SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
(Amendment No. ___)
[X] Filed by the Registrant
[ ] File by a Party other than the Registrant
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e) (2))
[ ] Definitive Additional Materials
[X] Definitive Proxy Statement
[ ] Soliciting Material Pursuant to sec.240.14a-11 (c) or sec.240.14a-12
PIRANHA INTERACTIVE PUBLISHING, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(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):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid: $_________
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:
(2) Form, Schedule or Registration Statement No.: _________
(3) Filing Party:
(4) Date Filed:
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PIRANHA INTERACTIVE PUBLISHING, INC.
1839 WEST DRAKE, SUITE B
TEMPE, ARIZONA 85285
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 15, 1998
To the Stockholders of Piranha Interactive Publishing, Inc.:
The Annual Meeting of the stockholders of Piranha Interactive Publishing,
Inc., a Nevada corporation (the "Company"), will be held at RCG Capital Markets
Group, Inc., 5635 East Thomas Road, Phoenix, Arizona 85018, on Thursday, October
15, 1998, at 9:00 a.m. M.S.T. for the following purposes:
1. To elect two Class I Directors to serve a three-year term;
2. To increase the number of shares reserved for issuance under the 1996
Stock Option Plan to 700,000 shares;
3. To ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent public accounting firm for the year ending
December 31, 1998; and
4. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Stockholders of record at the close of business on August 21, 1998 (the
"Record Date") are entitled to vote at the meeting and any adjournment or
postponement thereof. Shares can be voted at the meeting only if the holder is
present or represented by proxy. A list of stockholders entitled to vote at the
meeting will be available for inspection at the Company's corporate headquarters
for any purpose germane to the Annual Meeting during ordinary business hours for
ten (10) days prior to the meeting.
A copy of the Company's 1997 Annual Report to Stockholders, which includes
audited financial statements, is enclosed. Management and the Board of Directors
cordially invite you to attend the Annual Meeting.
By Order of the Board of Directors,
/s/ Timothy M. Brannan
Timothy M. Brannan
President and Chief Executive Officer
Tempe, Arizona
September 18, 1998
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THIS MEETING. PLEASE
COMPLETE, DATE, SIGN AND PROMPTLY MAIL THE ENCLOSED PROXY CARD IN THE
ACCOMPANYING ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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PIRANHA INTERACTIVE PUBLISHING, INC.
PROXY STATEMENT FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 15, 1998
TABLE OF CONTENTS
Page
----
INFORMATION CONCERNING SOLICITATION AND VOTING.......................... 1
Voting and Revocation of Proxies................................... 1
Solicitation of Proxies............................................ 1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......... 2
Voting Trust Agreement and Irrevocable Proxy Agreement............. 2
Escrow Agreements.................................................. 3
PROPOSAL NO. 1: ELECTION OF DIRECTORS................................... 6
DIRECTORS AND EXECUTIVE OFFICERS........................................ 6
Meetings and Committees of the Board of Directors.................. 7
EXECUTIVE COMPENSATION.................................................. 8
Directors' Compensation............................................ 8
Indemnification and Limitation of Liability........................ 8
Employment Agreements.............................................. 8
PROPOSAL NO. 2: AMEND 1996 STOCK OPTION PLAN............................ 9
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................... 11
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT....................... 11
PROPOSAL NO. 3: RATIFICATION OF APPOINTMENT OF
INDEPENDENT PUBLIC ACCOUNTANTS....................................... 12
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING....................... 12
OTHER BUSINESS.......................................................... 12
1997 ANNUAL REPORT ON FORM 10-KSB....................................... 12
i
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PIRANHA INTERACTIVE PUBLISHING, INC.
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
The accompanying proxy is solicited by the Board of Directors of Piranha
Interactive Publishing, Inc., a Nevada corporation (the "Company"), for use at
the Annual Meeting of Stockholders to be held on October 15, 1998 (the "Annual
Meeting"), or any adjournment or postponement thereof, for the purposes set
forth herein and in the accompanying Notice of Annual Meeting of Stockholders.
This Proxy Statement and the accompanying form of proxy were first mailed to all
stockholders entitled to vote at the Annual Meeting on or about September 23,
1998. The Annual Meeting will be held at RCG Capital Markets Group, Inc., 5635
East Thomas Road, Phoenix, Arizona 85018. The corporate offices of the Company
are located at 1839 West Drake, Suite B, Tempe, Arizona 85283 and its telephone
number at that address is (602) 491-0500.
Only stockholders of record at the close of business on August 21, 1998
(the "Record Date") are entitled to notice of and to vote at the Annual Meeting
or any adjournment or postponement thereof. On the Record Date, 3,200,000 shares
of Common Stock, $.001 par value per share (the "Common Stock"), were issued and
outstanding. Each holder of Common Stock is entitled to one vote, exercisable in
person or by proxy, for each share of the Company's Common Stock held of record
on the Record Date.
The presence of a majority of the combined voting power of the Common
Stock, in person or by proxy, is required to constitute a quorum for the conduct
of business at the annual Meeting. Votes withheld from any Director are counted
for purposes of determining the presence of a quorum, but have no legal effect
under Nevada law. Abstentions and broker non-votes will also be included in the
determination of the number of shares represented for a quorum. The proposal for
which stockholder approval is being sought cannot be approved without the
affirmative vote of the holders of a majority of the shares present, in person
or by proxy, at the Annual Meeting. At the Annual Meeting, the Company will
appoint an Inspector of Election to count all votes and ballots and make a
written report thereof.
VOTING AND REVOCATION OF PROXIES
All valid proxies received before the Annual Meeting and not revoked will
be exercised. All shares represented by proxy will be voted, and where
a stockholder specifies by means of his or her proxy a choice with respect
to any matter to be acted upon, the shares will be voted in accordance with
the specifications so made. If no choice is indicated on the proxy, the
shares will be voted in accordance with the recommendations of the Board of
Directors as to such matters. Proxies may be revoked at any time prior
to the time they are voted by: (a) delivering to the Secretary of the Company a
written instrument of revocation bearing a date later than the date of the
proxy; or (b) duly executing and delivering to the Secretary a subsequent proxy
relating to the same shares; or (c) attending the meeting and voting in person.
Mere attendance at the Annual Meeting will not itself have the effect of
revoking the proxy.
SOLICITATION OF PROXIES
The Company will pay the cost of soliciting proxies, including the cost of
preparing and mailing the Notice of Annual Meeting and Proxy Statement.
Solicitation will be primarily by mailing this Proxy Statement to all
stockholders entitled to vote at the meeting. Proxies may be solicited by
officers and Directors of the Company personally or by telephone or facsimile,
without additional compensation. The Company may reimburse brokers, banks and
others holding shares in their names for others for the cost of forwarding proxy
materials and obtaining proxies from beneficial owners.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of September 15, 1998, certain
information concerning the beneficial ownership of the Company's Common Stock,
by (i) each Director, (ii) the Named Executive Officer, (iii) each stockholder
known by the Company to own beneficially 5% or more of the Company's outstanding
Common Stock, and (iv) all executive officers and Directors of the Company as a
group, and their percentage ownership of all shares of Common Stock outstanding.
Common Stock
----------------------
Number of % of
Name (1) Shares(2) Class
- -------- --------- -----
Timothy M. Brannan(3) 1,600,000 50.0
Keith P. Higginson(4) 306,836 9.6
J. Wade Stallings, II 306,836 9.6
Douglas M. Brannan 173,055 5.4
Wyndi D. Ballard 173,055 5.4
Ian D. Berman(5) 10,000 *
Michael D. Flink(5) 10,000 *
All Executive Officers and Directors 1,620,000 50.3
as a Group (6 persons)(3)(6)
- --------------
* Less than 1.0%
(1) Except as otherwise noted, each of the parties listed above has sole voting
and investment power over the securities listed. The address for all
officers and Directors of the Company is 1839 West Drake, Suite B, Tempe,
Arizona 85283.
