to be presented at the 2009 annual
meeting of stockholders must be received by the Company not later than February
4, 2009. Under SEC rules, you must have held for one year at least 2,000 shares
or 1% of our outstanding stock in order to submit a proposal. Stockholders
must
submit such proposals in writing to
RxElite,
Inc.
,
Attention Secretary.
HOUSE
HOLDING OF MATERIALS
In
some
instances, only one copy of this proxy is being delivered to multiple
stockholders sharing an address, unless the Company has received instructions
from one or more of the stockholders to continue to deliver multiple copies.
We
will deliver promptly upon oral or written request a separate copy of the proxy
statement to any stockholder at your address. If you wish to receive a separate
copy of the proxy statement, you may call us at (208) 288-5550, or send a
written request to RxElite, Inc, Attention Secretary. If you have received
only
one copy of the proxy statement and wish to receive a separate copy for each
stockholder in the future, you may call us at the telephone number or write
us
at the address listed above. Alternatively, stockholders sharing an address
who
now receive multiple copies of the Proxy Statement may request delivery of
a
single copy, also by calling us at the number or writing to us at the address
listed above.
MISCELLANEOUS
The
Company will pay the cost of soliciting proxies in the accompanying form. In
addition to solicitation by mail, certain officers and regular employees of
the
Company may solicit the return of proxies by telephone, telegram or personal
interview and may request brokerage houses, custodians, nominees and fiduciaries
to forward soliciting material to their principals and will agree to reimburse
them for their reasonable out-of-pocket expenses.
OTHER
BUSINESS
The
Board
of Directors knows of no business to be brought before the annual meeting other
than as set forth above. If other matters properly come before the meeting,
it
is the intention of the persons named in the solicited proxy to vote the proxy
on such matters in accordance with their judgment.
Stockholders
are urged to mark, sign and send in their proxies without delay.
A
COPY OF
THE COMPANY’S ANNUAL REPORT ON FORM 10-KSB, AS AMENDED, FOR FISCAL
YEAR 2007 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (INCLUDING RELATED
FINANCIAL STATEMENTS AND SCHEDULES) IS AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE,
UPON WRITTEN REQUEST TO RXELITE, INC.
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By
Order of the Board of Directors,
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May
12, 2008
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/s/
Peter W. Williams
Chairman
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RXELITE,
INC.
ANNUAL
MEETING OF STOCKHOLDERS
June
4, 2008
PROXY
The
undersigned hereby appoints Jonathan Houssian and Peter W. Williams and each
of
them, proxies, with full powers of substitution to each to vote all shares
of
Common Stock of RXELITE, INC. owned by the undersigned at the Annual Meeting
of
Stockholders to be held on June 4, 2008, and at any adjournments thereof, hereby
revoking any proxy heretofore given. The undersigned instructs such proxies
to
vote as follows:
Set
forth
below are the names of nominees who will be elected to serve until the next
annual meeting of stockholders.
(Instruction:
Please check appropriate box.
To
withhold authority for any individual nominee, strike a line through the
nominee’s name in the list below.
)
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o
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FOR
all
Nominees listed below
(except
as marked to the contrary below)
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Jonathan
Houssian
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o
WITHHOLD
AUTHORITY
to
withhold voting for the nominee
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David
Rector
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o
WITHHOLD
AUTHORITY
to
withhold voting for the nominee
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Daniel
Chen
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o
WITHHOLD
AUTHORITY
to
withhold voting for the nominee
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Arie
Gutman, Ph.D
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o
WITHHOLD
AUTHORITY
to
withhold voting for the nominee
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Mark
Auerbach
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o
WITHHOLD
AUTHORITY
to
withhold voting for the nominee
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Frank
Leo
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o
WITHHOLD
AUTHORITY
to
withhold voting for the nominee
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Peter
W. Williams
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o
WITHHOLD
AUTHORITY
to
withhold voting for the nominee
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o
WITHHOLD
AUTHORITY
to
withhold voting for the nominees
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ii.
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Proposal
to
approve a Reverse Stock Split of 1 share for up to every 20 issued
and
outstanding shares, subject to the final ratio to be determined
by the
Board of Directors at the time of the Reverse Split
.
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¨
For
¨
Against
¨
Abstain
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iii.
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Proposal
to approve and adopt the 2007 Incentive Stock
Plan
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¨
For
¨
Against
¨
Abstain
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iv.
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Proposal
to ratify the appointment of HJ & Associates, LLC, as the Company’s
independent
registered
public accounting firm for the fiscal year ending December 31,
2008.
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¨
For
¨
Against
¨
Abstain
AND
TO
VOTE UPON ANY OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF,
all as
described in the Proxy Statement dated as of May 12, 2008, receipt of which
is
hereby acknowledged.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. PLEASE SIGN AND RETURN
THE PROXY IN THE ENCLOSED ENVELOPE.
Either
of
the proxies, who shall be present and acting, shall have and may exercise all
the powers hereby granted.
IF
NO
OTHER ELECTION IS MADE, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR:
(i) THE ELECTION OF SEVEN DIRECTORS; (ii) THE PROPOSAL FOR THE REVERSE SPLIT;
(iii) THE PROPOSAL TO ADOPT AND APPROVE THE 2007 INCENTIVE STOCK PLAN; and
(iv)
THE RATIFICATION OF THE APPOINTMENT OF HJ & ASSOCIATES, LLC, AS THE
COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2008.
Said
proxies will use their discretion with respect to any other matters which
properly come before the meeting including the authority to vote to adjorn
the
meeting.
Dated:
______________________, 2008
_______________________________
Signature
_______________________________
Print
Name
(Please
date and sign exactly as accounts. Each joint owner should sign. Executors,
administrators, trustees, etc. should also so indicate when
signing.)
