<PAGE>
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check
the appropriate box:
[_] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
NEW WORLD 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
[_] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2) or
Item 22(a)(2) of Schedule 14A.
[_] 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:
---------------------------------------------------------------------
<PAGE>
NEW WORLD PUBLISHING, INC.
1641 20th Street
Santa Monica, CA 90404
NOTICE OF SPECIAL MEETING
To Be Held
October 12, 1999
NOTICE IS HEREBY GIVEN, in accordance with the applicable provisions of
the Colorado Business Corporations Act, that a special meeting of the
stockholders (the "Meeting") of New World Publishing, Inc., a Colorado
corporation (the "Company"), whose principal executive offices are located at
1641 20th Street, Santa Monica, CA 90404, will be held as follows:
PLACE: Miramar Sheraton Hotel, 101 Wilshire Blvd., Santa Monica,
CA 90401
DATE: October 12, 1999
TIME: 5:00 p.m. PST
The purpose of the Meeting is as follows:
1. To change the Company's name to "SONICPORT.COM, INC."
2. Ratifying the change of certified public auditors from Janet A.
Loss, C.P.A. to Singer, Lewak, Greenbaum & Goldstein LLP.
3. To adopt a 1999 Incentive Stock Option Plan.
4. To change the state of incorporation from Colorado to Nevada.
5. All such other matters as may be brought before such Meeting.
The Board of Directors has fixed the close of business on September 10,
1999 as the record date for determination of stockholders entitled to notice of,
and to vote at, the Meeting.
Shares can be voted at the Meeting only if the record holder thereof is
present at the Meeting or represented by proxy. To ensure the presence of a
quorum at the Meeting, you are requested to sign and date the accompanying
Appointment of Proxy and return it promptly in the enclosed return envelope. The
giving of such Appointment of Proxy will not affect your rights to vote in
person in the event you attend the Meeting.
September 28, 1999 By Order of The Board of Directors
1
<PAGE>
NEW WORLD PUBLISHING, INC.
1641 20th Street
Santa Monica, CA 90404
PROXY STATEMENT
Mailing Date: September 28, 1999
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD: OCTOBER 12, 1999
GENERAL
This Proxy Statement is furnished to the holders of Common Stock,
$0.0001 par value per share (the "Common Stock"), of New World Publishing, Inc.
(the "Company" or the "Registrant"), on behalf of the Company, in connection
with its solicitation of Appointments of Proxy in the form enclosed herewith for
use at a special meeting of stockholders (the "Meeting") to be held on October
12, 1999, and at any adjournments thereof. The Meeting will be held at 5:00 p.m.
local time, on the above date, at Miramar Sheraton Hotel, 101 Wilshire Blvd.,
Santa Monica, CA 90401. The matters to be acted upon at the Meeting are set
forth in the accompanying Notice of Meeting and are described herein.
The cost of this solicitation of Appointments of Proxy will be borne by
the Company. In addition to the solicitation of Appointments of Proxy by mail,
certain officers, directors and regular employees of the Company, without
additional remuneration, may solicit Appointments of Proxy, personally or by
telephone, telegraph or cable. Arrangements will also be made with brokerage
firms and other nominee holders for forwarding proxy materials to the beneficial
owners of shares of the Common Stock, and the Company will reimburse such
persons for reasonable out-of-pocket expenses incurred by them in connection
therewith.
A majority of the outstanding shares entitled to vote, present in
person or represented by proxy, shall constitute a quorum. Proxies which abstain
on one or more proposals and "broker non-votes" will be deemed present for
quorum purposes for all proposals to be voted on at the meeting. Broker
non-votes occur where a broker holding stock in street name votes the shares on
some matters but not others. The missing votes are broker non-votes. Client
directed abstentions are not broker non-votes. Broker non-votes will be treated
as not entitled to vote and therefore will not be counted as either a vote for
or against the proposals. Stockholders whose shares are in street name and do
not return a proxy are not counted for any purpose and are neither an abstention
nor a broker non-vote. Stockholders who sign, date and return a proxy but do not
indicate how their shares are to be voted are giving management full authority
to vote their shares as they deem best for the Company.
VOTING OF APPOINTMENTS OF PROXY
The persons named in the enclosed Appointment of Proxy, as proxies to
represent stockholders at the Meeting, are David Baeza and Stanton Dodson, and
each of them. An Appointment of Proxy which is properly executed and returned,
and not revoked, will be voted in accordance with the directions contained
therein. If no directions are given, that Appointment of Proxy will be voted FOR
the name change as further described in Proposal 1, FOR the ratification of new
auditors, as further described in Proposal 2 herein, FOR adoption of 1999
Incentive Stock Option Plan, as further described in Proposal 3 herein, and FOR
the change of the state of incorporation as further described in Proposal 4
herein. On any other matters that may come before the Meeting, each Appointment
of Proxy will be voted in accordance with the best judgment of the proxies.
2
<PAGE>
REVOCABILITY OF APPOINTMENTS OF PROXY
An Appointment of Proxy may be revoked by the stockholder at any time
before it is exercised by filing with the Secretary of the Company a written
revocation or a duly executed Appointment of Proxy bearing a later date, or by
attending the Meeting and announcing his intention to vote in person.
RECORD DATE AND VOTING RIGHTS
The close of business on September 10, 1999 has been fixed as the
record date for the determination of stockholders entitled to notice of, and to
vote at, the Meeting. Only those stockholders of record, on that date, will be
entitled to vote on the proposals described herein.
The voting securities of the Company are the shares of its Common
Stock, of which shares were issued and outstanding as of September 10, 1999. All
outstanding shares of Common Stock are entitled to one vote on each matter
submitted for voting at the meeting.
David Baeza, the Company's Chief Executive Officer and President,
Stanton Dodson, the Company's Chairman and William Cooper, the Company's Chief
Financial Officer, who collectively hold 62.03% of the Company's common stock,
have indicated their intention to vote for the proposals to be presented at the
Meeting.
BENEFICIAL OWNERSHIP OF COMMON STOCK
PRINCIPAL STOCKHOLDERS, DIRECTORS AND OFFICERS. The following table
sets forth the beneficial ownership of the Company's Common Stock, as of
September 10, 1999, by each person known to the Company to own more than five
percent (5%) of the Company's Common Stock and by each of the Company's current
directors, and by all directors and officers of the Company as a group. The
table has been prepared based on information provided to the Company by each
stockholder.