(2) Includes certain shares subject to escrow as follows: Timothy M. Brannan,
337,348 shares; Keith P. Higginson, individually, 117,461 shares and as
trustee, 117,461; J. Wade Stallings, II, 234,921 shares; Douglas M.
Brannan, 132,495 shares; and Wyndi D. Ballard, 132,495 shares.
(3) Includes (i) 887,653 shares subject to a Voting Trust Agreement, of which
Timothy M. Brannan is Voting Trustee, and (ii) 271,730 shares subject to an
Irrevocable Proxy Agreement, of which Timothy M. Brannan is proxy holder.
See "Voting Trust Agreement and Irrevocable Proxy Agreement" below. Except
as disclosed herein, Mr. Brannan expressly disclaims beneficial interest in
any of such shares.
(4) Includes 153,418 shares held by a trust of which Mr. Higginson is trustee
and has sole voting power, but in which he disclaims any beneficial
interest.
(5) Represents vested options to purchase up to 10,000 shares of Common Stock.
(6) Includes vested options to purchase up to 20,000 shares of Common Stock.
VOTING TRUST AGREEMENT AND IRREVOCABLE PROXY AGREEMENT
Nine stockholders of the Company owning an aggregate of 1,600,000 shares of
Common Stock, which represent 50% of the total voting power, entered into a
Voting Trust Agreement and an Irrevocable Proxy Agreement ("Proxy Agreement"),
in November 1996. Of the 1,600,000 shares, 1,225,000 shares (which shares have
been placed in Escrow, see "-- Escrow Agreements", below), are subject to a
Voting Trust Agreement or held directly by the voting trustee, and 375,000
shares are subject to the Proxy Agreement or held directly by the proxy holder.
All 1,600,000 shares are also subject to Lock-Up Agreements, which expire in
October, 1998.
Timothy M. Brannan, the President and Chairman of the Company, is
designated as both the trustee of the Voting Trust Agreement and the proxy
holder under the Proxy Agreement, and is empowered to vote all shares
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subject to the Voting Trust Agreement and the Proxy Agreement with respect to
any matter subject to a vote by the Company's stockholders. Such matters include
voting in favor of the election of himself as a Director and an officer of the
Company and in favor of ratification or approval of acts himself as a Director
and an officer in the conduct of business affairs of the Company, and other acts
relating to the Company, including, but not limited to, dissolution,
liquidation, a merger or consolidation of the Company or the sale of all, or
substantially all, of its assets.
The agreement of the stockholders to deposit their shares in the Voting
Trust and to grant their proxy under the Proxy Agreement is irrevocable until
October 18, 1998. Thereafter, parties to the Proxy Agreement may withdraw their
respective shares on ten days prior written notice to the Trustee if they sell
them to third parties. Parties to the Voting Trust Agreement may also withdraw
their shares on ten days prior notice if such shares are not then subject to the
Escrow Agreement. The Voting Trust Agreement and the Proxy Agreement both
terminate upon the earliest of September 2002, the date on which Mr. Brannan
ceases to be an employee of the Company or resigns as Trustee or Proxy Holder,
as applicable, or dies, or upon termination of the Voting Trust Agreement or the
Proxy Agreement by the unanimous written agreement of the holders of the shares
(other than Timothy M. Brannan) subject to the Voting Trust Agreement or the
Proxy Agreement, as applicable.
ESCROW AGREEMENTS
Certain holders of the Company's Common Stock have placed into escrow, on a
pro rata basis, an aggregate of 1,225,000 shares pursuant to an Escrow Agreement
(the "Escrow Agreement"). Such stockholders will continue to vote the Escrow
Shares, all of which, except those held by Timothy M. Brannan, are subject to
the Voting Trust described above of which Mr. Brannan is the trustee. The Escrow
Shares are not further assignable or transferable.
Escrow Shares will be released from the escrow and placed in the Voting
Trust if the Voting Trust is in existence and, if not, to the stockholders as
follows:
1. 300,000 shares held in escrow shall be released therefrom if:
(a) the Company's net income before provision for income taxes and
exclusive of any extraordinary earnings (all as audited and
determined by the Company's independent public accountants) (the
"Minimum Pretax Income") equals at least $2,000,000 during the
fiscal year ending on December 31, 1998 or 1999; or
(b) the Minimum Pretax Income equals at least $3,000,000 during the
fiscal year ending December 31, 2000; or
(c) the Minimum Pretax Income equals at least $4,000,000 during the
fiscal year ending December 31, 2001; or
(d) commencing on September 18, 1997 and ending March 17, 1999, the
Bid Price (as defined in the Escrow Agreement) of the Company's
Common Stock shall average in excess of $11.50 per share (subject
to adjustment in the event of any stock splits, reverse stock
splits or other similar events) for 30 consecutive business days;
or
(e) commencing March 18, 1999 and ending September 17, 2000, the Bid
Price shall average in excess of $15.00 per share (subject to
adjustment in the event of any stock splits, reverse stock splits
or other similar events) for 30 consecutive business days; or
(f) the Company is acquired by or merged with or into another entity
during either of the periods referred to above and as a result
thereof the holders of shares of Common Stock not then subject to
escrow (after giving consideration to the release from escrow of
such 300,000 shares and subject to adjustment in the event of any
stock splits, reverse stock splits or other similar events)
receive per share consideration equal or greater than (i) $11.50
per share during the 18-month period commencing on September 18,
1997; or (ii) $15.00 per share during the 18-month period
commencing March 18, 1999.
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2. An additional 525,000 shares held in escrow shall be released
therefrom if:
(a) the Minimum Pretax Income equals at least $3,300,000 during the
fiscal year ending on December 31, 1998 or 1999; or
(b) the Minimum Pretax Income equals at least $4,400,000 during the
fiscal year ending on December 31, 2000; or
(c) the Minimum Pretax Income equals at least $5,500,000 during the
fiscal year ending on December 31, 2001; or
(d) commencing on September 18, 1997 and ending on March 17, 1999,
the Bid Price of the Company's Common Stock shall average in
excess of $12.50 per share (subject to adjustment in the event of
any stock splits, reverse stock splits or other similar events)
for 20 consecutive business days; or
(e) commencing March 18, 1999 and ending September 17, 2000, the Bid
Price shall average in excess of $16.50 per share (subject to
adjustment in the event of any stock splits, reverse stock splits
or other similar events) for 20 consecutive business days; or
(f) the Company is acquired by or merged with or into another entity
during either of the periods referred to above and as a result
thereof the holders of shares of Common Stock not then subject to
escrow (after giving consideration to the release from escrow of
such 525,000 shares (and the 300,000 shares set forth above, if
not previously released) and subject to adjustment in the event
of any stock splits, reverse stock splits or other similar
events) receive per share consideration equal or greater than (i)
$12.50 per share during the 18-month period commencing on
September 18, 1997; or (ii) $16.50 per share during the 18-month
period commencing March 18, 1999.