The
proxy is solicited on behalf of the Board of Directors. Please sign and return
in the enclosed envelope
.
APPENDIX
A
CERTIFICATE
OF AMENDMENT
TO
CERTIFICATE
OF INCORPORATION
OF
RXELITE,
INC.
RxElite,
Inc.. (the “Corporation”), a corporation organized and existing under the
General Corporation Law of the State of Delaware, does hereby certify:
FIRST:
That the Board of Directors of the Corporation has duly adopted resolutions
(i) authorizing the Corporation to execute and file with the Secretary of
State of the State of Delaware this Certificate of Amendment to Certificate
of
Incorporation (this “Certificate of Amendment”) to combine each
[ ]
outstanding shares of the Corporation’s Common Stock, par value $0.001 per
share, into one (1) share of Common Stock, par value $0.001 per share; and
(ii) declaring this Certificate of Amendment to be advisable and
recommended for approval by the stockholders of the Corporation.
SECOND:
That this Certificate of Amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware by the Board of Directors and stockholders of the Corporation.
THIRD:
That the capital of the Corporation shall not be reduced under or by reason
of
this Certificate of Amendment.
FOURTH:
That upon the effectiveness of this Certificate of Amendment, the first
paragraph (“A”) of Article FOURTH of the Amended Certificate of Incorporation is
hereby amended such that, as amended, said paragraph shall read in its entirety
as follows:
“The
Corporation is authorized to issue two classes of stock to be designated,
respectively, “
Common
Stock
”
and
“
Preferred
Stock
.”
The
total number of shares of all classes of stock that the Corporation is
authorized to issued is Two Hundred One Million (201,000,000) shares, consisting
of Two Hundred Million (200,000,000) shares of common Stock with a par value
of
$0.001 per share and One Million (1,000,000) shares of Preferred Stock with
a
par value of $0.001 per share.”
Upon
the
filing of this Certificate of Amendment, each
[ ]
shares of Common Stock, par value $0.001 per share, issued and outstanding
at
such time shall be combined into one (1) share of Common Stock, par value
$0.001 per share (the “Reverse Stock Split”). No fractional share shall be
issued upon the Reverse Stock Split. All shares of Common Stock (including
fractions thereof) issuable upon the Reverse Stock Split to a given holder
shall
be aggregated for purposes of determining whether the Reverse Stock Split would
result in the issuance of any fractional share. If, after the aforementioned
aggregation, the Reverse Stock Split would result in the issuance of a fraction
of a share of Common Stock, the Corporation shall, in lieu of issuing any such
fractional share, round the fractional share to the next nearest whole share
and
issue such additional share to the holder. Upon surrender by a holder of a
certificate or certificates for Common Stock (including, for this purpose,
a
holder of shares of Common Stock issuable upon conversion of Preferred Stock,
if
any), duly endorsed, at the office of the Corporation, the Corporation shall,
as
soon as practicable thereafter, issue and deliver to such holder, or to the
nominee or assignee of such holder, a new certificate or certificates for the
number of shares of Common Stock that such holder shall be entitled to following
the Reverse Stock Split.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to
Certificate of Incorporation to be executed by Jonathan Houssian, its Chief
Executive Officer and President, this
day of
, 2008.
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RXELITE,
INC.
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By:
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Jonathan
Houssian
Chief
Executive Officer and President
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APPENDIX
B
RxELITE
HOLDINGS, INC.
AMENDED
AND RESTATED
2007
INCENTIVE STOCK PLAN
1.
Background
.
The
Plan permits the grant of Non-Qualified Stock Options, Incentive Stock Options,
Stock Purchase Rights, Stock Appreciation Rights and Restricted Stock Awards.
2.
Purposes
of the Plan
.
The
purposes of this 2007 Incentive Stock Plan are: to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to Employees, Directors and Consultants, and to promote
the
success of the Company’s business.
3.
Definitions
.
As used
herein, the following definitions shall apply:
(a)
“Administrator”
means
the Board or any of its Committees as shall be administering the Plan, in
accordance with Section 5 of the Plan.
(b)
“Affiliate”
means
any corporation or any other entity (including, but not limited to, partnerships
and joint ventures) controlling, controlled by, or under common control with
the
Company.
(c)
“Applicable
Laws”
means
the requirements relating to the administration of stock option plans under
U.S.
state corporate laws, U.S. federal and state securities laws, the Code, any
stock exchange or quotation system on which the Common Stock is listed or quoted
and the applicable laws of any foreign country or jurisdiction where Options
or
Stock Purchase Rights are, or will be, granted under the Plan.
(d)
“Annual
Revenue”
means
the Company’s or a business unit’s net sales for the Fiscal Year, determined in
accordance with generally accepted accounting principles; provided, however,
that prior to the Fiscal Year, the Committee shall determine whether any
significant item(s) shall be excluded or included from the calculation of Annual
Revenue with respect to one or more Participants.
(e)
“Award”
means,
individually or collectively, a grant under the Plan of Options, Stock Purchase
Rights, Stock Appreciation Rights and Restricted Stock Awards.
(f)
“Award
Agreement”
means
the written agreement setting forth the terms and provisions applicable to
each
Award granted under the Plan. The Award Agreement is subject to the terms and
conditions of the Plan.
(g)
“Board”
means
the Board of Directors of the Company.
(h)
“Cash
Flow from Operations”
means as
to any Fiscal Year, the Company’s cash generated from operating activities, or a
business unit’s cash generated from operating activities, determined in
accordance with generally acceptable accounting principles.
(i)
“Code”
means
the Internal Revenue Code of 1986, as amended. Reference to a specific section
of the Code or regulation thereunder shall include such section or regulation,
any valid regulation promulgated under such section, and any comparable
provision of any future legislation or regulation amending, supplementing or
superseding such section or regulation.
