SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange act of 1934
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 under Rule 14a-12
[ ] Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2)).
PPOL, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Not applicable
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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
Rule0-11(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.
Amount Previously Paid:
___________________________________________________________________________
Form, Schedule or Registration Statement No.:
___________________________________________________________________________
Filing Party:
___________________________________________________________________________
Date Filed:
___________________________________________________________________________
PPOL, INC.
1 CITY BOULEVARD WEST
SUITE 870
ORANGE, CALIFORNIA 92868
_______________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JULY 26, 2004
_______________
To the Shareholders of PPOL, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of PPOL, Inc., a California corporation (the "Company"), will
be held at the Westin Hotel at South Coast Plaza, located at 686 Anton
Boulevard, Costa Mesa, California 92626 on Monday, July 26, 2004 at 10:00 a.m.
local time for the following purposes, as more fully described in the Proxy
Statement accompanying this Notice:
1. To elect seven (7) directors of the Company each to serve a
term of one (1) year and until their successors are duly
elected and qualified;
2. To approve and ratify the appointment of Stonefield Josephson,
Inc. as independent auditors of the Company for the fiscal
year ending March 31, 2005; and
3. To transact such other business as may properly come before
the meeting or any adjournment thereof.
Only Shareholders of record at the close of business on June 15, 2004
are entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof. A list of such Shareholders will be available for examination by any
stockholder at the Annual Meeting, or at the office of the Secretary of the
Company, 1 City Boulevard West, Suite 870, Orange, California 92868 for a period
of ten (10) days prior to the Annual Meeting.
A copy of the Company's Annual Report for the fiscal year ended March
31, 2004, which contains consolidated financial statements, is included with
this mailing. Your attention is directed to the accompanying Proxy Statement for
the text of the matters to be proposed at the Annual Meeting and further
information regarding each proposal to be made.
SHAREHOLDERS UNABLE TO ATTEND THE ANNUAL MEETING IN PERSON ARE ASKED TO
COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE. IF YOU ATTEND THE MEETING, YOU MAY REVOKE YOUR PROXY AND VOTE
IN PERSON IF YOU WISH.
By Order of the Board of Directors,
/S/ NOBUO TAKADA
Nobuo Takada
CHAIRMAN OF THE BOARD
Orange, California
June 25, 2004
PPOL, INC.
1 CITY BOULEVARD WEST
SUITE 870
ORANGE, CALIFORNIA 92868
_______________
PROXY STATEMENT
APPROXIMATE DATE PROXY MATERIAL FIRST SENT TO SHAREHOLDERS:
JUNE 30, 2004
_______________
ANNUAL MEETING OF SHAREHOLDERS--JULY 26, 2004
INFORMATION CONCERNING SOLICITATION AND VOTING
This Proxy Statement is furnished by the Board of Directors of PPOL,
Inc., a California corporation (the "Board" and the "Company," respectively), in
connection with the solicitation of proxies to be used at the Annual Meeting of
Shareholders (the "Annual Meeting") of the Company to be held on Monday, July
26, 2004, at 10:00 a.m. local time, at the Westin Hotel at South Coast Plaza
located at 686 Anton Boulevard, Costa Mesa, California 92626 and at any
adjournments or postponements thereof. Our principal executive office is 1 City
Boulevard West, Suite 870, Orange, California 92868 and our telephone number is
(714) 221-7250. The purposes of the Annual Meeting are set forth in the
accompanying Notice of Annual Meeting of Shareholders.
ANY PROXY IN WHICH NO DIRECTION IS SPECIFIED WILL BE VOTED IN FAVOR OF EACH OF
THE MATTERS FOR WHICH NO DIRECTION IS SPECIFIED.
GENERAL INFORMATION ABOUT THE ANNUAL MEETING
The close of business on June 15, 2004 has been fixed as the record
date for the determination of Shareholders entitled to receive notice of and to
vote at the Annual Meeting. On that date, the Company's outstanding voting
securities consisted of 17,993,752 shares of Common Stock. On all matters that
come before the Annual Meeting, each stockholder or his or her proxy will be
entitled to one (1) vote for each share of Common Stock held by the stockholder
on the record date.
If a broker, bank or other nominee holds your shares, you will receive
instructions from them that you must follow in order to have your shares voted.
The holders of a majority of the Company's stock issued and outstanding
and entitled to vote at the Annual Meeting, present in person or represented by
proxy, will constitute a quorum for the transaction of business at the Annual
Meeting or any adjournment thereof. Abstentions will be counted for purposes of
determining if a quorum is present at the Annual Meeting for the transaction of
business. Accordingly, if you have returned valid proxy instructions or attend
the Annual Meeting in person, your Common Stock will be counted for the purpose
of determining whether there is a quorum, even if you wish to abstain from
voting on some or all matters at the Annual Meeting. Broker nominee votes will
be counted as present or represented for purposes of determining the presence of
a quorum.
1
Abstentions are included in determining the number of shares voted on
the proposals submitted to Shareholders (other than the election of directors)
and will have the same effect as a vote against such proposals. Although broker
"non-votes" and abstentions will be counted for the purposes of attaining a
quorum for Proposal One (to elect Yoshihiro Aota, Robert Brasch, Naota
Hamaguchi, Lowell Hattori, Yoshikazu Ohashi, Hideo Ohkubo and Nobuo Takada as
directors), directors are elected by a plurality of the votes of the shares of
Common Stock represented and voted at the Annual Meeting and, therefore, broker
non-votes and abstentions will have no effect on the outcome of the election of
directors. Abstentions and broker non-votes will be included in determining the
number of shares voted on Proposal Two (to approve and ratify the appointment of
Stonefield Josephson, Inc. as independent auditors of the Company for the fiscal
year ending March 31, 2005) and will have the same effect as a vote against such
proposal.
If any shareholder gives notice at the Meeting prior to commencement of
voting that the shareholder intends to cumulate his or her votes, then the
directors shall be elected by the cumulative voting method. In such event, the
shareholders shall have the right to cast that number of votes equal to the
number of shares which they hold multiplied by the number of directors to be
elected by them, i.e., for the purpose of this election, three votes for each
share. Each shareholder may cast the whole number of votes for one candidate, or
distribute them among two or more candidates. The persons named in the
accompanying proxy will have discretionary authority to cumulate votes in the
election of directors in favor of one or more candidates.
Toshiaki Shimojo, Nobuo Takada or either of them will serve as proxy
holders, each with full power of substitution, at the annual shareholders
meeting of stockholders to be held on July 26, 2004. When proxies are properly
dated, executed and returned, the shares represented by such proxies will be
voted at the Annual Meeting in accordance with the instructions of the
stockholder. However, if no specific instructions are given, the shares will be
voted in accordance with the following recommendations of our Board of
Directors:
o "FOR" the election of Yoshihiro Aota, Robert Brasch, Naota
Hamaguchi, Lowell Hattori, Yoshikazu Ohashi, Hideo Ohkubo and
Nobuo Takada to serve for one (1) year and until their
successors are duly elected and qualified; and
o "FOR" approval and ratification of Stonefield Josephson, Inc.
as our independent auditors for the fiscal year ending March
31, 2005.
We are not aware of any matters to be presented other than those
described in this Proxy Statement. If any matters not described in the Proxy
Statement are properly presented at the meeting, the proxy holders will use
their own judgment to determine how to vote your shares. If the meeting is
adjourned, the proxy holders can vote your shares on the new meeting date as
well, unless you have revoked your proxy instructions.
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time prior to its use by (i) delivering a written notice
of revocation to the principal financial officer of the Company, (ii) filing a
duly executed proxy bearing a later date with the Company or (iii) attending the
Annual Meeting and voting in person.
The costs of this solicitation will be borne by the Company. The
Company will request brokerage houses and other nominees, custodians and
fiduciaries to forward soliciting material to beneficial owners of the Company's
Common Stock. The Company may reimburse brokerage firms and other persons
representing beneficial owners for their expenses in forwarding solicitation
materials to beneficial owners. Proxies may also be solicited by certain of the
Company's directors, officers and regular employees, without additional
compensation, either personally, by telephone, facsimile or other means.
2
PROPOSAL ONE
ELECTION OF DIRECTORS
GENERAL
The Bylaws of the Company provide that the Board of Directors is to be
fixed at no less than three (3) and no more than seven (7) directors. The
current number of directors is currently fixed at seven (7).
