Preliminary Proxy Statement
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a)
of
the Securities Exchange Act of 1934 (Amendment
No. )
Filed
by
the Registrant ý
Filed
by
a Party other than the Registrant ¨
Check
the
appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to § 240.14a-11(c) or §
240.14a-12
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PGMI,
INC.
(Name
of Registrant as Specified In Its Charter)
N/A
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment
of Filing Fee (Check the appropriate box):
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No
fee required
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
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(1)
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Title
of each class of securities to which transaction applies:
_________________________________________________
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(2)
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Aggregate
number of securities to which transaction applies:
_________________________________________________
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
________________________________________________________
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(4)
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Proposed
maximum aggregate value of transaction:
________________________________________________________
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(5)
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Total
fee paid:
________________________________________________________
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Fee
previously paid by written preliminary materials.
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¨
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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.
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(1)
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Amount
previously paid:
________________________________________________________
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(2)
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Form,
Schedule or Registration Statement No.:
________________________________________________________
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(3)
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Filing
Party:
________________________________________________________
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(4)
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Date
Filed:
________________________________________________________
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PGMI,
INC.
Date:
January __, 2007
Dear
Shareholder:
You
are
cordially invited to attend our annual meeting of shareholders on Thursday,
January 18, 2007, at 10:00 a.m. Hawaii - Aleutian Standard Time at the Dubin
Law
Offices, located at 55
Merchant Street, Suite 3100, Honolulu, Hawaii.
This
booklet includes the Notice of Annual Meeting and the Proxy Statement. The
Proxy
Statement describes the business to be transacted at the meeting and provides
other information about the company that you should know when you vote your
shares.
Your
vote
is very important. Instructions for voting appear on the proxy card or the
voting instruction form. Please review the instructions on the proxy card or
the
voting instruction form forwarded by your bank, broker or other holder of record
regarding each of these voting options.
In
addition to the formal business to be transacted, management will make a
presentation on developments of the past year and respond to comments and
questions of general interest to shareholders.
We
hope
you can attend the meeting and we look forward to seeing you on Thursday,
January 18th.
Sincerely
yours,
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| /s/ Shinichi
Kanemoto |
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SHINICHI
KANEMOTO
Chief
Executive Officer
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5912
Bolsa Avenue, Suite 108, Huntington Beach, California 92649 ●
(714)
895-7772●
Fax
(714)
895-7732
PGMI,
INC.
5912
Bolsa Avenue, Suite 108
Huntington
Beach, California 92649
Notice
of Annual Meeting of Shareholders
Notice
is
hereby given that the Annual Meeting of Shareholders will be held at the Dubin
Law Offices, located at 55
Merchant Street, Suite 3100, Honolulu, Hawaii on Thursday, January 18,
2007 at 10:00 a.m. Hawaii - Aleutian Standard Time, for the following purposes
as set forth in the accompanying Proxy Statement:
| · |
To
elect five directors to our Board of Directors,
each for a term of one year;
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| · |
To
ratify the Board of Directors’ appointment
of
McKennon, Wilson & Morgan LLP as our independent registered public
accounting firm for
fiscal year 2007;
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| · |
To
approve the adoption of our 2006 Stock Incentive
Plan;
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To
approve a 25 to 1 reverse stock split of all outstanding shares
of our
capital stock; and
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| · |
To
transact such other business as may properly come before the meeting
or
any adjournment thereof.
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Only
shareholders of record at the close of business on December 19, 2006 will be
entitled to vote at the meeting.
This
Proxy Statement and accompanying proxy card are being distributed on or about
January 2, 2007.
By
Order
of the Board of Directors,
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| /s/ Eiichi
Kanemoto |
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Eiichi Kanemoto
Corporate Secretary
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__________________________
Huntington
Beach, California
PLEASE
SUBMIT A PROXY AS SOON AS POSSIBLE SO THAT YOUR SHARES CAN BE VOTED AT THE
ANNUAL MEETING IN ACCORDANCE WITH YOUR INSTRUCTIONS. PLEASE REFER TO THE
INSTRUCTIONS ON THE PROXY CARD OR THE INFORMATION FORWARDED BY YOUR BROKER,
BANK
OR OTHER HOLDER OF RECORD FOR SPECIFIC INSTRUCTIONS ON VOTING. EVEN IF YOU
HAVE
VOTED YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING. PLEASE
NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK OR
OTHER
NOMINEE AND YOU WISH TO VOTE IN PERSON AT THE MEETING, YOU MUST OBTAIN A LEGAL
PROXY ISSUED IN YOUR NAME FROM SUCH BROKER, BANK OR OTHER NOMINEE.
Proxy
Statement
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General
Information About The Annual Meeting and
Voting
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General
Information
Your
vote is very important.
For this
reason, the Board of Directors of PGMI, Inc., a Utah corporation (referred
to as
“we,” “us,” “our,” “Company,” or “PGMI”), is soliciting your proxy to vote your
shares of Common Stock at the Annual Meeting of Shareholders (the “Annual
Meeting”), or at any continuation, postponement or adjournment thereof, for the
purposes discussed in this Proxy Statement and in the accompanying Notice of
Annual Meeting and any business properly brought before the Annual Meeting.
Why
am I receiving these materials?
Proxies
are solicited to give all shareholders of record an opportunity to vote on
matters properly presented at the Annual Meeting. This Proxy Statement is being
sent to all shareholders of record as of the close of business on December
19,
2006 in connection with the solicitation of proxies on behalf of the Board
of
Directors for use at the Annual Meeting of Shareholders on January 18, 2007.
We
intend to mail this Proxy Statement and accompanying proxy card on or about
January 2, 2007 to all shareholders entitled to vote at the Annual Meeting.
Our
Financial Information
The
Annual Report to shareholders of the Company for the fiscal year ended June
30,
2006, including audited consolidated financial statements, has been mailed
to
the shareholders concurrently herewith, but such report is not incorporated
in
this Proxy Statement and is not deemed to be a part of the proxy solicitation
material.
Who
is eligible to vote?
Shareholders
of PGMI, as recorded in our stock register at the close of business on December
19, 2006, can vote at the Annual Meeting. Each share of our Common Stock is
entitled to one vote and each share of Series A and Series E Preferred Stock
is
entitled to five (5) votes. As of December 14, 2006, there were 25,453,671,
4,326,285 and 97,059,998 shares of our Common Stock, Class A Preferred Stock
and
Class E Preferred Stock, respectively, outstanding and entitled to vote.
How
do I vote?
There
are
four ways to vote by proxy:
| (4) |
in
person at the Annual Meeting.
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If
you
choose to vote by mail, mark your proxy card enclosed with the Proxy Statement,
date and sign it, and mail it in the postage-paid envelope. If you vote by
telephone or via the Internet, please do not return a signed proxy card. We
recommend you vote by proxy even if you plan to attend the meeting. You can
always change your vote at the Annual Meeting. Please note, however, that if
your shares are held of record by a broker, bank, or other nominee and you
wish
to vote in person at the meeting, you must obtain a legal proxy issued in your
name from such broker, bank or other nominee.
Who
pays the cost of proxy solicitation?
Our
Board
of Directors is soliciting the enclosed proxy. We will make proxy solicitations
by electronic or regular mail and we will bear the costs of this solicitation.