(j)
“Committee”
means a
committee of Directors appointed by the Board in accordance with Section 5
of
the Plan.
(k)
“Common
Stock”
means
the common stock of the Company.
(l)
“Company”
means
RxElite Holdings, Inc., a Delaware corporation.
(m)
“Consultant”
means
any person, including an advisor, engaged by the Company or a Parent or
Subsidiary to render services to such entity.
(n)
“Director”
means a
member of the Board, either as an Employee or an Outside Director.
(o)
“Disability”
means
total and permanent disability as defined in Section 22(e)(3) of the
Code.
(p)
“Earnings
Per Share”
means as
to any Fiscal Year, the Company’s Net Income or a business unit’s Pro Forma Net
Income, divided by a weighted average number of common shares outstanding and
dilutive common equivalent shares deemed outstanding.
(q)
“Employee”
means
any person, including Officers and Directors, employed by the Company or any
Parent or Subsidiary of the Company. A Service Provider shall not cease to
be an
Employee in the case of (i) any leave of absence approved by the Company or
(ii)
transfers between locations of the Company or between the Company, its Parent,
any Subsidiary, or any successor. For purposes of Incentive Stock Options,
no
such leave may exceed ninety days, unless reemployment upon expiration of such
leave is guaranteed by statute or contract. If reemployment upon expiration
of a
leave of absence approved by the Company is not so guaranteed, then three months
following the 91st day of such leave, any Incentive Stock Option held by the
Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Non-Qualified Stock Option. Neither service as
a
Director nor payment of a director’s fee by the Company shall be sufficient to
constitute “employment” by the Company.
(r)
“Exercise
Price”
means
the price at which a Share may be purchased by a Participant pursuant to the
exercise of an Option.
(s)
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
(t)
“Fair
Market Value”
means,
as of any date, the value of Common Stock determined as follows:
(i)
If
the
Common Stock is listed on any established stock exchange or a national market
system, including without limitation the Nasdaq National Market or The Nasdaq
SmallCap Market of The Nasdaq Stock Market, the Fair Market Value of a Share
of
Common Stock shall be the closing sales price for the Common Stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system
for
the last market trading day prior to the date of determination, as reported
in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii)
If
the
Common Stock is quoted on the Over the Counter Bulletin Board, the Fair Market
Value of a Share of Common Stock shall be the closing price for the Common
Stock
(or the closing bid, if no sales were reported) on the last market trading
day
prior to the date of determination, as reported in The Wall Street Journal
or
such other source as the Administrator deems reliable;
(iii)
If
the
Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value of a Share of Common Stock shall
be the mean between the high bid and low asked prices for the Common Stock
on
the last market trading day prior to the date of determination, as reported
in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(iv)
In
the
absence of an established market for the Common Stock, the Fair Market Value
shall be determined in good faith by the Administrator by the reasonable
application of a reasonable valuation method so that neither Options nor Stock
Appreciation Rights are treated as providing for deferral of compensation within
the meaning of Code Section 409A and regulations and other guidance issued
thereunder.
(u)
“Fiscal
Year”
means
the fiscal year of the Company.
(v)
“Grant
Date”
means,
with respect to an Award, the date that the Award was granted.
(w)
“Incentive
Stock Option”
means an
Option intended to qualify as an incentive stock option within the meaning
of
Section 422 of the Code and the regulations promulgated thereunder.
(x)
“Initial
Service”
means
the
period of time beginning as of the date that a Service Provider first rendered
services to the Company or any Parent or Subsidiary of the Company and ending
on
the date of adoption of the Plan, provided that reference to such term may
include the total compensation paid during such period to the Service Provider
by the Company and any Parent or Subsidiary of the Company.
(y)
“Net
Income”
means as
to any Fiscal Year, the income after taxes of the Company for the Fiscal Year
determined in accordance with generally accepted accounting principles, provided
that prior to the Fiscal Year, the Committee shall determine whether any
significant item(s) shall be included or excluded from the calculation of Net
Income with respect to one or more Participants.
(z)
“Non-Qualified
Stock Option”
means an
Option not intended to qualify as an Incentive Stock Option.
(aa
)
“Notice
of Grant”
means a
written or electronic notice evidencing certain terms and conditions of an
individual Award grant. The Notice of Grant is part of the Award
Agreement.
(bb)
“Officer”
means a
person who is an officer of the Company within the meaning of Section 16 of
the
Exchange Act and the rules and regulations promulgated thereunder.
(cc)
“Operating
Profit”
means
the Company’s or a business unit’s profit from operations but excluding any
unusual items, determined in accordance with generally accepted accounting
principles.
(dd)
“Option”
means an
Incentive Stock Option or a Non-Qualified Stock Option granted pursuant to
the
Plan.
(ee)
“Optionee”
means
the holder of an outstanding Option or Stock Purchase Right granted under the
Plan.
(ff)
“Option
Exchange Program”
means a
program whereby outstanding Options are surrendered or cancelled in exchange
for
the right to receive options of the same type, of a different type and/or cash
pursuant to such terms as the Administrator may determine.
(gg)
“Optioned
Stock”
means
the Common Stock subject to an Award.
(hh)
“Outside
Director”
means a
Director who is not an Employee.
(ii)
“Parent”
means a
“parent corporation,” whether now or hereafter existing, as defined in Section
424(e) of the Code.
(jj)
“Participant”
means
the holder of an outstanding Award, which shall include an
Optionee.