<TABLE>
<CAPTION>
AMOUNT OF
NAME AND BENEFICIAL PERCENT OF
ADDRESS OWNERSHIP (2) CLASS (2)
<S> <C> <C>
David Baeza (1) 7,376,934 (3) 31.73%
Chief Executive Officer, President and Director
Stanton Dodson (1) 6,504,915 (4) 27.98%
Chairman
William Cooper (1) 540,044 (5) 2.32%
Chief Financial Officer,
Secretary and Director
John Cooper (1) 1,000 (6) *%
Director
John and Laurie Quam 1,210,000 (7) 5.21%
1977 S. Vivian Street
Lakewood, CO 80228
Judith F. Harayda 0 0
1977 S. Vivian Street
Lakewood, CO 80228
All Directors and Officers
as a Group (4 persons) 14,421,993 62.03%
- -------------------------------
</TABLE>
* Less than 1%
3
<PAGE>
As used in this table, "beneficial ownership"is determined in accordance with
the rules of the Securities and Exchange Commission and generally includes
voting or investment power with respect to the shares shown. Except as indicated
by footnote and subject to community property laws where applicable, to the
Company's knowledge the stockholders named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(1) C/o Communications Television, Inc. address: 1641 20th Street, Santa
Monica, CA 90404.
(2) Based on 23,246,835 shares outstanding as of September 10, 1999.
(3) Excludes 50,000 options exercisable at $4.00 per share granted to Mr.
Baeza under 1999 Plan, as herein defined. The options were fully vested at
the date of grant.
(4) Excludes 50,000 options exercisable at $4.00 per share granted to Mr.
Dodson under 1999 Plan, as herein defined. The options were fully vested
at the date of grant.
(5) Excludes 20,000 options exercisable at $4.00 per share granted to Mr.
Cooper under 1999 Plan, as herein defined. The options were fully vested
at the date of grant.
(6) Excludes 25,000 options exercisable at $0.50 per share granted to Mr.
Cooper. The options were fully vested at the date of grant.
(7) After cancellation of 7,425,000 shares held collectively by John and
Laurie Quam.
As of September 10, 1999, there were approximately 187 shareholders of
record. The percentage of beneficial ownership is based upon 23,246,835 shares
of Common Stock outstanding as of September 10, 1999.
EXECUTIVE COMPENSATION
No executive officers received compensation in excess of $100,000 for
the year ended December 31, 1998.
4
<PAGE>
PROPOSAL NO. 1
NAME CHANGE
The Board of Directors has proposed to amend the Company's Articles of
Incorporation to change the name of the Company to "Sonicport. com, Inc." The
Board of Directors believes that the new name reflects better the current
business of the Company. The Company is an Internet service provider which is
developing and operating extensive subscriber-based vertical portals through the
use of short form direct response television ("DRTV") advertising, Internet,
direct mail, and telemarketing campaigns.
As of May 18, 1999 the Company acquired Communications Television,
Inc., a California corporation ("CTV") in exchange for 19,020,167 newly issued
shares of common voting stock of the Company, for the purpose of effecting a
tax-free reorganization pursuant to sections 351, 354 and 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended ("IRC") pursuant to the Agreement and
Plan of Reorganization (the "Reorganization Agreement") by and between the
Company, CTV and CTV shareholders. Pursuant to the Agreement, the Board of
Directors of the Company resigned and was replaced with the designees of CTV.
The Agreement was approved by the Board of Directors of the Company. No
shareholders' approval was required nor solicited for the adoption of the
Agreement.
The above proposal requires the affirmative vote of a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting. The Board of
Directors recommends that the stockholders vote FOR this proposal.
PROPOSAL NO. 2
RATIFICATION OF CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors approved on July 6, 1999 the change of the
Company's certified public accountants from Janet A. Loss, CPA to Singer, Lewak,
Greenbaum & Goldstein LLP., the auditors of the Company's subsidiary,
Communications Television, Inc. The Board of Directors recommends that the
stockholders vote FOR this proposal.
PROPOSAL NO. 3
ADOPTION OF 1999 STOCK OPTION PLAN
In August, 1999, the Company's Board of Directors unanimously approved
the Company's 1999 Stock Option Plan (the "1999 Plan"). The purpose of the 1999
Plan is to enable the Company to attract and retain top-quality employees,
officers, directors and consultants and to provide such employees, officers,
directors and consultants with an incentive to enhance stockholder returns. The
full text of the 1999 Plan appears as Exhibit A to this Proxy Statement and the
description of the 1999 Plan herein is qualified by reference to Exhibit A.
DESCRIPTION OF THE 1999 PLAN
The 1999 Plan provides for the grant to directors, officers, employees
and consultants of the Company (including its subsidiaries) of options to
purchase up to an aggregate of 2,200,000 shares of Common Stock. The 1999 Plan
may be administered by the Board of Directors or a committee of the Board of
Directors (in either case, the "Committee"), which has complete discretion to
select the optionees and to establish the terms and conditions of each option,
subject to the provisions of the 1999 Plan. Options granted under the 1999 Plan
may be "incentive stock options" as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or nonqualified options.
The exercise price of incentive stock options may not be less than 100%
of the fair market value of the Common Stock as of the date of grant (110% of
the fair market value if the grant is to an employee who owns more than 10% of
the total combined voting power of all classes of capital stock of the Company).
The Code currently limits to $100,000 the aggregate value of Common Stock that
may be acquired in any one year pursuant to incentive stock options under the
1999 Plan or any other option plan adopted by the Company. Nonqualified options
may be granted under the 1999 Plan at an exercise price of not less than 100% of
the fair market value of the Common Stock on the date of grant. Nonqualified
options also may be granted without regard to any restriction on the amount of
Common Stock that may be acquired pursuant to such options in any one year.
Subject to the limitations contained in the 1999 Plan, options granted
under the 1999 Plan will become exercisable at such times and in such
installments (but not less than 20% per year) as the Committee shall provide in
the terms of each individual stock option agreement. The Committee must also
5
<PAGE>
provide in the terms of each stock option agreement when the option expires and
becomes unexercisable, and may also provide the option expires immediately upon
termination of employment for any reason. No option held by directors, executive
officers or other persons subject to Section 16 of the Securities Exchange Act
of 1934, as amended, may be exercised during the first six months after such
option is granted.