We will request banks, brokerage houses, nominees and other fiduciaries
nominally holding shares of our Common Stock and Preferred Stock to forward
the
proxy soliciting materials to the beneficial owners of such Common Stock and
Preferred Stock and to obtain authorization for the execution of proxies. We
will, upon request, reimburse such parties for their reasonable expenses in
forwarding proxy materials to the beneficial owners.
What
is a proxy?
Giving
us
your proxy means you authorize us to vote your shares at the meeting in the
manner you direct. You may vote for all, some or none of our director
candidates. You may also vote for or against the other proposals or abstain
from
voting.
How
do I specify how I want my shares voted?
If
you
are a registered shareholder, you can specify how you want your shares voted
on
each proposal by marking the appropriate boxes on the proxy card. Please review
the voting instructions on the proxy card and read the entire text of the
proposals and the positions of the Board of Directors in the Proxy Statement
prior to marking your vote.
If
your
proxy card is signed and returned without specifying a vote or an abstention
on
a proposal, it will be voted according to the recommendation of the Board of
Directors on that proposal. That recommendation is shown for each proposal
on
the proxy card.
How
do I vote if I am a beneficial shareholder?
If
you
are a beneficial shareholder, you have the right to direct your broker or
nominee on how to vote the shares. You should complete a Voting Instruction
Card
which your broker or nominee is obligated to provide you. If you wish to vote
in
person at the meeting, you must first obtain from the record holder a proxy
issued in your name.
What
are the Board of Directors’ voting recommendations?
For
the
reasons set forth in more detail later in the Proxy Statement, our Board of
Directors recommends that you vote:
FOR
| · |
the
election of our five directors;
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| · |
the
ratification of the Board of Directors’ appointment of McKennon, Wilson
& Morgan LLP as our independent registered public accounting firm for
fiscal year 2007;
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| · |
the
adoption of our 2006 Stock Incentive Plan;
and
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| · |
the
approval of a 25 to 1 revenue stock split of all outstanding shares
of our
capital stock.
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Can
I revoke a proxy?
To
revoke
your proxy if you are a shareholder of record, you must advise our Secretary
in
writing before the meeting, deliver a validly executed proxy with a later date
that we receive prior to the meeting, or attend the meeting and vote your shares
in person. You may revoke your proxy at any time before your shares are voted.
Attendance at the Annual Meeting will not, by itself, revoke a
proxy.
What
is a quorum?
In
order
to carry on the business of the meeting, we must have a quorum. This means
that
at least a majority of the outstanding shares eligible to vote must be present
at the meeting, either by proxy or in person. Abstentions and broker non-votes
are counted as present at the meeting for determining whether we have a quorum.
A broker non-vote occurs when a broker returns a proxy but does not vote on
a
particular proposal because the broker does not have discretionary voting power
for that particular item and has not received voting instructions from the
beneficial owner.
How
many votes are needed to have the proposals pass?
Directors
will be elected by a favorable vote of a plurality of the shares of Common
Stock
present and entitled to vote, in person or by proxy, at the Annual Meeting.
Accordingly, abstentions and broker non-votes as to the election of directors
will not be counted in determining which nominees received the largest number
of
votes cast.
With
respect to the remaining management proposals, abstentions will be counted
for
purposes of determining the total number of votes cast with respect to a
proposal and accordingly will have the same effect as a vote against the
proposal. Broker non-votes will not be counted for purposes of determining
the
total number of votes cast with respect to a particular proposal on which the
broker has expressly not voted. Accordingly, broker non-votes will not affect
the outcome of the voting on a proposal that requires a majority of the votes
cast (such as the adoption of the 2006 Stock Incentive Plan). However, because
Utah law requires Proposal 4 to be approved by a majority of our outstanding
shares, and not merely the approval of a majority of the votes cast, broker
non-votes will have the same effect as a vote against Proposal 4.
How
are the votes counted?
The
inspector of election appointed for the Annual Meeting will separately tabulate
affirmative and negative votes and abstentions. Any information that identifies
a shareholder or the particular vote of a shareholder is kept
confidential.
What
is “Householding” of annual meeting materials?
Some
banks, brokers and other nominee record holders may be "householding" our proxy
statements and annual reports. This means that only one copy of our proxy
statement and annual report to shareholders may have been sent to multiple
shareholders in your household. We will promptly deliver a separate copy of
either document to you if you call or write us at our principal executive
offices, 5912 Bolsa Avenue, Suite 108, Huntington Beach, California 92649,
Attn:
Secretary, telephone: (714) 895-7772. If you want to receive separate
copies of the proxy statement or annual report to shareholders in the future,
or
if you are receiving multiple copies and would like to receive only one copy
per
household, you should contact your bank, broker, or other nominee record holder,
or you may contact us at the above address and telephone number.
Security
Ownership Of Directors And Executive Officers
And
Certain Beneficial
Owners
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Share
Ownership
The
following table sets forth certain information regarding the beneficial
ownership of each outstanding class of our capital stock as of December 14,
2006, by: (i) each entity or person whom we know to own beneficially more
than five percent (5%) of each such class; (ii) each director and director
nominee; (iii) our Chief Executive Officer and our other Named Executive
Officer for the year ended June 30, 2006; and (iv) all directors, director
nominees, and Named Executive Officers of the Company as a group. Unless
otherwise noted below, the address of the persons listed on the table is c/o
PGMI, Inc., 5912 Bolsa Avenue, Suite 108, Huntington Beach, California 92649.
The amounts and percentages of capital stock beneficially owned are reported
on
the basis of regulations of the SEC governing the determination of beneficial
ownership of securities. Under the rules of the SEC, a person is deemed to
be a
“beneficial owner” of a security if that person has or shares “voting power,”
which includes the power to vote or to direct the voting of such security,
or
“investment power,” which includes the power to dispose of or to direct the
disposition of such security. A person is also deemed to be a beneficial owner
of any securities of which that person has a right to acquire beneficial
ownership within 60 days. Under these rules, more than one person may be deemed
a beneficial owner of the same securities and a person may be deemed a
beneficial owner of securities as to which he has no economic interest. We
believe, based on the information furnished to us, that the persons named in
the
table below have sole voting and investment power with respect to all shares
of
capital stock reflected as beneficially owned, subject to applicable community
property laws. We have based our calculation of the percentage of beneficial
ownership on 25,453,671, 4,326,285 and 97,059,998 shares of common stock Class
A
preferred stock and Class E preferred stock, respectively, outstanding on
December 14, 2006.
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Name
of Beneficial Owner
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Amount
and Nature of
Beneficial
Owner
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Percent
of Class
%
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Common
Stock:
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Shinichi
Kanemoto
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0
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0%
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Gakushin
Kanemoto
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0
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0%
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Eiichi
Kanemoto
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0
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0%
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Mark
Buck (1)
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467,450
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1.8%
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Akira
Oyake (2)
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0
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0%
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Brian
Weiss (3)
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0
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0%
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Phase
One, LLC
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9,930,640
(4)
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31.6%
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Spice
Island Products, Inc.