(kk)
“Performance
Goals”
means
the goal(s) (or combined goal(s)) determined by the Committee (in its
discretion) to be applicable to a Participant with respect to an Award. As
determined by the Committee, the Performance Goals applicable to an Award may
provide for a targeted level or levels of achievement using one or more of
the
following measures: (a) Annual Revenue, (b) Operating Profit, (c) Cash Flow
from
Operations, (d) Net Income, (e) Pro Forma Net Income, (f) Earnings Per Share,
and (g) Return on Sales. The Performance Goals may differ from Participant
to
Participant and from Award to Award. Any criteria used may be (i) measured
in
absolute terms, (ii) measured in relative terms (including, but not limited
to
compared to another company or companies), (iii) measured against the
performance of the Company as a whole or a segment of the Company and/or (iv)
measured on a pre-tax or post-tax basis (if applicable).
(ll)
“Plan”
means
this Amended and Restated 2007 Incentive Stock Plan.
(mm)
“Pro
Forma Net Income”
means as
to any business unit for any Fiscal Year, the Controllable Profits of such
business unit, minus allocations of designated corporate expenses.
(nn)
“Reload
Option”
means an
Option that automatically is granted if a Participant pays the exercise price
of
an Option by tendering Shares.
(oo)
“Restricted
Stock”
means
shares of Common Stock acquired pursuant to a grant of Stock Purchase Rights
under Section 12 of the Plan.
(pp)
“Restricted
Stock Purchase Agreement”
means a
written agreement between the Company and the Optionee evidencing the terms
and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions
of
the Plan and the Notice of Grant.
(qq)
“Retirement”
means,
in the case of an Employee or Director: (a) a Termination of Service occurring
on or after age sixty-five (65), or (b) a Termination of Service occurring
on or
after age sixty (60) with at least ten (10) Years of Service. With respect
to a
Consultant, no Termination of Service shall be deemed to be on account of
“Retirement.”
(rr)
“Return
on Sales”
means as
to any Fiscal Year, the percentage equal to the Company’s Net Income or the
business unit’s Pro Forma Net Income, divided by the Company’s or the business
unit’s Annual Revenue, as applicable.
(ss)
“Rule
16b-3”
means
Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3, as in effect
when
discretion is being exercised with respect to the Plan.
(tt)
“Section
16(b)”
means
Section 16(b) of the Exchange Act.
(uu)
“Service
Provider”
means an
Employee, Director or Consultant.
(vv)
‘Share”
means a
share of the Common Stock, as adjusted in accordance with Section 13 of the
Plan.
(ww)
“Stock
Appreciation Right”
or “SAR”
means an Award, granted alone or in tandem with a related Option that pursuant
to Section 13 is designated as an SAR.
(xx)
“Stock
Purchase Right”
means
the right to purchase Common Stock pursuant to Section 12 of the Plan, as
evidenced by a Notice of Grant.
(yy)
“Subsidiary”
means a
“subsidiary corporation”, whether now or hereafter existing, as defined in
Section 424(f) of the Code.
(zz)
“Termination
of Service”
means
(a) in the case of an Employee, a cessation of the employee-employer
relationship between the Employee and the Company or an Affiliate for any
reason, including, but not by way of limitation, a termination by resignation,
discharge, death, Disability, Retirement, or the disaffiliation of an Affiliate,
but excluding any such termination where there is a simultaneous re-employment
or engagement as a consultant by the Company or an Affiliate; (b) in the case
of
a Consultant, a cessation of the service relationship between the Consultant
and
the Company or an Affiliate for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability, or
the
disaffiliation of an Affiliate, but excluding any such termination where there
is a simultaneous employment as an Employee or re-engagement of the Consultant
by the Company or an Affiliate; and (c) in the case of a Director, a cessation
of the Director’s service on the Board for any reason, including, but not by way
of limitation, a termination by resignation, death, Disability, Retirement
or
non-reelection to the Board, but excluding any such termination where there
is a
simultaneous employment as an Employee or engagement as a Consultant by the
Company or an Affiliate.
4.
Stock
Subject to the Plan
.
Subject
to the provisions of Section 15 of the Plan, the maximum aggregate number of
Shares that may be optioned and sold under the Plan is 14,873,892 Shares. The
Shares may be authorized, but unissued, or reacquired Common Stock.
If
an
Award expires or becomes unexercisable without having been exercised in full,
or
is surrendered pursuant to an Option Exchange Program, the unpurchased Shares
which were subject thereto shall become available for future grant or sale
under
the Plan (unless the Plan has terminated); provided, however, that Shares that
have actually been issued under the Plan, whether upon exercise of an Option
or
Stock Appreciation Right, shall not be returned to the Plan and shall not become
available for future distribution under the Plan, except that if Shares of
Restricted Stock are repurchased by the Company at their original purchase
price, such Shares shall become available for future grant under the
Plan.
5.
Administration
of the Plan
.
(a)
Procedure.
(i)
Multiple
Administrative Bodies
.
The
Plan may be administered by different Committees with respect to different
groups of Service Providers.
(ii)
Section
162(m)
.
To the
extent that the Administrator determines it to be desirable to qualify Awards
granted hereunder as “performance-based compensation” within the meaning of
Section 162(m) of the Code, the Plan shall be administered by a Committee of
two
or more “outside directors” within the meaning of Section 162(m) of the Code.
For purposes of qualifying grants of Awards as “performance-based compensation”
under Section 162(m) of the Code, the Committee, in its discretion, may set
restrictions based upon the achievement of Performance Goals. The Performance
Goals shall be set by the Committee on or before the latest date permissible
to
enable the Awards to qualify as “performance-based compensation” under Section
162(m) of the Code. In granting Awards that are intended to qualify under
Section 162(m) of the Code, the Committee shall follow any procedures determined
by it from time to time to be necessary or appropriate to ensure qualification
of the Awards under Section 162(m) of the Code (e.g., in determining the
Performance Goals).
(iii)
Rule
16b-3
.
To the
extent desirable to qualify transactions hereunder as exempt under Rule 16b-3,
the transactions contemplated hereunder shall be structured to satisfy the
requirements for exemption under Rule 16b-3.
