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SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Check the appropriate box:
<TABLE>
<S> <C>
/X/ Preliminary Information Statement / / Confidential, for Use of the Commission
/ / Definitive Information Statement Only (as permitted by Rule 14c-5(d)(2))
</TABLE>
iMALL, INC.
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(Name of Registrant As Specified in Charter)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
/ / Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) 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) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials
/ / 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.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPIES
IMALL, INC.
4400 Coldwater Canyon Boulevard, Suite 200
Studio City, California 91604
INFORMATION STATEMENT
(Dated October 19, 1997)
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY. THE ACTIONS, DEFINED BELOW, HAVE ALREADY BEEN APPROVED BY WRITTEN
CONSENT OF HOLDERS OF A MAJORITY OF THE COMPANY'S OUTSTANDING COMMON STOCK. A
VOTE OF THE REMAINING SHAREHOLDERS IS NOT NECESSARY.
GENERAL
This Information Statement is first being furnished on or about October
19, 1997 to shareholders of record as of the close of business on October 15,
1997 (the "Record Date") of the Common Stock, $.001 par value per share (the
"Common Stock") of iMall, Inc., a Nevada corporation (the "Company"), in
connection with the following (collectively, the "Actions"):
1. to amend the Articles of Incorporation to authorize up to 10,000,000
shares of Preferred Stock;
2. to effect an up to 1-for-10 reverse stock split; and
3. to approve the Company's 1997 Stock Option Plan.
The Board of Directors has approved, and a total of three shareholders
(the "Consenting Shareholders") representing 39,000,000 shares (approximately
65.11%) of the 61,793,129 shares outstanding of the Common Stock as of October
8, 1997 have consented in writing, to the Actions. Such approval and consent are
sufficient under the Nevada General Corporation Law and the Company's By-Laws to
approve the Actions. Accordingly, the Actions will not be submitted to the other
shareholders of the Company for a vote and this Information Statement is being
furnished to shareholders solely to provide them with certain information
concerning the Actions in accordance with the requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the regulations
promulgated thereunder, including Regulation 14C.
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This Information Statement contains forward-looking statements which
involve risks and uncertainties. The Company's actual results may differ
significantly from the results discussed in the forward-looking statements.
FOR ADDITIONAL INFORMATION ABOUT THE COMPANY, REFERENCE IS MADE TO THE
COMPANY'S REGISTRATION STATEMENT ON FORM 10-SB.
The principal executive offices of the Company are located at 4400
Coldwater Canyon Boulevard, Suite 200, Studio City, California 91604.
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AMENDMENT TO THE CERTIFICATE
OF INCORPORATION TO AUTHORIZE UP TO 10,000,000
SHARES OF PREFERRED STOCK
The Board of Directors has unanimously adopted and the Consenting
Shareholders have approved an amendment to the Articles of Incorporation (the
"Preferred Stock Amendment") to authorize the issuance by the Company of up to
10,000,000 shares of preferred stock (the "Preferred Stock"). The text of the
Preferred Stock Amendment is attached as Exhibit A and is incorporated herein by
reference.
Reasons for the Amendment
The Board of Directors believes that the authorization of the Preferred
Stock is in the best interests of the Company and its shareholders and believes
that it is advisable to authorize such shares and have them available in
connection with possible future transactions, such as the private placement
described in the next paragraph, strategic alliances, corporate mergers,
acquisitions, possible funding of new product programs or businesses and other
uses not presently determinable and as may be deemed to be feasible and in the
best interests of the Company. In addition, the Board of Directors believes that
it is desirable that the Company have the flexibility to issue shares of
Preferred Stock without further shareholder action, except as otherwise provided
by law.
Private Placement
The Company is currently conducting a private placement (the "Private
Placement") of up to 2,000,000 shares (the "Preferred Shares") of Convertible
Preferred Stock (the "Convertible Preferred Stock") and warrants ("Warrants") to
purchase up to 5,000,000 shares of the Company's Common Stock for $.40 per share
(All per share numbers are on a pre-reverse stock split basis). The offering is
in units ("Units") at a price of $100,000 per Unit, each Unit consisting of
25,000 Preferred Shares and 62,500 Warrants which will be immediately detachable
and separately transferable. The Company has appointed Commonwealth Associates
as its exclusive placement agent for the Units. As the present Articles of
Incorporation do not authorize the issuance of any preferred stock, in order to
complete the Private Placement as presently contemplated, the Articles of
Incorporation of the Company must be amended to authorize the issuance of
Preferred Stock.
Pursuant to the Private Placement as presently contemplated, each
Preferred Share is entitled to receive dividends on a semi-annual basis, when
and as declared by the Company's Board of Directors, at the rate of 9% per annum
in preference to any payment made on any shares of Common Stock (the "Common
Shares") or on any other class or series of capital stock of the Company ranking
junior to the Convertible Preferred Stock. Any dividend payable on the Preferred
Shares will be paid, at the option of the Company in cash
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or in additional Preferred Shares valued at $4.00 per share. Each Preferred
Share is also entitled to a liquidation preference of $4.00 per share, plus any
accrued but unpaid dividends, in preference to any other class or series of
capital stock of the Company, other than the Preferred Shares or any other class
or series of capital stock which is entitled to priority over the Convertible
Preferred Stock. Except as otherwise provided by applicable law, holders of
shares of the Convertible Preferred Stock have no voting rights. At any time
after the issuance of the Convertible Preferred Stock, any holder of the
Convertible Preferred Stock may convert a Preferred Share into ten Common Shares
(the "Conversion Price") (subject to adjustment upon the occurrence certain
events including stock dividends, corporate reorganizations, stock splits etc.).