The Board of Directors knows of no reason why the nominees should be
unable or unwilling to serve, but if any nominee should, for any reason, be
unable or unwilling to serve, the proxies will be voted for the election of such
other person to the office of director as the Board of Directors may recommend
in the place of such nominee.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
NOMINEES FOR ELECTION AS MEMBERS OF THE BOARD OF DIRECTORS.
VOTING INFORMATION
Proxies solicited by the Board of Directors will, unless otherwise
directed, be voted to elect all nominees proposed by the Board. A stockholder
submitting a proxy may vote for all or any of the nominees for election to the
Board of Directors or may withhold his or her vote from all or any of such
nominees. If a quorum is present and voting, the nominees receiving the highest
number of votes, up to the number of directors to be elected, will be elected to
the Board. An abstention from voting on this matter by a stockholder, while
included for purposes of calculating a quorum for the Annual Meeting, has no
effect. In addition, although broker "non-votes" will be counted for purposes of
attaining a quorum, they too will have no effect on the vote. The persons
designated in the enclosed proxy will vote your shares FOR each nominee unless
instructions otherwise are indicated in the enclosed proxy.
Each nominee has agreed to serve the Company as a director if elected.
However, should the nominee become unwilling or unable to serve if elected, the
Proxy agents named in the proxy will exercise their voting power in favor of
such other person as the Board of Directors of the Company may recommend.
3
CURRENT DIRECTORS AND NOMINEES
The following table sets forth the name, age and other information of
current directors and nominees:
STANDING FOR
REELECTION OR
NAME DIRECTOR SINCE TERM EXPIRES ELECTION INDEPENDENT
---- -------------- ------------ -------- -----------
CURRENT DIRECTORS
-----------------
Yoshihiro Aota 59 2002 2004 Yes No
Yoichi Awagakubo* 44 2004 2004 No No
Nobuo Takada 56 2002 2004 Yes No
NOMINEES
--------
Robert Brasch 66 -- -- Yes Yes
Naota Hamaguchi 43 -- -- Yes Yes
Lowell Hattori 66 -- -- Yes Yes
Yoshikazu Ohashi 63 -- -- Yes Yes
Hideo Ohkubo 49 -- -- Yes No
*Mr. Yoichi Awagakubo replaced Mr. Kazushige Shimizu in January 2004 as a
director and CFO.
The following is a brief background summary for each of the current and
nominee directors:
Mr. Yoshihiro Aota has been the President and a director of AJOL since
1994 and is a driving force behind AJOL's membership growth in the Acube
community. Prior to AJOL, Mr. Aota worked for Forval Corporation which is the
majority shareholder in PPOL, Inc. While at Forval Corporation, Mr. Aota
directed Forval's business strategy, PC business and NW business. Prior to
Forval Corporation, Mr. Aota was in charge of business planning and
administration of Katena Corporation, a Japanese Corporation. Mr. Aota holds a
Bachelor of Science degree from Tokyo University.
Mr. Yoichi Awagakubo has more than 25 years of experience, primarily in
corporate planning. He was most recently Director and General Manager of
Corporate Planning Development at Forval Corporation, where he served for 18
years in various management positions. Previously, Mr. Awagakubo was with Japan
Radio Co., Ltd. from 1979 to 1985.
Mr. Brasch is a graduate of Columbia University with over 30 years of
business and banking experience. He began his career in banking and in 1983
became the founding president and CEO of World Trade Bank. In 1987 Mr. Brasch
founded Pacific Partners, Inc. where he continues today as its President to
identify and develop new business opportunities for Asian companies in the
United States and for American companies in Asia, particularly focusing on
strategic alliances between Japanese and American companies. Mr Brasch is fluent
in English, German and Japanese.
Mr. Naota Hamaguchi is Founder, President and CEO of JCI, an
international consulting firm with offices in Tokyo, Japan and Dallas Texas,
specializing in assisting companies conduct business, primarily in Japan and the
U.S., and startups expanding their business on a global business. He has also
assisted 15 startups go public in the US and Japan. Prior to forming JCI in
July, 1992, he was associated with Price Waterhouse for two years and KPMG Peat
Marwick for eight years in Dallas, Texas where he assisted Japanese companies
doing business in the US. He serves as Board member on various non-profit
organizations dedicated to promoting business and friendship between the US and
Japan. Mr. Hamaguchi received his Masters degree from the University of Texas in
Management and Administrative Sciences and his BBS from Soka University.
4
Mr. Lowell Hattori is the Founder and Principle of Hattori & Associates
which provides international trade and business consultation to firms seeking
diversification into overseas markets. Mr. Hattori is a CPA with in depth
knowledge in financial, planning and operational matters gained in his public
accounting and private industry experiences. Mr. Hattori led Fortin Industries,
Inc. into the U.K, France and Tokyo after which Westinghouse Electric
Corporation acquired the company due to its success. Mr. Hattori was also a
Director of the Japanese Practice Unit of Price Waterhouse where his main
function was business development of Japanese companies in the United States.
Mr. Hattori earned an MBA from UCLA and holds a BS degree from Widener
University.
Dr. Yoshikazu Ohashi has been with Cognex Corporation, the worlds
leading supplier of machine vision systems, or computers that can "see" since
1992. He currently serves as Advisor to Cognex's Japanese subsidiary.
Previously, he was Marketing Manager, and was involved in global marketing
covering Japan, US, Europe and Asia. Prior to joining Cognex, Dr. Ohashi held
various positions as a research scientist and educator at prestigious
organizations such as Arco Oil and Gas, University of Pennsylvania, NASA and
Carnegie Institution of Washington. He obtained his Ph.D. from Harvard
University in Earth and Planetary Sciences. His MS and BS are from Tokyo
University.
Mr. Ohkubo established Shin Nihon Kouhan in 1980 which later became
known as Forval Corporation (Forval). Today, Forval is one of Japan's leading
telecommunications companies providing hardware, software and related services
to meet Japan's growing demand in these important areas. Mr. Ohkubo has served
as Forval's President since 1980, leading Forval throughout its continuing
growth. He is the author of a book titled "Learn from Bushido, 48 rules" and
earned the First Entrepreneur Grand Prize by the New Business Conference. Mr.
Ohkubo holds a Bachelors degree from Kokugakuin University.
Mr. Nobuo Takada joined Daiwa Securities in 1970 as a staff analyst in
the Research department and has held various positions in research, corporate
finance, trading and information systems at Daiwa Securities offices in Kyoto,
Tokyo, and Geneva, Switzerland. In 1992, Mr. Takada founded Aston Holdings, an
investment firm in Tokyo, Japan. In 1996, Mr. Takada formed Boston Advisory
Services, an investment advisory firm in Tokyo, Japan, where he currently serves
as its CEO. Mr. Takada is the CEO of Leo Global Fund, which holds approximately
36% of PPOL's common shares. Mr. Takada holds an MBA from Indiana University and
a B.S. in Economics from Doshisha University.
The Company believes that each current director standing for reelection
and nominees standing for election to the board will be able to serve. If any
nominee becomes unable or unwilling to serve, Proxies may be voted for the
election of such person or persons as the Board of Directors determines.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held fourteen meetings during the fiscal year
ended March 31, 2004. Mr. Takada and Mr. Aota attended all of the meetings of
the Board of Directors. Mr. Awagakubo attended three of the four meetings held
since he became a director in January 2004. Mr. Shimizu attended all 10 meetings
held during his time as a director. The current Board consists of three
individuals who are also employees of the Company, its subsidiary or one of its
major shareholders.
The Board currently does not have any committees. The Company intends to
fill its committees with independent directors. The Company does not have any
independent directors at the current time. However, there are 4 independent
director-nominees standing for election at the annual shareholders meeting. Upon
election of these independent, non-employee directors, the Company intends to
form or reconstitute three (3) committees: an Audit Committee, a Compensation
Committee and a Nominating and Corporate Governance Committee. The following
describes each intended committee and its intended function upon formation. All
members of these committees will be independent, non-employee directors.