Unless otherwise provided in the applicable stock option agreement,
upon termination of employment of an optionee, all options that were then
exercisable would terminate three months (three years in the case of termination
by reason of death or disability) following termination of employment. Any
options which were not exercisable on the date of such termination would
immediately terminate concurrently with the termination of employment.
The Board of Directors may at any time amend, alter, suspend or
terminate the Plan. No amendment, alteration, suspension or termination of the
Plan will impair the rights of any optionee, unless mutually agreed otherwise
between the optionee and the Committee, which agreement must be in writing and
signed by the optionee and the Company. Termination of the Plan will not affect
the Committee's ability to exercise the powers granted to it hereunder with
respect to options granted under the Plan prior to the date of such termination.
Options granted under the 1999 Plan may not be exercised more than ten
years after the grant (five years after the grant if the grant is an incentive
stock option to an employee who owns more than 10% of the total combined voting
power of all classes of capital stock of the Company). Options granted under the
1999 Plan are not transferable and may be exercised only by the respective
grantees during their lifetime or by their heirs, executors or administrators in
the event of death. Under the 1999 Plan, shares subject to cancelled or
terminated options are reserved for subsequently granted options. The number of
options outstanding and the exercise price thereof are subject to adjustment in
the case of certain transactions such as mergers, recapitalizations, stock
splits or stock dividends. The 1999 Plan is effective for ten years, unless
sooner terminated or suspended.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Incentive stock options granted under the 1999 Plan will be afforded
favorable federal income tax treatment under the Code. If an option is treated
as an incentive stock option, the optionee will recognize no income upon grant
or exercise of the option unless the alternative minimum tax rules apply. Upon
an optionee's sale of the shares (assuming that the sale occurs at least two
years after grant of the option and at least one year after exercise of the
option), any gain will be taxed to the optionee as long-term capital gain. If
the optionee disposes of the shares prior to the expiration of the above holding
periods, then the optionee will recognize ordinary income in an amount generally
measured as the difference between the exercise price and the lower of the fair
market value of the shares at the exercise date or the sale price of the shares.
Any gain or loss recognized on such a premature sale of the shares in excess of
the amount treated as ordinary income will be characterized as capital gain or
loss.
All other options granted under the 1999 Plan will be nonstatutory
stock options and will not qualify for any special tax benefits to the optionee.
An optionee will not recognize any taxable income at the time he or she is
granted a nonstatutory stock option. However, upon exercise of the nonstatutory
stock option, the optionee will recognize ordinary income for federal income tax
purposes in an amount generally measured as the excess of the then fair market
value of each share over its exercise price. Upon an optionee's resale of such
shares, any difference between the sale price and the fair market value of such
shares on the date of exercise will be treated as capital gain or loss and will
generally qualify for long-term capital gain or loss treatment if the shares
have been held for more than one year. Recently enacted legislation provides for
reduced tax rates for long-term capital gains based on the taxpayer's income and
the length of the taxpayer's holding period.
The foregoing does not purport to be a complete summary of the federal
income tax considerations that may be relevant to holders of options or to the
Company. It also does not reflect provisions of the income tax laws of any
municipality, state or foreign country in which an optionee may reside, nor does
it reflect the tax consequences of an optionee's death.
6
<PAGE>
PARTICIPATION IN THE 1999 PLAN
All of the Company's executive officers, directors and employees of the
Company and its subsidiary will be eligible to participate in the 1999 Plan. The
Company has granted a total of 580,000 options under the 1999 Plan, out of which
50,000 options exercisable at $4.00 per share were granted to David Baeza, the
Company's President and Chief Executive Officer; 50,000 options exercisable at
$4.00 per share were granted to Stanton Dodson, the Company's Chairman; 20,000
options exercisable at $4.00 per share to William Cooper, the Company's Chief
Financial Officer, and the remaining 460,000 options were granted to various
Company's employees. The options granted to Messrs. Baeza, Dodson and Cooper are
vested upon the date of the grant.
David Baeza, Stanton Dodson and William Cooper, the Company's principal
shareholders have indicated their intention to vote in favor of the foregoing
proposal. Since these stockholders together own beneficially approximately
62.03% of the Company's outstanding shares of Common Stock, the proposal is
expected to be approved without regard to any votes of the other stockholders of
the Company.
The above proposal requires the affirmative vote of a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting. The Board of
Directors recommends that the stockholders vote FOR this proposal.
PROPOSAL NO. 4
APPROVAL TO CHANGE THE STATE OF INCORPORATION
FROM COLORADO TO NEVADA
The following discussion summarizes certain aspects of the proposal to
change the state of incorporation of the Company from Colorado to Nevada (the
"Reincorporation Merger"). The Reincorporation Merger will be effected pursuant
to an Agreement and Plan of Merger (the "Reincorporation Merger Agreement")
between New World Publishing, Inc., a Colorado Corporation ("NWP-Colorado") and
New World Publishing, Inc., a Nevada corporation ("NWP-Nevada").
Principal Reasons for Reincorporation in Nevada
- -----------------------------------------------
The Board of Directors of the Company believes that the best interests
of the Company and its shareholders will be served by changing the Company's
state of incorporation from Colorado to Nevada. Specifically, under the
corporation laws of the state of Nevada, the Company's shareholders will be able
to take certain corporate actions by a majority consent in writing, without
calling a special meeting, which would provide greater flexibility to the
Company's corporate governance.
Operating the Company as a Nevada corporation will not interfere with,
nor substantially differ from, the present corporate activities of the Company.
As a Nevada corporation, NWP-Nevada will be governed by the Nevada Revised
Statute (the "Nevada Statute"), whereas NWP-Colorado is governed by the Colorado
Revised Statutes (the "Colorado Law"). The Board of Directors has reviewed and
analyzed the Nevada Statute and believes that it is a comprehensive, flexible
legal structure under which to operate. Because of differences in the laws of
these states, rights of the Company's shareholders will change in several
material respects as a result of the proposed reincorporation.
Certain Changes in the Rights of Shareholders Resulting from the Reincorporation
Merger and the Effects Thereof
- --------------------------------------------------------------------------------
Although it is impracticable to describe all of the differences between
the corporation laws of Colorado, the state in which the Company is
incorporated, and the laws of the State of Nevada, the state in which NWP-Nevada
is incorporated, the following is a summary of certain significant differences
between the rights which shareholders have as holders of shares of NWP-Colorado
Common Stock, and those which they would have as holders of shares of NWP-Nevada
Common Stock.