(iv)
Other
Administration
.
Other
than as provided above, the Plan shall be administered by (A) the Board or
(B) a
Committee, which committee shall be constituted to satisfy Applicable
Laws.
(b)
Powers
of the Administrator
.
Subject
to the provisions of the Plan, and in the case of a Committee, subject to the
specific duties delegated by the Board to such Committee, the Administrator
shall have the authority, in its discretion:
(i)
to
determine the Fair Market Value;
(ii)
to
select
the Service Providers to whom Awards may be granted hereunder;
(iii)
to
determine the number of shares of Common Stock to be covered by each Award
granted hereunder;
(iv)
to
approve forms of agreement for use under the Plan;
(v)
to
determine the terms and conditions, not inconsistent with the terms of the
Plan,
of any Award granted hereunder. Such terms and conditions include, but are
not
limited to, the exercise price, the time or times when Awards may be exercised
(which may be based on performance criteria), any vesting acceleration or waiver
of forfeiture restrictions, and any restriction or limitation regarding any
Award or the Shares relating thereto, based in each case on such factors as
the
Administrator, in its sole discretion, shall determine;
(vi)
to
reduce
the exercise price of any Award to the then current Fair Market Value if the
Fair Market Value of the Common Stock covered by such Award shall have declined
since the date the Award was granted; provided, however, that no such reduction
of the exercise price of an Award will occur, unless approved by the Company’s
stockholders (except for adjustments made pursuant to Section 15);
(vii)
to
institute an Option Exchange Program, provided that no such program may, without
the approval of the Company’s stockholders, allow for the cancellation of an
outstanding Option followed by its immediate replacement with a new Option
with
a lower exercise price;
(viii)
to
construe and interpret the terms of the Plan and Awards granted pursuant to
the
Plan;
(ix)
to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of satisfying applicable foreign laws;
(x)
to
modify
or amend each Award (subject to Section 17(c) of the Plan), including the
discretionary authority to extend the post-termination exercisability period
of
Options longer than is otherwise provided for in the Plan;
(xi)
to
allow
Optionees to satisfy withholding tax obligations by electing to have the Company
withhold from the Shares to be issued upon exercise of an Award that number
of
Shares having a Fair Market Value equal to the minimum amount required to be
withheld. The Fair Market Value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined. All
elections by an Optionee to have Shares withheld for this purpose shall be
made
in such form and under such conditions as the Administrator may deem necessary
or advisable;
(xii)
to
authorize any person to execute on behalf of the Company any instrument required
to effect the grant of an Award previously granted by the
Administrator;
(xiii)
to
make
all other determinations deemed necessary or advisable for administering the
Plan.
(c)
Effect
of Administrator’s Decision
.
The
Administrator’s decisions, determinations and interpretations shall be final and
binding on all Optionees and any other holders of Options or Stock Purchase
Rights.
6.
Eligibility
.
Non-Qualified Stock Options, Stock Purchase Rights, and Stock Appreciation
Rights may be granted to Service Providers. Incentive Stock Options may be
granted only to Employees.
7.
Limitations
.
(a)
Each
Option shall be designated in the Award Agreement as either an Incentive Stock
Option or a Non-Qualified Stock Option. However, notwithstanding such
designation, to the extent that the aggregate Fair Market Value of the Shares
with respect to which Incentive Stock Options are exercisable for the first
time
by the Optionee during any calendar year (under all plans of the Company and
any
Parent or Subsidiary) exceeds $100,000, such Options shall be treated as
Non-Qualified Stock Options. For purposes of this Section 7(a), Incentive Stock
Options shall be taken into account in the order in which they were granted.
The
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(b)
Neither
the Plan nor any Award shall confer upon an Optionee any right with respect
to
continuing the Optionee’s relationship as a Service Provider with the Company,
nor shall they interfere in any way with the Optionee’s right or the Company’s
right to terminate such relationship at any time, with or without
cause.
8.
Term
of Plan
.
Subject
to Section 21 of the Plan, the Plan shall become effective upon adoption by
the
Board and obtaining stockholder approval. The Plan shall continue in effect
for
a term of ten (10) years unless terminated earlier under Section 17 of the
Plan.
9.
Term
of Option
.
The
term of each Option shall be stated in the Award Agreement. In the case of
an
Incentive Stock Option, the term shall be ten (10) years from the date of grant
or such shorter term as may be provided in the Award Agreement. Moreover, in
the
case of an Incentive Stock Option granted to an Optionee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Parent or Subsidiary, the term of the Incentive Stock Option shall be
five (5) years from the date of grant or such shorter term as may be provided
in
the Award Agreement.
10.
Option
Exercise Price and Consideration
.
(a)
Exercise
Price
.
The per
share exercise price for the Shares to be issued pursuant to exercise of an
Option shall be determined by the Administrator, subject to the
following:
(i)
In
the
case of an Incentive Stock Option
(A)
granted
to an Employee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than 110% of the Fair Market Value per Share
on
the date of grant.
(B)
granted
to any Employee other than an Employee described in paragraph (A) immediately
above, the per Share exercise price shall be no less than 100% of the Fair
Market Value per Share on the date of grant.
(ii)
In
the
case of a Non-Qualified Stock Option, the per Share exercise price shall be
no
less than 100% of the Fair Market Value per Share on the date of
grant.
(b)
Waiting
Period and Exercise Dates
.
At the
time an Option is granted, the Administrator shall determine the vesting
provisions applicable to such Option, including but not limited to the period
within which the Option may be exercised, the number of Shares and times as
of
which any part or all of the Option may be exercised and any conditions which
must be satisfied before the Option may be exercised.
(c)
Form
of Consideration
.