If the Common Shares issuable upon conversion of the Convertible
Preferred Stock are subject to an effective registration statement or if one
year has expired from the date of the closing of the Offering, the Company may
call for redemption the Preferred Shares upon 30 days notice at any time during
the five year period following the closing of the Private Placement (the
"Closing"), provided that the Company's Common Stock is publicly traded and its
average of the closing bid and ask price for the 30 trading day period prior to
the date of notice (the "Market Price") is in excess of one dollar per share (as
such price may be adjusted based upon certain events including stock dividends,
corporation reorganizations, stock splits, etc.).
In the event that the Market Price of the Company's stock (based upon
the average of the closing bid and ask price for any 30 consecutive trading day
period) is less than the Market Price as of the date of the Closing, the
Conversion Price will be adjusted automatically to such Market Price with
respect to all shares of Common Stock issuable upon any then unexercised
Convertible Preferred Stock.
The above description is based upon the current structure of the
Private Placement. It is possible that the terms of the Private Placement and
any capital stock issued thereunder could change in a material manner, including
that the Private Placement would not include Preferred Stock. Additionally, no
assurance can be given that the Private Placement will be consummated, or if it
is, the timing thereof.
Effect of the Amendment
The Preferred Stock issued as a result of the Preferred Stock Amendment
will have such designations, preferences, conversion rights, cumulative,
relative, participating, optional or other rights, including voting rights,
qualifications, limitations or restrictions thereof as are determined by the
Board of Directors. Upon the Preferred Stock Amendment being filed, the Board of
Directors would be entitled to authorize the creation and issuance of up to
10,000,000 shares of Preferred Stock in one or more series with such limitations
and restrictions as may be determined in the Board's sole discretion, without
further authorization by the Company's shareholders. Shareholders will not have
preemptive rights to subscribe for
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shares of Preferred Stock. If the Private Placement is consummated on the terms
described above, the Board will have the authority to designate a series of
Preferred Stock containing such terms or any different terms as finally
determined.
It is not possible to determine the actual effect of the Preferred
Stock on the rights of the shareholders of the Company until the Board of
Directors determines the rights of the holders of a series of the Preferred
Stock. However, such effects might include (i) restrictions on the payment of
dividends to holders of the Common Stock; (ii) dilution of voting power to the
extent that the holders of shares of Preferred Stock are given voting rights;
(iii) dilution of the equity interests and voting power if the Preferred Stock
is convertible into Common Stock; and (iv) restrictions upon any distribution of
assets to the holders of the Common Stock upon liquidation or dissolution and
until the satisfaction of any liquidation preference granted to the holders of
Preferred Stock.
The Board of Directors is required by Nevada law to make any
determination to issue shares of Preferred Stock based upon its judgment as to
the best interests of the Shareholders and the Company. Although the Board of
Directors has no present intention of doing so, it could issue shares of
Preferred Stock (within the limits imposed by applicable law) that could,
depending on the terms of such series, make more difficult or discourage in an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest or other means. When in the judgment of the Board of Directors
such action would be in the best interests of the shareholders and the Company,
the issuance of shares of Preferred Stock could be used to create voting or
other impediments or to discourage persons seeking to gain control of the
Company, for example, by the sale of Preferred Stock to purchasers favorable to
the Board of Directors. In addition, the Board of Directors could authorize
holders of a series of Preferred Stock to vote either separately as a class or
with the holders of Common Stock on any merger, sale or exchange of assets by
the Company or any other extraordinary corporate transaction. The existence of
the additional authorized shares could have the effect of discouraging
unsolicited takeover attempts. The issuance of new shares could also be used to
dilute the stock ownership of a person or equity seeking to obtain control of
the Company should the Board of Directors consider the action of such entity or
person not to be in the best interests of the shareholders and the Company. Such
issuance of Preferred Stock could also have the effect of diluting the earnings
per share and book value per share of the Common Stock held by the holders of
the Common Stock.
While the Company may consider effecting an equity offering of
Preferred Stock in the future for the purposes of raising additional working
capital or otherwise, the Company, except as set forth above with regard to the
Private Placement, as of the date hereof has no agreements or understandings
with any third party to effect any such offering and no assurances are given
that any offering will in fact be effected.
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DISSENTER'S RIGHTS
Pursuant to the Nevada General Corporation Law, the Company's
shareholders are not entitled to dissenters' rights of appraisal with respect to
the Preferred Stock Amendment.
REVERSE STOCK SPLIT
The Board of Directors has authorized and the Consenting Shareholders
have approved an amendment to the Articles of Incorporation (the "Reverse Stock
Split Amendment") with respect to an up to 1:10 reverse stock split (the
"Reverse Stock Split") of the issued and outstanding shares of the Company's
Common Stock to be effective as and when determined by the Board of Directors
(the "Effective Date"). The exact amount of the Reverse Split will also be
determined by the Board of Directors.