1. Shareholder Vote for Certain Matters
Both the Colorado Law and the Nevada Statute require an affirmative
vote of a majority of the outstanding stock in order to approve a merger (other
than certain parent-subsidiary mergers) or the sale, lease or exchange of all or
substantially all of the corporation's assets. The Colorado Articles of
Incorporation (the "Colorado Articles") and the Nevada Articles of Incorporation
(the "Nevada Articles") are silent regarding such a vote. Accordingly, both the
Colorado Articles and Nevada Articles by operation of law provide for a majority
shareholder vote to approve such transactions.
The Colorado Law and the Nevada Statute both permit a subsidiary
corporation to merge into its parent corporation without approval of
shareholders of either corporation. This provision applies under both statutes
when the parent owns at least 90% of the subsidiary.
7
<PAGE>
2. Removal of Directors by Action of Shareholders
Under both the Colorado Law and the Nevada Statute, any director or the
entire board of directors may be removed, with or without cause, upon the vote
of the shares entitled to vote in the election of directors at a meeting
expressly called for such purpose. Under Colorado Law, a director may be removed
if the number of votes cast in favor of removal exceeds the number of votes cast
against the removal. Under the Nevada Statute a director may be removed by the
vote of shareholders representing not less than two-thirds of the outstanding
shares entitled to vote.
3. Cumulative Voting
Under both the Colorado Law and the Nevada Statute, cumulative voting
is not required unless provided for in the Articles of Incorporation. Neither
the Colorado Articles nor the Nevada Articles provide for cumulative voting.
4. Dividends
Under both the Colorado Law and Nevada Statute, a corporation may make
a distribution to its stockholders, but no distribution may be made if, after
giving it effect: (i) the corporation would not be able to pay its debts as they
become due in the usual course of business; or (ii) except as otherwise
specifically allowed by the articles of incorporation, the corporation's total
assets would be less than the sum of its total liabilities plus the amount that
would be needed, if the corporation were to be dissolved at the time of
distribution, to satisfy the preferential rights upon dissolution of
stockholders whose preferential rights are superior to those receiving the
distribution.
5. Special Meetings of Shareholders
Under the Colorado Law, special meetings of the stockholders may be
called by the board of directors or by such other person or persons as may be
authorized by the articles of incorporation or by the bylaws. The bylaws of
NWP-Colorado provide that special meetings may be called by the President or the
board of directors or by President upon a written request to call the meeting of
stockholder(s) of record of 20% or more of common stock of the Company. There is
no comparable provision in the Nevada Statute. The bylaws of NWP-Nevada provide
that special meetings shall be called by the President or by the Board of
Directors.
6. Shareholder Action by Written Consent
The Colorado Law provides that any action required to be taken at a
meeting of the shareholders may be taken without a meeting if all of the
shareholders entitled to vote thereon consent to such action in writing. The
Nevada Statute provides that any action required to be taken at a meeting of
shareholders may be taken without a meeting if the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted, consented in writing to the action proposed to
be taken.
7. Indemnification
The Colorado Law and the Nevada Statute each specify certain
circumstances when a corporation must, and other circumstances when it may,
indemnify its officers, directors, employees and agents against legal expenses
and liabilities. Both states provisions are generally the same. Both the
Colorado Law and the Nevada Statute require, unless ordered by a court, a
finding to be made: that the officer, director, employee or agent has met the
required standard of conduct by majority vote of the board of directors for
which the quorum does not consist of parties to the proceeding; or by a majority
vote of a committee of the board consisting of two or more directors not parties
to the proceeding; or by independent legal counsel in a written opinion; or by
shareholder approval. Neither the provisions of the Nevada Statute nor the
Colorado Law are exclusive, and both permit indemnification as provided under
any bylaw, agreement, vote of shareholders or of disinterested directors, or
otherwise.
Both the Colorado Articles and the Nevada Articles require
indemnification to the fullest extent allowable under the Colorado Law and the
Nevada Statute, respectively.
8
<PAGE>
8. Directors' Liability
The Colorado Law permits a corporation, with the approval of its
shareholders, to eliminate or limit personal liability of its directors for
liability arising in connection with (i) any breach of the director's duty of
loyalty to the corporation or its shareholders, or (ii) acts and omissions not
in good faith or which involve intentional misconduct, or a knowing violation of
law, or (iii) director's approval of distribution(s) in violation of Colorado
law, or any transaction from which the director directly or indirectly derived
an improper personal benefit. A corporation may not indemnify its director(s)
(i) in connection with a proceeding by or in the right of the corporation in
which the director was adjudged liable to the corporation; or (ii) in connection
with any other proceeding charging that the director derived an improper
personal benefit, whether or not involving action in an official capacity, in
which proceeding the director was adjudged liable on the basis that he or she
derived an improper personal benefit. The Nevada Statute permits a corporation
to eliminate or limit personal liability of its directors, except for liability
arising in connection with (i) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law; or (ii) the payment of
distributions in violation of the Nevada Statute. Under both the Colorado
Articles and the Nevada Articles, the applicable provisions of the respective
statutes are restated.
9. Amendment and Repeal of Bylaws
The Colorado Law provides that the board of directors may adopt, amend
or repeal bylaws unless otherwise stated in the articles of incorporation. Such
provision does not limit the stockholders' power to do so in either case. The
shareholders may adopt, amend or repeal the bylaws even though the bylaws may
also be adopted, amended or repealed by the board of directors. There is no
similar provision in the Nevada Statute. The Colorado Articles state that the
power to adopt, amend, or repeal the bylaws is reserved to the Board of
Directors. The Nevada Articles are silent with respect to amendment and repeal
of the bylaws of NWP-Nevada, but the bylaws of NWP-Nevada which have been
adopted by the Board of Directors state that the power to adopt, amend or repeal
the bylaws is reserved to the Board. The bylaws adopted by the Board are subject
to any bylaws that may be adopted by the shareholders.
10. Stock Repurchases
The Colorado Law provides that a corporation may acquire its own
shares. Under the Nevada Statute a corporation may acquire its own shares.
However, no such purchase can be made if, after giving effect to the purchase:
(i) the corporation would not be able to pay its debts as they become due in the
usual course of business; or (ii) the corporation's total assets would be less
than the sum of its total liabilities plus the amount that would be needed, if
the corporation were to be dissolved at the time of distribution, to satisfy
preferential rights (if any) of stockholders upon dissolution.