3. The remaining 400,000 shares held in escrow shall be released
therefrom if:
(a) the Minimum Pretax Income equals at least $3,800,000 during the
fiscal year ending on December 31, 1998 or 1999; or
(b) the Minimum Pretax Income equals at least $5,100,000 during the
fiscal year ending on December 31, 2000; or
(c) the Minimum Pretax Income equals at least $6,400,000 during the
fiscal year ending December 31, 2001; or
(d) commencing at September 18, 1997 and ending March 17, 1999, the
Bid Price of the Company's Common Stock shall average in excess
of $12.50 per share (subject to adjustment in the event of any
stock splits, reverse stock splits or other similar events) for
20 consecutive business days; or
(e) commencing March 18, 1999 and ending September 17, 2000, the Bid
Price shall average in excess of $16.50 per share (subject to
adjustment in the event of any stock splits, reverse stock splits
or other similar events) for 20 consecutive business days; or
(f) the Company is acquired by or merged with or into another
entity during either of the periods referred to above and
as a result thereof the holders of shares of Common Stock
not then subject to escrow (after giving consideration to the
release from Escrow of such 400,000 shares, (and the
825,000 shares set forth above, if not previously released)
and subject to adjustment in the event of any stock splits,
reverse stock splits or other similar events) receive per
share consideration equal to or greater than (i) $12.50 per share
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during the 18-month period commencing September 18, 1997; or (ii)
$16.50 per share during the 18-month period commencing March 18,
1999.
The Minimum Pretax Income amounts set forth in 1, 2, and 3 above, assume
the release of all of the Escrow Shares and the conversion into Common Stock of
any outstanding securities which are convertible into Common Stock solely upon
surrender of such convertible securities without the payment of any additional
consideration, but shall be increased proportionally to reflect the issuance of
certain additional shares, including any shares that may be issued upon the
exercise of the Company's Class A Warrants or other options or warrants
presently outstanding or hereafter granted by the Company. The Minimum Pretax
Income shall be calculated exclusive of any extraordinary earnings, including,
but not limited to, any charge to income resulting from the release of the
Escrow Shares. On March 31, 2002, all shares still held in escrow will be
forfeited, which shares will then be placed in the Company's treasury for
cancellation thereof as a contribution to capital.
Distributions, in the event the Company is acquired or merged with or into
another entity, will be made as follows:
(a) if the merger or acquisition proceeds are sufficient to pay the
non-escrowed Common Stock prior to such event up to the
applicable amount per share price set forth in paragraph 1(f),
2(f) or 3(f) above, then such number of shares of escrowed Common
Stock shall be released from escrow, pro rata, to enable the
holders thereof to participate in the balance remaining up to the
applicable per share price.
(b) if the merger or acquisition proceeds are sufficient to pay the
then non-escrowed and the then escrowed Common Stock, the full
amount set forth in paragraphs 1(f), 2(f) or 3(f) above, then all
of the Escrow Shares eligible for release pursuant to paragraphs
1(f), 2(f) and/or 3(f) above, shall be released and
distributions, if any, will be made on all Common Stock
outstanding, whether or not previously subject to escrow.
Any money, securities, rights, or property distributed in respect of the
Escrow Shares, including any property distributed as dividends or pursuant to
any stock split, merger, recapitalization, dissolution, or total or partial
liquidation of the Company, shall be held in escrow until release of the Escrow
Shares. Shares in escrow as to which the applicable earnings levels or average
Bid Price criteria set forth above have not been met on or before March 31,
2002, as well as any dividends or other distributions made with respect thereto,
will be contributed to the capital of the Company and canceled. The Company
expects that the release of the Escrow Shares held by officers, Directors,
employees, and consultants of the Company will be deemed compensatory and,
accordingly, will result in a substantial charge to reportable earnings, which
would equal the fair market value of such shares on the date of release. Such
charge could substantially eliminate the Company's net income for financial
reporting purposes for the period(s) during which such shares are, or become
probable or being, released from escrow. Although the amount of compensation
expense recognized by the Company will not affect the Company's total
stockholder's equity, it may have a negative effect on the market price of the
Company's securities.
The earnings levels set forth above were determined by arms-length
negotiation and should not be construed to imply or predict any future earnings
by the Company or any increase in the market price of its securities.
5
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PROPOSAL NO. 1:
ELECTION OF DIRECTORS
The Board of Directors currently consists of five members and is divided
into three classes. One class of Directors is elected each year to serve for a
term of three years. Each Director serves until his successor has been elected
and qualified, or until his earlier resignation or removal. The terms of the
Class I Directors, J. Wade Stallings II and Ian D. Berman expire at the Annual
Meeting; the terms of Class II Directors, Keith P. Higginson and Michael D.
Flink expire in the following year; and the term of the Class III Director,
Timothy M. Brannan expires in two years. The Company's Articles of
Incorporation, as amended, (a) limit the liability of Directors, (b) restrict
the removal of Directors under certain circumstances, and (c) impose conditions
on the ability of stockholders to nominate persons for the position of Director.
The Company has agreed to nominate a designee of D.H. Blair Investment
Banking Corp. ("Blair"), the representative of the several underwriters of the
Company's initial public offering of securities in 1997, to the Company's Board
of Directors until September 18, 2002, if so requested. As of the date hereof,
Blair has not designated any such nominee.
The Company has nominated Messrs. Stallings and Berman to be re-elected at
the Annual Meeting. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for Messrs. Stallings and Berman. In the event that
either Mr. Stallings or Mr. Berman is unable or declines to serve as Director at
the time of the Annual Meeting, the proxies will be voted for any nominee who
shall be designated by the Board of Directors to fill the vacancy. It is not
expected that either Mr. Stallings or Mr. Berman will be unable or will decline
to serve as Director. If elected, the term of office of Messrs. Stallings and
Berman will continue until the third annual meeting of stockholders after
election or until his respective successor has been duly elected and qualified.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
ELECTION OF J. WADE STALLINGS II AND IAN D. BERMAN TO SERVE AS CLASS I
DIRECTORS.
DIRECTORS AND EXECUTIVE OFFICERS
The Directors and executive officers of the Company as of September 15,
1998 were as follows:
Timothy M. Brannan 40 President, Chief Executive Officer and
Chairman of the Board of Directors
Keith P. Higginson 34 Vice President, Chief Financial Officer
and Director
J. Wade Stallings, II 37 Vice President, General Counsel and Director
Douglas M. Brannan 32 Vice President, Sales
Ian D. Berman 42 Director
Michael D. Flink 37 Director
TIMOTHY M. BRANNAN. Mr. Brannan has served as President, Chief Executive
Officer and Chairman of the Board of the Company since its inception in November
1994. Mr. Brannan served as Executive Vice President for Software Marketing
Corporation ("SMC"), a privately held software publisher, from November 1991
until October 1994. Mr. Brannan served as Executive Vice President for Automap,
Inc. ("Automap"), also a privately held publisher of interactive software, from
November 1991 until June 1993. Mr. Brannan attended Arizona State University
where he studied Business and Marketing.
KEITH P. HIGGINSON. Mr. Higginson has served as Vice President, Chief
Financial Officer and a Director of the Company since its inception in November
1994. From January 1993 until October 1994, Mr. Higginson served as Controller
for SMC. From January 1993 until June 1993, Mr. Higginson also served as
Controller of Automap. Mr. Higginson received a Bachelor's Degree in Accounting
from San Diego State University.
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J. WADE STALLINGS, II. Mr. Stallings has served as Vice President, General
Counsel and a Director of the Company since its inception in November 1994. From
February through October 1994, Mr. Stallings served as Vice President and
General Counsel to SMC. Prior thereto, Mr. Stallings was the Coordinator of the
Office of Properties for the Baha'i World Center, an international non-profit
organization from February 1990 until February 1994. Mr. Stallings received a
Bachelor's Degree in Management from the University of Alabama and a Juris
Doctor Degree from Washington and Lee University School of Law.