During the fiscal year ended March 31, 2004, the Board performed the
responsibilities of the Audit Committee. The functions of the Audit Committee,
upon reconstitution of independent directors, will include reviewing and
supervising the financial controls of the Company, making recommendations to the
Board of Directors regarding the Company's independent accountants, reviewing
5
the books and accounts of the Company, meeting with the officers of the Company
regarding the Company's financial controls, acting upon recommendations of the
independent accountants and taking such further actions as the Audit Committee
deems necessary to complete an audit of the books and accounts of the Company.
The members of the Audit Committee will be "independent" as defined in Rule
4200(a)(15) of the National Association of Securities Dealers' listing
standards. The Company currently does not have a financial expert on the audit
committee because it currently does not yet have any independent directors to
serve that role. The Company will identify the financial expert, if at all,
after the shareholders meeting if and when the independent nominees become
elected.
Upon formation, the Compensation Committee's functions will include
reviewing with management cash and other compensation policies for employees,
making recommendations to the Board of Directors regarding compensation matters
and determining compensation for the Chief Executive Officer, Chief Operating
Officer and Chief Financial Officer. In addition, the Compensation Committee
will administer the Company's stock plans and determine the terms and conditions
of issuances of awards thereunder.
Upon formation, the Nominating and Corporate Governance Committee will
make recommendations to the Board regarding the size and composition of the
Board, establish procedures for the nomination process, recommend candidates for
election to the Board of Directors and nominate officers for appointment by the
Board. In addition, the Committee will review and report to the Board on a
periodic basis with regard to matters of corporate governance. The Committee
will consider nominees recommended by security holders and evaluate those
nominees. Security holders making such a nomination must deliver the
recommendation in writing to the principal financial officer of the Company.
6
PROPOSAL TWO
RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected the accounting firm of Stonefield
Josephson, Inc. to serve as its independent accountants for the fiscal year
ending March 31, 2005. Stonefield Josephson, Inc. has audited the Company's
financial statements from the fiscal years ended March 31, 2000 through March
31, 2004. A proposal to ratify the appointment of Stonefield Josephson, Inc. for
the current year will be presented at the Annual Meeting. Representatives of
Stonefield Josephson, Inc. may be present at the Annual Meeting. If present,
they will have an opportunity to make a statement if they desire to do so and
will be available to respond to appropriate questions from Shareholders.
The decision to appoint Stonefield Josephson, Inc. was based on the
recommendation of the Board. Before making its recommendation, the Board
carefully considered the firm's qualifications as independent auditors. This
included a review of the qualifications of the engagement team, the quality
control procedures the firm has established, the issues, if any, raised by the
most recent quality control review, and the reputation for integrity and
competence of the firm in the fields of accounting and auditing. The Board's
review also included matters required to be considered under the SEC's Rules on
Auditor Independence, including the nature and extent of non-audit services, to
ensure that they will not impair the independence of the accountants. The Board
expressed its satisfaction with Stonefield Josephson, Inc. in all of these
respects.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF INDEPENDENT AUDITORS.
VOTING INFORMATION
Ratification of the selection requires the affirmative vote by a
majority of the shares of Common Stock having voting power present in person or
represented by proxy at the Annual Meeting. An abstention from voting on this
matter by a Shareholder, is included for purposes of calculating a quorum and
has the effect of a vote against the ratification of Stonefield Josephson, Inc.
as our independent auditors. In addition, broker "non-votes," also counted for
purposes of attaining a quorum, have the effect of a vote against the
ratification of Stonefield Josephson, Inc. as our independent auditors. The
persons designated in the enclosed proxy will vote your shares FOR approval of
the resolution unless instructions to the contrary are indicated in the enclosed
proxy. Notwithstanding its selection, the Board, in its discretion, may appoint
new independent auditors at any time during the year if the Board believes that
such a change would be in the best interests of the Company and its
Shareholders. If the Shareholders do not ratify the appointment of Stonefield
Josephson, Inc., the Board may reconsider its selection.
The Company incurred the following fees to Stonefield Josephson, Inc.
during the 2004 and 2003 fiscal years:
2004 2003
--------- ---------
Audit fees 75,000 63,000
Tax fees -- --
All other fees -- 100,000 *
--------- ---------
75,000 163,000
========= =========
* For services rendered in conjunction with the Company filing its
registration statement on Form 10 with the SEC.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. The Company did
not engage Stonefield Josephson, Inc. for financial information systems design
and implementation, as defined in Paragraph (c)(4)(ii) of Rule 2-01 of
Regulation S-X, during the most recent fiscal year.
7
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 2004, certain
information with respect to the beneficial ownership of the Company's Common
Stock by (i) any person (including any "group" as that term is used in Section
13(d)(3) of the Exchange Act) known by the Company to be the beneficial owner of
more than 5% of any class of the Company's voting securities, (ii) each
director, (iii) each of the named executive officers, as defined below, and (iv)
all current directors and executive officers of the Company as a group. As of
March 31, 2004, there were 17,993,752 shares of issued and outstanding Common
Stock.
NUMBER OF SHARES
OF COMMON STOCK PERCENT OF TOTAL
NAME AND ADDRESS BENEFICIALLY OWNED (1) COMMON STOCK
5% SHAREHOLDERS
Forval Corporation (2)
Aoyama Oval Bldg., 3rd Fl.
5-52-2 Jingu-mae, Shibuya-ku
Tokyo, Japan 150-001 10,547,594 58.62 %
Leo Global Fund (3)
Mori Bldg, 3F Toranomon 11
6-4 Toranomon, 2-Chome
Minato-Ku, Tokyo, Japan 105-0001 6,437,280 35.78 %
DIRECTORS AND OFFICERS
Nobuo Takada (5)
Mori Bldg, 3F Toranomon 11
6-4 Toranomon, 2-Chome
Minato-Ku, Tokyo, Japan 105-0001 6,437,280 (4) 35.78 % (4)
Yoshihiro Aota
Aoyama Oval Bldg., 3rd Fl.
5-52-2 Jingu-mae, Shibuya-ku
Tokyo, Japan 150-001 20,000 0.11 %
Peter Pomeroy
1 City Boulevard West, Suite 870
Orange, California 92868 0 0 %
Yoichi Awagakubo
1 City Boulevard West, Suite 870
Orange, California 92868 0 0 %
---------------
(1) 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 securities.
(2) Forval Corporation has sole voting and investment power of the shares
beneficially owned by it.
(3) Mr. Nobuo Takada, the chief executive officer of Leo Global Fund has the
power to vote Leo Global Fund's ownership of shares in the Company. The majority
owner of Leo Global Fund is AJOO, a leading distributor of AJOL. Forval
Corporation does not have any equity interest in AJOO.
(4) Inclusive of the 6,437,280 shares owned by Leo Global Fund for which Mr.
Nobuo Takada serves as its chief executive officer. Mr. Takada has the power to
vote Leo Global Fund's shares in the Company.
(5) Mr. Takada will be stepping down from the post of CEO as of the annual
shareholder meeting, but will stand for reelection as a director.
8
EXECUTIVE COMPENSATION AND OTHER INFORMATION
EXECUTIVE OFFICERS
The following sets forth certain information regarding the executive
officers of the Company.
NAME AGE POSITION
------------------------ --- -----------------------
Nobuo Takada 56 Chief Executive Officer
Yoshihiro Aota 59 Chief Operating Officer
Peter Pomeroy* 50 President
Yoichi Awagakubo 44 Chief Financial Officer
* - Peter Pomeroy took over responsibilities as president in April 2004 from
Yoshihiro Aota who continues as Director and Chief Operating Officer for PPOL.
COMPENSATION OF EXECUTIVE OFFICERS
A. THE COMPANY
Up to and including the Company's last fiscal year ended March 31,
2004, current executive officers of the Company had not received any
compensation. The former Chief Financial Officer, Kazushige Shimizu, had
received $90,000 in salary during the fiscal year ended March 31, 2004.