11. Loans to Employees and Directors
The Colorado Law and The Nevada Statute do not contain specific
restrictions on loans or guarantees to or for the benefit of any employee (other
than procedural requirements of notice under the Colorado Law). However,
Colorado Law does require that any contract or transaction between the
corporation and an officer or director either: (i) must be disclosed as to the
material facts of such a transaction (or such facts are known) to the Board of
Directors and must be approved by a majority vote of the disinterested directors
(even though the disinterested directors are less than a quorum), or a majority
vote of outstanding shares (including shares owned by the interested director or
officer); or (ii) must be fair to the corporation.
Similarly, the Nevada Statute requires that any contract or transaction
between the corporation and an officer or director either: (i) must be approved
by a majority vote of the disinterested directors, or a majority vote of
outstanding shares (including shares owned by the interested director or
officer) and in either instance the officer's or director's interest in the
transaction is known; or (ii) must be fair to the corporation.
12. Appraisal Rights
Under the Colorado Law and the Nevada Statute, shareholders, in certain
circumstances, have the right to dissent form certain corporate reorganizations
and mergers, provided certain statutory procedures are followed. A shareholder
exercising his right to dissent may demand payment in cash for his shares equal
to their fair value, excluding any appreciation or depreciation in anticipation
of the transaction (although such appreciation or depreciation may be included
in determining fair value if its exclusion would be unfair). Fair value is
determined by an appropriate court upon the petition of the shareholder. See
"Rights of Dissenting Shareholders" below.
9
<PAGE>
The Colorado Law provides that shareholders who neither voted in favor
of a merger or consolidation nor consented thereto in writing shall be entitled
to an appraisal by the district court of the county in the state where the
principal office is located of the fair value of the stockholder's shares.
Appraisal rights are available for the shares of any class or shares of stock of
a constituent corporation in a merger or consolidation. In addition, any
corporation may provide in its articles of incorporation that appraisal rights
under this section shall be available for the shares of any class or series of
its stock as a result of an amendment to its articles of incorporation, any
merger or consolidation in which the corporation is a constituent corporation or
the sale of all or substantially all of the assets of the corporation.
The Nevada Statute provides that a stockholder is entitled to dissent
from and obtain payment of the fair market value of his shares in the event of
the following corporate action: (a) consummation of a plan of merger to which
the domestic corporation is a party (i) if approval by the stockholders is
required for the merger and he is entitled to vote on the merger, or (ii) in
certain circumstances, if the domestic corporation is a subsidiary and is merged
with its parent; (b) consummation of a plan of exchange to which the domestic
corporation is a party as the corporation whose subject owner's interests will
be acquired, if he is entitled to vote on the plan; (c) any corporate action
taken pursuant to a vote of the stockholders to the extent that the articles of
incorporation, bylaws or a resolution of the board of directors provides that
voting or nonvoting stockholders are entitled to dissent and obtain payment for
their shares.
13. Tender Offers and Takeover Bids
The Colorado Law does not regulate the making of tender offers or
takeover bids. The Nevada Statute contains provisions that apply (unless the
articles of incorporation or bylaws in effect on the 10th day following the
acquisition of a controlling interest provide otherwise) to any acquisition of a
controlling interest in an issuing corporation. The articles of incorporation or
bylaws may impose stricter requirements on the acquisitions of a controlling
interest in the corporation. The Nevada Statute does not restrict the directors
of an issuing corporation from taking action to protect the interests of the
corporation and its stockholders, including, but not limited to, adopting or
executing plans, arrangements or instruments that deny rights, privileges, power
or authority to a holder of a specified number or percentage of share ownership
or voting power.
An "issuing corporation" is defined as a Corporation which is organized
in Nevada and has 200 or more stockholders, at least 100 of whom are
stockholders of record and residents of Nevada, and does business in Nevada.
Based on current operations, these provisions under the Nevada Statute would not
apply to NWP-Nevada.
14. Rights of Dissenting Shareholders
Shareholders of the Company will have the right to dissent from the
action of other shareholders in approving the Reincorporation Merger. If the
Reincorporation Merger is consummated, all New World Publishing, Inc.
shareholders who properly exercise their dissenters' rights would be entitled to
rights of appraisal under the Colorado Law. A shareholder of New World
Publishing, Inc. has the right to dissent only as to all of the shares
registered in his name (or part of the shares registered in his name only if he
dissents with respect to all of the shares beneficially owned by any one person)
from the action of the other shareholders in approving the Reincorporation
Merger. Any shareholder who wishes to dissent and obtain payment for his shares
must file with the Company, prior to the Special Meeting, a written notice of
his intention to demand that he be paid fair compensation for his shares if the
Reincorporation Merger is consummated, and must refrain from voting his shares
"FOR" Proposal No. 4. A shareholder who fails in either respect will not acquire
a right to payment for his shares. If a shareholder returns an unmarked proxy,
such proxy will be voted "FOR" all proposals listed on the proxy which are
unmarked, and thus, an unmarked proxy with respect to Proposal No. 4 will be a
vote "FOR" the Reincorporation Merger and would constitute a waiver of the
shareholder's appraisal rights. A shareholder who abstains from voting by
marking "ABSTAIN" on his proxy with respect to Proposal No. 4 will not be
considered to have waived his appraisal rights. A copy of the applicable
provisions of the Colorado Revised Statutes, Section 7-113-102, 7-113-201,
7-113-202 and 7-113-203, specifying the procedures to be followed by a
dissenting shareholder is reprinted in its entirety below as Exhibit "B".
VOTE AGAINST PROPOSAL NO. 4 WILL NOT IN ITSELF CONSTITUTE THE WRITTEN
DEMAND REQUIRED BY THE COLORADO LAW TO ENTITLE A SHAREHOLDER TO PAYMENT FOR HIS
SHARES. STRICT COMPLIANCE WITH THE COLORADO LAW WILL BE NECESSARY TO RETAIN SUCH
RIGHTS. THE FOREGOING SUMMARY IS NOT A COMPLETE STATEMENT OF THE PROVISIONS OF
SECTIONS 7-113-102, 7-113-201, 7-113-202 AND 7-113-203 OF THE COLORADO REVISED
STATUTES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SECTIONS 7-113- 102,
7-113-201, 7-113-202 AND 7-113-203, A COPY OF WHICH IS ATTACHED AS EXHIBIT B TO
THIS PROXY STATEMENT.
