Commission File No.0-23530
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential for use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
TRANS ENERGY, INC.
(Name of Registrant as Specified in its Charter)
TRANS ENERGY, INC.
(Name of Person Filing Proxy Statement)
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: n/a
(2) Aggregate number of securities to which transaction
applies: n/a
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11: n/a.
(4) Proposed maximum aggregate value of transaction: n/a
(5) Total fee paid: -0-
[ ] 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:
TRANS ENERGY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 16, 2000
To our Stockholders:
NOTICE is hereby given that the Annual Meeting of Stockholders
(the "Meeting") of Trans Energy, Inc., a Nevada corporation (the
"Company"), will be held on Friday, June 16, 2000, at 10:00 a.m.
local time, at the Little America Hotel, 500 South Main Street,
Salt Lake City, Utah, for the following purposes.
(1) To elect 4 directors to serve for the ensuing year or
until their successors are duly elected and qualified;
(2) To ratify the proposal to amend the Articles of
Incorporation to change the authorize capitalization of
the Company to 100,000,000 shares of common stock and
10,000,000 shares of preferred stock.
(3) To consider and vote upon the proposal to approve the
Trans Energy, Inc. 2000 Stock Option Plan.
(4) To ratify the appointment of HJ & Associates, LLC
(formerly know as Jones, Jensen & Company), as
independent auditors for the Company for the fiscal year
ending December 31, 2000; and
(5) To transact such other business as may properly come
before the Meeting and any adjournments thereof.
Only stockholders of record at the close of business on May
29, 2000 are entitled to notice of and to vote at the Meeting and
any adjournments thereof.
All stockholders are cordially invited to attend the Meeting
in person. To assure your representation at the Meeting and
whether or not you plan to attend in person, you are urged to mark,
sign, date and return the enclosed proxy card at your earliest
convenience. Any stockholder attending the Meeting may revoke
their proxy and vote their shares in person.
By Order of the Board of Directors,
William F. Woodburn, Vice President
St. Marys, West Virginia
May 30, 2000
Trans Energy, INC.
210 Second Street
P.O. Box 393
St. Marys, West Virginia 26170
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the
solicitation of proxies for use at the Annual Meeting of
Stockholders (the "Meeting") of Trans Energy, Inc. (the "Company")
to be held on Friday, June 16, 2000 at 10:00 a.m. local time at the
Little America Hotel, 500 South Main Street, Salt Lake City, Utah,
and at any and all adjournments thereof. The accompanying proxy is
solicited by the Board of Directors of the Company and is revocable
by the stockholder anytime before it is voted. For more
information concerning the procedure for revoking the proxy see
"General". This Proxy Statement is first being mailed to
stockholders on or about May 30, 2000, accompanied by the Company's
Annual Report to Stockholders for the fiscal year ended December
31, 1999.
Only stockholders of record at the close of business on May
30, 2000 are entitled to notice of and to vote at the Meeting. At
the record date, there were [27,188,725] shares of the Company's
Common Stock (the "Common Stock") outstanding and each share is
entitled to one vote at the Meeting.
Any properly executed proxy returned to the Company will be
voted in accordance with the instructions indicated on thereon. If
no instructions are marked with respect to the matters to be acted
upon, each such proxy will be voted in accordance with the
recommendations of the Board of Directors set forth in this Proxy
Statement.
ITEM 1. ELECTION OF DIRECTORS
Pursuant to the provisions of the Company's Articles of
Incorporation and By-Laws, directors are to be elected annually.
Presently, the number of directors in office is four.
At the Meeting, four directors will be nominated to be elected
to the Board of Directors, each director to hold office for one
year or until their successors are elected and qualified. Unless
otherwise instructed, it is intended that the shares represented by
the enclosed proxy will be voted FOR the election of the four
nominees named below, all of which are currently directors of the
Company. In the event any of the nominees named herein are unable
or decline to serve as a director at the time of the Meeting, it is
intended that the proxies will be voted for the election of a
substitute nominee as the proxy holder may determine. The Board of
Directors has no reason to believe that any nominee listed below
will be unable or will decline to serve as a director. A majority
of the votes cast is required to approve the election of each
director.
The following persons, all of which are incumbent directors
are being nominated for election to the Company's Board of
Directors:
Nominee for Election to the Office of Director
at the 2000 Annual Meeting
Director
Nominee Age Since Position
Loren E. Bagley 57 1991 President and Director
William F. Woodburn 58 1991 Vice President and Director
John B. Sims 74 1988 Director
Gary F. Lawyer 52 1997 Director
BUSINESS EXPERIENCE OF DIRECTORS AND NOMINEES
Loren E. Bagley has been Executive Vice President of the
Company since August, 1991, and became President and C.E.O. in
September, 1993. From 1979 to the present, Mr. Bagley has been
self-employed in the oil and gas industry as president, C.E.O. or
vice president of various corporations which he has either started
or purchased, including Ritchie County Gathering Systems, Inc. Mr.
Bagley's experience in the oil and gas industry includes acting as
a lease agent, funding and drilling of oil and gas wells,
supervising production of over 175 existing wells, contract
negotiations for purchasing and marketing of natural gas contracts,
and owning a well logging company specializing in analysis of
wells. Prior to becoming involved in the oil and gas industry, Mr.
Bagley was employed by the United States government with the
Agriculture Department. Mr. Bagley attended Ohio University and
Salem College and earned a B.S. Degree.
William F. Woodburn has served as Vice President in charge of
Operations and a director of the Company since August, 1991 and has
been actively engaged in the oil and gas business in various
capacities for the past twenty years. For several years prior to
1991, Mr. Woodburn supervised the production of oil and natural gas
and managed the pipeline operations of Tyler Construction Company,
Inc. and Tyler Pipeline, Inc. Mr. Woodburn is a stockholder and
serves as President of Tyler Construction Company, Inc., and is
also a stockholder of Tyler Pipeline, Inc. which owns and operates
oil and gas wells in addition to natural gas pipelines, and Ohio
Valley Welding, Inc. which owns a fleet of heavy equipment that
services the oil and gas industry. Prior to his involvement in the
oil and gas industry, Mr. Woodburn was employed by the United
States Army Corps of Engineers for twenty four years and was
Resident Engineer on several construction projects. Mr. Woodburn
graduated from West Virginia University with a B.S. in civil
engineering.
John B. Sims served as President, C.E.O. and a director of the
Company from 1988 to September, 1993 and currently is a director.
Prior to joining the Company and from 1984 to 1988, Mr. Sims was
the General Partner of Ben's Run Oil Company which was acquired by
the Company in January, 1988. Mr. Sims has also been the general
partner for fourteen limited partnerships from 1977 to 1984
drilling a total of twenty eight wells. Prior to his involvement
in the oil and gas business, Mr. Sims was a real estate developer
for twenty years as well as an exclusive real estate broker for
Ednam Forrest in Charlottesville, Virginia. During 1994, Mr. Sims
voluntarily initiated a personal bankruptcy proceeding pursuant to
Chapter 7 of the United States Bankruptcy Code. Pursuant to the
terms of such proceeding, Mr. Sims was discharged of certain of his
debts which were incurred as a consequence of his personal
guarantees of certain business related debts, not related to the
Company, upon which the primary obligor defaulted.
Gary F. Lawyer became a director of the Company in December
1997. Gary F. Lawyer has been President and a major shareholder of
GeoSense, Inc. which is an international oil and gas
exploration/exploitation and production consulting company based in
Englewood, Colorado since 1991. Prior to founding GeoSense, Inc.,
Mr. Lawyer has been employed in several executive and managerial
positions with various energy companies for the past 25 years. Mr.
Lawyer received his Master of Science degree in Geology from
Brigham Young University.
The Board of Directors recommends that the stockholders vote
"FOR" the election of each nominee for director named above. If no
specification in made in the proxy, the shares will be voted "FOR"
the above nominees.
INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES
All directors hold office until the next annual meeting of
stockholders and until their successors have been duly elected and
qualified. There are no agreements with respect to the election of
directors. The Company has not compensated its directors for
service on the Board of Directors or any committee thereof, but
directors are reimbursed for expenses incurred for attendance at
meetings of the Board of Directors and any committee of the Board
of Directors. Executive officers are appointed annually by the
Board of Directors and each executive officer serves at the
discretion of the Board of Directors. The Executive Committee of
the Board of Directors, to the extent permitted under Nevada law,
exercises all of the power and authority of the Board of Directors
in the management of the business and affairs of the Company
between meetings of the Board of Directors.
During the Company's last fiscal year ending December 31,
1999, there were 6 meetings of the Board of Directors. Attendance
at the meetings averaged 100% in person, by phone or by proxy in
1999, and no member of the Board of Directors attended less than
75% or more of the aggregate number of meetings of the Board of
Directors in person or by proxy and any Committee of which he is a
member.
The Board of Directors, acting as a committee of the whole,
has the responsibility for considering nominations for prospective
Board members. The Board of Directors will consider nominees
recommended by stockholders who submit a notice of nomination to
the Company at least 60 days but not more than 90 days prior to the
first anniversary of the preceding year's Annual Meeting. Such
notice shall contain appropriate data with respect to the suggested
candidate in order to make an informed decision as to the
qualifications of the person.
Executive compensation
The following table sets forth all cash compensation paid by
the Company for services rendered to the Company for the years
ended December 31, 1999, 1998 and 1997, to the Company's Chief
Executive Officer. No executive officer of the Company has earned
a salary greater than $100,000 annually for any of the periods
depicted.
Summary Compensation Table
Other All
Annual Other
Name and Compen- Compen-
Principal Position Year Salary Bonus sation sation
Loren E. Bagley, 1999 $ -0- $ -0- $ -0- $ -0-
President, C.E.O. 1998 $ -0- $ -0- $ -0- $ -0-
1997 $ 18,000 $ -0- $ -0- $ -0-
Employment Agreements
The Company does not have any employment agreements with any
of its directors, executive officers of employees.
Related Transactions
During the last two fiscal years, there have been no
transactions between the Company and any officer, director, nominee
for election as director, or any stockholder owning greater than
five percent (5%) of The Company's outstanding shares, nor any
member of the above referenced individuals' immediate family,
except as set forth below.
(a) Loren E. Bagley is President of Sancho, a principal
purchaser of The Company's natural gas. Mr. Bagley's wife, Carolyn
S. Bagley is a director and owner of 33% of the outstanding capital
stock of Sancho. Under its contract with Sancho, the Company has
the right to sell natural gas subject to the terms and conditions
of a 20-year contract, as amended, that Sancho entered into with
Hope in 1988. This agreement is a flexible volume supply agreement
whereby the Company receives the full price which Sancho receives
less a $.05 per Mcf marketing fee paid to Sancho. The price of the
natural gas is based upon the greater of the residential gas
commodity index or the published Inside F.E.R.C. Index, at The
Company's option, for the first 1,500 Mcf purchased per day by Hope
and thereafter the price is the Inside F.E.R.C. Index. The
residential gas commodity index does not directly fluctuate with
the overall price of natural gas. The Inside F.E.R.C. Index
fluctuates monthly with the change in the price of natural gas.
While such option provides certain price protection for the Company
there can be no assurance that prices paid by the Company to
suppliers will be lower than the price which the Company would
receive under the Hope arrangement. During 1998, the Company paid
Sancho an aggregate of approximately $3,700 pursuant to such 20-
year contract.
(b) On May 7, 1996, the Company borrowed $100,000 from
William Stevenson. Such amount is repayable in one installment of
principal and interest of $110,000 on November 7, 1996. Messrs.
Bagley, William F. Woodburn and John B. Sims are jointly and
severally liable with the Company for the repayment of such
obligation. Such obligation is secured by the pledge of 50,000
shares of Common Stock owned by Mr. Woodburn's wife, Janet L.
Woodburn. The loan remains outstanding.
(c) A company owned by an officer of the Company's former
subsidiary, Vulcan Energy Corporation ("Vulcan"), owns the
remaining 20% of Vulcan's Common Stock. The management company is
entitled to a management fee of $252,000 per year and 20% of net
profits before taxes less 20% of the principal paid to the seller
of Vulcan. This 20% net profits interest has had no effect on The
Company's consolidated financial statements because the subsidiary
generated net losses through December 31, 1996. Because the
operations of Vulcan have been discontinued, management believes
that the Company has no obligation related to this management
agreement in future periods.
(d) The Company occupies approximately 4,000 square feet of
office space in St. Marys, West Virginia, which it shares with its
subsidiaries Tyler Construction Company, Inc. and Ritchie County
Gathering Systems, Inc. Prior to 1997, the office space was paid
for by Sancho and the Company used the office space rent free. The
Company believes that the foregoing transactions with Sancho were
made on terms no less favorable to the Company than those available
from unaffiliated third parties.
It is The Company's policy that any future material
transactions between it and members of its management or their
affiliates shall be on terms no less favorable than those available
from unaffiliated third parties.
Section 16(a) Beneficial Ownership Reporting Compliance
Each of the Company's officers and directors is required to
file a Form 5, Annual Statement of Changes in Beneficial Ownership,
on or before the 45th day after the end of the fiscal year. These
reports have not filed on a timely basis and will be submitted to
the Securities and Exchange Commission.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, to the best
knowledge of the Company, as of December 31, 1999, with respect to
each person known by the Company to own beneficially more than 5%
of the outstanding Common Stock, each director and all directors,
officers and principal stockholders as a group.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class(1)
Loren E. Bagley * 1,317,364(2) 4.8%
210 Second Street
St. Marys, WV 26170
William F. Woodburn * 1,324,527(3) 14.8%
210 Second Street
St. Marys, WV 26170
John B. Sims * 88,807(4) 0.3%
210 Second Street
St. Marys, WV 26170
Gary F. Lawyer * 75,000(5) 0.3%
21430 Timtam Circle
Parker, CO 80134
Balmour Funds 2,330,448(6) 7.9%
Chesterfield Capital 3,246,754(6) 10.7%
Resources
Douglas Nagel 2,597,403(6) 8.7%
4590 N.E. San Pebble Trace
Stuart, FL 34996
Austost Anstalt Schaan 2,330,448(6) 7.9%
Barry Seidman 3,246,754(6) 10.7%
P.O. Box 9813
Ranch Santa Fe, CA 92067
All directors and executive 905,698(7) 10.1%
officers as a group
(4 persons in group)
* Director and/or executive officer
Note: Unless otherwise indicated in the footnotes below, the
Company has been advised that each person above has sole
voting power over the shares indicated above.
(1) Based upon 27,188,725 shares of Common Stock outstanding on
May 19, 2000, but does not take into consideration stock
options owned by certain officers and directors entitling the
holders to purchase an aggregate of 675,000 shares of Common
Stock and which are currently exercisable. Also, certain
other persons listed above can receive shares upon conversion
of debentures. These shares will also increase the total
deemed issued and outstanding. See Note (6) below.
Percentage ownership is calculated separately for each person
on the basis of the actual number of outstanding shares as of
May 19, 2000 and assumes the exercise of stock options or
conversion of convertible debentures held by such person (but
not by anyone else) exercisable within sixty days.
(2) Includes 312,500 shares that may be acquired by Mr. Bagley
pursuant to stock options exercisable at $,50 per share and
31,250 shares of Common Stock held in the name of Carolyn S.
Bagley, wife of Loren E. Bagley, over which Ms. Bagley retains
voting power.