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3,572,865
(5)
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12.7%
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Antaeus
Capital Partners, LLC
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8,025,459
(6)
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24.0%
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All
directors and executive
officers
as a group
(6
persons)
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467,450
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1.8%
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Class
A Preferred Stock:
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Antaeus
Capital Partners, LLC
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1,591,148
(7)
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37.5%
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Phase
One, LLC
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1,199,138
(8)
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28.2%
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CCC
Interests Limited
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530,382
(9)
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12.5%
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Spice
Island Products, Inc.
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522,669
(10)
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12.3%
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Class
E Preferred Stock:
|
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Shinichi
Kanemoto
|
38,823,999
(11)
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40%
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Eiichi
Kanemoto
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38,823,999
(12)
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40%
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Gakushin
Kanemoto
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1,455,900
(13)
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1.5%
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Taiki
Kanemoto
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8,250,100
(14)
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8.5%
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Kousei
Kanemoto
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8,250,100
(15)
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8.5%
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All
directors and officers as
a
group (3 persons)
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79,103,898
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81.5%
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(1) The
address of the beneficial owner is 5231 A Kuaiwi Place, Honolulu, Hawaii
92821.
(2) The
address of the beneficial owner is 1612 Marguerite Avenue, Corona Del Mar,
California 92625.
(3) The
address of the beneficial owner is 2020 Main Street, Suite 500, Irvine,
California 92614.
(4) Includes
5,995,690 shares of common stock which may be acquired upon conversion of
1,199,138 shares of class A preferred stock. The address of the beneficial
owner
is 2433 Waolani Avenue, Honolulu, Hawaii 96817. Per
their
agreement each member of Phase One has voting and investment control over
only
its pro-rata portion of the shares based on such member's ownership of Phase
One, and disclaims beneficial ownership over all other
shares.
(5) Includes
2,613,345 shares of common stock which may be acquired upon conversion of
522,669 shares of class A preferred stock. The address of the beneficial
owner
is Level 2, CIDB Building, Rarotonga, Cook Islands.
(6) Includes
7,955,740 shares of common stock which may be acquired upon conversion of
1,591,148 shares of class A preferred stock. The address of the beneficial
owner
is 9952 Santa Monica Boulevard, Suite 210, Beverly Hills, California
90212.
(7) Represents
1,591,148 shares of class A preferred stock which are convertible into, and
have
voting rights equivalent to, 7,955,740 shares of our common stock.
(8) Represents
1,199,138 shares of class A preferred stock which are convertible into, and
have
voting rights equivalent to, 5,995,690 shares of our common stock.
(9) Represents
530,382 shares of class A preferred stock which are convertible into, and
have
voting rights equivalent to, 2,651,910 shares of our common stock.
(10) Represents
522,669 shares of class A preferred stock which are convertible into, and
have
voting rights equivalent to, 2,613,345 shares of our common stock.
(11) Represents
38,823,999 shares of class E preferred stock which, following December 8,
2008,
will be convertible into and have voting and presently have voting rights
equivalent to, 194,119,995 shares of our common stock.
(12) Represents
38,823,999 shares of class E preferred stock which, following December 8,
2008,
will be convertible into and have voting and presently have voting rights
equivalent to, 194,119,995 shares of our common stock.
(13) Represents
1,455,900 shares of class E preferred stock which, following December 8,
2008,
will be convertible into and have voting and presently have voting rights
equivalent to, 7,279,500 shares of our common stock.
(14) Represents
8,250,100 shares of class E preferred stock which, following December 8,
2008,
will be convertible into and have voting and presently have voting rights
equivalent to, 41,250,500 shares of our common stock.
(15) Represents
8,250,100 shares of class E preferred stock which, following December 8,
2008,
will be convertible into and have voting and presently have voting rights
equivalent to, 41,250,500 shares of our common stock.
(13) Represents
8,250,100 shares of class E preferred stock which, following December 8, 2008,
will be convertible into and have voting and presently have voting rights
equivalent to, 41,250,500 shares of our common stock.
(14) Represents
8,250,100 shares of class E preferred stock which, following December 8, 2008,
will be convertible into and have voting and presently have voting rights
equivalent to, 41,250,500 shares of our common stock.
Section
16(a) Beneficial Ownership Reporting Compliance
Section 16(a)
of the Exchange Act requires our executive officers and directors, and persons
who own more than 10% of a registered class of our equity securities (“Reporting
Persons”), to file reports of ownership and changes in ownership with the SEC.
Reporting Persons are required by SEC regulations to furnish us with copies
of
all forms they file pursuant to Section 16(a). Based solely on our review
of the copies of such reports we received, and written representations from
certain Reporting Persons that no other reports were required for those persons,
to the best of our knowledge, we believe that during the year ended June 30,
2006, with the exception of Mark Buck, Spice Island Products, Inc., Antaeus
Capital Partners, LLC and CCC Interests Limited, each of the Reporting Persons
met all applicable Section 16(a) filing requirements.
|
Proposal
No. 1:
Election
of Directors
|
The
first
proposal on the agenda for the Annual Meeting will be electing four incumbent
directors to serve until the next annual meeting or until their successors
are
elected. Unless authority to vote for directors has been withheld in the proxy,
the persons named in the enclosed proxy intend to vote at the Annual Meeting
FOR
the
election of the nominees presented below.
Under
Utah law, the five nominees receiving the highest number of votes will be
elected as directors at the Annual Meeting. As a result, proxies voted to
"Withhold Authority" and broker non-votes will have no practical
effect.
Each
of
the nominees is an incumbent director. Each of the nominees has consented to
serve as a director for the ensuing year. If any nominee becomes unavailable
to
serve for any reason before the election, then the enclosed proxy will be voted
for the election of such substitute nominee, if any, as shall be designated
by
the Board of Directors. The Board of Directors has no reason to believe that
any
of the nominees will become unavailable to serve. The following is biographical
information for each nominee to serve until the 2008 Annual Meeting of
Shareholders.
Shinichi
Kanemoto, age
49.
Shinichi Kanemoto is the son of Mr. Gakushin Kanemoto. He currently
serves as the President and Chief Executive Officer of Marugin, positions he
has
held since 1993. Mr. Kanemoto is also a member of the board of
directors of Marugin. Mr. Kanemoto originally joined Marugin in 1981,
and was promoted to a Director in 1990, prior to being appointed to his current
officer positions. Effective December 9, 2005, Mr. Shinichi Kanemoto became
the President, Chief Executive Officer and a member of the Board of Directors
of
PGMI, Inc.
Eiichi
Kanemoto, age
46.
Eiichi Kanemoto is the son of Mr. Gakushin Kanemoto. He currently
serves as our Executive Director, a position he was appointed to in 1993.
Mr. Kanemoto is also a member of the board of directors of Marugin.
Mr. Kanemoto originally joined Marugin in 1984, and was promoted to a
Director in 1990, prior to being appointed to his current officer
position. Effective December 9, 2005, Mr. Eiichi Kanemoto became the
Secretary and a member of the Board of Directors of PGMI, Inc.
Mark
Buck, age
61.
Mr. Buck served as our President, Chief Executive Officer and Chief
Financial Officer from March 2002 until December 9, 2005, and has been a member
of our Board of Directors since March 2002. Mr. Buck is also a commercial
real estate broker specializing in sales and leasing. He has worked for
Commercial Real Estate Services in Honolulu, Hawaii since 1986 as Vice President
of Marketing and Sales. Mr. Buck has been an owner and partner in
three small businesses that he later sold.