GENERAL
Upon the Effective Date, the Reverse Stock Split will be deemed
effective, and each certificate representing shares of Common Stock outstanding
immediately prior to the Reverse Stock Split (the "Old Shares") will be deemed
automatically, without any action on the part of the shareholders, to represent
up to 1/10 (with the exact amount to be determined by the Board of Directors) of
the number of shares of Common Stock after the Reverse Stock Split (the "New
Shares"); provided, however, that no fractional New Shares will be issued as a
result of the Reverse Split. In lieu of such fractional interest, a shareholder
will receive cash equal to the average closing prices of the Common Stock for
the three trading days following the Effective Date multiplied by the fractional
interest. After the Reverse Split becomes effective, shareholders will be asked
to surrender certificates representing Old Shares in accordance with the
procedures set forth in a letter of transmittal to be sent by the Company. Upon
such surrender, a certificate representing the New Shares will be issued
(together with cash for any fractional interest) and forwarded to the
shareholders. However, each certificate representing Old Shares will continue to
be valid and represent New Shares equal to up to 1/10 the number of Old Shares.
PURPOSES OF THE PROPOSED REVERSE SPLIT
The Reverse Stock Split is to be effected for several reasons. The
Reverse Stock Split should enhance the acceptability of the Common Stock by the
financial community and investing public. The reduction in the number of issued
and outstanding shares of Common Stock caused by the Reverse Stock Split is
expected to increase the market price of the Common Stock. The Board of
Directors also believes that the proposed Reverse Stock Split will result in a
broader market for the Common Stock than that which currently exists. A variety
of brokerage house policies and practices tend to discourage individual
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brokers within those firms from dealing with lower priced stocks. Some of those
policies and practices pertain to the payment of broker's commissions and to the
procedures that function to make the handling of lower priced stock economically
unattractive to brokers. In addition, the structure of trading commissions also
tends to have an adverse impact upon holders of lower priced stock because the
brokerage commission on a sale of lower priced stock generally represents a
higher percentage of the sales price than the commission of a relatively higher
priced issue. The Reverse Stock Split may result in a price level for the Common
Stock that will reduce, to some extent, the effect of the above-referenced
policies and practices of brokerage firms and diminish the adverse impact of
trading commissions on the market for the Common Stock. The expected increased
price level may also encourage interest and trading in the Common Stock and
possibly promote greater liquidity for the Company's shareholders.
Currently, the Company's shares of Common Stock are traded on the OTC
Electronic Bulletin Board. The Board of Directors believes that the Reverse
Stock Split may be of assistance in the Company's efforts to meet the initial
listing application requirements maintained by NASDAQ for its SmallCap Market.
However, there can be no assurance that any or all of these effects
will occur; including, without limitation, that the market price per New Share
Common Stock after the Reverse Stock Split will be up to ten times the market
price of an Old Share of Common Stock before the Reverse Stock Split, or that
such price will either exceed or remain in excess of the current market price.
Further, there is no assurance that the market for the Common Stock will be
improved. Shareholders should note that the Board of Directors cannot predict
what effect the Reverse Stock Split will have on the market price of the Common
Stock.
IMPLEMENTATION OF REVERSE STOCK SPLIT
The Reverse Stock Split will be effected by filing the Reverse Stock
Split Amendment to the Articles of Incorporation with the Nevada Secretary of
State. Upon the effectiveness of the filing, without any further action on the
part of the Company or the shareholders, after the Effective Date, the
certificates representing Old Shares will be deemed to represent up to 1/10 of
the number of New Shares (exclusive of any fractional interest).
As soon as practicable after the Effective Date, the Company will send
a letter of transmittal to each holder of record of Old Shares of Common Stock
outstanding on the Effective Date. The letter of transmittal will contain
instructions for the surrender of certificate(s) representing such Old Shares to
Signature Stock Transfer, Inc., the Company's exchange agent (the "Exchange
Agent"). Upon proper completion and execution of the letter of transmittal and
return thereof to the Exchange Agent, together with the certificate(s)
representing Old Shares, a shareholder will be entitled to receive a certificate
representing the number of New Shares of Common Stock into which his Old Shares
have been reclassified and changed as a result of the Reverse Stock Split and
cash for any fractional share interest.
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Shareholders should not submit any certificates until requested to do
so. No new certificates will be issued to a shareholder until he has surrendered
his outstanding certificate(s) together with the properly completed and executed
letter of transmittal to the Exchange Agent.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT
The Company has not sought and will not seek an opinion of counsel or a
ruling from the Internal Revenue Service regarding the federal income tax
consequences of the Reverse Stock Split. The Company, however, believes that
because the Reverse Stock Split is not part of a plan to periodically increase a
shareholder's proportionate interest in the assets or earnings and profits of
the Company, the Reverse Stock Split will have the following federal income tax
effects:
1. Except to the extent of the cash received for any fractional
interest, a shareholder will not recognize gain or loss on the exchange. In the
aggregate, the shareholder's basis in the New Shares will equal his basis in the
Old Shares.
2. A shareholder's holding period for the New Shares will be the same
as the holding period on the Old Shares exchanged therefor.
3. The Reverse Stock Split will constitute a reorganization within the
meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as
amended, and the Company will not recognize any gain or loss as a result of the
Reverse Stock Split.
APPROVAL OF THE 1997 STOCK OPTION PLAN
Effective January 31, 1997, the Board of Directors (the "Board")
adopted the 1997 Stock Option Plan (the "Plan"), subject to shareholder
approval.
The following summary describes the material features of the Plan.
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PURPOSE
The purpose of the Plan is to provide additional incentive to those
officers, directors and key employees and consultants of the Company whose
substantial contributions are essential to the continued growth and success of
the Company's business in order to strengthen their commitment to the Company,
to motivate such officers, directors, consultants and employees to faithfully
and diligently perform their assigned responsibilities and to attract and retain
competent and dedicated individuals whose efforts will result in the long-term
growth and profitability of the Company.