B. AJOL (THE COMPANY'S WHOLLY OWNED SUBSIDIARY)
The following table sets forth the compensation of AJOL's "Named
Executive Officers," which consist of a) all persons serving as the chief
executive officer during the fiscal year and b) the four (4) most highly
compensated individuals serving at the end of the fiscal year, in addition to
the chief executive officer:
SUMMARY ANNUAL COMPENSATION TABLE
---------------------------------
FISCAL
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) TOTAL
-------------------------------
Yoshihiro Aota 2004 $ 177,405 $ 274,430 $ 451,835
President, CEO and Director 2003 $ 164,357 $ 221,439 $ 385,796
2002 $ 157,807 $ 216,283 $ 374,090
Manabu Nakamura 2004 $ 108,813 $ 35,410 $ 144,223
Director 2003 $ 100,809 $ 32,806 $ 133,615
2002 $ 98,465 $ 32,042 $ 130,507
Masao Yamamoto 2004 $ 109,242 $ 35,410 $ 144,652
Director 2003 $ 101,305 $ 32,806 $ 134,111
2002 $ 98,946 $ 32,043 $ 130,988
Nobuyuki Iishi 2004 $ 92,250 $ 21,246 $ 114,496
Supervisor 2003 $ 22,499 $ 32,059 $ 54,558
2002 $ -- $ -- $ --
Shoji Otani 2004 $ 63,343 $ 12,394 $ 75,737
Supervisor 2003 $ 49,591 $ 26,817 $ 76,408
2002 $ 47,028 $ 28,681 $ 75,709
9
OPTION GRANTS IN LAST FISCAL YEAR
As previously reported, the Company established a stock option plan in
March 2004 (the "2004 Plan"). In accordance with the 2004 Plan, the Company is
authorized to issue incentive stock options and non-qualified stock options for
up to 2,000,000 shares of the Company's common stock. A copy of the Plan is
attached in Exhibit A to this proxy statement and is included for informational
purposes only. Shareholders are not being asked to vote on the adoption of this
plan.
The Plan is intended to encourage stock ownership by employees and
directors of the Company so that they may acquire or increase their proprietary
interest in the Company and to encourage such employees and directors to remain
in the employ of the Company and to put forth maximum efforts for the success of
the Company's business. There were 1,220,000 options granted on March 25, 2004
which will vest 100% two years after their grant date.
Percent of
total
options
granted to
employees Exercise
Number of in the price per
Name options fiscal year share Expiration Date
-------------------- ----------- ------------- ------------ ---------------
Yoshihiro Aota 1,000,000 81.97% $4.00 March 25, 2014
Nobuo Takada 50,000 4.10% $4.00 March 25, 2014
Masao Yamamoto 40,000 3.28% $4.00 March 25, 2014
Toshiaki Shimojo 30,000 2.46% $4.00 March 25, 2014
Yuji Kamata 20,000 1.64% $4.00 March 25, 2014
Nobuyuki Iishi 40,000 3.28% $4.00 March 25, 2014
Manabu Nakamura 40,000 3.28% $4.00 March 25, 2014
-----------
Total 1,220,000
===========
Reference is made to Note 1 and Note 6 of the Company's financial
statements for the year ended March 31, 2004 (which is included in the annual
report on Form 10-K and which is being delivered with this Proxy Statement) for
more detailed information regarding the Company's 2004 Plan.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
PPOL entered into an employment agreement with Peter Pomeroy on April
22, 2004. This agreement provides for annual compensation to Mr. Pomeroy in the
sum of $156,000 and bonuses of 5% of capital raised by the Company from April
22, 2004 through August 31, 2004. Additionally, the agreement calls for the
Company to recommend to the Board of Directors, with its sole and absolute
discretion, that 716,000 stock options be granted to Mr. Pomeroy with a vesting
schedule through March 31, 2006 as defined in the agreement and at exercise
price(s) and expiration(s) to be determined. In exchange, Mr. Pomeroy will
provide exclusive services to the Company and fulfill the role and
responsibilities of President as defined in the agreement.
10
AJOL, the Company's wholly owned subsidiary, has entered into
employment agreements with Masao Yamamoto, Manabu Nakamura and Nobuyuki Iishi
for the term July 1, 2003 through June 30, 2004. Each agreement provides for
annual compensation to Mr. Yamamoto, Mr. Nakamura and Mr. Iishi in the sum of
approximately $115,000 per year. Under the agreements, each of the employees
will provide services to the Company in the area of sales, sales support, office
duties, counting, production, distribution, operations technology, and such
other responsibilities assigned to each of these individuals by AJOL.
Additionally, AJOL has an employment agreement with Hiroko Miyazawa.
The agreement is for the term commencing July 1, 2003 and terminating June 30,
2004. The agreement provides Ms. Miyazawa with monthly compensation of
approximately $4,200 and a bonus twice a year based on monthly compensation of
one (1) to three (3) months. The bonus is discretionary and may be paid, if at
all, based upon AJOL's results of operations. Additionally, Ms. Miyazawa is
entitled to reimbursement of business travel at the rate of approximately $57
per day. Under the agreement, Ms. Miyazawa will provide services to the Company
in the area of sales, sales support, office duties, counting, production,
distribution, operations technology, and such other responsibilities assigned to
her by AJOL.
COMPENSATION OF DIRECTORS
The Company reimburses directors for travel and other out-of-pocket
expenses incurred in attending Board meetings. The Company did not pay cash
compensation to its directors during the fiscal year ended March 31, 2004 with
the exception of $30,000 paid to Nobuo Takada for his director responsibilities.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's officers and directors, and persons who
own more than 10% of a registered class of the Company's equity securities, to
file certain reports of ownership with the Securities and Exchange Commission
(the "SEC") and with the National Association of Securities Dealers, Inc. Such
officers, directors and shareholders are also required by SEC rules to furnish
the Company with copies of all Section 16(a) forms they file. To the Company's
knowledge, all reports required to be filed during fiscal year ended March 31,
2004 pursuant to Section 16(a) of the Exchange Act by directors, executive
officers and 10% shareholders have been filed.
CODE OF ETHICS
The Company adopted a code of ethics applicable to all of its
directors, officers and employees which is a "code of ethics" as defined by the
applicable rules of the Securities and Exchange Commission (SEC). This code of
ethics is found as exhibit 14 to our 10-K for fiscal 2004 as filed with the SEC.
If the Company makes any amendments to this code of ethics other than technical,
administrative or other non-substantive amendments, or grants any waiver,
including implicit waivers, from a provision of this code of ethics, the Company
will disclose the nature of the amendments or waivers, its effective date and to
whom it applies in a report on Form 8-K filed with the SEC.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company entered into separate agreements with Forval and Leo Global
Fund, its two majority shareholders, to provide research on investment
opportunities and market trends in the United States. The agreements
specifically call for the Company to provide research on: 1) US trends and
products in the communications and information technology area, 2) the market
for broadband services and related infrastructure and hardware in the US, 3)
research of US market trends with respect to business and matters of interest to
Leo Global Fund and other subsidiaries of Forval, 4) formation of strategic
alliances and partnerships with synergistic US businesses, 5) other related
research on matters of interest to Forval and Leo Global Fund, and 6) investment
opportunities. The total consideration for these services was $483,858 which was
received by the Company in fiscal 2003. As the services for this consideration
11
were not completed until fiscal 2004, the associated revenue for this was not
recognized until fiscal 2004. There is no assurance that the Company will
receive such projects from Forval and Leo Global Fund in the future.
AJOL, the Company's wholly owned subsidiary, purchased office equipment
from Forval Corporation, the Company's majority shareholder, for the fair market
value of approximately $68,000.
STOCK PERFORMANCE
The Company's Common Stock began trading on the Over the Counter
Bulletin Board (OTCBB) during the third fiscal quarter on October 14, 2003. The
outstanding shares of Common Stock are currently held by approximately 1,828
shareholders of record. The Company is currently quoted on the OTC Bulletin
Board system ("OTCBB"), and can be located on the OTCBB under the symbol "PPLC."
The following chart lists the high and low closing stock price range from the
Company's market makers. These over-the-counter market quotations reflect the
inter-deal prices without retail mark-up, markdown, or commissions and may not
necessarily represent actual transactions.
Year Ended March 31, 2004 High Low
------------------------------------ --------- --------
Prior to October 14, 2003 n/a n/a
October 14, 2003 - December 31, 2003 $4.50 $3.30
Fourth Quarter* $4.50 $3.30
* January 1, 2004 to March 31, 2004
The declaration of any dividends in the future by the Company is
subject to the discretion of our board of directors and will depend upon various
factors, including our net earnings, financial condition, cash requirements,
future projects and other factors deemed relevant by our board of directors.