DOUGLAS M. BRANNAN. Mr. Brannan has served as Vice President, Sales for the
Company since October 1995. Prior thereto, Mr. Brannan served as Director,
Western Sales for Softkey International (subsequently renamed The Learning
Company), a publicly traded software company, from September 1994 until October
1995. From January 1992 until September 1994, Mr. Brannan was Vice President,
Sales, for SMC. In addition, from January 1992 until June 1993, Mr. Brannan was
Director of Sales for Automap. Mr. Brannan received a Bachelor's Degree in
Health Science from San Diego State University.
IAN D. BERMAN. Mr. Berman became a Director of the Company in September
1997. In 1991, Mr. Berman co-founded Frost & Berman Incorporated, an investment
banking and financial advisory consulting firm. Since that time, Mr. Berman has
served as Managing Director for the firm, which focuses exclusively on the
entertainment and education software industry. From 1985 to 1991, Mr. Berman
served as a Senior Manager with the Capital Markets Group for Touche Ross. From
1983 to 1985, Mr. Berman served as a Senior Analyst with Salomon Brothers, Inc.
Mr. Berman is a Certified Public Accountant and received a Bachelor of Commerce
Degree in Accounting and a Master's Degree in Finance from the University of
Witwatersand University (Johannesburg).
MICHAEL D. FLINK. Mr. Flink became a Director of the Company in September
1997. Since October 1997, Mr. Flink has served as General Manager for Levin
Consulting. From October 1995 until September 1997, Mr. Flink served as the
Senior Vice President, Merchandising & Advertising for Communication EXPO, a
communication products superstore. From January 1994 until September 1995, Mr.
Flink served as Vice President of Computer City, a division of Tandy
Corporation, where he was responsible for all merchandising, advertising
and strategic planning functions for the computer and software retailer. From
1992 through December 1993, Mr. Flink served as Consumer Brand and Product
Management Consultant to IBM. From 1990 through 1992, Mr. Flink served as
President and Chief Operating Officer of R&R Electronics and Appliance, a
regional chain of consumer electronics and appliance superstores. From 1978
through 1990, Mr. Flink served in various management capacities with Tandy
Corporation's Radio Shack division. Mr. Flink received a Bachelor of Arts in
Communication from North Carolina State University.
Messrs. Douglas M. Brannan and Timothy M. Brannan are brothers. No other
Directors or Officers are related by blood or marriage.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended December 31, 1997, the Board of Directors did not
meet; however, it acted four times by unanimous written consent in lieu of a
meeting. The Board of Directors has a Compensation Committee and an Audit
Committee but does not maintain a Nominating Committee.
The Compensation Committee reviews and recommends to the Board of Directors
the compensation and benefits of all officers of the Company and also
administers the Company's 1996 Plan, pursuant to which stock options are granted
to officers, Directors, key employees and consultants. The Compensation
Committee is currently comprised of Timothy M. Brannan, Michael D. Flink and Ian
D. Berman.
The Audit Committee reviews, with the Company's independent accountants,
the annual financial statements of the Company, and also reviews the
effectiveness of the Company's financial and accounting functions and
organizations and makes recommendations to the Board of Directors in that
regard.
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EXECUTIVE COMPENSATION
The following table sets forth the compensation received for the three
fiscal years ended December 31, 1997, by the Company's Chief Executive Officer
(the "Named Executive Officer"). No executive officer of the Company received in
excess of $100,000 during such periods.
SUMMARY COMPENSATION TABLE
Annual Compensation (1)
-------------------------
Name And Principal Position Year Salary Bonus
- --------------------------- ---- ------ -----
Timothy M. Brannan, Chairman, President 1997 $75,000 $4,142
1996 50,250 1,083
1995 12,926 0
- -----------------
(1) The Company was not formed until November 14, 1994 and no salaries were
paid until October 1995. Effective November 1, 1996, Mr. Brannan became
subject to an employment agreement pursuant to which he is compensated
thereafter at an annual base rate of $75,000.
Mr. Brannan did not receive any other annual compensation, long-term
compensation or other compensation during the Company's fiscal years ended
December 31, 1997, 1996 or 1995.
DIRECTORS' COMPENSATION
Directors are not currently compensated for their services in that capacity
or for serving on committees but are reimbursed for their reasonable expenses
incurred in connection with serving as Directors. Non-employee Directors serving
on the Company's Board of Directors received an initial grant of options to
purchase 10,000 shares of Common Stock in September 1997 and may receive
additional future options at the discretion of the Board.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The Company's Articles of Incorporation and Bylaws require the Company to
indemnify each of its officers and Directors against liabilities and reasonable
expenses incurred in any action or proceeding, including stockholders'
derivative actions, by reason of such person being or having been an officer or
Director of the Company, or of any other corporation for which he or she serves
as such at the request of the Company, to the fullest extent permitted by Nevada
law. Pursuant to Nevada law, the Company has adopted provisions in its Articles
of Incorporation and Bylaws that eliminate, to the fullest extent available
under Nevada law, the personal liability of its Directors and officers to the
Company or its stockholders for monetary damages incurred as a result of the
breach of their duty of care. These provisions neither limit the availability of
equitable remedies nor eliminate Directors' or officers' liability for engaging
in intentional misconduct or fraud, knowingly violating a law or unlawfully
paying a distribution.
The Company has been advised that it is the position of the Commission that
insofar as the foregoing provision may be invoked to disclaim liability for
damages arising under the Securities Act, such provision is against public
policy as expressed in the Securities Act and is therefore unenforceable.
EMPLOYMENT AGREEMENTS
Effective November 1, 1996, the Company entered into three-year employment
agreements with its senior executive officers, Timothy M. Brannan, Keith P.
Higginson, J. Wade Stallings, II and Douglas M. Brannan. The agreements provide
for base salaries of $75,000, $65,000, $65,000 and $65,000 for Mr. Timothy M.
Brannan, Mr. Higginson, Mr. Stallings and Mr. Douglas M. Brannan, respectively,
subject to review at least annually by the Board of Directors. The executives
may receive bonuses at the discretion of the Board. The Company may unilaterally
terminate the agreements for "Cause," which includes (i) conviction of a felony
or (ii) failure to diligently cure a specified deficiency in the executive's
performance within 30 days.
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In the event the Company terminates the executive's employment during the
term of the agreement without Cause, or in the event the executive terminates
the agreement for "Good Reason" (as defined in the agreements), which includes
certain changes in the executive's duties or a change in control of the Company,
the Company shall pay to such executive (i) his/her salary through the
termination date plus any accrued but unpaid bonuses and (ii) with respect to
executives other than Timothy M. Brannan, a severance payment equal to the
executive's then current annual salary and an amount equal to the average of all
bonuses paid to the executive in the three years immediately preceding
termination, which the Company has the option to pay over one year. With respect
to Timothy M. Brannan, the severance payment would be equal to two times his
then current annual salary and an amount equal to the average of all bonuses
paid to him in the three years immediately preceding termination, which the
Company has the option to pay over two years. In addition, the Company must
maintain until the first to occur of (i) the executive's attainment of
substitute employment or (ii) two years from the date of termination with
respect to Timothy M. Brannan and one year form the date of termination with
respect to the other executives, the executive's benefits under the Company's
benefit plans to which the executive and his/her eligible beneficiaries were
entitled immediately prior to the date of termination. If the executive
requests, the Company must also assign to the executive any assignable insurance
policy on the life of the executive owned by the Company and at the end of the
period of coverage. If the executive is terminated for Cause or if the executive
terminates his/her employment other than for Good Reason, the Company's only
obligation is to pay the executive his/her base salary and accrued vacation pay
through the date of termination. If any of the executives are terminated without
Cause or resign for Good Reason following a change in control to the Company,
the executive is entitled to two years' severance compensation including
benefits until obtaining alternate employment.