Brian
Weiss, age
35.
Mr. Weiss has served as a director of the Company since November 2006. He has
over 13 years of experience in corporate finance, accounting, SEC reporting,
restructuring, mergers and acquisitions. Since November 2005, Mr. Weiss has
been
Managing Director of BSW & Associates, a corporate finance and accounting
advisory services firm. From 2004 to 2005 Mr. Weiss served as Vice President
of
Finance, North America and successfully led the financial turnaround of Tomy
Corporation a subsidiary of Tomy Co. Ltd, one of the world’s largest toy
companies prior to its merger with Takara. From 2002 to 2004, Mr. Weiss served
as Financial Controller for Jazz Semiconductor. From 2000 to 2002, Mr. Weiss
served as Corporate Controller for Avamar Technologies, prior to being acquired
by EMC Corporation. Mr. Weiss received his M.B.A from the University of Southern
California, a B.S in Accounting from San Diego State University and is an
inactive Certified Public Accountant.
Akira
Oyake, Mr.
Oyake
has served as a director of the Company since November 2006. Mr. Oyake has
over
33 years experience in product sales and marketing. Mr. Oyake is presently
the
Chief Representative in the United States for Precision Japan, Ltd, a company
headquartered in Japan, a position he has held since June 2005. From March
2004
to May 2005 Mr. Oyake was the Chief Representative in the United States for
The Big Sports Co., Ltd., a company headquartered in Japan, a position he has
held since March 2004. From December 2002 to February 2004, Mr. Oyake served
as
the General Manager of the United States office of AKTC, Inc. From May 1996
to
November 2004, Mr. Oyake was President and Director of Billcon Corporation
of
America, a subsidiary of Billcon Corporation in Tokyo, Japan, where he was
responsible for the company’s financial affairs, sales and marketing and new
product development. Mr. Oyake received his bachelor degree in Business
Administration from Dokkyo University in Japan.
Relationships
Among Directors or Executive Officers
Shinichi
Kanemoto and Eiichi Kanemoto are brothers.
Board
and Board Committee Matters
Our
business is managed under the direction of our Board of Directors pursuant
to
the Utah Revised Business Corporation Act, and our Bylaws. Our Board has
responsibility for establishing broad corporate policies and for the overall
performance of our Company. Our Board is kept advised of the Company’s business
through regular interaction with the Chief Executive Officer and other officers
of the Company and through reviewing materials provided to them and by
participating in Board meetings.
Committees
of the Board.
Our
shares are quoted on the OTC Bulletin Board. Since we are not a listed issuer,
we are not subject to various requirements of the Securities and Exchange
Commission or certain self-regulatory bodies such as Nasdaq or the American
Stock Exchange, which require our Board of Directors to establish and maintain
an audit committee, compensation committee and nominating committee.
Notwithstanding that we are not yet required to have committees, at a meeting
of
our Board of Directors on November 17, 2006, our Board established the following
committees and appointed the following directors to such committees: Audit
Committee, which is comprised of Mark Buck and Brian Weiss; Compensation
Committee, which is comprised of Mark Buck and Akira Oyake; and, Nominating
Committee, which is comprised of Mark Buck and Akira Oyake. Each member of
each
of the committees is independent under the American Stock Exchange listing
standards as currently in effect, and our Board of Directors has determined
that
Mr. Weiss is an "audit committee financial expert" as defined by the Securities
and Exchange Commission. At such time as we become a listed company, we intend
for the Audit Committee to comply with any other member compensation
requirements of the applicable exchange. Each committee maintains a written
charter, copies of which are available free of charge to any shareholder who
sends a request for a paper copy to PGMI, Inc., 5912 Bolsa Avenue, Suite 108,
Huntington Beach, California 92649. A copy of the Audit Committee Charter is
attached hereto as Exhibit
A.
Code
of Business Conduct and Ethics. Our
Board
of Directors has approved a Code of Business Conduct and Ethics, which
applies
to all of our employees, directors and officers, including our principal
executive officer, principal financial officer, principal accounting officer
and
controller.
The Code of Business Conduct and Ethics addresses such topics as protection
and
proper use of our assets, compliance with applicable laws and regulations,
accuracy and preservation of records, accounting and financial reporting,
conflicts of interest and insider trading. The Code of Business Conduct
and Ethics is available
free of charge to any shareholder who sends a request for a paper copy to PGMI,
Inc., 5912 Bolsa Avenue, Suite 108, Huntington Beach, California 92649.
Director
Compensation.
We
entered into an agreement with Mark Buck, effective January 1, 2006, which
continues until the last date of Mr. Buck’s current term as a member of our
Board of Directors. The Agreement will be automatically renewed in the event
that Mr. Buck is reelected to our Board of Directors. Pursuant to the agreement,
Mr. Buck is paid an annual retainer of $18,000 and $500 per Board meeting
attended. The Agreement also provides that Mr. Buck shall receive an annual
grant of stock options in an amount to be determined by the Board of Directors.
No options have been granted to Mr. Buck as of December 14, 2006. In November
2006 we also entered into agreements with our other two new independent
directors. The agreement with Mr. Oyake provides for an annual retainer of
$18,000 to be paid in equal quarterly installments. The agreement with Mr.
Weiss
provides for an annual retainer of $30,000 payable in equal quarterly
installments. Both agreements are for a term of one year and automatically
renew
if the director is re-elected. Each agreement provides for annual stock option
grants at the discretion of the Board. No options have been granted as of
December 14, 2006.
Attendance
at the Annual Meeting
We
have
no policy requiring directors to attend annual meetings of shareholders, but
directors are encouraged to attend our annual meetings at which they stand
for
re-election.
THE
BOARD RECOMMENDS A VOTE “FOR”
EACH NAMED NOMINEE.
|
Proposal
No. 2:
Ratify
Appointment of Independent Registered Public Accounting
Firm
|
The
next
proposal on the agenda for the Annual Meeting will be ratifying the Board's
appointment of McKennon, Wilson & Morgan LLP as the Company's independent
registered public accounting firm for fiscal year 2006. Our Board of Directors
has approved the selection of McKennon, Wilson & Morgan LLP as our
independent registered public accounting firm for fiscal year 2006, subject
to
ratification by our shareholders. McKennon, Wilson & Morgan LLP has served
in this capacity for each of the two (2) years ended June 30, 2006, and has
reported on the Company's fiscal year 2006 consolidated financial statements.
During the two (2) fiscal years ended June 30, 2006, there were no disagreements
between the Company and McKennon, Wilson & Morgan LLP on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.
Representatives
of McKennon, Wilson & Morgan LLP are expected to be present at the
meeting.
Shareholder
ratification of the selection of McKennon, Wilson & Morgan LLP as the
Company’s independent auditors is not required by the Bylaws or otherwise.
However, the Board is submitting the selection of McKennon, Wilson & Morgan
LLP to the shareholders for ratification as a matter of corporate practice.
If
the shareholders fail to ratify the selection, the Board of Directors will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board of Directors in its discretion may direct the appointment
of
a different independent accounting firm at any time during the year if the
Board
of Directors determines that such a change would be in the best interests of
the
Company and its shareholders.
THE
BOARD RECOMMENDS THAT YOU VOTE “FOR”
THE RATIFICATION OF MCKENNON, WILSON & MORGAN LLP.