PPOL has not paid any cash or other dividends on its common stock since its
inception and currently does not intend to pay dividends in the foreseeable
future.
ANNUAL REPORT ON FORM 10-K
At the Company's cost, with the exception of associated exhibits
charged at $0.15 per page if requested, an annual report on Form 10-K as filed
with the SEC for the year ended March 31, 2004 is being mailed concurrently with
this Proxy statement to all shareholders as of the Record Date.
12
STOCKHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for
stockholder action at subsequent annual meetings of the Company consistent with
Rule 14a-8 promulgated under the Exchange Act. Proposals of Shareholders
intended to be presented at the Company's next annual meeting of Shareholders
must be received by the Company (Attention: Chief Financial Officer, at the
principal offices of the Company), no later than February 28, 2005, for
inclusion in the Company's proxy statement and form of proxy for that meeting.
Stockholder proposals are also subject to the Company's Bylaws, which may be
amended from time to time.
OTHER MATTERS
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Annual Meeting in accordance with the
directions given. Any proxy in which no direction is specified will be voted in
favor of each of the nominees and the matters to be considered.
The Board of Directors does not intend to bring any matters before the
Annual Meeting other than as stated in this Proxy Statement and is not aware
that any other matters will be presented for action at the Meeting. Should any
other matters be properly presented, the persons named in the enclosed form of
proxy will vote the proxy with respect thereto in accordance with their best
judgment, pursuant to the discretionary authority granted by the proxy.
COPIES OF THE COMPANY'S RECENT REPORTS ON FORM 10-K, EXCLUDING
ASSOCIATED EXHIBITS CHARGED AT $0.15 PER PAGE, AND FORM 10-Q AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION WILL BE PROVIDED TO SHAREHOLDERS WITHOUT
CHARGE UPON WRITTEN OR ORAL REQUEST TO THE COMPANY AT: PPOL, INC., 1 CITY
BOULEVARD WEST, SUITE 870, ORANGE, CALIFORNIA 92868, TELEPHONE NUMBER (714)
221-7250.
By Order of the Board of Directors,
/S/ NOBUO TAKADA
Nobuo Takada
CHAIRMAN OF THE BOARD
Orange, California
June 25, 2004
13
Exhibit A
PPOL, INC.
2004 STOCK INCENTIVE PLAN
1. PURPOSES OF THE PLAN. The purposes of this Plan are to attract and
retain the best available personnel, to provide additional incentives to
Employees, Directors and Consultants and to promote the success of the Company's
business.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of the Committees
appointed to administer the Plan.
(b) "AFFILIATE" and "ASSOCIATE" shall have the respective
meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange
Act.
(c) "APPLICABLE LAWS" means the legal requirements relating to
the administration of stock incentive plans, if any, under applicable provisions
of federal securities laws, state corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Awards granted to residents therein.
(d) "ASSUMED" means that (i) pursuant to a Corporate
Transaction defined in Section (q)(i), (q)(ii) or (q)(iii), the contractual
obligations represented by the Award are expressly assumed (and not simply by
operation of law) by the successor entity or its Parent in connection with the
Corporate Transaction or (ii) pursuant to a Corporate Transaction defined in
Section (q)(iv) or (q)(v), the Award is expressly affirmed by the Company.
(e) "AWARD" means the grant of an Option, Restricted Stock, or
other right or benefit under the Plan.
(f) "AWARD AGREEMENT" means the written agreement evidencing
the grant of an Award executed by the Company and the Grantee, including any
amendments thereto.
(g) "BOARD" means the Board of Directors of the Company.
(h) "Cause" means, with respect to the termination by the
Company or a Related Entity of the Grantee's Continuous Service, that such
termination is for "Cause" as such term is expressly defined in a then-effective
written agreement between the Grantee and the Company or such Related Entity, or
in the absence of such then-effective written agreement and definition, is based
on, in the determination of the Administrator, the Grantee's: (i) performance of
any act or failure to perform any act in bad faith and to the detriment of the
Company or a Related Entity; (ii) dishonesty, intentional misconduct or material
breach of any agreement with the Company or a Related Entity; or (iii)
commission of a crime involving dishonesty, breach of trust, or physical or
emotional harm to any person.
(i) "CHANGE IN CONTROL" means a change in ownership or control
of the Company effected through either of the following transactions:
(i) the direct or indirect acquisition by any person
or related group of persons (other than an acquisition from or by the Company or
by a Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Company's outstanding securities pursuant to
a tender or exchange offer made directly to the Company's stockholders which a
majority of the Continuing Directors who are not Affiliates or Associates of the
offeror do not recommend such stockholders accept, or
(ii) a change in the composition of the Board over a
period of thirty-six (36) months or less such that a majority of the Board
members (rounded up to the next whole number) ceases, by reason of one or more
contested elections for Board membership, to be comprised of individuals who are
Continuing Directors.
(j) "CODE" means the Internal Revenue Code of 1986, as
amended.
1
(k) "COMMITTEE" means any committee appointed by the Board to
administer the Plan.
(l) "COMMON STOCK" means the common stock of the Company.
(m) "COMPANY" means PPOL, Inc., a California corporation.
(n) "CONSULTANT" means any person (other than an Employee or a
Director, solely with respect to rendering services in such person's capacity as
a Director) who is engaged by the Company or any Related Entity to render
consulting or advisory services to the Company or such Related Entity.
(o) "CONTINUING DIRECTORS" means members of the Board who
either (i) have been Board members continuously for a period of at least
thirty-six (36) months or (ii) have been Board members for less than thirty-six
(36) months and were elected or nominated for election as Board members by at
least a majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.
(p) "CONTINUOUS SERVICE" means that the provision of services
to the Company or a Related Entity in any capacity of Employee, Director or
Consultant, is not interrupted or terminated. Continuous Service shall not be
considered interrupted in the case of (i) any approved leave of absence, (ii)
transfers among the Company, any Related Entity, or any successor, in any
capacity of Employee, Director or Consultant, or (iii) any change in status as
long as the individual remains in the service of the Company or a Related Entity
in any capacity of Employee, Director or Consultant (except as otherwise
provided in the Award Agreement). An approved leave of absence shall include
sick leave, military leave, or any other authorized personal leave. For purposes
of each Incentive Stock Option granted under the Plan, if such leave exceeds
ninety (90) days, and reemployment upon expiration of such leave is not
guaranteed by statute or contract, then the Incentive Stock Option shall be
treated as a Non-Qualified Stock Option on the day three (3) months and one (1)
day following the expiration of such ninety (90) day period.
(q) "CORPORATE TRANSACTION" means any of the following
transactions:
(i) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the principal purpose of
which is to change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all
or substantially all of the assets of the Company;
(iii) the complete liquidation or dissolution of the
Company;
(iv) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than forty percent
(40%) of the total combined voting power of the Company's outstanding securities
are transferred to a person or persons different from those who held such
securities immediately prior to such merger; or
(v) acquisition in a single or series of related
transactions by any person or related group of persons (other than the Company
or by a Company-sponsored employee benefit plan) of beneficial ownership (within
the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the Company's
outstanding securities but excluding any such transaction or series of related
transactions that the Administrator determines shall not be a Corporate
Transaction.
(r) "COVERED EMPLOYEE" means an Employee who is a "covered
employee" under Section 162(m)(3) of the Code.
(s) "DIRECTOR" means a member of the Board or the board of
directors of any Related Entity.
(t) "DISABILITY" means as defined under the long-term
disability policy of the Company or the Related Entity to which the Grantee
provides services regardless of whether the Grantee is covered by such policy.
If the Company or the Related Entity to which the Grantee provides service does
not have a long-term disability plan in place, "Disability" means that a Grantee
is unable to carry out the responsibilities and functions of the position held
by the Grantee by reason of any medically determinable physical or mental
2
impairment for a period of not less than ninety (90) consecutive days. A Grantee
will not be considered to have incurred a Disability unless he or she furnishes
proof of such impairment sufficient to satisfy the Administrator in its
discretion.
(u) "EMPLOYEE" means any person, including an Officer or
Director, who is in the employ of the Company or any Related Entity, subject to
the control and direction of the Company or any Related Entity as to both the
work to be performed and the manner and method of performance. The payment of a
director's fee by the Company or a Related Entity shall not be sufficient to
constitute "employment" by the Company.