If the executive is incapacitated due to physical or mental illness during
the term of his/her employment, the agreements provide that the Company shall
pay to the executive a lump sum equal to the executive's then current base
salary and the average of all bonuses paid to the executive in the three years
preceding the date of termination due to illness. If the executive dies during
his/her employment, his/her salary through the date of his/her death, any
accrued but unpaid bonuses and any benefits payable pursuant to the Company's
survivor's benefits insurance and other applicable programs and plans then in
effect are payable to his/her estate.
If the executive's employment is terminated, the Company has agreed to
indemnify the executive for claims and expenses associated with certain personal
guarantees, if any, made by the executive. The Company also has agreed to use
its best efforts to secure the release of any such personal guarantees. In
addition, the Company has agreed to indemnify the executive against all costs
incurred in enforcing his/her rights under the agreement following a change in
control of the Company.
PROPOSAL NO. 2:
AMEND 1996 STOCK OPTION PLAN
A total of 300,000 shares of Common Stock are currently available for
issuance under the Company's 1996 Stock Option Plan (the "1996 Plan").
Substantially all of such shares are reserved for issuance upon exercise of
outstanding options. On September 18, 1998, the Company's Board of Directors
resolved, subject to approval by the stockholders, to increase the number of
shares of Common Stock available under the 1996 Plan to 700,000 shares.
The Board believes that in order to attract and retain officers, directors,
employees and consultants of the highest caliber, provide increased incentives
for such persons to strive to attain the Company's long-term goal of increasing
stockholder value, and to continue to promote the growth and well being of the
Company, it is in the best interests of the Company and its stockholders to
provide officers, Directors, employees and consultants of the Company, through
the granting of stock options, the opportunity to participate in the
appreciation in value of the Company's Common Stock. The 1996 Plan has been
effective in retaining and motivating key employees and consultants and
attracting experienced and seasoned individuals to work on behalf of the
Company.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR AMENDING
THE 1996 PLAN BY INCREASING THE AGGREGATE NUMBER OF SHARES OF COMMON STOCK
ISSUABLE PURSUANT TO GRANTS THEREUNDER TO 700,000 SHARES.
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CERTAIN INFORMATION CONCERNING CURRENTLY OUTSTANDING OPTIONS. As of
September 15, 1998, options to purchase an aggregate of 209,300 shares had been
granted under the 1996 Plan, of which 207,500 were then outstanding. All of
these options have an exercise price of $5.00 per share and terminate at various
dates from August 31, 2002 through March 31, 2008. As of September 15, 1998, the
Common Stock underlying outstanding options had a fair market value of
approximately $207,500.00, based upon the closing bid price of the Common Stock,
as reported by the Nasdaq Stock Market, Inc. Approximately 18 employees
(including 4 executive officers), 5 Directors and 10 consultants of the Company
were eligible to participate in the 1996 Plan as of September 15, 1998. The
table below summarizes all options granted to (i) the Company's Chief Executive
Officer, (ii) all current executive officers as a group (the "Executive Group"),
(iii) all current non-executive officer directors, as a group (the "Non-Executiv
Director Group"), (iv) all persons who held 5% or more of such options (the
"Significant Participants") and (v) all non-executive officer employees, as a
group (the "Non-Executive Employee Group"), each as of September 15, 1998.
Additional options may be granted to executive officers, directors, employees
and consultants to the Company from time to time at the discretion of the Board
of Directors, or a duly appointed committee thereof.
Number of Shares
Name and Position Underlying Options Dollar Value(1)
----------------- ------------------ ---------------
Timothy M. Brannan,
Chief Executive Officer 0
Executive Group 0
Non-Executive Director Group 20,000
Significant Participants
RCG Capital Markets Group, Inc. 40,000 (2)
Maris Multimedia 70,000 (3)
Milton Cohen 16,000
Tamra Nestler 15,000
Non-Executive Employee Group 41,500
- ----------------
(1) None of the Company's outstanding options are currently in-the-money and,
as such, no dollar value is attributable thereto.
(2) Of these options, 36,000 are contingent upon the holder achieving certain
performance milestones.
(3) Of these options, 60,000 are contingent upon the holder's licensed product
achieving certain cumulative sales milestones.
SUMMARY OF THE 1996 PLAN. The 1996 Plan authorizes the Board to grant
options to Directors, officers, employees and consultants of the Company to
purchase shares of Common Stock. Directors, officers, employees and consultants
(including independent contractors and software developers) of the Company who,
in the opinion of the Board of Directors, are responsible for the continued
growth and development and the financial success of the Company are eligible to
be granted options by the Board of Directors under the 1996 Plan. Options may be
nonqualified options, incentive stock options, or any combination of the
foregoing. In general, options granted under the 1996 Plan are not transferable
and expire ten years after the date of grant. The per share exercise price of
any incentive stock option granted under the 1996 Plan may not be less than the
fair market value of the Common Stock on the date of grant. Incentive stock
options granted to persons who have voting control over 10% or more of the
Company's capital stock are granted at 110% of the fair market value of the
underlying shares on the date of grant and expire five years after the date of
grant. No option may be granted after December 13, 2006.
The 1996 Plan provides the Board of Directors with the discretion to
determine when options granted thereunder will become exercisable. Generally,
such options may be exercised after a period of time specified by the Board
of Directors at any time prior to expiration. No option granted under the
1996 Plan is transferable by the optionee other than by will or the laws
of descent and distribution, and each option is exercisable during the lifetime
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of the optionee only by the optionee. The Company has agreed that it will not,
without the prior written consent of D.H. Blair Investment Banking Corp., grant
any options to employees with a per share exercise price of less than the
greater of $5.00 or the fair market value on the date of grant at any time prior
to March 18, 1999.
CERTAIN FEDERAL TAX CONSEQUENCES OF THE 1996 PLAN. Under current tax law,
there are no Federal income tax consequences to either the employee or the
Company on the grant of nonqualified options if granted under the terms set
forth in the 1996 Plan. Upon exercise of a nonqualified option, the excess of
the fair market value of the shares subject to the option over the option price
(the "Spread") at the date of exercise is taxable as ordinary income to the
optionee in the year it is exercised and is deductible by the Company as
compensation for Federal income tax purposes, if Federal income tax is withheld
on the Spread. However, if the shares are subject to vesting restrictions
conditioned on future employment or the holder is subject to short-swing profits
liability restrictions of Section 16(b) of the Exchange Act (i.e., is an
executive officer, director or 10% stockholder of the Company), then taxation
and measurement of the Spread is deferred until such restrictions lapse, unless
a special election is made under 83(b) of the Code to report such income
currently without regard to such restrictions. The optionee's basis in the
shares will be equal to the fair market value on the date taxation is imposed
and the holding period commences on such date.
Incentive option holders incur no Federal ordinary income tax liability at
the time of grant or upon exercise of such option, assuming that the optionee
was an employee of the Company from the date the option was granted until 90
days before such exercise. However, upon exercise, the Spread must be added to
Federal taxable ordinary income in computing the optionee's "alternative minimum
tax" liability. An optionee's basis in the shares received on exercise of an
incentive stock option will be the option price of such shares for regular
income tax purposes. No deduction is allowable to the Company for Federal income
tax purposes in connection with the grant or exercise of incentive options.
If the holder of shares acquired through exercise of an incentive option
sells such shares within two years of the date of grant of such option or within
one year from the date of exercise of such option (a "Disqualifying
Disposition"), the optionee will realize income taxable at ordinary rates.