Audit
and Non-Audit Fees
The
following summarizes aggregate fees for professional audit services rendered
by
McKennon, Wilson & Morgan LLP during fiscal years ended June 30, 2006 and
2005:
|
|
|
2006
|
|
2005
|
|
|
Audit
Fees
|
|
$
|
216,000
|
|
$
|
201,000
|
|
|
Audit
Related
|
|
|
-
|
|
|
-
|
|
|
Tax
Fees
|
|
|
-
|
|
|
-
|
|
|
All
Other Fees
|
|
|
10,000
|
|
|
-
|
|
|
Total
Fees
|
|
$
|
226,000
|
|
$
|
201,000
|
|
Audit
Fees pertain to the audit of our annual consolidated financial statements for
fiscal years 2006 and 2005 and, reviews of our quarterly consolidated financial
statements during such fiscal years. All other fees for fiscal year 2006 relate
to procedures performed in connection with our reverse acquisition.
Pre-Approval
Policy for Services Provided by our Independent Registered Public Accounting
Firm
The
Audit
Committee has established a policy to pre-approve all audit and permissible
non-audit services provided by our independent registered public accounting
firm
consistent with applicable SEC rules. Now that we have established an Audit
Committee, it will pre-approve all future audit and permissible non-audit
services provided by our independent registered public accounting
firm.
McKennon,
Wilson & Morgan LLP did not perform any professional services with respect
to information systems design and implementation for the years ended June 30,
2006 and 2005.
Report
of the Audit Committee of the Board of Directors
As
the
Audit Committee was established following the audit of our most recent fiscal
year end, no report of the Audit Committee is included with this Proxy
Statement. We intend to include such report in our future Proxy
Statements.
|
Proposal
No. 3:
To
Approve The Adoption Of Our 2006 Stock Incentive
Plan
|
On
March
11, 2006, the Board of Directors adopted our 2006 Stock Incentive Plan (the
“2006 Plan” or “Plan”) and authorized the Company to present the Plan to our
stockholders for ratification. The material features of the 2006 Plan are
summarized below. The summary is qualified in its entirety by reference to
the
specific provisions of the 2006 Plan, the full text of which is set forth as
Exhibit
B
to this
proxy statement.
Purpose
The
purpose of the Plan is to advance the interests of the Company and its
shareholders by strengthening the Company's ability to attract and retain
individuals of training, experience and ability as officers, employees,
non-employee directors and consultants and to furnish additional incentives
to
such key individuals to promote the Company's financial success by providing
them with an equity ownership in the Company. It is the intent of the Company
that such individuals be encouraged to obtain and retain an equity interest
in
the Company, and each participant will be specifically apprised of said
intent.
Administration
The
Plan
will be administered by a Compensation Committee, to be composed of not less
than two independent directors appointed by the Board. Each member of the
Compensation Committee shall, at all times during their service as such, be
a
"non-employee director" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934. The Compensation Committee shall have conclusive authority
to construe and interpret the Plan and any award agreement entered into under
the Plan, and to establish, amend and rescind administrative policies for the
administration of the Plan and such additional authority as the Board may from
time to time determine is necessary or desirable.
Eligibility
Those
persons eligible to participate in the Plan shall include officers and other
employees, non-employee directors and consultants of the Company and its
subsidiaries.
Shares
Subject To The Plan
The
total
number of shares of Common Stock available under the Plan shall be 25,000,000,
subject to adjustment as provided in the Plan.
Participation
The
Compensation Committee shall select, from time to time, officers, employees,
non-employee directors and consultants who, in the opinion of the Compensation
Committee, can further the Plan's Purpose, and the Compensation Committee shall
determine the type or types of awards to be made to the participants. The terms,
conditions and restrictions of each award shall be set forth in an award
agreement.
Structure
Of The Plan
The
Plan
shall be divided into two separate equity programs: (i) the “Discretionary
Option Grant Program” under which eligible persons may, at the discretion of the
Plan Administrator, be granted options to purchase shares of Common Stock,
and
(ii) the “Stock Issuance Program” under which eligible persons may, at the
discretion of the Plan Administrator, be issued shares of Common Stock directly,
either through the immediate purchase of such shares or as a bonus for services
rendered to the Company (or any Parent or Subsidiary).
Change
In Control
In
the
event of a "change in control" of the Company, stock options not otherwise
exercisable shall become fully exercisable.
Federal
Income Tax Aspects
The
following paragraphs are a summary of the general federal income tax
consequences to U.S. taxpayers and the Company of awards granted under the
2005
Stock Incentive Plan. Tax consequences for any particular individual may be
different. This summary is not intended to be exhaustive and does not describe
all federal, state or local tax laws.
Non-Statutory
Stock Options. No taxable income is reportable when a
non-statutory stock option is granted to a participant. Upon exercise, the
participant will recognize ordinary income in an amount equal to the excess
of
the fair market value (on the exercise date) of the shares purchased over the
exercise price of the option. Any additional gain or loss recognized upon any
later disposition of the shares would be capital gain or loss.
Incentive
Stock Options. No taxable income is reportable when an
incentive stock option is granted or exercised (except for purposes of the
alternative minimum tax, in which case taxation is the same as for nonqualified
stock options). If the participant exercises the option and then later sells
or
otherwise disposes of the shares more than two years after the grant date and
more than one year after the exercise date, the difference between the sale
price and the exercise price will be taxed as capital gain or loss. If the
participant exercises the option and then later sells or otherwise disposes
of
the shares before the end of the two- or one-year holding periods described
above, he or she generally will have ordinary income at the time of the sale
equal to the fair market value of the shares on the exercise date (or the sale
price, if less) minus the exercise price of the option.
Restricted
Stock. A participant will not have taxable income upon
grant unless he or she elects to be taxed at that time. Instead, he or she
will
recognize ordinary income at the time of vesting equal to the fair market value
(on the vesting date) of the shares or cash received minus any amount paid
for
the shares.
Tax
Effect on Company. The Company generally will be entitled to a tax
deduction in connection with an award under the 2006 Stock Incentive Plan in
an
amount equal to the ordinary income realized by a participant and at the time
the participant recognizes such income (for example, the exercise of a
nonqualified stock option). Special rules limit the deductibility of
compensation paid to our Chief Executive Officer and to each of our four most
highly compensated executive officers. Under Section 162(m) of the Internal
Revenue Code, the annual compensation paid to any of these specified executives
will be deductible only to the extent that it does not exceed $1,000,000.
However, the Company can preserve the deductibility of certain compensation
in
excess of $1,000,000 if the conditions of Section 162(m) are met.
Plan
Benefits
The
exact
types and amounts of any awards to be made by the Committee to any eligible
employees pursuant to the Plan are not presently determinable. As a result
of
the discretionary nature of the Plan, it is not possible to state who the
participants in such Plan will be, the number of options or other awards to
be
received by any person or group, or the benefits or amounts that would have
been
received by certain persons or groups under such Plan during the last fiscal
year if the Plan had been in effect during that year.