COMMON STOCK AVAILABLE
Subject to adjustment as described below, the maximum number of shares
of Common Stock which may be awarded under the Plan may not exceed an aggregate
of 6,000,000 shares over the life of the Plan. The Plan provides for equitable
adjustment of the number of shares subject to the Plan and the number of shares
of each subsequent award of stock thereunder and of the unexercised portion of
the stock option award described below in the event of a change in the
capitalization of the Company due to a stock split, stock dividend,
recapitalization, merger or similar event.
ELIGIBILITY
Persons who are eligible to receive stock options granted under the
Plan are those individuals and entities as the Compensation Committee or such
other committee appointed by the Board of Directors to administer the Plan (the
"Committee") in its discretion determines should be awarded such incentives
given the best interest of the Company; provided, however, that incentive stock
options ("ISOs") may only be granted to employees of the Company and its
affiliates. Additionally, any person holding capital stock possessing more than
10% of the total combined voting power of all classes of stock of the Company or
any affiliate are not eligible to receive ISOs unless the exercise price per
share is at least 110% of the fair market value of the stock on the date the
option is granted.
ADMINISTRATION
The authority to control and manage the operation and administration of
the Plan is vested in the Committee appointed by the Board from time to time.
Members of the Committee shall serve at the pleasure of the Board of Directors.
The Committee may from time to time determine which employees of the Company or
its affiliates or other individuals or entities may be granted options under the
Plan, the terms thereof (including, without limitation, determining whether the
option is an ISO and the times at which the option shall become exercisable),
and the number of shares for which an option or options may be granted. If
rights of the Company to repurchase stock are imposed, the Board or the
Committee may, in its sole discretion, accelerate, in whole or in part, the time
for lapsing of
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any rights of the Company to repurchase shares or forfeiture restrictions. The
Board or the Committee has the sole authority, in its absolute discretion, to
adopt, amend and rescind such rules and regulations, consistent with the
provisions of the Plan, as, in its opinion, may be advisable in the
administration of the Plan, to construe and interpret the Plan, the rules and
regulations, and the instruments evidencing options granted under the Plan and
to make all other determinations deemed necessary or advisable for the
administration of the Plan. All decisions, determinations and interpretations of
the Committee are binding on all option holders under the Plan.
GRANT AND EXERCISE OF OPTIONS
All ISOs will have option exercise prices per option share not less
than the fair market value of a share on the date the option is granted, except
in the case of ISOs granted to any person possessing more than 10% of the total
combined voting power of all classes of stock in which case the price will be
not less than 110% of such fair market value. The term of each option may not be
more than 10 years, except that the term of each ISO issued to any person
possessing more than 10% of the voting power of all classes of stock may not be
more than five years.
The vesting schedule for any option granted under the Plan, will be
determined by the Board or the Committee and will be set forth in a specific
option agreement. To the extent not exercised, installments will accumulate and
be exercisable, in whole or in part, at any time after becoming exercisable, but
not later than the date the option expires. The Committee has the right to
accelerate the exercisability of any option.
Each ISO granted pursuant to the Plan is exercisable, during the
optionee's lifetime, only by the optionee or the optionee's guardian or legal
representative. Neither the option nor any right to purchase stock may be
transferred, assigned or pledged other than by will under the laws of descent
and distribution.
Payment of the purchase price is by cash or check, or, at the
discretion of the Committee, by transfer of shares or pursuant to a cashless
exercise feature.
The Committee may, in its discretion, assist any option holder in the
exercise of options granted under the Plan, including the satisfaction of any
tax arising therefrom by (i) authorizing the extension of the loans from the
Company, (ii) permitting the option holder to pay the exercise price in
installments or (iii) authorizing a guaranty by the Company of a third party
loan to the option holder.
AMENDMENT AND TERMINATION
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The Board may at any time suspend or terminate the Plan, and may amend
it from time to time in such respects as the Board may deem advisable. The Plan
shall terminate on the earlier of January 31, 2007.
As of October 1, 1997, options for the purchase of 846,540 shares were
outstanding by 67 employees.
MARKET VALUE OF UNDERLYING SECURITIES
On October 9, 1997, the closing bid price for the Company's Common
Stock on the OTC Bulletin Board was $.5625.
FEDERAL INCOME TAX INFORMATION
Under the terms of the Plan, options may be granted as either ISO's
under Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code")
and the regulations thereunder or non-incentive stock options under Section 18
of the Code ("NSO"). In general, an optionee does not recognize taxable income
upon grant or exercise of an ISO and the Company is not entitled to any business
expense deduction with respect thereto. However, upon the exercise of an ISO,
the excess of the fair market value on the date of exercise of the shares
received over the exercise price of the shares is treated as an item of
adjustment for purpose of calculating alternative minimum taxable income. In
order for the exercise of an ISO to qualify for the foregoing tax treatment, the
optionee generally must be an employee of the Company or a subsidiary (within
the meaning of Section 422 of the Code) from the date the ISO is granted through
the date three months before the date of exercise (one year before the date of
exercise in the case of an optionee who is terminated due to disability).