(3) Includes 312,500 shares that may be acquired by Mr. Woodburn
pursuant to stock options exercisable at $.50 per share and
50,000 shares of Common Stock in the name of Janet L.
Woodburn, wife of William F. Woodburn, over which shares Ms.
Woodburn retains voting power. Does not include 25,000 shares
of Common Stock owned by Mark D. Woodburn, son of William F.
Woodburn, over which shares William F. Woodburn disclaims any
voting control.
(4) Includes 25,000 shares that may be acquired by Mr. Sims
pursuant to stock options exercisable at $.50 per share and
13,807 shares of Common Stock held jointly with Virginia Sims,
wife of John B. Sims.
(5) Includes 25,000 shares that may be acquired by Mr. Lawyer
pursuant to stock options exercisable at $.50 per share.
(6) Share amounts indicated are the number of shares that each
respective stockholder can receive upon conversion of
Debentures and do not indicate shares presently owned.
Percentage ownership is calculated separately for each person
on the basis of the actual number of outstanding shares as of
December 6, 1999 and assumes the conversion of Debentures held
by such person (but not by anyone else) exercisable within
sixty days, but does not take into account shares issued for
interest or penalty. Only Debenture holders that would own 5%
or more of the total outstanding shares upon the conversion of
all Debentures are depicted in the table.
(7) Includes 675,000 shares that may be acquired by certain
directors pursuant to stock options exercisable at $.50 per
share.
ITEM 2. CHANGE OF CAPITALIZATION
The Board of Directors has unanimously approved the proposal
to amend the Company's Articles of Incorporation in order to change
the authorized capitalization by (i) increasing the number of
authorized common shares from 30,000,000 shares to 100,000,000
shares, par value One-Tenth of a Cent ($.001) per share, and
(ii) authorizing 10,000,000 shares of preferred stock. Shares of
the Company's proposed preferred stock will be issuable in various
series with terms, rights, voting privileges and preferences to be
determined at the discretion of the Board at the time of issuance.
All fully paid stock of the Company shall not be liable to call or
assessment.
By adopting the proposed amendment increasing the Company's
authorized capitalization, the Company will have sufficient shares
of Common Stock to accommodate the conversion of certain
outstanding convertible debentures. The Company also will have
additional shares of authorized common and preferred stock which
will give the Board of Directors greater flexibility in fulfilling
the Company's future needs. The additional shares will also be
available for issuance from time to time by the Company in the
discretion of the Board, normally without further stockholder
action (except as may be required for a particular transaction by
applicable law of requirements of regulatory agencies), for any
proper corporate purpose including, among other things, future
acquisitions of property or securities of other corporations, stock
dividends, stock splits, stock options, issuance of convertible
debt and equity financings.
The amendment will not be effective until approved by the
stockholders of the Company. The affirmative vote of the shares
represented at the meeting and entitled to vote is required for
approval of the amendment.
The Board recommends that stockholders vote "FOR" the
proposal to change the authorized capitalization of the Company.
If no specification is made in the proxy, the shares will be voted
for the "FOR" approval.
ITEM 3. RATIFICATION OF TRANS ENERGY, INC. 2000 STOCK OPTION PLAN
On February 11, 2000, the Board of Directors adopted the Trans
Energy, Inc. 2000 Stock Option Plan (the "Plan") to provide for the
grant of non-qualified stock options and incentive stock options to
key employees of the Company including officers, directors and
consultants. A copy of the Plan is annexed hereto as Attachment 1.
Under the Plan, the maximum number of shares of Common Stock
represented by grants of options is 2,000,000 shares. The number
of shares is subject to adjustment on account of stock splits,
stock dividends and other dilutive changes in the Common Stock.
Upon exercise of the options, the option holders must pay to the
Company the full exercise price as established by the Plan in order
to acquire their shares.
Participation
The intent of the Plan is to provide the Company with a means
of attracting and retaining the services of highly motivated and
qualified key personnel. Accordingly, the Plan is limited to the
Company's employees, executive officers, directors, consultants,
and to employees of companies that do business with the Company.
The approximate number of employees, officers and directors
currently potentially eligible to participate in the Plan is
approximately ten.
Principal Features of the Plan
The Plan permits the Company to grant stock options. Its
purpose is to promote the Company's interests and the interests of
the stockholders by motivating key employees to work towards
achieving the Company's long-range goals and by attracting and
retaining exceptional employees, directors and consultants. By
motivating these persons to share in the Company's long-term
growth, their interests are more closely aligned with those of the
stockholders.
Administration
The Plan shall be administered by a committee (the
"Committee"), the members of which shall be appointed from time to
time by the Board of Directors of the Company. The Company intends
that the Plan conforms in all respects with the requirements of
Rule 16b-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended. The Committee must be
structured at all times so that it satisfies the "disinterested
administration" requirement of Rule 16b-3. To the extent that any
aspect of the Plan or its administration shall at any time be
viewed as inconsistent with the requirements of Rule 16b-3 or, such
aspect shall be deemed to be modified, deleted or otherwise changed
as necessary to ensure continued compliance with such provision.
Duties of Committee
In accordance with the provisions of the Plan, the Committee,
by resolution, shall (i) select those eligible persons to whom
Options shall be granted ("Optionees"); (ii) determine the time or
times at which each Option shall be granted, whether an Option is
an ISO or an NQO and the number of shares to be subject to each
Option; and (iii) fix the time and manner in which the Option may
be exercised, the Option exercise price, and the Option period.
The Committee shall determine the form of option agreement to
evidence the terms and conditions of each Option. The Committee,
from time to time, may adopt such rules and regulations for
carrying out the purposes of the Plan as it may deem proper and in
the best interests of the Company. The Committee shall keep
minutes of its meetings and records of its actions. A majority of
the members of the Committee shall constitute a quorum for the
transaction of any business by the Committee. The Committee may
act at any time by an affirmative vote of a majority of those
members voting. Such vote may be taken at a meeting (which may be
conducted in person or by any telecommunication medium) or by
written consent of Committee members without a meeting.
The Committee shall resolve all questions arising under the
Plan and option agreements entered into pursuant to the Plan. Each
determination, interpretation, or other action made or taken by the
Committee shall be final and conclusive and binding.
Stock Options
A stock option award grants to the optionee the right to buy
a specified number of shares of the Company's Common Stock at a
fixed price, subject to such terms and conditions as the committee
may determine.
Exercise Price
The exercise price of all options is determined by the
Committee at the time of grant, but the exercise price of any stock
option may not be less than 100% of the fair market value of the
underlying stock on the date of the grant. The market price of the
Company's Common Stock on May 18, 2000 was $0.14 per share.
Payment
Each option may be exercised in whole, at any time, or in
part, from time to time, within the period for exercise set forth
in the related option agreement. Optionees are not required to pay
cash in return for the grant of an option (except as may be
required by law). However, consideration equal to the exercise
price must be paid to exercise an option. At the discretion of the
Committee, options may be exercised by payment of the exercise
price either in cash or by tendering of shares of the Company's
Common Stock having a fair market value equal to the exercise
price, or a combination thereof.
Transferability
An option shall be exercisable only by the optionee, or in the
event of death, by the optionee's guardian(s), conservator(s), or
other legal representative(s), during the optionee's lifetime. No
option may be transferred by the optionee, either voluntarily or
involuntarily, except by will of the laws of descent and
distribution or pursuant to a qualified domestic relations order as
defined by the Plan.
Limitations
Under the Plan, the maximum number of shares that may be
granted is 2,000,000 shares. No option shall be exercisable before
six months after the date of grant of such option.
Vesting and Expiration
The Committee has the authority to determine the vesting and
expiration of the stock option grants. However, in the event of a
participant's death, all unexercised options may be exercised by
the optionee's legal guardian(s),conservator(s), or other legal
representative(s) within twelve months after the optionee's death
or before the expiration of the option, whichever shall first
occur. In the event of a termination or employment, except for
events set forth in the Plan, all exercisable options shall
terminate.