10
<PAGE>
The Reincorporation Merger
- --------------------------
Effective Date
The Reincorporation Merger will be consummated and take effect on such
date (the "Effective Date") as the Articles of Merger are filed with the
Secretary of State of the State of Nevada and the Secretary of State of the
State of Colorado. Such filings are anticipated to be made as soon as
practicable following the adoption and approval of the Reincorporation Merger
Agreement by the shareholders of NWP-Colorado.
Capitalization of NWP-Nevada; Stock Certificates
NWP-Nevada will have authority to issue 100,000,000 shares of Common
Stock, par value $.0001 per share and 10,000,000 shares of preferred Stock, par
value $0.10 per share.
In the Reincorporation Merger, NWP-Colorado Common Stock will be
converted, without any action on the part of the holders thereof, share for
share into NWP-Nevada Common Stock. All shares of NWP-Nevada Common Stock to be
issued in the Reincorporation Merger will be fully paid and non-assessable. As
holders of stock in NWP-Nevada, the NWP-Nevada shareholders will have the rights
provided in the Nevada Articles and the Nevada Statute. See "Certain Changes in
the Rights of Shareholders Resulting from the Reincorporation Merger and the
Effects Thereof."
IT WILL NOT BE NECESSARY FOR HOLDERS OF NWP-COLORADO COMMON STOCK TO
SURRENDER THEIR CERTIFICATES FOR NEW CERTIFICATES REPRESENTING NWP-NEVADA COMMON
STOCK.
After the Reincorporation Merger, certificates which previously
represented shares of NWP-Colorado Common Stock will be deemed to represent an
equal number of shares of NWP-Nevada Common Stock. Certificates representing
NWP-Nevada Common Stock will be replaced only when submitted to the Transfer
Agent with a request that they be so replaced or when they are presented for
transfer.
Options or warrants to acquire NWP-Colorado Common Stock which are
outstanding immediately prior to the Reincorporation Merger will be converted
into options or warrants to purchase the same number of shares of NWP-Nevada
Common Stock on the same terms and conditions as in effect immediately prior to
the Reincorporation Merger, and after an adjustment for the reverse split has
been taken into account.
Indebtedness of the Company
All indebtedness of NWP-Colorado outstanding on the Effective Date will
be assumed by NWP-Nevada in connection with the Reincorporation Merger.
Certain Federal Income Tax Consequences
The Company's management believes that, for federal income tax
purposes:
1. No gain or loss will be recognized by NWP-Colorado, NWP-Nevada or
shareholders of NWP-Colorado (other than dissenting shareholders; see "Rights of
Dissenting Shareholders") by reason of the consummation of the Reincorporation
Merger;
2. Each shareholder's tax basis in the NWP-Nevada Common Stock into which his
NWP-Colorado Common Stock is converted will be the same as the tax basis of the
NWP-Colorado Common Stock held by him immediately prior to the consummation of
the Reincorporation Merger; and
3. A shareholder who holds NWP-Colorado Common Stock as a capital asset will
include in his holding period for NWP-Nevada Common Stock the period during
which he held NWP-Colorado Common Stock.
11
<PAGE>
The receipt of cash pursuant to the exercise of dissenters' rights will
be a taxable transaction for federal income tax purposes to the shareholders
receiving such cash. A dissenting NWP-Colorado shareholder who owns no shares of
NWP-Nevada Common Stock after the Effective Date (either directly or
constructively pursuant to Section 318 of the Internal Revenue Code) will
recognize gain or loss measured by the difference between the cash received and
his adjusted tax basis in the shares of NWP-Colorado Common Stock exchanged
therefor.
No information is provided herein as to the state, local or foreign tax
consequences of the Reincorporation Merger. The federal income tax discussion
set forth above is for general information only. Each shareholder is urged to
consult his own tax advisor as to these and any other tax consequences of the
Reincorporation Merger.
Vote Required; Recommendation of Board
The above proposal requires the affirmative vote of a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting. The Board of
Directors recommends that the stockholders vote FOR this proposal.
PROPOSAL NO. 5
OTHER MATTERS
The Board has no knowledge of any other matters which may come before
the meeting and does not intend to present any other matters. However, if any
other matters shall properly come before the meeting or any adjournment thereof,
the persons soliciting proxies will have the discretion to vote as they see fit
unless directed otherwise.
If you do not plan to attend the meeting, in order that your shares may
be represented and in order to assure the required quorum, please sign, date and
return your proxy promptly. In the event you are unable to attend the meeting,
at your request, the Company will cancel the proxy.
September 28, 1999 By Order of The Board of Directors
12
<PAGE>
EXHIBIT A
NEW WORLD PUBLISHING, INC. 1999 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan (the
"Plan") are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees,
Directors and Consultants and to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or Nonstatutory
Stock Options, as determined by the Administrator at the time of grant.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan in accordance with Section 4 hereof.
(b) "Applicable Laws" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options are granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a committee of Directors appointed by the Board
in accordance with Section 4 hereof.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means New World Publishing, Inc. , a Colorado
corporation.
(h) "Consultant" means any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services to such entity.
(i) "Director" means a member of the Board of Directors of the
Company.
(j) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider (defined below) shall not cease to be an Employee in the case of (i)
any leave of absence approved by the Company or (ii) transfers between locations
of the Company or between the Company, its Parent, any Subsidiary, or any
successor. For purposes of Incentive Stock Options, no such leave may exceed
three months, unless reemployment upon expiration of such leave is guaranteed by
statute or contract. If reemployment upon expiration of a leave of absence
approved by the Company is not so guaranteed, on the 181st day of such leave any
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option. Neither service as a Director nor payment of a director's fee by
the Company shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
13
<PAGE>
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(p) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "Option" means a stock option granted pursuant to the Plan.
(r) "Option Grant" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Grant is subject to the terms and conditions of the Plan.
(s) "Option Exchange Program" means a program whereby outstanding
Options are exchanged for Options with a lower exercise price.
(t) "Optioned Stock" means the Common Stock subject to an Option.
(u) "Optionee" means the holder of an outstanding Option granted under
the Plan.
(v) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this New World Publishing, Inc. 1999 Stock Option
Plan.
(x) "Section 16(b)" means Section 16(b) of the Securities Exchange Act
of 1934, as amended.
(y) "Service Provider" means an Employee, Director or Consultant.
(z) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 11 below.