Outstanding
Option Grants
As
of the
date of this Definitive Proxy Statement there are no outstanding stock option
grants, provided, however that the Board of Directors has approved the following
grants to be effective upon stockholder approval of the Plan:
|
Optionee
|
Exercise
Price
|
Shares
Underlying Option
|
Expiration
Date
|
|
Shinichi
Kanemoto
|
$
.61
|
12,255,000
|
March
11, 2011
|
|
Eiichi
Kanemoto
|
$
.61
|
12,255,000
|
March
11, 2011
|
|
Gakushin
Kanemoto
|
$
.56
|
254,250
|
March
11, 2016
|
|
Mark
Buck
|
$
.56
|
150,000
|
March
11, 2016
|
In
the
event that the Plan is approved, the above options will immediately vest as
to
one-third of the underlying shares, with the remaining two-thirds vesting in
two
equal installments on March 11, 2007 and March 11, 2008.
Approval
Of The Plan
Approval
of the Plan requires the affirmative vote of a majority of votes cast. Broker
non-votes will not be treated as votes cast for purposes of determining approval
of such proposal and will not be counted as votes for or against such
proposal.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR”
THE
APPROVAL OF THE 2006 STOCK INCENTIVE PLAN.
|
Proposal
No. 4:
To
Approve an Amendment to Our Articles of Incorporation to Effect a
Reverse
Stock Split of up to Thirty-to-One on
Our
Outstanding Common and Preferred
Stock
|
PGMI’s
Board of Directors has adopted a resolution approving, and recommending to
PGMI’s stockholders for their approval, a proposal to amend PGMI’s Articles of
Incorporation to effect a reverse stock split of up to thirty-to-one on
PGMI’s outstanding shares of common and preferred stock. If the reverse
stock split is approved by our stockholders and implemented, each 30 shares
of
PGMI’s common and preferred stock outstanding on the effective date of the
reverse stock split will be, following all appropriate filings with the Utah
Secretary of State, automatically changed into and become one share of PGMI’s
new common and preferred stock. Any resulting fractional share amounts will
be
issued as fractional shares. The reverse stock split will not change the current
per share par value of PGMI’s common or preferred stock or change the current
number of authorized shares of common stock or preferred stock. The effective
date of the reverse stock split will be selected by the Board of Directors
and
is currently expected to be on January 19, 2007.
Reasons
for the Reverse Stock Split
At
meetings held throughout the calendar 2006, the Board reviewed PGMI’s current
business and financial performance and the recent trading range of PGMI’s common
stock. During such meetings the Board determined that it would be in the best
interests of the Company and its shareholders that the Company lists its common
stock on a national exchange. In this regard, the Board decided to apply for
listing on the American Stock Exchange. In order to meet the minimum bid price
requirements of $3 per share the Company needs to effect a reverse stock split.
As of December 21, 2006, the closing price of the Company’s common stock
adjusted on the over-the-counter bulletin board was $0.14. In order to satisfy
the $3 minimum bid requirement the Board has determined that a thirty to-one
reverse split is desirable. Thus, in order to attain listing on the American
Stock Exchange, the Board has approved the reverse stock split.
The
Board
also believes that a reverse stock split could encourage greater investor
interest in PGMI’s common stock by making the stock price more attractive to the
many investors. The Board of Directors believes that in addition to not being
on
a national stock exchange the current market price of PGMI’s common stock may
impair its acceptability to institutional investors, professional investors
and
other members of the investing public. Many institutional and other investors
look upon stock trading at low prices as unduly speculative in nature and,
as a
matter of policy, avoid investing in such stocks. Further, various brokerage
house policies and practices tend to discourage individual brokers from dealing
in low-priced stocks. If effected, the reverse stock split would reduce the
number of outstanding shares of PGMI’s common stock and increase the trading
price of PGMI’s common stock. The Board of Directors believes that raising the
trading price of PGMI’s common stock will increase the attractiveness of PGMI’s
common stock to the investment community and possibly promote greater liquidity
for PGMI’s existing stockholders.
PGMI’s
Board of Directors also took into consideration a number of negative factors
associated with reverse stock splits, including: the negative perception of
reverse stock splits held by many investors, analysts and other stock market
participants; the fact that the stock price of some companies that have recently
effected reverse stock splits has subsequently declined back to pre-reverse
split levels; and the fact that having a greater number of outstanding shares
aids employee retention and recruitment by allowing a company to offer option
grants for a larger absolute number of shares. The Board, however, determined
that these negative factors were outweighed by the intended benefits described
above.
There
can
be no assurance that the reverse stock split will result in the benefits
described above. Specifically, there can be no assurance that the market price
of PGMI’s common stock immediately after the effective date of the proposed
reverse stock split would be maintained for any period of time or that such
market price would approximate 30 times the market price of PGMI’s common stock
before the reverse stock split. If the price is not maintained, PGMI may not
be
accepted for listing on the American Stock Exchange. There can also be no
assurance that the reverse stock split will not further adversely impact the
market price of PGMI’s common stock. In addition, it is possible that the
liquidity of PGMI’s common stock will be adversely affected by the reduced
number of shares outstanding after the reverse stock split.
Implementation
and Effects of the Reverse Stock Split
If
the
stockholders approve the reverse stock split at the meeting and the reverse
stock split is implemented, the Third Article of PGMI’s Articles of
Incorporation will be restated by filing a Certificate of Amendment which
replaces the existing Third Article with the following:
“THIRD
ARTICLE
The
total
number of shares of Common Stock the Company is authorized to issue is Seven
Hundred Fifty Million (750,000,000) shares with no par value.
The
total
number of shares of Preferred Stock the Company is authorized to issue is One
Hundred Fifty Million (150,000,000) shares with no par value, in such series
and
designations as may be authorized by the Board of Directors.
Effective
upon the effectiveness of these Articles of Amendment, each group of thirty
shares of common stock, no par value, shall be automatically combined, converted
into and reconstituted as one share of common stock, no par value. Effective
upon the effectiveness of these Articles of Amendment each group of thirty
shares of Class A Convertible Preferred Stock, no par value, shall be
automatically combined, converted into and reconstituted as one share of Class
A
Convertible Preferred Stock, no par value. Effective upon the effectiveness
of
these Articles of Amendment each group of thirty shares of Class E Convertible
Preferred Stock, no par value, shall be automatically combined, converted into
and reconstituted as one share of Class E Convertible Preferred Stock, no par
value. The Corporation shall deliver to each holder of shares of the
Corporation’s common stock, Class A Convertible Preferred Stock, and Class E
Convertible Preferred Stock (as constituted immediately prior to the
effectiveness of this reverse stock split) a certificate or certificates
representing the number of shares (including fractional shares) held by such
holder after giving effect to the reverse stock split.”
As
a
result of the reverse stock split, each thirty shares of PGMI’s common stock and
preferred stock outstanding on the effective date of the reverse stock split
(the “old common stock”) will be automatically changed into and become one share
of PGMI’s common stock (the “new common stock”) and preferred stock (the “new
preferred stock”), respectively. PGMI will issue fractional shares in connection
with the reverse stock split.
The
old
common stock is currently registered under the Securities Exchange Act of 1934
and PGMI is subject to the periodic reporting and other requirements of the
Exchange Act. The reverse stock split will not affect the registration of PGMI’s
common stock under the Exchange Act. Following the reverse stock split, PGMI’s
common stock will continue to be registered under the Exchange Act.