Change of Control
In the event of a reorganization or change in control of the
Company such as a merger, consolidation, share exchange or other
business combination, the Committee has the authority to accelerate
the exercisability of any unexercised options, subject to any terms
and conditions provided by the reorganization.
Amendment
The Board of Directors may amend, alter or terminate the Plan
at any time. The Company must obtain stockholder approval for any
change that would (i) require such approval under any regulatory or
tax requirement, (ii) materially impair any option previously
granted, (iii) materially increase the number of shares subject to
the plan, (iv) materially increase the benefits accruing to
optionees under the plan, or (v) materially modify the requirements
as to eligibility to participate in the Plan or the method for
determining the option exercise price.
Tax Consequences
The Federal income tax consequences of an employee's
participation in the Plan are complex and subject to change. The
following is only a summary of the general rules applicable to the
Plan. The summary is based on current provisions of the Internal
Revenue Code and does not cover any state or local tax consequences
of participation in the Plan. Participants should consult their
own tax advisors as a taxpayer's particular situation may be such
that some variation of the rules described below will apply.
When an optionee exercises a non-qualified option, the excess
of the fair market value of the shares on the date of exercise over
the option price will be treated as ordinary income to the optionee
and will be allowed as a deduction for Federal income tax purposes
to the Company.
When an optionee exercises an incentive stock option while
employed by the Company or within three months (one year for
disability) after termination of employment, no ordinary income
will be recognized by the optionee at that time. The excess, if
any, of the fair market value of the shares acquired over the
option price will be an adjustment to taxable income for purposes
of the Federally alternative minimum tax. If the shares acquired
upon exercise are not disposed of prior to the expiation of one
year after the date of transfer and two years after the date of
grant of the option, the excess, if any, of the sales proceeds over
the aggregate option price of such shares will be long-term capital
gain, but the Company will not be entitled to any tax deduction
with respect to such gain. If the shares are disposed of prior to
the expiration of such periods, the excess of the fair market value
of such shares at the time of exercise over the aggregate option
price (but not more than the gain on the disposition if the
disposition is a transaction on which a loss, if such had been
realized, would have been recognized) will be ordinary income at
the time of such disposition and the Company will be entitled to a
Federal tax deduction in a like amount. If an incentive stock
option is exercised by the optionee more than three months (one
year for disability) after termination of employment, the tax
consequences are the same as described for the non-qualified stock
options.
Special rule may apply if an optionee pays the exercise price
for an option in share previously owned by the optionee rather than
in cash. The Company's deductions described above may also be
subject to the limitations of Section 162(m) of the Internal
Revenue Code.
Benefits to Directors and Executive Officers
Awards under the Plan are made at the Committee's discretion.
Accordingly, future awards under the Plan particularly to directors
and executive officers, are not determinable at this time.
The affirmative vote of a majority of the votes cast is
required to approve the adoption of the Equity Incentive Plan.
The Board of Directors recommends that the stockholders vote
"FOR" ratification of the adoption of the Trans Energy, Inc. 2000
Stock Option Plan. If no specification is made in the proxy, the
shares will be voted for the "FOR" approval.
ITEM 4. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Subject to ratification by the stockholders at the Meeting,
the Board of Directors has appointed HJ & Associates, LLC, formerly
known as Jones, Jensen & Company, ("HJA") as independent auditors
for the fiscal year ending December 31, 2000 and until their
successors are selected. HJA has served as auditors of the
consolidated financial statements of the Company since the fiscal
year ended December 31, 1988. A representative of HJA will not be
present at the Meeting.
The affirmative vote of a majority of the votes cast is
required to approve the appointment of HJ & Associates, LLC as
independent public accountants.
The Board of Directors recommends that the stockholders vote
"FOR" ratification of the selection of HJ & Associates, independent
public accountants, to audit the consolidated financial statements
of the Company for the fiscal year ended December 31, 2000. If no
specification is made in the proxy, the shares will be voted for
the "FOR" approval.
OTHER MATTERS
The Board of Directors is not aware of any other matters to be
presented for action at the Meeting. However, if any other matter
is properly presented, it is the intention of the person named in
the enclosed form of proxy to vote in accordance with their
judgment on such matter.
ANNUAL REPORTS TO STOCKHOLDERS
The Company's Annual Report to Stockholders, including
financial statements for the fiscal year ended December 31, 1999,
is being delivered to stockholders together with this proxy
statement.
STOCKHOLDERS PROPOSAL
It is anticipated that the Company's fiscal 2000 Annual
Meeting of Stockholders will be held on or about June 18, 2001.
Stockholders who intend to present proposals at such Annual Meeting
must submit their proposals to the Secretary of the Company on or
before February 18, 2001.
GENERAL
The costs of soliciting proxies for the slate recommended by
the Board of Directors will be paid by the Company. In addition to
the use of the mails, proxies may be personally solicited by
directors, officers or regular employees of the Company (who will
not be compensated separately for their services) by mail,
telephone, telegraph, cable or personal discussion. The Company
will also request banks, brokers, and other custodians, nominees
and fiduciaries to forward proxy materials to the beneficial owners
of stock held of record by such persons and request authority for
the execution of proxies. The Company will reimburse such entities
for reasonable out-of-pocket expenses incurred in handling proxy
materials for the beneficial owners of the Company's Common Stock.
Any proxy given pursuant to this solicitation may be revoked
by the person giving it at any time before it is voted by
delivering to the Secretary of the Company a written notice of
revocation bearing a later date than the proxy, by duly executing
a subsequent proxy relating to the same shares, or by attending the
Meeting and voting in person. Attendance at the Meeting will not
in itself constitute revocation of a proxy unless the stockholder
votes their shares of Common Stock in person at the Meeting. Any
notice revoking a proxy should be sent to the Vice President of the
Company, William F. Woodburn, at Trans Energy, Inc., 210 Second
Street, P.O. Box 393, St. Marys, West Virginia 26170.
All shares represented at the Meeting by a proxy will be voted
in accordance with the instructions specified in that proxy.
Proxies received and marked "Abstain" as to any particular
proposal, will be counted in determining a quorum, however, such
proxies will not be counted for the vote on that particular
proposal. A majority of the shares represented at the meeting is
required to ratify any proposal presented. If no instructions are
marked with respect to the matters to be acted upon, each proxy
will be voted FOR the matter to be voted upon.
Please complete, date, sign and return the accompanying proxy
promptly.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. WE URGE
YOU TO COMPLETE, DATE, SIGN AND RETURN THE ACCOMPANYING PROXY, NO
MATTER HOW LARGE OR SMALL YOUR HOLDING MAY BE.
FINANCIAL INFORMATION
A copy of the Company's Annual Report on Form 10-KSB,
including any financial statements and schedules and exhibits
thereto, is attached as part of this Proxy Statement.
By Order of the Board of Directors
William F. Woodburn
Vice President
St. Marys, West Virginia
May 30, 2000
TRANS ENERGY, INC.
210 Second Street, P.O. Box 393, St. Marys, West Virginia 26170
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY
The undersigned hereby constitutes and appoints William F. Woodburn,
Vice President of Trans Energy, Inc., with power of substitution, the
proxies of the undersigned to attend the annual meeting of the
stockholders of Trans Energy, Inc. on June 16, 2000, and any adjournment
thereof, and to vote the stock of the corporation standing in the name
of the undersigned.