(aa) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
14
<PAGE>
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 2,200,000 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock. If an Option expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated). However, Shares that have actually been issued under the Plan,
upon exercise of an Option, shall not be returned to the Plan and shall not
become available for future distribution under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) Administrator. The Plan shall be administered by the Board or a
Committee appointed by the Board, which Committee shall be constituted to comply
with Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the Plan
and, in the case of a Committee, the specific duties delegated by the Board to
such Committee, and subject to the approval of any relevant authorities, the
Administrator shall have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options may from time
to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each such
award granted hereunder;
(iv) to approve forms of Option Grants for use under the Plan;
(v) to determine the terms and conditions, of any Option granted
hereunder. Such terms and conditions include, but are not limited to, the
exercise price, the time or times when Options may be exercised (which may be
based on performance criteria), any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or the
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to determine whether and under what circumstances an Option
may be settled in cash under subsection 9(e) instead of Common Stock;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(x) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option that number of Shares having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the Shares to be
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined. All elections by Optionees to have Shares withheld for this
purpose shall be made in such form and under such conditions as the
Administrator may deem necessary or advisable;
(xi) to construe and interpret the terms of the Plan and awards
granted and pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees.
15
<PAGE>
5. ELIGIBILITY.
(a) Nonstatutory Stock Options may be granted to Service Providers.
Incentive Stock Options may be granted only to Employees.
(b) Each Option shall be designated in the Option Grant as either an
Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding
such designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, such Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 5(b),
Incentive Stock Options shall be taken into account in the order in which they
were granted. The Fair Market Value of the Shares shall be determined as of the
time the Option with respect to such Shares is granted.
(c) Neither the Plan nor any Option shall confer upon any Optionee any
right with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate such relationship at any time, with or
without cause.
6. TERM OF PLAN. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for a term of ten (10) years unless sooner
terminated under Section 14 of the Plan.
7. TERM OF OPTION. The term of each Option shall be stated in the Option
Grant; provided, however, that the term shall be no more than ten (10) years
from the date of grant thereof. In the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, owns stock representing
more than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant or such shorter term as may be provided in the
Option Grant.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued upon
exercise of an Option shall be such price as is determined by the Administrator,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the exercise
price shall be no less than 110% of the Fair Market Value per Share on the date
of grant.
(B) granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a Service Provider who, at the time of grant
of such Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the exercise price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.
(B) granted to any other Service Provider, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
16
<PAGE>
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant). Such consideration may consist of (l) cash,
(2) check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) consideration received by the Company
under a cashless exercise program implemented by the Company in connection with
the Plan, or (6) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the Administrator
shall consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Administrator and set forth
in the Option Grant. Except in the case of Options granted to Officers,
Directors and Consultants, Options shall become exercisable at a rate of no less
than 20% per year over five (5) years from the date the Options are granted.
Unless the Administrator provides otherwise, vesting of Options granted
hereunder shall be tolled during any unpaid leave of absence. An Option may not
be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the Option Grant)
from the person entitled to exercise the Option, and (ii) full payment for the
Shares with respect to which the Option is exercised. Full payment may consist
of any consideration and method of payment authorized by the Administrator and
permitted by the Option Grant and the Plan. Shares issued upon exercise of an
Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the Company or
of a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Shares, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Shares are issued, except as provided in Section 11 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an Optionee
ceases to be a Service Provider, such Optionee may exercise his or her Option
within such period of time as is specified in the Option Grant (of at least
thirty (30) days) to the extent that the Option is vested on the date of
termination (but in no event later than the expiration of the term of the Option
as set forth in the Option Grant). In the absence of a specified time in the
Option Grant, the Option shall remain exercisable for three (3) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
17
<PAGE>
(c) Disability of Optionee. If an Optionee ceases to be a Service
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Grant (of
at least six (6) months) to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Option Grant). In the absence of a specified time in
the Option Grant, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan. If after termination,
the Optionee does not exercise his or her Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service Provider,
the Option may be exercised within such period of time as is specified in the
Option Grant (or at least six (6) months) to the extent that the Option is
vested on the date of death (but in no event later than the expiration of the
term of such Option as set forth in the Option Grant) by the Optionee's estate
or by a person who acquires the right to exercise the Option by bequest or
inheritance. In the absence of a specified time in the Option Grant, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to the
entire Option, the Shares covered by the unvested portion of the Option shall
immediately revert to the Plan. If the Option is not so exercised within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. NON-TRANSFERABILITY OF OPTIONS. The Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR ASSET SALE.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock 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 of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock 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. The 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 of Common Stock subject to an Option.
18
<PAGE>
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until fifteen (15) days prior to
such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option would not otherwise be exercisable. In addition,
the Administrator may provide that any Company repurchase option applicable to
any Shares purchased upon exercise of an Option shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place at the time
and in the manner contemplated. To the extent it has not been previously
exercised, an Option will terminate immediately prior to the consummation of
such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation, or the sale of substantially all of the assets of
the Company, each outstanding Option shall be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully exercisable
for a period of fifteen (15) days from the date of such notice, and the Option
shall terminate upon the expiration of such period. For the purposes of this
paragraph, the Option shall be considered assumed if, following the merger or
sale of assets, the option or right confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets is
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
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 at any time amend, alter,
suspend or terminate the Plan.
(b) Shareholder Approval. The Board shall obtain shareholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
19
<PAGE>
14. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Legal Compliance. 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 shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of an
Option, the Administrator 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.
15. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
16. RESERVATION OF SHARES. The Company, during the term of this Plan, shall
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17. SHAREHOLDER APPROVAL. The Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws.
18. INFORMATION TO OPTIONEES AND PURCHASERS. The Company shall provide to
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more Options outstanding, and, in the case of an individual who
acquires Shares pursuant to the Plan, during the period such individual owns
such Shares, copies of annual financial statements. The Company shall not be
required to provide such statements to key employees whose duties in connection
with the Company assure their access to equivalent information.