Ordinary income is reportable during the year of such sale equal to the
difference between the option price and the fair market value of the shares at
the date the option is exercised, but the amount includable as ordinary income
shall not exceed the excess, if any, of the proceeds of such sale over the
option price. In addition to ordinary income, a Disqualifying Disposition may
result in taxable income subject to capital gains treatment if the sales
proceeds exceed the optionee's basis in the shares (i.e., the option price plus
the amount includable as ordinary income). The amount of the optionee's taxable
income will be deductible by the Company in the year of the Disqualifying
Disposition.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1997, the Company engaged Frost & Berman Incorporated, an
investment banking and financial advisory consulting of which Ian Berman, a
Director, is Managing Director. Pursuant to this arrangement, Frost & Berman has
agreed to provide financing consulting services to the Company on a
month-to-month basis for a monthly fee of approximately $830.00.
The Company believes that the foregoing transaction was entered into on
terms no less favorable to the Company than may have been available from a third
party. All future transactions between the Company and its officers, Directors
and 5% stockholders will be on terms no less favorable to the Company than could
be obtained from independent third parties and will be approved by a majority of
the disinterested Directors and a majority of the entire Board of Directors.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act")
requires the Company's officers and Directors, and persons who beneficially own
more than 10% of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership of the Company's Common Stock and
other equity securities with the SEC. Officers, Directors and greater than 10%
shareholders are required by Exchange Act regulations to furnish the Company's
copies of all Section 16(a) forms they file.
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<PAGE>
Based solely on its review of the copies of such forms received by it, and
representations from certain reporting persons that no Form 5 was required to be
filed by such persons, the Company believes that during the fiscal year ended
December 31, 1997, all filing requirements applicable to its officers, Directors
and greater than 10% beneficial owners were complied with.
PROPOSAL NO. 3:
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed PricewaterhouseCoopers LLP ("PWC"),
independent public accountants, to audit the financial statements of the Company
for the fiscal year ended December 31, 1998.
Prior to its merger with Price Waterhouse LLP, Coopers & Lybrand LLP
audited the Company's books and the Board of Directors recommends that the
stockholders approve the proposal to ratify the appointment of
PricewaterhouseCoopers LLP to serve as independent auditors for the current
year. Representatives of PWC shall be present at the Annual Meeting and will
have an opportunity to make a statement if they desire to do so. They are also
expected to be available to respond to appropriate questions
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP TO SERVE AS THE COMPANY'S INDEPENDENT
ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 1998.
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING .
Any stockholder proposals intended to be presented at the Company's next
annual meeting of stockholders must be received by the company no later than May
22, 1999, to be evaluated by the Board for inclusion in the proxy statement for
that meeting.
OTHER BUSINESS
The Board of Directors is not aware of any other business to be considered
or acted upon at the Annual Meeting. If any other business properly comes before
the Annual Meeting as to which the Company did not have notice of at least 45
days prior to the date of mailing this Proxy Statement, it is the intention of
the persons named in the enclosed proxy card to vote the shares they represent
as the Board of Directors may recommend.
1997 ANNUAL REPORT ON FORM 10-KSB
The Company files annual reports on Form 10-KSB with the SEC. A copy of the
annual report for the fiscal year ended December 31, 1997 (except for certain
exhibits thereto) may be obtained, free of charge, upon written request
submitted by any stockholder to Piranha Interactive Publishing, Inc., 1839 West
Drake, Suite B, Tempe, Arizona 85283, Attention: Stockholder Relations. Copies
of all exhibits to the annual report are available upon a similar request,
subject to payment of a reasonable charge to reimburse the Company for its
expenses in supplying such exhibit.
By Order of the Board of Directors,
/s/ Timothy M. Brannan
Timothy M. Brannan
President and Chief Executive Officer
Tempe, Arizona
September 18, 1998
12
<PAGE>
PIRANHA INTERACTIVE PUBLISHING, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF PIRANHA INTERACTIVE PUBLISHING, INC.
FOR THE ANNUAL MEETING OF STOCKHOLDERS
The undersigned stockholder of Piranha Interactive Publishing, Inc., a
Nevada corporation (the "Company"), hereby acknowledges receipt of the Notice of
Annual Meeting of Stockholders dated September 18, 1998, and hereby appoints
Timothy M. Brannan and Keith P. Higginson and each of them, proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the Annual Meeting of
Stockholders of the Company to be held on October 15, 1998, at 9:00 a.m.,
M.S.T., at RCG Capital Markets Group, Inc., 5635 East Thomas Road, Phoenix,
Arizona 85018 and at any adjournment or adjournments thereof, and to vote all
shares of Common Stock that the undersigned would be entitled to vote if then
and there personally present, on the matters set forth below.
ELECTION OF DIRECTORS
[ ] VOTE FOR each of the following nominees, UNLESS SUCH NOMINEE'S NAME IS
STRUCK THROUGH.
J. Wade Stallings, II Ian D. Berman
[ ] WITHHOLD AUTHORITY to vote for either of the above-mentioned nominees.
AMENDMENT OF 1996 STOCK OPTION PLAN
[ ] VOTE FOR amendment of the 1996 Stock Option by increasing the number of
shares of Common Stock reserved for issuance thereunder to 700,000 shares.
[ ] VOTE AGAINST amendment of the 1996 Stock Option Plan.
[ ] WITHHOLD AUTHORITY to vote with respect to amending the 1996 Stock
Option Plan.
RATIFICATION OF APPOINTMENT OF PRICE WATERHOUSE COOPERS, LLP
[ ] VOTE FOR ratification of the appointment of Price Waterhouse Coopers LLP.
[ ] VOTE AGAINST ratification of the appointment of Price Waterhouse Coopers
LLP.
[ ] WITHHOLD AUTHORITY to vote for ratification of appointment of Price
Waterhouse Coopers LLP.
<PAGE>
THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED FOR EACH OF THE NOMINEES SET FORTH ABOVE, IN FAVOR OF AMENDMENT OF
THE 1996 STOCK OPTION PLAN, IN FAVOR OF RATIFICATION OF THE APPOINTMENT OF PRICE
WATERHOUSE COOPERS LLP AND AS SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS
AS MAY COME BEFORE THE MEETING.
A majority of such attorneys or substitutes as shall be present and shall act at
said Annual Meeting or any adjournment or adjournments thereof (or if only one
shall be present and act, then that one) shall have and may exercise all of the
powers of said attorneys-in-fact hereunder.
Dated: ___________________________, 1998
________________________________________
Signature
________________________________________
Signature if Held Jointly
________________________________________
Print Name(s)
(This Proxy should be dated, signed by
the stockholder(s) and returned promptly
in the enclosed envelope. When signing
as executor, administrator, attorney,
trustee or guardian, please give full
title as such. If a corporation, please
sign in full corporate name by president
or other authorized officer. If a
partnership, please sign in partnership
name by authorized person. If shares are
held by joint tenants or as community
property, both should sign.)
<PAGE>
APPENDIX
PIRANHA INTERACTIVE PUBLISHING, INC.
1996 STOCK OPTION PLAN
(AS AMENDED ON SEPTEMBER 18, 1998)
--------------------------
1. PURPOSES OF THE PLAN. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility to provide successful management of the Company's business, to
provide additional incentive to the Employees of the Company, and to promote the
success of the Company's business through the grant of options to purchase
shares of the Company's Common Stock.
Options granted hereunder may be either "Incentive Stock Options," as
defined in Section 422 of the Code, or "Non-Statutory Stock Options," at the
discretion of the Board and as reflected in the terms of the written option
agreement.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "BOARD" shall mean the Board of Directors of the Company or the
Committee, if one has been appointed.
(b) "CODE" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder.