1. To elect 4 directors:
FOR ( ) WITHHOLD AUTHORITY ( )
all nominees listed below to vote for all nominees
(except as marked to the listed below
contrary below)
Instructions: To withhold authority to vote for any individual
nominee, strike a line through the nominee's name
in the list below:
Loren E. Bagley
William F. Woodburn
John B. Sims
Gary F. Lawyer
2. Proposal to amend the Articles of Incorporation to change the
authorize capitalization of the Company to 100,000,000 shares of Common
Stock and 10,000,000 shares of preferred stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to approve the adoption of the Trans Energy, Inc. 2000
Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to Ratify the appointment of HJ & Associates, LLC
(formerly known as Jones, Jensen & Company) as the independent
auditors for Trans Energy, Inc. for the fiscal year ending December
31, 2000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. On any and all other matters that may properly come before the
meeting.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. IF NO SPECIFIC
DIRECTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS 1, 2,
3 AND 4.
______________________________ ______________________________
Print Name Signature of Stockholder
______________________________ ______________________________
Number of Shares Signature if Held Jointly
______________________________
Date
Please sign exactly as name appears on the certificate or
certificates representing shares to be voted by this proxy. When signing
as executor, administrator, attorney, trustee or guardian, please give
full titles 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 persons.
<PAGE>
ATTACHMENT 1
TRANS ENERGY, INC.
2000 STOCK OPTION PLAN
1. Purpose of the Plan.
The purpose of this 2000 Stock Option Plan ("Plan") of
Trans Energy, Inc., a Nevada corporation (the "Company"), is to
provide the Company with a means of attracting and retaining the
services of highly motivated and qualified key employees (including
officers), directors and consultants. The Plan is intended to
advance the interest of the Company by affording to key employees
(including officers) directors and consultants, upon whose skill,
judgment, initiative and efforts the Company is largely dependent
for the successful conduct of its business, an opportunity for
investment in the Company and the incentives inherent in stock
ownership in the Company. In addition, the Plan contemplates the
opportunity for investment in the Company by employees of companies
that do business with the Company. For purposes of this Plan, the
term, Company shall include subsidiaries, if any, of the Company.
2. Legal Compliance.
It is the intent of the Plan that all options granted
under it ("Options") shall be either "Incentive Stock Options"
("ISOs"), as such term is defined in Section 422 of the Internal
Revenue Code of 1986, as amended ("Code"), or non-qualified stock
options ("NQOs"); provided, however, ISOs shall be granted only to
employees of the Company. An Option shall be identified as an ISO
or an NQO in writing in the document or documents evidencing the
grant of the Option. All Options that are not so identified as
ISOs are intended to be NQOs. In addition the Plan provides for
the grant of NQOs to employees of companies that do business with
the Company. It is the further intent of the Plan that it conform
in all respects with the requirements of Rule 16b-3 of the
Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended ("Rule 16b-3"). To the extent that any
aspect of the Plan or its administration shall at any time be
viewed as inconsistent with the requirements of Rule 16b-3 or, in
connection with ISOs, the Code, such aspect shall be deemed to be
modified, deleted or otherwise changed as necessary to ensure
continued compliance with such provision.
3. Non-Exclusivity Of the Plan.
Nothing contained in the Plan is intended to amend,
modify, or rescind any previously approved compensation plans,
programs or options entered into by the Company. This Plan shall
be construed to be in addition to and independent of any and all
such other arrangements. Neither the adoption of the Plan by the
Board nor the submission of the Plan to the stockholders of the
Company for approval shall be construed as creating any limitations
on the power or authority of the Board to adopt, with or without
stockholder approval, such additional or other compensation
arrangements as the Board may from time to time deem desirable.
4. Administration of the Plan.
4.1 Plan Committee.
The Plan shall be administered by a committee
("Committee"). The members of the Committee shall be appointed
from time to time by the Board of Directors of the Company
("Board").
4.2 Grants of Options by the Committee.
In accordance with the provisions of the Plan, the
Committee, by resolution, shall select those eligible persons to
whom Options shall be granted ("Optionees"); shall determine the
time or times at which each Option shall be granted, whether an
Option is an ISO or an NQO and the number of shares to be subject
to each Option; and shall fix the time and manner in which the
Option may be exercised, the Option exercise price, and the Option
period.
The Committee shall determine the form of option
agreement to evidence the foregoing terms and conditions of each
Option, which need not be identical, in the form provided for in
Section 8. Such option agreements may include such other
provisions as the Committee may deem necessary or desirable
consistent with the Plan, the Code and Rule 16b-3.
4.3 Committee Procedures.
The Committee from time to time may adopt such rules
and regulations for carrying out the purposes of the Plan as it may
deem proper and in the best interests of the Company. The
Committee shall keep minutes of its meetings and records of its
actions. A majority of the members of the Committee shall
constitute a quorum for the transaction of any business by the
Committee. The Committee may act at any time by an affirmative
vote of a majority of those members voting. Such vote may be taken
at a meeting (which may be conducted in person or by any
telecommunication medium) or by written consent of Committee
members without a meeting.
4.4 Finality of Committee Action.
The Committee shall resolve all questions arising
under the plan and option agreements entered into pursuant to the
Plan. Each determination, interpretation, or other action made or
taken by the Committee shall be final and conclusive and binding on
all persons, including, without limitation, the Company, its
stockholders, the Committee and each of the members of the
Committee, and the directors, officers, employees and consultants
of the Company, including Optionees and their respective successors
in interest.
4.5 Non-Liability of Committee Members.
No Committee member shall be liable for any action
or determination made by him in good faith with respect to the Plan
or any Option granted under it.
4.6 Director NQOs.
(a) Each director of the Company shall be
automatically granted an NQO to purchase five-thousand (50,000)
shares of the Company's Common Stock (as defined in Section 6), and
thereafter on each anniversary of their first election or
appointment as director, each director of the Company shall be
automatically granted an NQO to purchase five-thousand (50,000)
shares of the Company's Common Stock (as defined in Section 6).
(b) Except as expressly authorized by this
Section 4.6, directors of the Company who are members of the
Committee are not otherwise eligible to participate in the Plan.
(c) Upon the grant of an NQO to a director, the
director shall receive a written option agreement substantially in
the form provided for in Section 8. Such director shall not be an
"Optionee" as defined in Section 4.2 of the Plan.
(d) The exercise price for each NQO granted under
this Section shall be one hundred percent (100%) of the Fair Market
Value (as defined in Section 9) of the Company's Common Stock (as
defined in Section 6) on the date of grant as determined by the
Committee pursuant to Section 9 of the Plan. Each NQO granted
under this Section shall be for a tern of five years and shall be
subject to earlier termination as hereinafter provided.
(e) An NQO granted under this Section may be
exercised in whole or consecutive installments, cumulative or
otherwise, during its term; provided, however, no NQO granted under
this Section shall be exercisable before six (6) months after the
date of grant of such NQO. In addition, NQOs granted under this
Section are subject to the rights and obligations of Optionees, as
provided in Section 12 of the Plan; provided, however, that the
"stock swap feature" provided for in Section 12 of the Plan shall
be available with respect to all NQOs granted under this Section.
(f) NQOs granted under this Section shall be
subject to the exercise and non-transferability terms of Section 15
of the Plan. In the event of the termination of service on the
Board by the holder of any NQO granted under this Section, then the
outstanding NQOs of such holder shall expire one year after such
termination, or their stated expiration date, whichever occurs
first.
(g) Notwithstanding Sections 4.1 and 7 of the Plan,
the grant of an NQO under this Section shall not disqualify such
director as a disinterested person for purposes of serving on the
Committee. The Committee shall have no power under Sections 4.2
and 8 of to Plan to determine the grant or terms of NQOs under this
Section, but shall retain its general authority under Section 4.4
of the Plan to interpret and administer the Plan; provided,
however, that to the extent practicable, an individual member of
the Committee should disqualify himself or herself from
participation on any question which is unique to his or her NQOs.
5. Board Power to Amend, Suspend, or Terminate the Plan.
The Board may from time to time make such changes in or
additions to the Plan as it may deem proper and in the best
interest of the Company and its stockholders. The Board may also
suspend or terminate the Plan at any time without notice, and in
its sole discretion.