If the optionee has held the shares acquired upon exercise of an ISO
for at least two years after the date of grant and for at least one year after
the date of exercise, upon disposition of the shares by the optionee, the
difference, if any, between the sales price of the shares and the exercise price
of the option is treated as long-term capital gain or loss. If the optionee does
not satisfy these ISO holding period requirements (a "Premature Disposition"),
the optionee will recognize ordinary income at the time of the disposition of
the shares, generally in an amount equal to the excess of the fair market value
of the shares at the time the option was exercised over the exercise price of
the option. The balance of the gain realized, if any, will be long-term or
short-term capital gain, depending on the holding period. If the optionee sells
the shares prior to the satisfaction of the ISO holding period requirements, but
at a price below the fair market value of the shares at the time the option was
exercised, the amount of ordinary income is limited to the amount realized on
the sale over the exercise price of the option. Upon a Premature Disposition,
the Company and its subsidiaries is allowed a business expense deduction to the
extent the optionee recognizes ordinary income.
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In general, an optionee to whom a NSO is granted recognizes no income
at the time of the grant of the option. Upon exercise of a NSO, an optionee
recognizes ordinary income and the Company is entitled to a deduction in an
amount equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price of the option. The Company's deduction is
conditioned upon its reporting the income amount.
The foregoing summary of the Plan is subject to the provisions of the
Plan which is included as Appendix A to this Proxy Statement.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
PERSONS ENTITLED TO NOTICE
The record dates for the determination of the shareholders entitled to
notice of and to consent to the Actions has been fixed as of the close of
business on October 20, 1997. As of the October 8, 1997, there were outstanding
61,793,129 shares of Common Stock, each of which is entitled to one vote.
Since the Actions have been duly approved by the Consenting
Shareholders holding a majority of the outstanding Common Stock, approval or
consent of the remaining shareholders is not required and is not being solicited
hereby or by any other means.
PRINCIPAL SHAREHOLDERS
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the Company
as of October 8, 1997 with respect to the beneficial ownership of the
outstanding shares of the Common Stock by the Company's directors and executive
officers and the directors and executive officers of the Company as a group. The
Company is aware of no shareholders other than certain directors and executive
officers of the Company who beneficially own more than five percent of the
outstanding shares of the Company's common stock. Each person listed below has
personal and sole beneficial ownership of the shares of common stock listed with
their name.
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<TABLE>
<CAPTION>
Name and Address of Number of
Beneficial Owner Shares Percentage(1)
- ------------------- --------- -------------
<S> <C> <C>
Craig R. Pickering 13,000,000 21.0%
1185 South Mike Jense Circle
Provo, Utah 84601
Richard Rosenblatt 13,000,000 21.0%
4400 Coldwater Canyon Blvd
Suite 200
Studio City, California 91604
Mark R. Comer 13,000,000 21.0%
4400 Coldwater Canyon Blvd
Suite 200
Studio City, California 91604
Stephen Fulling 0 0.0%
1185 South Mike Jense Circle
Provo, Utah 84601
Martin Rosenblatt 1,353,333 2.2%
4400 Coldwater Canyon Blvd
Suite 200
Studio City, California 91604
Craig Lewis 15,500 0.1%
1185 South Mike Jense Circle
Provo, Utah 84601
David M. Rees 0 0.0%
1185 South Mike Jense Circle
Provo, Utah 84601
Total of Directors 40,368,833 65.3%
and Executive
Officers as a group (7 persons)
</TABLE>
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(1) Based on 61,793,129 shares of common stock outstanding as of
October 8, 1997.
By Order of the Board of Directors
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ARTICLE IV of the Articles of Incorporation of the Company shall be amended to
read as follows:
The total authorized capitalization of this Corporation shall be 300,000,000
shares of Common Stock par value of $.001 per share and 10,000,000 shares of
Preferred Stock par value of $.001 per share.
The shares of preferred stock authorized hereby may, when authorized
for issuance by the Board of Directors of this corporation, be issued in series
having such designations, powers, preferences, rights and limitations, and on
such terms and conditions as the Board of Directors may from time to time
determine including the rights, if any, of the holders thereof with respect to
voting, dividends, redemption, liquidation and conversion.
Exhibit A
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IMALL, INC.
1997 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Plan is to provide additional incentive
to those directors, officers, and key employees and consultants of the Company
whose substantial contributions are essential to the continued growth and
success of the Company's business in order to strengthen their commitment to the
Company, to motivate such directors, officers, and employees and consultants to
faithfully and diligently perform their assigned responsibilities and to attract
and retain competent and dedicated individuals whose efforts will result in the
long-term growth and profitability of the Company. To accomplish such purposes,
the Plan provides that the Company may grant Incentive Stock Options or
Nonqualified Stock Options.
2. DEFINITIONS. For purposes of this Plan:
(a) "Agreement" means the written agreement evidencing the grant of
an Option setting forth the terms and conditions thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means, unless otherwise defined in the particular
Agreement evidencing the grant of an Option or an employment agreement covering
the Optionee, (i) the willful neglect or refusal to perform the Optionee's
duties or responsibilities or the willful taking of actions which materially
impair the Optionee's ability to perform the Optionee's duties or
responsibilities which continues after being brought to the attention of the
Optionee (other than any such failure resulting from the Optionee's incapacity
due to physical or mental illness) or (ii) the willful act or failure to act by
the Optionee which is materially injurious to the Company.
(d) "Change in Capitalization" means any increase, reduction, or
change or exchange of Shares for a different number or kind of shares or other
securities of the Company by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, issuance of warrants or rights, stock
dividend, stock Split Or reverse stock split, combination or exchange of shares,
repurchase of shares, change in corporate structure or otherwise.