20
<PAGE>
EXHIBIT B
SECTION 7-113-102. RIGHT TO DISSENT
(1) A shareholder, whether or not entitled to vote, is entitled to dissent and
obtain payment of the fair value of the shareholder's shares in the event of any
of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party if:
(I) Approval by the shareholders of that corporation is required for the merger
by Section 7-111-103 or 7-111-104 or by the articles of incorporation; or (II)
The corporation is a subsidiary that is merged with its parent corporation under
section 7-111-104; (b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired; c)
Consummation of a sale, lease, exchange, or other disposition of all, or
substantially all, of the property of the corporation for which a shareholder
vote is required under Section 7-112-102(1); and (d) Consummation of a sale,
lease, exchange or other disposition of all, or substantially all, of the
property of an entity controlled by the corporation if the shareholders of the
corporation were entitled to vote upon the consent of the corporation to the
disposition pursuant to section 7-112-102(2). (1.3) A shareholder is not
entitled to dissent and obtain payment, under subsection (1) of this section, of
the fair value of shares of any class or series of shares which either were
listed on a national securities exchange registered under the federal
"Securities Exchange act of 1934" as amended, or on the national market system
of the national association of securities dealers automated quotation system, or
were held of record by more than two thousand shareholders, at the time of: (a)
The record date fixed under section 7-107-107 to determine the shareholders
entitled to receive notice to the shareholders' meeting at which the corporate
action is submitted to vote; (b) The record date fixed under section 7-107-104
to determine the shareholders entitled to sign such writings consenting to the
corporate action; or (c) The effective date of the corporate action if the
corporate action is authorized other than by a vote of shareholders. (1.8) The
limitation set forth in subsection (1.3) of this section shall not apply if the
shareholder will receive for the shareholders' shares, pursuant to the corporate
action, anything except: (a) Shares of the corporation surviving the
consummation of the plan of merger or share exchange: (b) Shares of any other
corporation which at the effective date of the plan of merger or share exchange
either will be listed on a national securities exchange registered under the
federal "Securities Exchange act of 1934" as amended, or on the national market
system of the national association of securities dealers automated quotation
system, or were held of record by more than two thousand shareholders; (c) Cash
in lieu of fractional shares; or (d) Any combination of the foregoing described
shares or cash in lieu of fractional shares. (2.5) A shareholder, whether or not
entitled to vote, is entitled to dissent and obtain payment of the fair value of
the shareholder's shares in the event of a reverse split that reduces the number
of shares owned by the shareholder to a fraction of a share or to scrip if the
fractional share or scrip so created is to be acquired for cash or the scrip is
to be voided under section 7-106-104. (3) A shareholder, whether or not entitled
to vote, is entitled to dissent and obtain payment of the fair value of the
shareholder's shares in the event of any corporate action to the extent provided
by the bylaws or a resolution of the board of directors. (4) A shareholder
entitled to dissent and obtain payment for the shareholder's shares under this
article may not challenge the corporate action creating such entitlement unless
the action is unlawful or fraudulent with respect to the shareholder or the
corporation.
21
<PAGE>
SECTION 7-113-201. NOTICE OF DISSENTERS' RIGHTS.
(1) If a proposed corporate action creating dissenters' rights under section
7-113-102 is submitted to a vote at a shareholders' meeting, the notice of the
meeting shall be given to all shareholders, whether or not entitled to vote. The
notice shall state that shareholders are or may be entitled to assert
dissenters' rights under this article and shall be accompanied by a copy of this
article and the materials, if any, that under articles 101 to 117 of this title,
are required to be given to shareholders entitled to vote on the proposed action
at the meeting. Failure to give notice as provided by this subsection (1) shall
not affect any action taken at the shareholders' meeting for which the notice
was to have been given, but any shareholder who was entitled to dissent but who
was not given such a notice shall not be precluded from demanding payment for
the shareholder's shares under this article by reason of the shareholder's
failure to comply with the provisions of section 7-113- 202(1). (2) If a
proposed corporate action creating dissenters' rights under section 7-113-102 is
authorized without a meeting of shareholders pursuant to section 7-107-104, or
any written or oral solicitation of a shareholder to execute a writing
consenting to such action contemplated in section 7-107-104 shall be accompanied
or preceded by a written notice stating that shareholders are or may be entitled
to assert dissenters' rights under this article, by a copy of this article and
the materials, if any, that under articles 101 to 117 of this title, are
required to be given to shareholders entitled to vote on the proposed action if
the proposed action were submitted to a vote at a shareholders' meeting. Failure
to give notice as provided by this subsection (2) shall not affect any action
taken pursuant to section 7-107-104 for which the notice was to have been given,
but any shareholder who was entitled to dissent but who was not given such a
notice shall not be precluded from demanding payment for the shareholder's
shares under this article by reason of the shareholder's failure to comply with
the provisions of section 7-113-202(2).
SECTION 7-113-202. NOTICE OF INTENT TO DEMAND PAYMENT.
(1) If a proposed corporate action creating dissenters' rights under section
7-113-102 is submitted to a vote at a shareholders' meeting and if notice of
dissenters' rights has been given to such shareholder in connection with the
action pursuant to section 7-113-201 (1), a shareholder who wishes to assert
dissenters' rights shall: (a) Cause the corporation to receive, before the vote
is taken, written notice of the shareholder's intention to demand payment for
the shareholder's shares if the proposed corporate action is effectuated; and
(b) Not vote the shares in favor of the proposed corporate action. (2) If a
proposed corporate action creating dissenters' rights under section 7-113-102 is
authorized without a meeting of shareholders pursuant to section 7-107-104 and
if notice of dissenters' rights has been given to such shareholder in connection
with the action pursuant to section 7-113-201 (2), a shareholder who wishes to
assert dissenters' rights shall not execute a writing consenting to the proposed
corporate action. (3) A shareholder who does not satisfy the requirements of
subsection (1) or (2) of this section is not entitled to demand payment for the
shareholder's shares under this article.
SECTION 7-113-203. DISSENTER'S NOTICE.
(1) If a proposed corporate action creating dissenter's rights under Section
7-113-102 is authorized, the corporation shall give a written dissenters' notice
to all shareholders who are entitled to demand payment for their shares under
this article. (2)The dissenters' notice required by subsection (1) of this
section shall be given no later than ten days after the effective date of the
corporate action creating dissenters' rights under Section 7-113-102 and shall:
(a) State that the corporate action was authorized and state the effective date
or proposed effective date of the corporate action; (b) State an address at
which the corporation will receive payment demands and the address of a place
where certificates for certificated shares must be deposited; (c) Inform holders
of uncertificated shares to what extent transfer of the shares will be
restricted after the payment demand is received; (d) Supply a form for demanding
payment, which form shall request a dissenter to state an address to which
payment is to be made; (e) Set the date by which the corporation must receive
the payment demand and certificates for certificated shares, which date shall
not be less than thirty days after the date the notice required by subsection
(1) of this section is given; (f) State the requirement contemplated in Section
7-113-103(3), if such requirement is imposed; and (g)Be accompanied by a copy of
this article.
22