Notwithstanding the foregoing no such change addition
suspension or termination by the Board shall (i) materially impair
any option previously granted under the Plan without the express
written consent of the optionee; or (ii) materially increase the
number of shares subject to the Plan materially increase the
benefits accruing to optionees under the Plan, materially modify
the requirements as to eligibility to participate in the Plan or
alter the method of determining the option exercise price described
in Section 9 without stockholder approval.
6. Shares Subject to the Plan.
For the purposes of the Plan, the Committee is authorized
to grant Options fur up to 2,000,000 shares of the Company's common
stock ("Common Stock"), or the number and kind of shares of stock
or other securities which in accordance with Section 14, shall be
substituted for such shares of Common Stock or to which such shares
shall be adjusted. The Committee is authorized to grant options
under the Plan with respect to such shares. Any or all unsold
shares subject to an Option which for any reason expires or
otherwise terminates (excluding shares returned to the Company in
payment of the exercise price for additional shares) may again be
made subject to grant under the Plan.
7. Optionees.
Options shall be granted only to full-time elected or
appointed officers or other full-time key employee of the Company,
to employees of companies that do business with the Company or to
consultants to the Company designated by the Committee from time to
time as Optionees including, without limitation members of the
Board who are also full-time officers or key employees at the time
of grant. Any Optionee may hold more than one option to purchase
Common Stock whether such option is an Option held pursuant to the
Plan or otherwise. An Optionee who is an employee at the Company
("Employee Optionee") and who holds an Option must remain a
continuous full or part-time employee of the Company from the time
of grant of the Option to him until the time of its exercise,
except as provided in Section 11.3.
8. Grants of Options.
The Committee shall have the sole discretion to grant
Options under the Plan and to determine whether any Option shall be
an ISO or an NQO. The terms and conditions of the Options granted
under the Plan may differ from one another as the Committee, in its
absolute discretion, shall determine as long as all Options granted
under the Plan satisfy the requirements of the Plan. Upon
determination by the Committee that an Option is to be granted to
an Optionee, a written option agreement evidencing such Option
shall be given to the Optionee, specifying the number of shares
subject to the Option, the Option exercise price, whether the
Option is an ISO or an NQO, and the other individual terms and
conditions of such Option. Such option agreement may incorporate
generally applicable provisions from the Plan, a copy of which
shall be provided to all Optionees at the time of their initial
grants under the Plan. The Option shall be deemed granted as of
the date specified in the grant resolution of the Committee, and
the option agreement shall be dated as of the date of such
resolution.
9. Option Exercise Price.
The price per share to be paid by the Optionee at the
time an ISO is exercised shall not be less than one hundred percent
(100%) of the Fair Market Value (as hereinafter defined) of one
share of the optioned Common Stock on the date on which the Option
is granted. No ISO may be granted under the Plan to any person
who, at the time of such grant, owns (within the meaning of Section
424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting, power of all classes of stock of the
Company or any parent thereof, unless the exercise price of such
ISO is at least equal to one hundred and ten percent (l10%) of Fair
Market Value on the date of grant. The price per share to be paid
by the Optionee at the time an NQO is exercised shall not be less
than eighty-five (85%) of the Fair Market Value on the date on
which the NQO is granted, as determined by the Committee.
For purposes of the Plan, the "Fair Market Value" of a
share of the Company's Common Stock as of a given date shall be:
(i) the closing price of a share of the Company's Common Stock on
the principal exchange on which shares of the Company's Common
Stock are then trading, if any, on such date, or, if shares were
not traded on such date, then on the next preceding trading day
during which a sale occurred; or (ii) if the Company's Common Stock
is not traded on an exchange but is quoted on NASDAQ or a successor
quotation system, (1) the last sales price (if the Common Stock is
then listed as a National Market Issue under the NASD National
Market System) or (2) the mean between the closing representative
bid and asked prices (in all other cases) for the Common Stock on
such date as reported by NASDAQ or such successor quotation system;
or (iii) if the Company's Common Stock is not publicly traded on an
exchange and not quoted on NASDAQ or a successor quotation system,
the mean between the closing bid and asked prices for the Common
Stock on such date as determined in good faith by the Committee; or
(iv) if the Company's Common Stock is not publicly traded, the fair
market value established by the Committee acting in good faith. In
addition, with respect to any ISO, the Fair Market Value on any
given date shall be determined in a manner consistent with any
regulations issued by the Secretary of the Treasury for the purpose
of determining fair market value of securities subject to an ISO
plan under the Code.
10. Ceiling of ISO Grants.
The aggregate Fair Market Value (determined at the time
any ISO is granted) of the Common Stock with respect to which an
Optionee's ISOs, together with incentive stock options granted
under any other plan of the Company and any parent, are exercisable
for the first time by such Optionee during any calendar year shall
not exceed $100,000. In the event that an Optionee holds such
incentive stock options that become first exercisable (including as
a result of acceleration of exercisability under the Plan) in any
one year for shares having a Fair Market Value at the date of grant
in excess of $100,000, then the most recently granted of such ISOs,
to the extent that they are exercisable for shares having an
aggregate Fair Market Value in excess of such limit, shall be
deemed to be NQOs.
11. Duration, Exercisability, and Termination of Options
11.1 Option Period.
The option period shall be determined by the
Committee with respect to each Option granted. In no event,
however, may the option period exceed ten (10) years from the date
on which the Option is granted, or five (5) years in the case of a
grant of an ISO to an Optionee who is a ten percent (10%)
shareholder at the date on which the Option is granted as described
in Section 9.
11.2 Exercisability of Options and Acceleration of
Exercisability.
Each Option shall be exercisable in whole or in
consecutive installments, cumulative or otherwise, during its term
as determined in the discretion of the Committee; provided,
however, no Option shall be exercisable before six (6) months after
the date of grant of such Option.
Notwithstanding the foregoing, the Committee at the
tinge of grant may provide that the vesting of the right to
exercise a given Option or portion thereof may be accelerated
during the term of the Option, under one or more of the following
circumstances: (i) if the Common Stock of the Company shall be the
subject of a tender offer by any person other than the Company
which, by its terms, could result in the offerer acquiring more
than twenty-five percent (25%) of the then outstanding shares of
Common Stock of the Company, or (ii) if the shareholders shall
consider, or be asked to consider, merging consolidating the
Company with any other person, or transferring all or substantially
all of its assets to any other person, or (iii) if more than
twenty-five percent (25%) of the Company's then outstanding voting
shares shall he purchased by any person other than the Company,
such that granted but unexercisable Options may be exercised at any
time following the first public announcement of such event;
provided, however, that in no event shall an option be exercised
prior to six months alter the date of grant or beyond its stated
term.
11.3 Termination of Options due to Termination of
Employment, Disability, or Death of Optionee;
Termination for "Cause", or Resignation in
Violation of an Employment Agreement.
All Options granted under the Plan to any Employee
Optionee shall terminate and may no longer be exercised if the
Employee Optionee ceases, at any time during the period between the
grant of the Option and its exercise, to be an employee of the
Company; provided, however, the Committee may alter the termination
date of the Option if the Optionee transfers to an affiliate of the
Company.