(e) "Code" means the Internal Revenue Code of 1986, as amended.
(f) "Committee" means the Compensation Committee of the Board or
such other committee appointed by the Board to administer the Plan and to
perform the functions set forth herein.
(g) "Company" means iMall, Inc., a Nevada corporation.
(h) "Eligible Employee" means any director, officer or other key
employee or consultant of the Company designated by the Committee as eligible to
receive Options subject to the conditions set forth herein.
(i) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(j) "Fair Market Value" means the fair market value of the Shares as
determined by the Committee in its sole discretion; provided, however, that (A)
if the Shares are admitted to trading on a national securities exchange, Fair
Market Value on any date shall be the last
Exhibit B
<PAGE> 17
sale price reported for the Shares on such exchange on such date or on the last
date preceding such date on which a sale was reported, (B) if the Shares are
admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") or other comparable quotation system and
have been designated as a National Market System ("NMS") security, Fair Market
Value on any date shall be the last sale price reported for the Shares on such
system on such date or on the last day preceding such date on which a sale was
reported, or (C) if the Shares are admitted to quotation on NASDAQ and have not
been designated a NMS security, Fair Market Value on any date shall be the
average of the highest bid and lowest asked prices of the Shares on such system
on such date.
(k) "Incentive Stock Option" means an Option within the meaning of
Section 422 of the Code.
(l) "Nonqualified Stock Option" means an Option which is not an
Incentive Stock Option.
(m) "Option" means at Incentive Stock Option, a Nonqualified Stock
Option, or either or both of them, as the context requires.
(n) "Optionee" means a person to whom an Option has been granted
under the Plan.
(o) "Parent" means any corporation in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the
Company owns stock possessing 50% or more of the total combined voting power of
all classes of stock of one of the other corporations in such chain.
(p) "Plan" means the iMall, Inc. 1997 Stock Option Plan, as amended
from time to time.
(q) "Securities Act" means the Securities Act of 1933, as amended.
(r) "Shares" means of the common stock, par value $.001 per share of
the Company (including any new, additional or different stock or securities
resulting from a Change in Capitalization).
(s) "Ten-Percent Stockholder" means an Eligible Employee, who, at
the time an Incentive Stock Option is to be granted to such Eligible Employee,
owns (within the meaning of Section 422(b)(6) of the Code) stock possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company, a Parent or a Subsidiary within the meaning of Sections
422(e) and 422(f), respectively, of the Code.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee which shall hold
meetings at such times as may be necessary for the proper administration of the
Plan. The Committee shall keep minutes of its meetings. A majority of the
Committee shall constitute a quorum and a majority of a quorum may authorize any
action. Any decision reduced to writing and signed by a majority of the members
of the Committee shall be fully effective as if it had been made at a meeting
duly held. No member of the Committee shall be personally liable for any action,
determination or interpretation made in good faith with respect to the Plan or
Options, and all members of the Committee shall be fully indemnified by the
Company with respect to any such action, determination or interpretation. The
Company shall pay all expenses incurred in the administration of the Plan.
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(b) Subject to the express terms and conditions set forth herein,
the Committee shall have the power firm time to time:
(i) to determine those Eligible Employees to whom Options shall
be granted under the Plan and the number of Nonqualified Options and/or
Incentive Stock Options to be granted to each Eligible Employee and to
prescribe the terms and conditions (which need not be identical) of
each Option including the purchase price per Share of each Option;
(ii) to construe and interpret the Plan and the Options granted
hereunder and to establish, amend and revoke rules and regulations for
the administration of the Plan, including, but not limited to,
correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the manner and to the
extent it shall deem necessary or advisable to make the Plan fully
effective, and all decisions and determinations by the Committee in the
exercise of this power shall be final and binding upon the Company and
the Optionees, as the case may be:
(iii) to determine the duration and purposes for leaves of
absence which may be granted to an Optionee without constituting a
termination of employment or service for purposes of the Plan; and
(iv) generally, to exercise such powers and to perform such acts
as are deemed necessary or advisable to promote the best interests of
the Company with respect to the Plan.
4. STOCK SUBJECT TO PLAN.
(a) The maximum number of Shares that may be issued or transferred
pursuant to Options is 6,000,000 (or the number and kind of share of stock or
other securities which are substituted for those Shares or to which those Shares
are adjusted upon a Change in Capitalization), and the Company shall reserve for
the purposes of the Plan, out of its authorized but unissued Shams or out of
Shares held in the Company's treasury, or partly out of each, such number of
Shares as shall be determined by the Board.
(b) Whenever any outstanding Option or portion thereof expires, is
cancelled or is otherwise terminated (other than by exercise of the Option), the
Shares allocable to the unexercised portion of such Option may again be the
subject of Options hereunder.
5. ELIGIBILITY. Subject to the provisions of the Plan, the Committee
shall have full and final authority to select those Eligible Employees who will
receive Options.
6. OPTIONS. The Committee may grant Options in accordance with the
Plan, the terms and conditions of which shall beset forth in an Agreement. Each
Option and Agreement shall be subject to the following conditions:
(a) Purchase Price. The purchase price or the manner in which the
purchase price is to be determined for Shares under each Option shall be set
forth in the Agreement; provided, however, in the case of an Incentive Stock
Option the purchase price per Share under the Option shall not be less than 100%
of the Fair Market Value of a Share at the time the Option is granted (110% of
the Fair Market Value of a Share at the time the Option is granted in the case
of an Incentive Stock Option granted to a Ten-Percent Stockholder).