(c) "COMMON STOCK" shall mean the common stock of the Company
described in the Company's Articles of Incorporation, as amended.
(d) "COMPANY" shall mean Piranha Interactive Publishing, Inc., a
Nevada corporation, and shall include any parent or subsidiary corporation of
the Company as defined in Sections 424(e) and (f), respectively, of the Code.
(e) "COMMITTEE" shall mean the Committee appointed by the Board in
accordance with paragraph (a) of Section 4 of the Plan, if one is appointed.
(f) "CONSULTANT" shall mean any person, including without limitation
independent contractors and software developers and licensors, who perform
services on behalf of the Company from time to time.
(g) "DIRECTOR" shall mean a member of the Board.
(h) "EMPLOYEE" shall mean any person, including officers and
Directors, employed by the Company. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.
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(i) "EXCHANGE ACT" shall mean the Securities and Exchange Act of 1934,
as amended and the rules and regulations promulgated thereunder.
(j) "FAIR MARKET VALUE" shall mean, with respect to the date a given
Option is granted or exercised, the value of the Common Stock determined by the
Board in such manner as it may deem equitable for Plan purposes but, in the case
of an Incentive Stock Option, no less than is required by applicable laws or
regulations; provided, however, that where there is a public market for the
Common Stock, the Fair Market Value per Share shall be the mean of the bid and
asked prices of the Common Stock on the date of grant, as reported in the WALL
STREET JOURNAL (or, if not so reported, as otherwise reported by the National
Association of Securities Dealers Automated Quotation System) or, in the event
the Common Stock is listed on the New York Stock Exchange or the American Stock
Exchange, the Fair Market Value per Share shall be the closing price on such
exchange on the date of grant of the Option, as reported in the Wall Street
Journal.
(k) "INCENTIVE STOCK OPTION" shall mean an Option which is intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(l) "NON-STATUTORY OPTION" shall mean all Options which are not
Incentive Stock Options.
(m) "OPTION" shall mean a stock option granted under the Plan.
(n) "OPTIONED STOCK" shall mean the Common Stock subject to an Option.
(o) "OPTIONEE" shall mean an Employee, Director or Consultant of the
Company who has been granted one or more Options.
(p) "PARENT" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(q) "PLAN" shall mean this Stock Option Plan.
(r) "SHARE" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(s) "SUBSIDIARY" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
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(t) "TAX DATE" shall mean the date an Optionee is required to pay the
Company an amount with respect to tax withholding obligations in connection with
the exercise of an Option.
3. COMMON STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section
11 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan shall be 700,000 Shares of Common Stock. The Shares which
may be optioned and sold under the Plan may be authorized, but unissued, or
previously issued Shares acquired or to be acquired by the Company and held in
treasury.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares covered by such
Option shall, unless the Plan shall have been terminated, be available for
future grants of Options.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) The Board shall administer the Plan; provided, however,
that the Board may appoint a Committee consisting solely of two (2) or more
"Non-Employee Directors" to administer the Plan on behalf of the Board, in
accordance with Rule 16b-3 of the Exchange Act.
(ii) Once appointed, the Committee shall continue to serve until
otherwise directed by the Board. From time to time the Board may increase the
size of the Committee and appoint additional members thereof, remove members
(with or without cause), and appoint new members in substitution therefor or
fill vacancies however caused; provided, however, that at no time may any person
serve on the Committee if that person's membership would cause the Committee not
to satisfy the requirements of Rule 16b-3 of the Exchange Act.
Any reference herein to the Board shall, where appropriate,
encompass a Committee appointed to administer the Plan in accordance with this
Section 4.
(b) POWERS OF THE BOARD. Subject to the provisions of the Plan,
the Board shall have the authority, in its discretion: (i) to grant Incentive
Stock Options, in accordance with Section 422 of the Code, and to grant
Non-Statutory Stock Options; (ii) to determine, upon review of relevant
information and in accordance with Section 2(i) of the Plan, the Fair Market
Value of the Common Stock; (iii) to determine the exercise price per Share of
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Options to be granted, which exerce price shall be determined in accordance with
Section 8(a) of the Plan; (iv) to determine the Directors, Employees and
Consultants to whom, and the time or times at which, Options shall be granted
and the number of Shares to be represented by each Option; (v) to interpret the
Plan; (vi) to prescribe, amend and rescind rules and regulations relating to the
Plan; (vii) to determine the terms and provisions of each Option granted (which
need not be identical) and, with the consent of the Optionee thereof, modify or
amend each Option; (viii) to accelerate or defer (with the consent of the
Optionee) the exercise date of any Option; (ix) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the grant
of an Option previously granted by the Board; (x) to accept or reject the
election made by an Optionee pursuant to Section 17 of the Plan; and (xi) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
(c) EFFECT OF BOARD'S DECISION. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
5. ELIGIBILITY.
(a) Consistent with the Plan's purposes, Options may be granted
only to Directors, Employees and Consultants of the Company as determined by the
Board. An Optionee who has been granted an Option may, if he or she is otherwise
eligible, be granted an additional Option or Options. Incentive Stock Options
may be granted only to those Employees who meet the requirements applicable
under Section 422 of the Code.
(b) With respect to Incentive Stock Options granted under the Plan,
the aggregate fair market value (determined at the time the Incentive Stock
Option is granted) of the Common Stock with respect to which Incentive Stock
Options are exercisable for the first time by the Employee during any calendar
year (under all plans of the Company and its parent and subsidiary corporations)
shall not exceed One Hundred Thousand Dollars ($100,000).
The Plan shall not confer upon any Optionee any right with respect to
continuation of employment with the Company, nor shall it interfere in any way
with his or her right or the Company's right to terminate his or her employment
at any time.
6. BOARD APPROVAL AND EFFECTIVE DATE. The Plan shall take effect on
December 13, 1996, the date on which the Board approved the Plan. No Option may
be granted after December 13, 2006 (ten (10) years from the effective date of
the Plan); provided, however, that the Plan and all outstanding Options shall
remain in effect until such Options have expired or until such Options are
canceled.
7. TERM OF OPTION. Unless otherwise provided in the Stock Option
Agreement, the term of each Option shall be ten (10) years from the date of
grant thereof. In no case shall the term of any Incentive Stock Option
exceed ten (10) years from the date of grant thereof. Notwithstanding the
above, in the case of an Incentive Stock Option granted to an Employee who, at
the time the Incentive Stock Option is granted, owns ten percent (10%) or more
4
<PAGE>
of the Common Stock as such amount is calculated under Section 422(b)(6) of the
Code ("Ten Percent Shareholder"), the term of the Incentive Stock Option shall
be five (5) years from the date of grant thereof or such shorter time as may be
provided in the Stock Option Agreement.
8. EXERCISE PRICE AND PAYMENT.
(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 Board, but
in the case of an Incentive Stock Option shall be no less than one hundred
percent (100%) of the Fair Market Value per share on the date of grant;
provided, further, that in the case of an Incentive Stock Option granted to an
Employee who, at the time of the grant of such Incentive Stock Option, is a Ten
Percent Shareholder, the per Share exercise price shall be no less than one
hundred ten percent (110 %) of the Fair Market Value per Share on the date of
grant.
(b) PAYMENT. The price of an exercised Option and any taxes
attributable to the delivery of Common Stock under the Plan, or portion thereof,
shall be paid:
(i) In United States dollars in cash or by check, bank draft or
money order payable to the order of the Company; or
(ii) At the discretion of the Board, through the delivery of
shares of Common Stock, with an aggregate Fair Market Value, equal to the
option price; or
(iii) By a combination of (i) and (ii) above; or
(iv) In the manner provided in subsection (c) below.