The
Administrator shall determine the acceptable form of consideration for
exercising an Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the acceptable form
of
consideration at the time of grant. Such consideration may consist entirely
of:
(i)
cash;
(ii)
check;
(iii)
other
Shares, which in the case of Shares acquired directly or indirectly from the
Company, (A) have been vested and owned by the Optionee for more than six months
on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(iv)
consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan;
(v)
any
combination of the foregoing methods of payment; or
(vi)
such
other consideration and method of payment, including, without limitation,
cashless exercise on a “net exercise” basis, for the issuance of Shares to the
extent permitted by Applicable Laws.
11.
Exercise
of Option
.
(a)
Procedure
for Exercise; Rights as a Shareholder
.
Any
Option granted hereunder shall be exercisable according to the terms of the
Plan
and at such times and under such conditions, as determined by the Administrator
and set forth in the Award Agreement. Unless the Administrator provides
otherwise, vesting of Options granted hereunder shall be suspended during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An
Option
shall be deemed exercised when the Company receives: (i) written or electronic
notice of exercise (in accordance with the Award Agreement) from the person
entitled to exercise the Option, and (ii) full payment for the Shares with
respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Award Agreement and the Plan. Shares issued upon exercise
of an
Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company
or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to
the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 15 of the Plan.
Exercising
an Option in any manner shall decrease the number of Shares thereafter
available, both for purposes of the Plan and for sale under the Option, by
the
number of Shares as to which the Option is exercised.
(b)
Termination
of Relationship as a Service Provider
.
If an
Optionee ceases to be a Service Provider, other than upon the Optionee’s death
or Disability, the Optionee may exercise his or her Option within such period
of
time as is specified in the Award Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration
of
the term of such Option as set forth in the Award Agreement). In the absence
of
a specified time in the Award Agreement, the Option shall remain exercisable
for
three (3) months following the Optionee’s termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c)
Disability
of Optionee
.
If an
Optionee ceases to be a Service Provider as a result of the Optionee’s
Disability, the Optionee may exercise his or her Option within such period
of
time as is specified in the Award Agreement to the extent the Option is vested
on the date of termination (but in no event later than the expiration of the
term of such Option as set forth in the Award Agreement). In the absence of
a
specified time in the Award Agreement, the Option shall remain exercisable
for
twelve (12) months following the Optionee’s termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered
by
such Option shall revert to the Plan.
(d)
Death
of Optionee
.
If an
Optionee dies while a Service Provider, the Option may be exercised following
the Optionee’s death within such period of time as is specified in the Award
Agreement to the extent the Option is vested on the date of death (but in no
event later than the expiration of the term of such Option as set forth in
the
Award Agreement), by the Optionee’s designated beneficiary, provided such
beneficiary has been designated prior to Optionee’s death in a form acceptable
to the Administrator. If no such beneficiary has been designated by the
Optionee, then such Option may be exercised by the personal representative
of
the Optionee’s estate or by the person(s) to whom the Option is transferred
pursuant to the Optionee’s will or in accordance with the laws of descent and
distribution. In the absence of a specified time in the Award Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee’s
death. If, at the time of death, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
12.
Stock
Purchase Rights
.
(a)
Rights
to Purchase
.
Stock
Purchase Rights may be issued either alone, in addition to, or in tandem with
other awards granted under the Plan and/or cash awards made outside of the
Plan.
After the Administrator determines that it will offer Stock Purchase Rights
under the Plan, it shall advise the offeree in writing or electronically, by
means of a Notice of Grant, of the terms, conditions and restrictions related
to
the offer, including the number of Shares that the offeree shall be entitled
to
purchase, the price to be paid, and the time within which the offeree must
accept such offer. The offer shall be accepted by execution of a Restricted
Stock Purchase Agreement in the form determined by the
Administrator.
(b)
Number
of Shares
.
The
Administrator shall have complete discretion to determine the number of Stock
Purchase Rights granted to any Participant.
(c)
Repurchase
Option
.
Unless
the Administrator determines otherwise, the Restricted Stock Purchase Agreement
shall grant the Company a repurchase option exercisable upon the voluntary
or
involuntary termination of the purchaser’s service with the Company for any
reason (including death or Disability). The purchase price for Shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall lapse
at a rate determined by the Administrator.
(d)
Other
Provisions
.
The
Restricted Stock Purchase Agreement shall contain such other terms, provisions
and conditions not inconsistent with the Plan as may be determined by the
Administrator in its sole discretion.
(e)
Rights
as a Shareholder
.
Once
the Stock Purchase Right is exercised, the purchaser shall have the rights
equivalent to those of a shareholder, and shall be a shareholder when his or
her
purchase is entered upon the records of the duly authorized transfer agent
of
the Company. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Stock Purchase Right is exercised,
except as provided in Section 15 of the Plan.
13.
Stock
Appreciation Rights
.
(a)
Grant
of SARs
.
Subject
to the terms and conditions of the Plan, an SAR may be granted to Employees
and
Consultants at any time and from time to time as shall be determined by the
Administrator, in its sole discretion. The Administrator may grant an SAR alone
(a “freestanding SAR”), in tandem with an Option or Stock Purchase Right (a
“tandem SAR”), or any combination thereof.
(i)
Number
of Shares
.
The
Administrator shall have complete discretion to determine the number of SARs
granted to any Participant,.
(ii)
Exercise
Price and Other Terms
.
The
Administrator, subject to the provisions of the Plan, shall have complete
discretion to determine the terms and conditions of SARs granted under the
Plan.
However, the exercise price of an SAR shall be not less than one hundred percent
(100%) of the Fair Market Value of a Share on the Grant Date and the value
of
the payout with respect to an SAR shall be for no more than the excess of one
hundred percent (100%) of the Fair Market Value of the Shares subject to the
SAR
at the time the SAR is exercised over the Exercise Price of the
SAR.