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(b) Duration. Options granted hereunder shall be for such term as
the Committee shall determine, provided that no Option shall be exercisable
after the expiration of ten (10) years from the date it is granted (five (5)
years in the case of an Incentive Stock Option granted to a Ten-Percent
Stockholder). The Committee may, subsequent to the granting of any Option,
extend the term thereof but in no event shall the term as so extended exceed the
maximum term provided for in the preceding sentence.
(c) Non-transferability. No Incentive Stock Option granted hereunder
shall be transferable by the Optionee to whom granted otherwise than by will or
the laws of descent and distribution, and an Incentive Stock Option may be
exercised during the lifetime of such Optionee only by the Optionee or such
Optionee's guardian or legal representative. The terms of such Option shall be
binding upon the beneficiaries, executors, administrators, heirs and successors
of the Optionee.
(d) Vesting. The terms pertaining to the exercise of Options shall
be as determined by the Committee and the Committee may accelerate the
exercisability of any Option or portion thereof at any time.
(e) Termination of Employment. Unless otherwise set forth in the
Agreement, in the event that an Optionee ceases to be employed by the Company,
any outstanding Options held by such Optionee shall, unless the Agreement
evidencing such option provides otherwise, terminate as follows:
(i) If the Optionee's termination of employment is due to his
death, disability or retirement, the Option (to the extent exercisable
at the time of the Optionee's termination of employment) shall be
exercisable for a period of one (1) year following such termination of
employment, and shall thereafter terminate;
(ii) If the Optionee's termination of employment is by the
Company for Cause, the Option shall terminate on the date of the
Optionee's termination of employment; and
(iii) If the Optionee's termination of employment is for any
other reason, the Option (to the extent exercisable at the time of the
Optionee's termination of employment) shall be exercisable for a period
of ninety (90) days following such termination of employment, and shall
thereafter terminate.
Notwithstanding the foregoing, the Committee may provide, either at
the time an Option is granted or thereafter, that the Option may be exercised
after the periods provided for in this Section 6(e), but in no event beyond the
term of the Option.
(f) Method of Exercise. The exercise of an Option shall be made only
by a written notice delivered to the Secretary of the Company at the Company's
principal executive office specifying the number of Shares to be purchased and
accompanied by payment therefor and otherwise in accordance with the Agreement
pursuant to which the Option was granted. The purchase price for any Shares
purchased pursuant to the exercise of an Option shall be paid in full upon such
exercise in cash, by check, or, at the discretion of the Committee and upon such
terms and conditions as the Committee shall approve, by transferring Shares to
the Company or by a cashless exercise procedure. Any Shares transferred to the
Company as payment of the purchase price under an Option shall be valued at
their Fair Market Value on the day preceding the date of exercise of such
Option. If requested by the Committee, the Optionee shall deliver the Agreement
evidencing the Option to the Secretary of the Company who shall endorse thereon
a notation of such exercise and return such Agreement to the Optionee. Not less
than 100 Shares may be purchased at any time upon the exercise
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<PAGE> 20
of an Option unless the number of Shares so purchased constitutes the total
number of shares then purchasable under the Option.
(g) Rights of Optionees. No optionee shall be deemed for any purpose
to be the owner of any Shares subject to any Option unless and until (i) the
Option shall have been exercised pursuant to the terms thereof, (ii) the Company
shall have issued and delivered the Shares to the Optionee and (iii) the
Optionee's name shall have been entered as a stockholder of record on the books
of the Company. Thereupon, the Optionee shall have full voting, dividend and
other ownership rights with respect to such Shares.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION.
(a) In the event of a Change in Capitalization, the Committee shall
conclusively determine the appropriate adjustments, if any, to the maximum
number and class of shares of stock with respect to which options may be granted
under the Plan, the number and class of shares of stock as to which Options have
been granted under the Plan, and the purchase price therefor, if applicable.
Notwithstanding the foregoing, in the event of a Change in Capitalization
involving a merger, consolidation, reorganization, change in control or similar
event, the following shall apply: (a) the survivor or acquiror, as the case may
be, (the "Buyer") shall have the right to assume the Options or replace the
Options by similar options to acquire the Buyer's stock, (b) the Company may
accelerate all Options on or before the closing of the Change in Capitalization
subject to the availability of a reasonable period of time for the Optionees to
exercise the Options, or (c) the Company may cash out the outstanding Options
based on the then fair market value of the Options.
(b) Any such adjustment in the Shares or other securities subject to
outstanding Incentive Stock Options (including any adjustments in the purchase
price) shall be made in such manner as not to constitute a modification as
defined by Section 424(h)(3) of the Code and only to the extent otherwise
permitted by Sections 422 and 424 of the Code.
8. TERMINATION AND AMENDMENT OF THE PLAN. The Plan shall terminate on
the day preceding the tenth anniversary of its effective date, except with
respect to Options outstanding on such date, and no Options may be granted
thereafter. The Board may sooner terminate or amend the Plan at any time, and
from time to time; provided, however, that, except as provided in Section 7
hereof, no amendment shall be effective unless approved by the stockholders of
the Company where stockholder approval of such amendment is required (a) to
comply with Rule 16b-3 under the Exchange Act subsequent to the registration of
a class of equity securities of the Company under Section 12 of the Exchange Act
or (b) to comply with any other law, regulation or stock exchange rule. Except
as provided in Section 7 hereof, rights and obligations under any Option granted
before any amendment of the Plan shall not be adversely altered or impaired by
such amendment, except with the consent of the Optionee.