Notwithstanding the foregoing, (i) if the Employee
Optionee's employment with the Company shall have terminated for
any reason (other than involuntary dismissal for "cause" or
voluntary resignation in violation of any agreement to remain in
the employ of the company, including, without limitation, any such
agreement pursuant to Section 16), he may, at any time before the
expiration of three (3) months after such termination or before
expiration of the Option, whichever shall first occur, exercise the
Option (to the extent that the Option was exercisable by him on the
date of the termination of his employment); (ii) if the Employee
Optionee's employment shall have terminated due to disability (as
defined in Section 22(e)(3) of the Code and subject to such proof
of disability as the Committee may require), such Option may be
exercised by the Employee Optionee (or by his guardian(s), or
conservator(s), or other legal representative(s)) before the
expiration of twelve (12) months after such termination or before
expiration of the Option, whichever shall first occur (to the
extent that the Option was exercisable by him on the date of the
termination of his employment); (iii) in the event of the death of
the Employee Optionee, an Option exercisable by him at the date of
his death shall be exercisable by his legal representative(s),
legatee(s), or heir(s), or by his beneficiary or beneficiaries so
designated by him as permitted by Section 15, as the case may be,
within twelve (12) months after his death or before the expiration
of the Option, whichever shall first occur (to the extent that the
Option was exercisable by him on the date of his death); and (iv)
if the Employee Optionee's employment is terminated for "cause" or
in violation of any agreement to remain in the employ of the
Company, including, without limitation, any such agreement pursuant
to Section 16, he may, at any time before the expiration of thirty
(30) days after such termination or before the expiration of the
Option, whichever shall first occur, exercise the Option (to the
extent that the Option was exercisable by him on the date of
termination of his employment). For purposes of the Plan, "cause"
may include, without limitation, any illegal or improper conduct
(1) which injures or impairs the reputation, goodwill, or business
of the Company; (2) which involves the misappropriation of funds of
the Company, or the misuse of data, information, or documents
acquired in connection with employment by the Company; or (3) which
violates any other directive or policy promulgated by the Company.
A termination for "cause" may also include any resignation in
anticipation of discharge for "cause" or resignation accepted by
the Company in lieu of a formal discharge for "Cause."
12. Manner of Option Exercise; Rights and Obligations of
Optionees.
12.1 Written Notice of Exercise.
An Optionee may elect to exercise an Option in whole
or in part, from time to time, subject to the terms and conditions
contained in the Plan and in the agreement evidencing such Option,
by giving written notice of exercise to the Company at its
principal executive office.
12.2 Cash Payment for Optioned Shares.
If an Option is exercised for cash, such notice
shall be accompanied by a cashier's or personal check, or money
order, made payable to the Company for the full exercise price of
the shares purchased.
12.3 Stock Swap Feature.
At the time of the Option exercise, and subject to
the discretion of the Committee to accept payment in cash only, the
Optionee may determine whether the total purchase price of the
shares to be purchased shall be paid solely in cash or by transfer
from the Optionee to the Company of previously acquired shares of
Common Stock, or by a combination thereof. In the event that the
Optionee elects to pay the total purchase price ii whole or in part
with previously acquired shares of Common Stock, and subject to the
discretion of the Committee to accept payment in cash only, the
value of such shares shall be equal to their Fair Market Value on
the date of exercise, determined by the Committee in the same
manner used for determining Fair Market Value at the time of grant
for purposes of Section 9.
12.4 Investment Representation for Non-Registered Shares
and Legality of Issuance.
The receipt of shares of Common Stock upon the
exercise of an Option shall be conditioned upon the Optionee (or
any other person who exercises the Option on his or her behalf as
permitted by Section 11.3) providing to the Committee a written
representation that, at the time of such exercise, it is the intent
of such person(s) to acquire the shares for investment only and not
with a view toward distribution. The certificate for unregistered
shares issued for investment shall be restricted by the Company as
to transfer unless the Company receives an opinion of counsel
satisfactory to the Company to the effect that such restriction is
not necessary under then pertaining law. The providing of such
representation and such restrictions on transfer shall not,
however, be required upon any person's receipt of shares of Common
Stock under the Plan in the event that, at the time of grant of the
Option relating to such receipt or upon such receipt, whichever is
the appropriate measure under applicable federal or state
securities laws, the shares subject to the Option shall be (i)
covered by an effective and current registration statement under
the Securities Act of 1933, as amended, and (ii) either qualified
or exempt from qualification under applicable state securities
laws. The Company shall, however, under no circumstances be
required to sell or issue any shares under the Plan if, in the
opinion of the Committee, (i) the issuance of such shares would
constitute a violation by the Optionee or the Company of any
applicable law or regulation of any governmental authority, or (ii)
the consent or approval of any governmental body is necessary or
desirable as a condition of, or in connection with, the issuance of
such shares.
12.5 Stockholder Rights of Optionee.
Upon exercise, the Optionee (or any other person who
exercises the Option on his behalf as permitted by Section 11.3)
shall be recorded on the books of the Company as the owner of the
shares, and the Company shall deliver to such record owner one or
more duly issued stock certificates evidencing such ownership. No
person shall have any rights as a stockholder with respect to any
shares of Common Stock covered by an Option granted pursuant to the
Plan until such person shall have become the holder of record of
such shares. Except as provided in Section 14, no adjustments shall
be made for cash dividends or other distributions or other rights
as to which there is a record date preceding the date such person
becomes the holder of record of such shares.
12.6 Holding Period for Tax Purposes.
The Plan does not provide that an Optionee must hold
shares of Common Stock acquired under the plan or any minimum
period of time. Optionees are urged to consult with their own tax
advisors with respect tat the tax consequences to them of their
individual participation in the Plan.
13. Successive Grants.
Successive grants of Options may be made to any
Optionee under the Plan.
14. Adjustments.
If the outstanding Common Stock shall be hereafter
increased or decreased, or changed into or exchanged for a
different number or kind of shares or other securities of the
Company or of another corporation, by reason of a recapitalization,
reclassification, reorganization, merger, consolidation, share
exchange, or other business combination in which the Company is the
surviving parent corporation, stock split-up, combination of
shares, or dividend or other distribution payable in capital stock
or rights to acquire capital stock, appropriate adjustment shall be
made by the Committee in the number and kind of shares for which
options may be granted under the Plan. In addition, the Committee
shall made appropriate adjustment in the number and kind of shares
as to which outstanding and unexercised options shall be
exercisable, to the end that the proportionate interest of the
holder of the option shall, to the extent practicable, be
maintained as before the occurrence of such event. Such adjustment
in outstanding options shall be made without change in the total
price applicable to the unexercised portion of the option but with
a corresponding adjustment in flee exercise price per share.
In the event of the dissolution or liquidation of the
Company, any outstanding and unexercised options shall terminate as
of a future date to be fixed by the Committee.
In the event of a Reorganization (as hereinafter
defined), then,
a. If there is no plan or agreement with respect to the
Reorganization ("Reorganization Agreement"), or if the
Reorganization Agreement does not specifically provide for the
adjustment, change, conversion, or exchange of the outstanding and
unexercised options for cash or other property or securities of
another corporation, then any outstanding and unexercised options
shall terminate as of a future date to be fixed by the Committee;
or
b. If there is a Reorganization Agreement, and the
Reorganization Agreement specifically provides for the adjustment,
change, conversion, or exchange of the outstanding and unexercised
options for cash or other property or securities of another
corporation, then the Committee shall adjust the shares under such
outstanding and unexercised options, and shall adjust the shares
remaining under the Plan which are then available for the issuance
of options under the Plan if the Reorganization Agreement makes
specific provisions therefor, in a manner not inconsistent with the
provisions of the Reorganization Agreement for the adjustment,
change, conversion, or exchange of such options and shares.
The term "Reorganization" as used in this Section 14
shall mean any reorganization, merger, consolidation, share
exchange, or other business combination pursuant to which the
Company is not the surviving parent corporation after the effective
date of the Reorganization, or any sale or lease of all or
substantially all of the assets of the Company. Nothing herein
shall require the Company to adopt a Reorganization Agreement, or
to make provision for the adjustment, change, conversion, or
exchange of any options, or the shares subject hereto, in any
Reorganization Agreement which it does adopt.