(b)
Exercise
of Tandem SARs
.
Tandem
SARs may be exercised for all or part of the Shares subject to the related
Option or Stock Purchase Right upon the surrender of the right to exercise
the
equivalent portion of the related Option or Stock Purchase Right. A tandem
SAR
may be exercised only with respect to the Shares for which its related Option
or
Stock Purchase Right is then exercisable. With respect to a tandem SAR granted
in connection with an Incentive Stock Option: (a) the tandem SAR shall expire
no
later than the expiration of the underlying Incentive Stock Option; (b) the
value of the payout with respect to the tandem SAR shall be for no more than
one
hundred percent (100%) of the difference between the Exercise Price of the
underlying Incentive Stock Option and the Fair Market Value of the Shares
subject to the underlying Incentive Stock Option at the time the tandem SAR
is
exercised; and (c) the tandem SAR shall be exercisable only when the Fair Market
Value of the Shares subject to the Incentive Stock Option exceeds the Exercise
Price of the Incentive Stock Option.
(c)
Exercise
of Freestanding SARs
.
Freestanding SARs shall be exercisable on such terms and conditions as the
Administrator, in its sole discretion, shall determine.
(d)
SAR
Agreement
.
Each
SAR grant shall be evidenced by an Award Agreement that shall specify the
exercise price, the term of the SAR, the conditions of exercise, and such other
terms and conditions as the Administrator, in its sole discretion, shall
determine.
(e)
Expiration
of SARs
.
An SAR
granted under the Plan shall expire upon the date determined by the
Administrator, in its sole discretion, and set forth in the Award Agreement.
Notwithstanding the foregoing, the rules of Section 11 also shall apply to
SARs.
(f)
Payment
of SAR Amount
.
Upon
exercise of an SAR, a Participant shall be entitled to receive payment from
the
Company in an amount determined by multiplying:
(i)
The
difference between the Fair Market Value of a Share on the date of exercise
over
the exercise price; times
(ii)
The
number of Shares with respect to which the SAR is exercised.
At
the
discretion of the Administrator, the payment upon SAR exercise may be in cash,
in Shares of equivalent value, or in some combination thereof.
14.
Restricted
Stock Awards
(a)
Grant of Restricted Stock Awards.
The
Administrator may, from time to time, subject to the provisions of the Plan
and
such other terms and conditions as it may determine, grant a Restricted Stock
Award to Employees, Consultants or Directors. Restricted Stock Awards shall
be
awarded in such number and at such times during the term of the Plan as the
Administrator shall determine. Each Restricted Stock Award shall be subject
to
an Award Agreement setting forth the terms of such Restricted Stock Award and
may be evidenced in such manner as the Administrator deems appropriate,
including, without limitation, a book-entry registration or issuance of a stock
certificate or certificates.
(b)
Conditions
of Restricted Stock Awards.
The
grant of a Restricted Stock Award shall be subject to the
following:
(i)
Restriction
Period. Restricted Stock Awards granted to an Employee shall require the holder
to remain in the employment of the Company, a Subsidiary, or an Affiliate for
a
prescribed period as determined by the Administrator. Restricted Stock Awards
granted to Consultants or Directors shall require the holder to provide
continued services to the Company for a period of time as determined by the
Administrator. These employment and service requirements are collectively
referred to as a “Restriction Period”. The Administrator shall determine the
Restriction Period or Periods which shall apply to the shares of Common Stock
covered by each Restricted Stock Award or portion thereof. In addition to any
time vesting conditions determined by the Administrator, as the case may be,
Restricted Stock Awards may be subject to the achievement by the Company of
specified performance criteria based upon the Company’s achievement of all or
any of the operational, financial or stock performance criteria as may from
time
to time be established by the Board or the Administrator, as the case may be.
At
the end of the Restriction Period, assuming the fulfillment of any other
specified vesting conditions, the restrictions imposed by the Administrator
shall lapse with respect to the shares of Common Stock covered by the Restricted
Stock Award or portion thereof. In addition to any acceleration of vesting
which
may occur as provided in Section 16 hereof, the Board or Committee, as the
case
may be, may, in its discretion, accelerate the vesting of a Restricted Stock
Award in the case of the death, disability or retirement of the Participant
or
resignation of a Participant who is a consultant or a Director.
(ii)
Restrictions. The holder of a Restricted Stock Award may not sell, transfer,
pledge, exchange, hypothecate, or otherwise dispose of the shares of Common
Stock represented by the Restricted Stock Award during the applicable
Restriction Period. The Board shall impose such other restrictions and
conditions on any shares of Common Stock covered by a Restricted Stock Award
as
it may deem advisable including, without limitation, restrictions under
applicable federal or state securities laws, and may legend the certificates
representing Restricted Stock to give appropriate notice of such
restrictions.
(iii)
Rights as Stockholders. During any Restriction Period, the Board may, in its
discretion, grant to the holder of a Restricted Stock Award all or any of the
rights of a stockholder with respect to the shares, including, but not by way
of
limitation, the right to vote such shares and to receive dividends. If any
dividends or other distributions are paid in shares of Common Stock, all such
shares shall be subject to the same restrictions on transferability as the
shares of Restricted Stock with respect to which they were
paid.
15.
Non-Transferability
of Awards
.
Unless
determined otherwise by the Administrator, an Award may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than
by
will or by the laws of descent or distribution and may be exercised, during
the
lifetime of the Optionee, only by the Optionee. If the Administrator makes
an
Award transferable, such Award shall contain such additional terms and
conditions as the Administrator deems appropriate.
16.
Adjustments
Upon Changes in Capitalization, Dissolution or Liquidation, Merger or Asset
Sale
.
(a)
Changes
in Capitalization
.