Proportionate
voting rights and other rights of the holders of PGMI’s common stock will not be
affected by the reverse stock split. For example, a holder of 2.0% of the voting
power of the outstanding shares of old common stock immediately prior to the
effective date of the reverse stock split will continue to hold approximately
2.0% of the voting power of the outstanding shares of new common stock after
the
reverse stock split.
The
number of authorized shares of PGMI’s common and preferred stock, which
currently is 750,000,000 and 150,000,000, respectively, will not be reduced
as a
result of the reverse stock split. Consequently, the number of authorized but
unissued shares of common stock will increase as a result of the reverse stock
split. The issuance of such authorized but unissued shares may have the effect
of diluting the earnings per share and book value per share, as well as the
stock ownership and voting rights, of outstanding common stock and preferred.
Although not a factor in the decision of the Board of Directors to propose
the
reverse stock split, the increased number of authorized and unissued shares
of
common stock and preferred stock could be used by the Board of Directors as
an
anti-takeover defense. The Board’s decision to adopt and recommend the reverse
stock split was not in response to, a component of, or in contemplation of,
any
transaction involving a change of control.
PGMI’s
common and preferred stock will remain no par value stock following the reverse
stock split. Consequently, the par value of the common and preferred stock
will
not be reduced.
The
rights and privileges of the holders of shares of common stock and the
outstanding classes of preferred stock will be unaffected by the reverse stock
split.
If
approved, the reverse stock split may result in some stockholders owning “odd
lots” of less than 100 shares of new common stock or new preferred stock. Odd
lot shares may be more difficult to sell, and brokerage commissions and other
costs of transactions in odd lots are generally somewhat higher than the costs
of transactions in “round lots” of even multiples of 100 shares.
As
of
December 14, 2006, PGMI had 25,453,671 shares of common stock issued and
outstanding. In addition there were outstanding 4,326,285 and 97,059,998 shares
of class A preferred stock and class E preferred stock, respectively. If the
reverse stock split is approved and implemented, PGMI would have approximately
848,000 shares of common stock 144,000 shares of class A preferred stock and
3,235,300 shares of class E preferred stock issued and outstanding. The actual
number of shares outstanding after the reverse split will be the number
determined by dividing the number of outstanding shares prior to the reverse
split by 30.
If
the
reverse stock split is approved and implemented, a proportional adjustment
will
be made under PGMI’s stock incentive plan. Proportional adjustments will also be
made to the maximum number of shares issuable under our stock incentive
plan.
Notwithstanding
the receipt of shareholder approval for the reverse stock split, the Board
of
Directors retains the authority, at any time prior to the filing of the
Certificate of Amendment with the Secretary of State of the State of Utah,
to
abandon the proposed Certificate of Amendment and not effect the reverse stock
split or to effect the reverse stock split at a ratio of less than 30 to
1.
If
shareholders approve the reverse stock split at the meeting, unless the Board
elects to abandon the reverse stock split, the reverse stock split will become
effective on the date the Certificate of Amendment is filed with the Secretary
of State of the State of Utah. The Board currently expects that the reverse
stock split will be effective on Friday, January 19, 2007 and that Monday,
January 22, 2007 will be the first day of trading for the new common stock.
PGMI
will obtain a new CUSIP number for the new common stock.
Under
Utah law, shareholders are not entitled to dissenter’s rights with respect to
the reverse stock split.
Exchange
of Stock Certificates Following Implementation of the Reverse Stock
Split.
If
the
reverse stock split is approved and implemented, shareholders will be required
to exchange their stock certificates representing old common stock and old
preferred stock for new certificates representing new common stock, and new
preferred stock, respectively. Shareholders of record on the effective date
of
the reverse stock split will be furnished the necessary materials and
instructions for the surrender and exchange of share certificates at the
appropriate time by Stalt, Inc., PGMI’s transfer agent. Shareholders will not
have to pay a transfer fee or other fee in connection with the exchange of
certificates. As soon as practicable after the effective date, the transfer
agent will send a letter of transmittal to each shareholder advising of the
procedure for surrendering certificates representing shares of old common stock
and old preferred stock in exchange for new certificates representing ownership
of new common stock and new preferred stock, respectively.
YOU
SHOULD NOT SEND YOUR STOCK CERTIFICATES NOW. YOU SHOULD SEND THEM ONLY AFTER
YOU
RECEIVE THE LETTER OF TRANSMITTAL FROM THE TRANSFER AGENT.
As
soon
as practicable after the surrender to the transfer agent of any certificate
which represents shares of old common stock or old preferred stock, together
with a duly executed letter of transmittal and any other documents the transfer
agent may require you to provide, the transfer agent shall deliver to the person
in whose name the certificate for old common stock or old preferred stock had
been issued certificates registered in the name of such person representing
the
appropriate number of shares of new common stock or new preferred stock,
respectively. Each certificate representing shares of new common stock or new
preferred stock will continue to bear any legends restricting the transfer
of
such shares that were borne by the surrendered certificates representing the
shares of old common stock or old preferred stock held prior to the reverse
stock split.
Any
certificate held by you prior to the reverse stock split which represented
shares of old common stock or old preferred stock shall be deemed at and after
the effective date of the reverse stock split to represent the number of full
shares of new common stock or new preferred stock and the right to receive
cash
for the fair value of any fractional shares. Until you have surrendered your
stock certificates for exchange, you will not be entitled to receive any
dividends or other distributions that may be declared and payable by PGMI to
holders of record of common stock.
If
your
certificate for old common stock or old preferred stock has been lost, destroyed
or stolen, you will be entitled to receive a certificate representing the shares
of new common stock or new preferred stock into which your shares of old common
stock or old preferred stock are to be converted upon compliance with PGMI
or
the transfer agent’s procedures for issuing replacement certificates when
original certificates are lost, stolen or destroyed.
Federal
Income Tax Consequences
The
following description of the material federal income tax consequences of the
reverse stock split is based upon the Internal Revenue Code, the applicable
Treasury Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices all as in effect on the date of this proxy
statement. Changes to these laws could alter the tax consequences described
below, possibly with retroactive effect. PGMI has not sought and will not seek
an opinion of counsel or a ruling from the Internal Revenue Service regarding
the federal income tax consequences of the reverse stock split. This discussion
is for general information only and does not discuss consequences which may
apply to special classes of taxpayers (for example, non-resident aliens,
broker-dealers or insurance companies) and does not discuss the tax consequences
under the laws of any foreign, state or local jurisdictions. Shareholders are
urged to consult their own tax advisors to determine the particular consequences
to them.
PGMI
believes that because the reverse stock split is not part of a plan to increase
periodically a shareholder’s proportionate interest in PGMI’s assets or earnings
and profits, the reverse stock split will likely have the following federal
income tax effects:
| § |
A
shareholder will not recognize gain or loss on the exchange. In the
aggregate, such a shareholder’s basis in the new common stock will equal
the shareholder’s basis in the old common
stock.
|
| § |
PGMI
will not recognize any gain or loss as a result of the reverse stock
split.
|
THE
BOARD OF DIRECTORS BELIEVES THE ADOPTION OF THE PROPOSED AMENDMENT IS IN THE
BEST INTERESTS OF PGMI AND ITS SHAREHOLDERS AND RECOMMENDS THAT YOU VOTE
“FOR”
THIS PROPOSAL.
|
Executive
Compensation And Related
Matters
|
Compensation
of Executive Officers
Summary
Compensation Table.