The Committee shall provide to each optionee then holding
an outstanding and unexercised option not less than thirty (30)
calendar days' advanced written notice of any date fixed by the
Committee pursuant to this Section 14 and of the terms of any
Reorganization Agreement providing for the adjustment, change,
conversion, or exchange of outstanding and unexercised options.
Except as the Committee may otherwise provide, each Optionee shall
have the right during such period to exercise his option only to
the extent that the option was exercisable on the date such notice
was provided to the Optionee.
Any adjustment to any outstanding ISO pursuant to this
Section 14, if made by reason of a transaction described in Section
424(a) of the Code, shall be made so as to conform to the
requirements of that Section and the regulation thereunder. If any
other transaction described in Section 424(a) of the Code affects
the Common Stock subject to any unexercised ISO theretofore granted
under the Plan (hereinafter for purposes of this Section 14
referred to as the "old option"), the Board of Directors of the
Company or of any surviving or acquiring corporation may take such
action as it deems appropriate, in conformity with the requirements
of that Code Section and the regulations thereunder, to substitute
a new option for the old option, in order to make the new option,
as nearly, as may be practicable, equivalent to the old option, or
to assume the old option.
No modification, extension, renewal, or other change in
any option granted under the Plan may be made, after the grant of
such option, without the Optionee's consent, unless the same is
permitted by the provisions of the Plan and the option agreement.
In the case of an ISO, Optionees are hereby advised that certain
changes may disqualify the ISO from being considered as such under
Section 422 of the Code, or constitute a modification, extension,
or renewal of the ISO finder Section 424(h) of the Code.
All adjustments and determinations under this Section 14
shall be made by the Committee in good faith in its sole
discretion.
15. Non Transferability of Options.
An Option shall be exercisable only by the Optionee, or
in the event of his disability, by his guardian(s), conservator(s),
or other legal representative(s), during the Optionee's lifetime.
In the event of the death of the Optionee, an Option shall be
exercisable by his legal representative(s), legatee(s), or heir(s),
as the case may be, or by such person(s) as he may designate as his
beneficiary or beneficiaries in a signed statement included as a
part of the option agreement.
No Option shall be transferable by the Optionee, either
voluntarily or involuntarily, except by will or the laws of descent
and distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder.
Any attempt to exercise, transfer or otherwise dispose of
an interest in an Option in contravention of the terms and
conditions of the Plan, or of the option agreement for the Option,
shall immediately void the Option.
16. Continued Employment.
As determined in the sole discretion of the Committee at
the time of grant and if so stated in a writing signed by the
Company, each Option may have as a condition the requirement of an
Employee Optionee to remain in the employ of the Company, or of its
affiliates, and to render to it his or her exclusive service, at
such compensation as may be determined from time to time by it, for
a period not to exceed the term, of the Option, except for earlier
termination of employment by or with the express written consent of
the Company or on account of disability or death. The failure of
any Employee Optionee to abide by such agreement as to any Option
under the Plan may result in the termination of all of his or her
then outstanding Options granted pursuant to the Plan.
Neither the creation of the Plan nor the granting of
Option(s) under it shall be deemed to create a right in an Employee
Optionee to continued employment with the Company, and each such
Employee Optionee shall be and shall remain subject to discharge by
the Company as though the Plan had never come into existence.
Except as specifically provided by the Committee in any particular
case, the loss of existing or potential profit in options granted
under this Plan shall not constitute an element of damages in the
event of termination of the employment of an employee by contract
or otherwise.
17. Tax Withholding.
The exercise of any option granted under the Plan is
subject to the condition that if at any time the Company shall
determine, in its discretion, that the satisfaction of withholding
tax or other withholding liabilities under any federal, state or
local law is necessary or desirable as a condition of, or in
connection with, such exercise or a later lapsing of time or
restrictions on or disposition of the shares of Common Stock
received upon such exercise, then in such event, the exercise of
the option shall not be effective unless such withholding shall
have been effected or obtained in a manner acceptable to the
Company. When an optionee is required to pay to the Company an
amount required to be withheld under applicable income tax laws in
connection with the exercise of any option, the optionee may,
subject to the approval of the Committee, which approval shall not
have been disapproved at any time after the election is made,
satisfy the obligation, in whole or in part, by electing to have
the Company withhold shares of Common Stock having a value equal to
the amount required to be withhold. The value of the Common Stock
withheld pursuant to the election shall be determined by the
Committee, in accordance with the criteria set forth in Section 9,
with reference to the date the amount of tax to be withheld is
determined ("Tax Determination Date"). The optionee shall pay to
the Company in cash any amount required to be withheld that would
otherwise result in the withholding of a fractional share. The
election by an optionee who is a director or officer of the Company
within the meaning of Section 16 of the Securities Exchange Act of
1934, as amended ("Section l6 of the 1934 Act"), to be effective,
must meet all of the following requirements: (i) the election must
be made on or prior to Tax Determination Date; (ii) the election
must be irrevocable; (iii) the exercise of an option may only be
made six months or more subsequent to the grant of that option
(except that this limitation will not apply in the event death or
disability of the optionee occurs prior to the expiration of the
six-month period); and (iv) the election must be made either (a)
six months or more prior to the Tax Determination Date, or
(b) within a ten-day "window period" beginning on the third
business day following the release of the Company's annual or
quarterly summary statement of sales and earnings and ending on the
twelfth business day following the date of such release. Where the
Tax Determination Date of a director or officer of the Company
within the meaning of Section 16 of the 1934 Act is deferred until
six months after exercise and that director or officer elects to
have the Company withhold shares pursuant to the terms of this
Section 17, the full amount of option shares shall be issued or
transferred to him upon exercise but he will be unconditionally
obligated to tender back to the Company on the Tax Determination
Date the proper number of shares of Common Stock to satisfy
withholding requirements, plus cash for any fractional amount.
18. Compliance with Rule 701.
18.1 Rule 701.
Until the Company is eligible to register securities
issuable under the Plan by means of Form S-8 or a similar successor
form, in addition to complying with the provisions of Section 2,
the Company also shall comply with the requirements of Rule 701
under the Securities Act of 1933 ("1933 Act") relating to an
exemption from registration for employee stock option plans. These
requirements include, but are not limited to, the following:
(a) Copy of the Plan.
The Company shall provide each participant with a
copy of the Plan.
(b) Limitations on Amount.
The amount of securities offered and sold in
reliance on Rule 701 shall not exceed the greater of $500,000 or
either of the following amounts:
(i) The aggregate offering price of securities of the
Company subject to outstanding offers in reliance
on Rule 701 plus securities of the Company sold in
the preceding 12 months in reliance on Rule 701
shall not exceed 15% of the Company's total assets
(measured at the end of the last fiscal year).
(ii) The number of the Company's securities subject to
outstanding offers in reliance on Rule 701 plus the
Company's securities sold in the preceding 12
months in reliance on Rule 701 shall not exceed 15%
of the outstanding securities of that class.
18.2 General Limitation.
In no event shall the aggregate offering price of the
Company's securities subject to outstanding offers made in reliance
on Rule 701 plus the Company's securities sold in the preceding l2
months in reliance on Rule 701 exceed $5,000,000.
18.3 Restrictive Legend.
All stock certificates issued by the Company shall
contain appropriate legend setting forth restrictions on resale or
transfer of the securities.
19. Term of Plan.
19.1 Effective Date.
Subject to shareholder approval, the Plan shall
become effective on January 8, 2008.
19.2 Termination Date.
Except as to options previously granted and
outstanding under the plan, the Plan shall terminate at midnight on
January 1, 2008, and no Option shall be granted after that time.
Options then outstanding may continue to be exercised in accordance
with their terms. The Plan may be suspended or terminated at any
earlier time by the Board within the limitations set forth in
Section 5.
20. Governing Law.
The Plan and all rights and obligations under it shall be
construed and enforced in accordance with the laws of the State of
Nevada.