(v) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(w) "FAIR MARKET VALUE" means, as of any date, the value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation The
NASDAQ National Market or The NASDAQ Small Cap 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 on the date of determination (or, if no closing sales price or closing
bid was reported on that date, as applicable, on the last trading date such
closing sales price or closing bid was reported), as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted on an
automated quotation system (including the OTC Bulletin Board) or by a recognized
securities dealer, but selling prices are not reported, the Fair Market Value of
a share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the date of determination (or, if no such prices
were reported on that date, on the last date such prices were reported), as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable; or
(iii) In the absence of an established market for the
Common Stock of the type described in (i) and (ii), above, the Fair Market Value
thereof shall be determined by the Administrator in good faith.
(x) "Good Reason" means the occurrence after a Corporate
Transaction or Change in Control of any of the following events or conditions
unless consented to by the Grantee (and the Grantee shall be deemed to have
consented to any such event or condition unless the Grantee provides written
notice of the Grantee's non-acquiescence within 30 days of the effective time of
such event or condition):
(i) a change in the Grantee's responsibilities or
duties which represents a material and substantial diminution in the Grantee's
responsibilities or duties as in effect immediately preceding the consummation
of a Corporate Transaction or Change in Control;
(ii) a reduction in the Grantee's base salary to a
level below that in effect at any time within six (6) months preceding the
consummation of a Corporate Transaction or Change in Control or at any time
thereafter; or
(iii) requiring the Grantee to be based at any place
outside a 50-mile radius from the Grantee's job location [or residence] prior to
the Corporate Transaction or Change in Control except for reasonably required
travel on business which is not materially greater than such travel requirements
prior to the Corporate Transaction or Change in Control.
(y) "GRANTEE" means an Employee, Director or Consultant who
receives an Award under the Plan.
(z) "IMMEDIATE FAMILY" means any child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew,
mother-in-law, father-in-law, son-in law, daughter-in-law, brother-in-law, or
sister-in-law, including adoptive relationships, any person sharing the
Grantee's household (other than a tenant or employee), a trust in which these
persons (or the Grantee) have more than fifty percent (50%) of the beneficial
interest, a foundation in which these persons (or the Grantee) control the
management of assets, and any other entity in which these persons (or the
Grantee) own more than fifty percent (50%) of the voting interests.
3
(aa) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code
(bb) "NON-QUALIFIED STOCK OPTION" means an Option not intended
to qualify as an Incentive Stock Option.
(cc) "OFFICER" means a person who is an officer of the Company
or a Related Entity within the meaning of Section 16 of the Exchange Act and the
rules and regulations promulgated thereunder.
(dd) "OPTION" means an option to purchase Shares pursuant to
an Award Agreement granted under the Plan.
(ee) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(ff) "PERFORMANCE-BASED COMPENSATION" means compensation
qualifying as "performance-based compensation" under Section 162(m) of the Code.
(gg) "PLAN" means this 2004 Stock Incentive Plan.
(hh) "REGISTRATION DATE" means the first to occur of (i) the
closing of the first sale to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended, of (A) the Common Stock
or (B) the same class of securities of a successor corporation (or its Parent)
issued pursuant to a Corporate Transaction in exchange for or in substitution of
the Common Stock; and (ii) in the event of a Corporate Transaction, the date of
the consummation of the Corporate Transaction if the same class of securities of
the successor corporation (or its Parent) issuable in such Corporate Transaction
shall have been sold to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended, on or prior to the date of
consummation of such Corporate Transaction.
(ii) "RELATED ENTITY" means any Subsidiary of the Company and
any business, corporation, partnership, limited liability company or other
entity in which the Company or a Subsidiary of the Company holds a substantial
ownership interest, directly or indirectly.
(jj) "REPLACED" means that (i) pursuant to a Corporate
Transaction defined in Section 2(q)(i), 2(q)(ii) or 2(q)(iii), the Award is
replaced with a comparable stock award or a cash incentive program of the
successor entity thereof which preserves the compensation element of such Award
existing at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such Award or
(ii) pursuant to a Corporate Transaction defined in Section 2(q)(iv) or 2(q)(v),
the Award is replaced with a comparable stock award or a cash incentive program
of the Company thereof which preserves the compensation element of such Award
existing at the time of the Corporate Transaction and provides for subsequent
payout in accordance with the same vesting schedule applicable to such Award.
The determination of Award comparability shall be made by the Administrator and
its determination shall be final, binding and conclusive.
(kk) "RESTRICTED STOCK" means Shares issued under the Plan to
the Grantee for such consideration, if any, and subject to such restrictions on
transfer, rights of first refusal, repurchase provisions, forfeiture provisions,
and other terms and conditions as established by the Administrator.
(ll) "RULE 16B-3" means Rule 16b-3 promulgated under the
Exchange Act or any successor thereto.
(mm) "SHARE" means a share of the Common Stock.
(nn) "SUBSIDIARY" means a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10, below, the
maximum aggregate number of Shares which may be issued pursuant to all Awards
(including Incentive Stock Options) is 2,000,000 Shares. The Shares to be issued
pursuant to Awards may be authorized, but unissued, or reacquired Common Stock.
4
(b) Any Shares covered by an Award (or portion of an Award)
which is forfeited, canceled or expires shall be deemed not to have been issued
for purposes of determining the maximum aggregate number of Shares which may be
issued under the Plan. Shares that actually have been issued under the Plan
pursuant to an Award shall not be returned to the Plan and shall not become
available for future issuance under the Plan, except that if unvested Shares are
forfeited, or repurchased by the Company at the lower of their original purchase
price or their Fair Market Value at the time of repurchase, such Shares shall
become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PLAN ADMINISTRATOR.
(i) ADMINISTRATION WITH RESPECT TO DIRECTORS AND
OFFICERS. With respect to grants of Awards to Directors or Employees who are
also Officers or Directors of the Company, the Plan shall be administered by (A)
the Board or (B) a Committee designated by the Board, which Committee shall be
constituted in such a manner as to satisfy the Applicable Laws and to permit
such grants and related transactions under the Plan to be exempt from Section
16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board.
(ii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND
OTHER EMPLOYEES. With respect to grants of Awards to Employees or Consultants
who are neither Directors nor Officers of the Company, the Plan shall be
administered by (A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted in such a manner as to satisfy the Applicable
Laws. Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. The Board may authorize one or
more Officers to grant such Awards and may limit such authority as the Board
determines from time to time.
(iii) ADMINISTRATION WITH RESPECT TO COVERED
EMPLOYEES. Notwithstanding the foregoing, as of and after the date that the
exemption for the Plan under Section 162(m) of the Code expires, as set forth in
Section 18, below, grants of Awards to any Covered Employee intended to qualify
as Performance-Based Compensation shall be made only by a Committee (or
subcommittee of a Committee) which is comprised solely of two or more Directors
eligible to serve on a committee making Awards qualifying as Performance-Based
Compensation. In the case of such Awards granted to Covered Employees,
references to the "Administrator" or to a "Committee" shall be deemed to be
references to such Committee or subcommittee.
(iv) ADMINISTRATION ERRORS. In the event an Award is
granted in a manner inconsistent with the provisions of this subsection (a),
such Award shall be presumptively valid as of its grant date to the extent
permitted by the Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to Applicable Laws
and the provisions of the Plan (including any other powers given to the
Administrator hereunder), and except as otherwise provided by the Board, the
Administrator shall have the authority, in its discretion:
(i) to select the Employees, Directors and
Consultants to whom Awards may be granted from time to time hereunder;
(ii) to determine whether and to what extent Awards
are granted hereunder;
(iii) to determine the number of Shares or the amount
of other consideration to be covered by each Award granted hereunder;
(iv) to approve forms of Award Agreements for use
under the Plan;
(v) to determine the terms and conditions of any
Award granted hereunder;
(vi) to amend the terms of any outstanding Award
granted under the Plan, provided that any amendment that would adversely affect
the Grantee's rights under an outstanding Award shall not be made without the
Grantee's written consent;
5
(vii) to construe and interpret the terms of the Plan
and Awards, including, without limitation, any notice of award or Award
Agreement, granted pursuant to the Plan;
(viii) to establish additional terms, conditions,
rules or procedures to accommodate the rules or laws of applicable foreign
jurisdictions and to afford Grantees favorable treatment under such rules or
laws; provided, however, that no Award shall be granted under any such
additional terms, conditions, rules or procedures with terms or conditions which
are inconsistent with the provisions of the Plan; and
(ix) to take such other action, not inconsistent with
the terms of the Plan, as the Administrator deems appropriate.