Subject
to any required action by the stockholders of the Company, the number and class
of Shares that may be delivered under the Plan and/or the number, class, and
price of Shares covered by each outstanding Award, and the numerical Share
limits in Sections 4, 7, and 13 of the Plan, shall be proportionately adjusted
for any increase or decrease in the number of issued Shares resulting from
a
stock split, reverse stock split, stock dividend, combination or
reclassification of the Shares, or any other increase or decrease in the number
of issued Shares effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been “effected without receipt of consideration.”
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein,
no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Award.
(b)
Dissolution
or Liquidation
.
In the
event of the proposed dissolution or liquidation of the Company, the
Administrator shall notify each Participant as soon as practicable prior to
the
effective date of such proposed transaction. The Administrator in its discretion
may provide for a Participant to have the right to exercise his or her Award
until ten (10) days prior to such transaction as to all of the Optioned Stock
covered thereby, including Shares as to which the Award would not otherwise
be
exercisable. In addition, the Administrator may provide that any Company
repurchase option applicable to any Share’s purchased upon exercise of an Award
shall lapse as to all such Shares, provided the proposed dissolution or
liquidation takes place at the time and in the manner contemplated. To the
extent it has not been previously exercised, an Award will terminate immediately
prior to the consummation of such proposed action.
(c)
Merger
or Asset Sale
.
In the
event of a merger of the Company with or into another corporation, or the sale
of substantially all of the assets of the Company, each outstanding Award shall
be assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation; In the
event
that the successor corporation refuses to assume or substitute for the Award,
the Participant will fully vest in and have the right to exercise all of his
or
her outstanding Options and Stock Appreciation Rights, including Shares as
to
which such Awards would not otherwise be vested or exercisable, and all
restrictions on Restricted Stock will lapse. In addition, if an Option or Stock
Appreciation Right becomes fully vested and exercisable in lieu of assumption
or
substitution in the event of a merger or sale of assets, the Administrator
will
notify the Participant in writing or electronically that the Option or Stock
Appreciation Right will be fully vested and exercisable for a period of 15
days
from the date of such notice, and the Option or Stock Appreciation Right will
terminate upon the expiration of such period.
For
the
purposes of this paragraph, the Award shall be considered assumed if, following
the merger or sale of assets, the Award confers the right to purchase or
receive, for each Share subject to the Award immediately prior to the merger
or
sale of assets, the consideration (whether stock, cash, or other securities
or
property) or, in the case of a Stock Appreciation Right upon the exercise of
which the Administrator determines to pay cash, the fair market value of the
consideration received in the merger or sale of assets by holders of Common
Stock for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of consideration chosen
by the holders of a majority of the outstanding Shares); provided, however,
that
if such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator
may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of an Option or Stock Appreciation Right for
each
Share subject to such Award, to be solely common stock of the successor
corporation or its Parent equal in fair market value to the per Share
consideration received by holders of Common Stock in the merger or sale of
assets.
Notwithstanding
anything in this Section 16(c) to the contrary, an Award that vests, is earned
or paid-out upon the satisfaction of one or more Performance Goals will not
be
considered assumed if the Company or its successor modifies any of such
Performance Goals without the Participant’s consent; provided, however, a
modification to such Performance Goals only to reflect the successor
corporation’s corporate structure post-merger or post-sale of assets will not be
deemed to invalidate an otherwise valid Award assumption.
Further,
provided, notwithstanding anything in this Section 16(c) to the contrary
however, in connection with the grant of any Award to a Participant, the Company
or the Administrator shall have the right to provide for different treatment
or
rights, including the termination of an Award, upon a merger of the Company
or a
sale of assets by the Company.
17.
Date
of Grant
.
The
date of grant of an Award shall be, for all purposes, the date on which the
Company completes the corporate action necessary to create the legally binding
right constituting the Award, including without limitation determining the
maximum number of shares that can be acquired under the Award, the minimum
exercise price, the class of Shares and the identity of the Participant. Notice
of the determination shall be provided to each Optionee within a reasonable
time
after the date of such grant.
18.
Amendment
and Termination of the Plan
.
(a)
Amendment
and Termination
.
The
Board may at any time amend, alter, suspend or terminate the Plan.
(b)
Shareholder
Approval
.
The
Company shall obtain shareholder approval of any Plan amendment to the extent
necessary and desirable to comply with Applicable Laws.
(c)
Effect
of Amendment or Termination
.
No
amendment, alteration, suspension or termination of the Plan shall impair the
rights of any Optionee, unless mutually agreed otherwise between the Optionee
and the Administrator, which agreement must be in writing and signed by the
Optionee and the Company. Termination of the Plan shall not affect the
Administrator’s ability to exercise the powers granted to it hereunder with
respect to Options granted under the Plan prior to the date of such
termination.
19.
Conditions
Upon Issuance of Shares
.
(a)
Legal
Compliance
.
Shares
shall not be issued pursuant to the exercise of an Award unless the exercise
of
such Award and the issuance and delivery of such Shares shall comply with
Applicable Laws and shall be further subject to the approval of counsel for
the
Company with respect to such compliance.
(b)
Investment
Representations
.
As a
condition to the exercise of an Award, the Company may require the person
exercising such Award to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required.
20.
Inability
to Obtain Authority
.
The
inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company’s counsel to be necessary
to the lawful issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell such Shares
as to which such requisite authority shall not have been obtained.
21.
Reservation
of Shares
.
The
Company, during the term of this Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
22.
Shareholder
Approval
.
The
Plan shall be subject to approval by the shareholders of the Company within
twelve (12) months after the date the Plan was originally approved by the Board
of Directors. Such shareholder approval shall be obtained in the manner and
to
the degree required under Applicable Laws.
RXElite (CE) (USOTC:RXEI)
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RXElite (CE) (USOTC:RXEI)
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