The Board shall determine acceptable methods for tendering
Common Stock as payment upon exercise of an Option and may impose such
limitations and prohibitions on the use of Common Stock to exercise an Option as
it deems appropriate. With respect to Non-Statutory Options, at the election of
the Optionee pursuant to Section 17, the Company may satisfy its withholding
obligations by retaining such number of shares of Common Stock subject to the
exercised Option which have an aggregate Fair Market Value on the exercise date
equal to the Company's aggregate federal, state, local and foreign tax
withholding and FICA and FUTA obligations with respect to income generated by
the exercise of the Option by Optionee.
(c) FINANCIAL ASSISTANCE TO OPTIONEES. The Board may assist Optionees
in paying the exercise price of Options granted under this Plan in the following
manner:
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(i) The extension of a loan to the Optionee by the Company; or
(ii) A guaranty by the Company of a loan obtained by the Optionee
from a third party.
The terms of any loans, installment payments or guarantees,
including the interest rate and terms of repayment, and collateral requirements,
if any, shall be determined by the Board, in its sole discretion. Subject to
applicable margin requirements, any loans, installment payments or guarantees
authorized by the Board pursuant to the Plan may be granted without security,
but the maximum credit available shall not exceed the exercise price for the
Shares for which the Option is to be exercised, plus any federal and state
income tax liability incurred in connection with the exercise of the Option.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE, RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan. Unless otherwise determined by the Board at the time of grant, an Option
may be exercised in whole or in part. An Option may not be exercised for a
fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option by the number of Shares as to which the
Option is exercised.
(b) TERMINATION OF STATUS AS AN EMPLOYEE. Unless otherwise provided
in a Stock Option Agreement relating to an Option that is not an Incentive Stock
Option, if an Employee's employment by the Company is terminated, except if such
termination is voluntary or occurs due to retirement with the consent of the
Board, death or disability, then the Option, to the extent not exercised, shall
cease on the date on which Employee's employment by the Company is terminated.
If an Employee's termination is voluntary or occurs due to retirement with the
consent of the Board, then the Employee may, but only within thirty (30) days
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(or such other period of time not exceeding three (3) months as is determined by
the Board) after the date he or she ceases to be an Employee of the Company,
exercise his or her Option to the extent that he or she was entitled to exercise
it at the date of such termination. To the extent that he or she was not
entitled to exercise the Option at the date of such termination, or if he or she
does not exercise such Option (which he or she was entitled to exercise) within
the time specified herein, the Option shall terminate.
(c) DISABILITY. Unless otherwise provided in an Option Agreement
relating to an Option that is not an Incentive Stock Option, notwithstanding the
provisions of Section 8(b) above, in the event an Employee is unable to continue
his or her employment with the Company as a result of his or her permanent and
total disability (as defined in Section 22(e)(3) of the Code), he or she may,
but only within three (3) months (or such other period of time not exceeding
twelve (12) months as it is determined by the Board) from the date of
termination, exercise his or her Option to the extent he or she was entitled to
exercise it at the date of such termination. To the extent that he or she was
not entitled to exercise the Option at the date of termination, or if he or she
does not exercise such Option (which he or she was entitled to exercise) within
the time specified herein, the Option shall terminate.
(d) DEATH OF OPTIONEE. Unless otherwise provided in an Option
Agreement relating to an Option, if Optionee dies during the term of the Option
and is at the time of his or her death an Employee of the Company who shall have
been in continuous status as an Employee since the date of grant of the Option,
the Option may be exercised, at any time within one (1) year following the date
of death (or such other period of time as is determined by the Board), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent that Optionee was entitled to
exercise the Option on the date of death. To the extent that Optionee was not
entitled to exercise the Option on the date of death, or if the Optionee's
estate, or person who acquired the right to exercise the Option by bequest or
inheritance, does not exercise such Option (which he or she was entitled to
exercise) within the time specified herein the Option shall terminate.
10. NON-TRANSFERABILITY OF OPTIONS. An Option 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, or pursuant to a "qualified
domestic relations order" under the Code and ERISA, and may be exercised, during
the lifetime of the Optionee, only by the Optionee.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to any
required action by the shareholders of the Company, the number of Shares
covered by each outstanding Option, and the number of Shares which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per Share covered by each such
outstanding Option, 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 Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
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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 Option.
In the event of the proposed dissolution or liquidation of the
Company, the Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable. In
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the Optionee shall have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable. If the Board makes an
Option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice (but not later than the expiration of the term of the Option under
the Option Agreement), and the Option will terminate upon the expiration of such
period.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee to whom
an Option is so granted within a reasonable time after the date of such grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided, however, that the following revisions or amendments shall require
approval of the holders of a majority of the outstanding Shares of the Company
entitled to vote:
(i) Any increase in the number of Shares subject to the Plan,
other than in connection with an adjustment under Section 11 of the Plan;
(ii) Any change in the designation of the class of employees
eligible to be granted Options; or
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(iii) If the Company has a class of equity security registered
under Section 12 of the Exchange Act at the time of such revision or
amendment, any material increase in the benefits accruing to participants
under the Plan.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, respectively, and the requirements of any stock exchange upon which
the Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
In the case of an Incentive Stock Option, any Optionee who disposes of
Shares of Common Stock acquired on the exercise of an Option by sale or exchange
(a) either within two (2) years after the date of the grant of the Option under
which the Common Stock was acquired or (b) within one (1) year after the
acquisition of such Shares of Common Stock shall notify the Company of such
disposition and of the amount realized upon such disposition.
15. 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.
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.
16. OPTION AGREEMENT. Options shall be evidenced by written Stock Option
Agreements in such form as the Board shall approve.
17. WITHHOLDING TAXES. Subject to Section 4(b)(x) of the Plan and prior to
the Tax Date, the Optionee may make an irrevocable election to have the Company
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withhold from those Shares that would otherwise be received upon the exercise of
any Non-Statutory Stock Option, a number of Shares having a Fair Market Value
equal to the minimum amount necessary to satisfy the Company's federal, state,
local and foreign tax withholding obligations and FICA and FUTA obligations with
respect to the exercise of such Option by the Optionee.
18. MISCELLANEOUS PROVISIONS.
(a) PLAN EXPENSE. Any expenses of administering this Plan shall be
borne by the Company.
(b) USE OF EXERCISE PROCEEDS. The payment received from Optionees from
the exercise of Options shall be used for the general corporate purposes of the
Company.
(c) CONSTRUCTION OF PLAN. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined in accordance with the laws of
the State of Nevada and where applicable, in accordance with the Code.
(d) TAXES. The Company shall be entitled if necessary or desirable to
pay or withhold the amount of any tax attributable to the delivery of Common
Stock under the Plan from other amounts payable to the Employee after giving the
person entitled to receive such Common Stock notice as far in advance as
practical, and the Company may defer making delivery of such Common Stock if any
such tax may be pending unless and until indemnified to its satisfaction.
(e) INDEMNIFICATION. In addition to such other rights of
indemnification as they may have as members of the Board, the members of the
Board shall be indemnified by the Company against all costs and expenses
reasonably incurred by them in connection with any action, suit or proceeding to
which they or any of them may be party by reason of any action taken or failure
to act under or in connection with the Plan or any Option, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except a
judgment based upon a finding of bad faith; provided that upon the institution
of any such action, suit or proceeding a Board member shall, in writing, give
the Company notice thereof and an opportunity, at its own expense, to handle and
defend the same before such Board member undertakes to handle and defend it on
her or his or her own behalf.
(f) GENDER. For purposes of this Plan, words used in the masculine
gender shall include the feminine and neuter, and the singular shall include the
plural and vice versa, as appropriate.
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