5. ELIGIBILITY. Awards other than Incentive Stock Options may be
granted to Employees, Directors and Consultants. Incentive Stock Options may be
granted only to Employees of the Company or a Subsidiary of the Company. An
Employee, Director or Consultant who has been granted an Award may, if otherwise
eligible, be granted additional Awards. Awards may be granted to such Employees,
Directors or Consultants who are residing in foreign jurisdictions as the
Administrator may determine from time to time.
6. TERMS AND CONDITIONS OF AWARDS.
(a) DESIGNATION OF AWARD. Each Award shall be designated in
the Award Agreement. In the case of an Option, the Option shall be designated as
either an Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of Shares subject to Options designated as Incentive Stock Options which
become exercisable for the first time by a Grantee during any calendar year
(under all plans of the Company or any Subsidiary of the Company) exceeds
$100,000, such excess Options, to the extent of the Shares covered thereby in
excess of the foregoing limitation, shall be treated as Non-Qualified Stock
Options. For this purpose, Incentive Stock Options shall be taken into account
in the order in which they were granted, and the Fair Market Value of the Shares
shall be determined as of the grant date of the relevant Option.
(b) CONDITIONS OF AWARD. Subject to the terms of the Plan, the
Administrator shall determine the provisions, terms and conditions of each Award
including, but not limited to, the Award vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, form of payment
(cash, Shares or other consideration) upon settlement of the Award, payment
contingencies, and satisfaction of any performance criteria. The performance
criteria established by the Administrator may be based on any one of, or
combination of, increase in share price, earnings per share, total stockholder
return, return on equity, return on assets, return on investment, net operating
income, cash flow, revenue, economic value added, personal management
objectives, or other measure of performance selected by the Administrator.
Partial achievement of the specified criteria may result in a payment or vesting
corresponding to the degree of achievement as specified in the Award Agreement.
(c) ACQUISITIONS AND OTHER TRANSACTIONS. The Administrator may
issue Awards under the Plan in settlement, assumption or substitution for,
outstanding awards or obligations to grant future awards in connection with the
Company or a Related Entity acquiring another entity, an interest in another
entity or an additional interest in a Related Entity whether by merger, stock
purchase, asset purchase or other form of transaction.
(d) DEFERRAL OF AWARD PAYMENT. The Administrator may establish
one or more programs under the Plan to permit selected Grantees the opportunity
to elect to defer receipt of consideration upon exercise of an Award,
satisfaction of performance criteria, or other event that absent the election
would entitle the Grantee to payment or receipt of Shares or other consideration
under an Award (but only to the extent that such deferral programs would not
result in an accounting compensation charge unless otherwise determined by the
Administrator). The Administrator may establish the election procedures, the
timing of such elections, the mechanisms for payments of, and accrual of
interest or other earnings, if any, on amounts, Shares or other consideration so
deferred, and such other terms, conditions, rules and procedures that the
Administrator deems advisable for the administration of any such deferral
program.
(e) SEPARATE PROGRAMS. The Administrator may establish one or
more separate programs under the Plan for the purpose of issuing particular
forms of Awards to one or more classes of Grantees on such terms and conditions
as determined by the Administrator from time to time.
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(f) INDIVIDUAL OPTION LIMIT. Following the date that the
exemption from application of Section 162(m) of the Code described in Section 18
(or any exemption having similar effect) ceases to apply to Awards, The maximum
number of Shares with respect to which Options may be granted to any Grantee in
any fiscal year of the Company shall be 100,000 Shares. In connection with a
Grantee's commencement of Continuous Service, a Grantee may be granted Options
for up to an additional 1,000,000 Shares which shall not count against the limit
set forth in the previous sentence. The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization
pursuant to Section 10, below. To the extent required by Section 162(m) of the
Code or the regulations thereunder, in applying the foregoing limitations with
respect to a Grantee, if any Option is canceled, the canceled Option shall
continue to count against the maximum number of Shares with respect to which
Options may be granted to the Grantee. For this purpose, the repricing of an
Option shall be treated as the cancellation of the existing Option and the grant
of a new Option.
(g) EARLY EXERCISE. The Award Agreement may, but need not,
include a provision whereby the Grantee may elect at any time while an Employee,
Director or Consultant to exercise any part or all of the Award prior to full
vesting of the Award. Any unvested Shares received pursuant to such exercise may
be subject to a repurchase right in favor of the Company or a Related Entity or
to any other restriction the Administrator determines to be appropriate.
(h) TERM OF AWARD. The term of each Award shall be the term
stated in the Award Agreement, provided, however, that the term of an Incentive
Stock Option shall be no more than ten (10) years from the date of grant
thereof. However, in the case of an Incentive Stock Option granted to a Grantee
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
Subsidiary of the Company, the term of the Incentive Stock Option shall be five
(5) years from the date of grant thereof or such shorter term as may be provided
in the Award Agreement.
(i) TRANSFERABILITY OF AWARDS. Incentive Stock 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 Grantee, only by the Grantee; provided,
however, that the Grantee may designate a beneficiary of the Grantee's Incentive
Stock Option in the event of the Grantee's death on a beneficiary designation
form provided by the Administrator. Other Awards shall be transferable by will
and by the laws of descent and distribution, and during the lifetime of the
Grantee, by gift or pursuant to a domestic relations order to members of the
Grantee's Immediate Family to the extent and in the manner determined by the
Administrator.
(j) TIME OF GRANTING AWARDS. The date of grant of an Award
shall for all purposes be the date on which the Administrator makes the
determination to grant such Award, or such other date as is determined by the
Administrator.
7. AWARD EXERCISE OR PURCHASE PRICE, CONSIDERATION AND TAXES.
(a) EXERCISE OR PURCHASE PRICE. The exercise or purchase
price, if any, for an Award shall be as follows:
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time
of the grant of such Incentive Stock Option owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company or
any Subsidiary of the Company, the per Share exercise price shall be not less
than one hundred ten percent (110%) of the Fair Market Value per Share on the
date of grant; or
(B) granted to any Employee other than an
Employee described in the preceding paragraph, the per Share exercise price
shall be not less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Non-Qualified Stock Option, the
per Share exercise price shall be not less than [EIGHTY-FIVE PERCENT (85%)] of
the Fair Market Value per Share on the date of grant [UNLESS OTHERWISE
DETERMINED BY THE ADMINISTRATOR].
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(iii) In the case of Awards intended to qualify as
Performance-Based Compensation, the exercise or purchase price, if any, shall be
not less than one hundred percent (100%) of the Fair Market Value per Share on
the date of grant.
(iv) In the case of other Awards, such price as is
determined by the Administrator.
(v) Notwithstanding the foregoing provisions of this
Section 7(a), in the case of an Award issued pursuant to Section 6(c), above,
the exercise or purchase price for the Award shall be determined in accordance
with the provisions of the relevant instrument evidencing the agreement to issue
such Award.
(b) CONSIDERATION. Subject to Applicable Laws, the
consideration to be paid for the Shares to be issued upon exercise or purchase
of an Award 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). In addition to any other types of
consideration the Administrator may determine, the Administrator is authorized
to accept as consideration for Shares issued under the Plan the following:
(i) cash;
(ii) check;
(iii) delivery of Grantee's promissory note with such
recourse, interest, security, and redemption provisions as the Administrator
determines as appropriate;
(iv) surrender of Shares or delivery of a properly
executed form of attestation of ownership of Shares as the Administrator may
require (including withholding of Shares otherwise deliverable upon exercise of
the Award) which have a Fair Market Value on the date of surrender or
attestation equal to the aggregate exercise price of the Shares as to which said
Award shall be exercised (but only to the extent that such exercise of the Award
would not result in an accounting compensation charge with respect to the Shares
used to pay the exercise price unless otherwise determined by the
Administrator);
(v) with respect to Options, payment through a
broker-dealer sale and remittance procedure pursuant to which the Grantee (A)
shall provide written instructions to a Company designated brokerage firm to
effect the immediate sale of some or all of the purchased Shares and remit to
the Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
Shares and (B) shall provide written directives to the Company to deliver the
certificates for the purchased Shares directly to such brokerage firm in order
to complete the sale transaction; or
(vi) any combination of the foregoing methods of
payment.