9. NON-EXCLUSIVITY OF THE PLAN. The adoption of the Plan by the Board
shall not be construed as amending, modifying or rescinding any previously
approved incentive arrangement or as creating any limitations on the power of
the Board to adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of stock options otherwise than
under the Plan, and such arrangements may be either applicable generally or only
in specific cases.
10. LIMITATION OF LIABILITY. As illustrative of the limitations of
liability of the Company, but not intended to be exhaustive thereof, nothing in
the Plan shall be construed to:
(a) give any person any right to be granted an Option other than at
the sole discretion of the Committee;
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<PAGE> 21
(b) give any person any rights whatsoever with respect to Shares
except as specifically provided in the Plan;
(c) limit in any way the right of the Company to terminate the
employment of any person at any time; or
(d) be evidence of any agreement or understanding, expressed or
implied, that the Company will employ any person in any particular position, at
any particular rate of compensation or for any particular period of time.
11. REGULATIONS AND OTHER APPROVALS; GOVERNING LAW.
(a) This Plan and the rights of all persons claiming hereunder
shall be construed and determined in accordance with the laws of the State of
Utah without giving effect to the choice of law principles thereof.
(b) The obligation of the Company to sell or deliver Shares with
respect to Options granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable federal and state
securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Committee.
(c) Subsequent to the registration of a class of equity securities
of the Company under Section 12 of the Exchange Act, any provisions of the Plan
inconsistent with Rule 16b-3 under the Exchange Act shall be inoperative and
shall not affect the validity of the Plan.
(d) Except as otherwise provided in Section 8, the Board may make
such changes as may be necessary or appropriate to comply with the rules and
regulations of any government authority or to obtain for Optionees granted
Incentive Stock Options, the tax benefits under the applicable provisions of the
Code and regulations promulgated thereunder.
(e) Each Option is subject to the requirement that, if at any time
the Committee determines, in its absolute discretion, that the listing,
registration or qualification of Shares issued pursuant to the Plan is required
by any securities exchange or under any state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the grant of an Option or the issuance of
Shares, no Options shall be granted or payment made or Shares issued, in whole
or in part, unless listing, registration, qualification consent or approval has
been effected or obtained free of any conditions as acceptable to the Committee.
(f) In the event that the disposition of Shares acquired pursuant
to the Plan is not covered by a then current registration statement under the
Securities Act and is no not otherwise exempt from such registration, such
Shares shall be restricted against transfer to the extent required by the
Securities Act or regulations thereunder, and the Committee may require an
Optionee receiving Shares pursuant to the Plan, as a condition precedent to
receipt of such Shares, to represent to the Company in writing that the Shares
acquired by such Optionee are acquired for investment only and not with a view
to distribution.
12. MISCELLANEOUS.
(a) Multiple Agreements. The terms of each Option may differ from
other Options granted under the Plan at the same time, or at any other time. The
Committee may also grant more than one Option to a given Optionee during the
term of the Plan, either in addition to, or in substitution for, one or more
Options previously granted to that Optionee. The grant of multiple
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<PAGE> 22
Options may be evidenced by a single Agreement or multiple Agreements, as
determined by the Committee.
(b) Withholding of Taxes. The Company shall have the right to
deduct from any payment of cash to any Optionee an amount equal to the federal,
state and local income taxes and other amounts required by law to be withheld
with respect to any Option. Notwithstanding anything to the contrary contained
herein, if an Optionee is entitled to receive Shares upon exercise of an Option,
the Company shall have the right to require such Optionee, prior to the delivery
of such Shares, to pay to the Company the amount of any federal, state or local
income takes and other amounts which the Company is required by law to withhold.
The Agreement evidencing any Incentive Stock Options granted under this Plan
shall provide that if the Optionee makes a disposition, within the meaning of
Section 424(c) of the Code and regulations promulgated thereunder, of any Share
or Shares issued to such Optionee pursuant to such Optionee's exercise of the
Incentive Stock Option, and such disposition occurs within the two-year period
commencing on the day after the date of grant of such Option or within the one
year period commencing on the day after the sale or transfer of the Share or
Shares to the Optionee pursuant to the exercise of such Option, such Optionee
shall, within ten (10) days of such disposition, notify the Company thereof and
thereafter immediately deliver to the Company any amount of federal, state or
local income taxes and other amounts which the Company informs the Optionee the
Company is required to withhold.
(c) Designation of Beneficiary. Each Optionee may, with the consent
of the Committee, designate a person or persons to receive in event of such
Optionee's death, any Option or any amount of Shares payable pursuant thereto,
to which such Optionee would then be entitled. Such designation will be made
upon forms supplied by and delivered to the Company and may be revoked or
changed in writing. in the event of the death of an Optionee and in the absence
of a beneficiary validly designated under the Plan who is living at the time of
such Optionee's death, the Company shall deliver such Options and/or amounts
payable to the executor or administrator of the estate of the Optionee, or if no
such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its discretion, may deliver such Options and/or
amounts payable to the spouse or to any one or more dependents or relatives of
the Optionee, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
13. EFFECTIVE DATE. The effective date of the Plan is January 31, 1997.
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