(c) TAXES. No Shares shall be delivered under the Plan to any
Grantee or other person until such Grantee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Award the Company shall withhold or collect from
Grantee an amount sufficient to satisfy such tax obligations.
8. EXERCISE OF AWARD.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER.
(i) Any Award granted hereunder shall be exercisable
at such times and under such conditions as determined by the Administrator under
the terms of the Plan and specified in the Award Agreement.
(ii) An Award shall be deemed to be exercised when
written notice of such exercise has been given to the Company in accordance with
the terms of the Award by the person entitled to exercise the Award and full
payment for the Shares with respect to which the Award is exercised, including,
to the extent selected, use of the broker-dealer sale and remittance procedure
to pay the purchase price as provided in Section 7(b)(v). Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
8
stockholder shall exist with respect to Shares subject to an Award,
notwithstanding the exercise of an Option or other Award. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Award. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in the Award Agreement or Section 10, below.
(b) EXERCISE OF AWARD FOLLOWING TERMINATION OF CONTINUOUS
SERVICE.
(i) An Award may not be exercised after the
termination date of such Award set forth in the Award Agreement and may be
exercised following the termination of a Grantee's Continuous Service only to
the extent provided in the Award Agreement.
(ii) Where the Award Agreement permits a Grantee to
exercise an Award following the termination of the Grantee's Continuous Service
for a specified period, the Award shall terminate to the extent not exercised on
the last day of the specified period or the last day of the original term of the
Award, whichever occurs first.
(iii) Any Award designated as an Incentive Stock
Option to the extent not exercised within the time permitted by law for the
exercise of Incentive Stock Options following the termination of a Grantee's
Continuous Service shall convert automatically to a Non-Qualified Stock Option
and thereafter shall be exercisable as such to the extent exercisable by its
terms for the period specified in the Award Agreement.
9. CONDITIONS UPON ISSUANCE OF SHARES.
(a) Shares shall not be issued pursuant to the exercise of an
Award unless the exercise of such Award and the issuance and delivery of such
Shares pursuant thereto shall comply with all Applicable Laws, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Award, the Company
may require the person exercising such Award to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required
by any Applicable Laws.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. Subject to any required
action by the stockholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Awards have yet been granted or which
have been returned to the Plan, the exercise or purchase price of each such
outstanding Award, the maximum number of Shares with respect to which Options
may be granted to any Grantee in any fiscal year of the Company, as well as any
other terms that the Administrator determines require adjustment shall be
proportionately adjusted for (i) any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Shares, or similar transaction affecting
the Shares, (ii) any other increase or decrease in the number of issued Shares
effected without receipt of consideration by the Company, or (iii) as the
Administrator may determine in its discretion, any other transaction with
respect to Common Stock including a corporate merger, consolidation, acquisition
of property or stock, separation (including a spin-off or other distribution of
stock or property), reorganization, liquidation (whether partial or complete) or
any similar transaction; provided, however that conversion of any convertible
securities of the Company shall not be deemed to have been "effected without
receipt of consideration." Such adjustment shall be made by the Administrator
and its determination shall be final, binding and conclusive. Except as the
Administrator determines, 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 hereof shall be made with respect to, the
number or price of Shares subject to an Award.
11. CORPORATE TRANSACTIONS
(a) TERMINATION OF AWARD TO EXTENT NOT ASSUMED IN CORPORATE
TRANSACTION. Effective upon the consummation of a Corporate Transaction, all
outstanding Awards under the Plan shall terminate. However, all such Awards
shall not terminate to the extent they are Assumed in connection with the
Corporate Transaction.
9
(b) ACCELERATION OF AWARD UPON CORPORATE TRANSACTION OR CHANGE
IN CONTROL.
Except as provided otherwise in an individual Award Agreement, in the
event of any Corporate Transaction or Change in Control, there will not be any
acceleration of vesting or exercisability of any Award.
12. EFFECTIVE DATE AND TERM OF PLAN. The Plan shall become effective
upon the earlier to occur of its adoption by the Board or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated. Subject to Section 17, below, and Applicable
Laws, Awards may be granted under the Plan upon its becoming effective.
13. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN.
(a) The Board may at any time amend, suspend or terminate the
Plan. To the extent necessary to comply with Applicable Laws, the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) No Award may be granted during any suspension of the Plan
or after termination of the Plan.
(c) No suspension or termination of the Plan (including
termination of the Plan under Section 12, above) shall adversely affect any
rights under Awards already granted to a Grantee.
14. RESERVATION OF SHARES.
(a) The Company, during the term of the Plan, will at all
times reserve and keep available such number of Shares as shall be sufficient to
satisfy the requirements of the Plan.
(b) 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.
15. NO EFFECT ON TERMS OF EMPLOYMENT/CONSULTING RELATIONSHIP. The Plan
shall not confer upon any Grantee any right with respect to the Grantee's
Continuous Service, nor shall it interfere in any way with his or her right or
the right of the Company or any Related Entity to terminate the Grantee's
Continuous Service at any time, with or without Cause, and with or without
notice. The ability of the Company or any Related Entity to terminate the
employment of a Grantee who is employed at will is in no way affected by its
determination that the Grantee's Continuous Service has been terminated for
Cause for the purposes of this Plan.
16. NO EFFECT ON RETIREMENT AND OTHER BENEFIT PLANS. Except as
specifically provided in a retirement or other benefit plan of the Company or a
Related Entity, Awards shall not be deemed compensation for purposes of
computing benefits or contributions under any retirement plan of the Company or
a Related Entity, and shall not affect any benefits under any other benefit plan
of any kind or any benefit plan subsequently instituted under which the
availability or amount of benefits is related to level of compensation. The Plan
is not a "Retirement Plan" or "Welfare Plan" under the Employee Retirement
Income Security Act of 1974, as amended.
17. STOCKHOLDER APPROVAL. The grant of Incentive Stock Options under
the Plan shall be subject to approval by the stockholders of the Company within
twelve (12) months before or after the date the Plan is adopted excluding
Incentive Stock Options issued in substitution for outstanding Incentive Stock
Options pursuant to Section 424(a) of the Code. Such stockholder approval shall
be obtained in the degree and manner required under Applicable Laws. The
Administrator may grant Incentive Stock Options under the Plan prior to approval
by the stockholders, but until such approval is obtained, no such Incentive
Stock Option shall be exercisable. In the event that stockholder approval is not
obtained within the twelve (12) month period provided above, all Incentive Stock
Options previously granted under the Plan shall be exercisable as Non-Qualified
Stock Options.
18. Effect of Section 162(m) of the Code. The Plan, and all Awards
issued thereunder, are intended to be exempt from the application of Section
162(m) of the Code, which restricts under certain circumstances the Federal
income tax deduction for compensation paid by a public company to named
executives in excess of $1 million per year. The exemption is based on Treasury
10
Regulation Section 1.162-27(f), in the form existing on the effective date of
the Plan, with the understanding that such regulation generally exempts from the
application of Section 162(m) of the Code compensation paid pursuant to a plan
that existed before a company becomes publicly held. Under such Treasury
Regulation, this exemption is available to the Plan for the duration of the
period that lasts until the earlier of (i) the expiration of the Plan, (ii) the
material modification of the Plan, (iii) the exhaustion of the maximum number of
shares of Common Stock available for Awards under the Plan, as set forth in
Section 6(a), (iv) the first meeting of shareholders at which directors are to
be elected that occurs after the close of the third calendar year following the
calendar year in which the Company first becomes subject to the reporting
obligations of Section 12 of the Exchange Act, or (v) such other date required
by Section 162(m) of the Code and the rules and regulations promulgated
thereunder. To the extent that the Administrator determines as of the date of
grant of an Award that (i) the Award is intended to qualify as Performance-Based
Compensation and (ii) the exemption described above is no longer available with
respect to such Award, such Award shall not be effective until any stockholder
approval required under Section 162(m) of the Code has been obtained.
11