The
following table sets forth the total cash compensation, paid to or earned during
each of our last three fiscal years by (i) our Chief Executive Officer and
(ii) our other executive officer whose salary and bonus exceeded $100,000
for the fiscal year ended June 30, 2006 (collectively referred to herein as
the
“Named Executive Officers”).
| |
|
SUMMARY
COMPENSATION TABLE
|
|
|
| |
|
Annual
Compensation
|
Long
Term Compensation
|
| |
|
|
|
|
Awards
|
Payouts
|
|
Name
&
Position
|
Fiscal
Year
|
Salary
($)
(1)
|
Bonus
($)
(1)
|
Other
Annual
Compensation
($)
|
Restricted
Stock
Awards
($)
|
Securities
Underlying
Options
SARS
(#)
|
L/TIP
Payouts
($)
|
All
Other
Compensation
($)
(2)
|
|
Shinichi
Kanemoto
|
6/30/2006
|
$310,249
|
0
|
0
|
0
|
0
|
0
|
0
|
|
(President
and CEO)
|
6/30/2005
|
$342,593
|
0
|
0
|
0
|
0
|
0
|
0
|
| |
6/30/2004
|
$346,352
|
0
|
0
|
0
|
0
|
0
|
0
|
| |
|
|
|
|
|
|
|
|
|
Eiichi
Kanemoto
|
6/30/2006
|
$206,891
|
0
|
0
|
0
|
0
|
0
|
0
|
|
(Secretary)
|
6/30/2005
|
$228,395
|
0
|
0
|
0
|
0
|
0
|
0
|
| |
6/30/2004
|
$229,187
|
0
|
0
|
0
|
0
|
0
|
0
|
(1) The
salary and bonus figures represent the compensation paid to the Named Officers
by our wholly-owned operating subsidiary, Marugin International, Inc. in their
respective capacities as officers of such subsidiary.
(2)
We
do not
currently provide any contingent or deferred forms of compensation arrangements,
annuities, pension or retirement benefits to its directors, officers or
employees.
Equity
Compensation Plan Information
We
maintain one equity compensation plan, our 2006 Stock Incentive Plan (the “2006
Plan”). This 2006 Plan is one of the proposals upon which you will vote at our
2006 Annual Meeting. The 2006 Plan is described above under Proposal 3.
Presently, there are no outstanding stock option grants under the 2006 Plan.
If
the shareholders approve the 2006 Plan, the Board of Directors has authorized
the granting of options as follows:
|
Optionee
|
Exercise
Price
|
Shares
Underlying Option
|
Expiration
Date
|
|
Shinishi
Kanemoto
|
$
.61
|
12,255,000
|
March
11, 2011
|
|
Eiichi
Kanemoto
|
$
.61
|
12,255,000
|
March
11, 2011
|
|
Gakushin
Kanemoto
|
$
.56
|
254,250
|
March
11, 2016
|
|
Mark
Buck
|
$
.56
|
150,000
|
March
11, 2016
|
The
weighted average exercise price of the above stock options is $.61 and following
such grants the 2006 Plan would have 85,750 shares of common stock reserved
for
future grants.
Report
of the Compensation Committee of the Board of Directors on Executive
Compensation
Our
recently appointed Compensation Committee of the Board of Directors (the
“Committee”) is responsible for administering PGMI’s executive compensation
program. In this regard, the role of the Committee is to oversee our
compensation programs and policies applicable to all employees, to review and
approve all decisions regarding executive officers’ compensation and to
administer our equity incentive plans (including reviewing and approving stock
option grants). The Committee’s charter reflects these various responsibilities.
Although the Committee was recently created, in the future the Committee will
regularly report to the Board of Directors on its actions and
recommendations.
The
Committee presently is composed of two members who
are
not current or former employees of PGMI. The Board has determined that each
member is independent under the current listing standards of the American Stock
Exchange.
Since
the
Committee was formed following our last fiscal year, it has not furnished a
report on executive compensation for the fiscal year ended June 30,
2006.
Shareholder
Proposals and Nominations
Pursuant
to Rule 14a-8 under the Exchange Act, shareholders may present proper
proposals for inclusion in the Company’s proxy statement and for consideration
at the Company’s next annual meeting of shareholders. To be eligible for
inclusion in the Company’s 2007 Proxy Statement, your proposal must be received
by the Company no later than September 20, 2007, and must otherwise comply
with
Rule 14a-8. While the Board will consider shareholder proposals, the
Company reserves the right to omit from the Company’s proxy statement
shareholder proposals that it is not required to include under the Exchange
Act,
including Rule 14a-8.
Shareholders
must provide actual written notice of their intent to make nomination(s) to
the
Secretary of the Company no later than 90 days prior to the relevant annual
meeting. Each notice must set forth (i) the name and address of the
shareholder who intends to make the nomination(s) and the person(s) to be
nominated; (ii) a representation that the shareholder is a holder of record
of stock of the Company entitled to vote at such meeting and intends to appear
in person or by proxy at the meeting to nominate the person(s) specified in
the
notice; (iii) a description of all arrangements or understandings between
the shareholder and each nominee and any other person(s) (naming such person(s))
pursuant to which the nomination(s) are to be made by the shareholder;
(iv) such other information regarding each nominee as would be required to
be included in a proxy statement filed pursuant to the proxy rules of the SEC
had the nominee been nominated, or intended to be nominated, by the Board;
and
(v) the consent of each nominee to serve as a director of the Company if so
elected. Any candidates recommended by shareholders for nomination to the Board
will be evaluated in the same manner that nominees suggested by Board members,
management or other parties.
Communication
with the Board of Directors
The
Company’s annual meeting of shareholders provides an opportunity each year for
shareholders to ask questions of or otherwise communicate directly with members
of the Board on appropriate matters. In addition, shareholders may communicate
in writing with any particular director, or the directors as a group, by sending
such written communication to the Secretary of the Company at the Company’s
principal executive office, 5912
Bolsa Avenue, Suite 108, Huntington Beach, California 92649.
Copies
of written communications received at such address will be provided to the
Board
or the relevant director unless such communications are considered, in the
reasonable judgment of the Secretary, to be inappropriate for submission to
the
intended recipient(s). examples of shareholder communications that would be
considered inappropriate for submission to the Board include, without
limitation, customer complaints, solicitations, communications that do not
relate directly or indirectly to the Company’s business or communications that
relate to improper or irrelevant topics.
Annual
Report on Form 10-KSB
A
copy of
the Company's Annual Report on Form 10-KSB, as filed with the Securities and
Exchange Commission (exclusive of Exhibits), will be furnished by first class
mail, within one business day of receipt of request, without charge to any
person from whom the accompanying proxy is solicited upon written request to
PGMI, Inc., Attention: Corporate Secretary, 5912 Bolsa Avenue, Suite 108,
Huntington Beach, California 92649. If Exhibit copies are requested, a copying
charge of $.20 per page will be made. In addition, in the near future, all
of
the Company’s public filings, including the Annual Report on Form 10-KSB, will
be found on our website at www.PGMI-Inc.com
(this
website address is not intended to function as a hyperlink, and the information
contained on the Company’s website is not intended to be a part of this Proxy
Statement).
| |
|
|
| |
By
Order of the
Board of Directors |
|
|
|
| Date: January
__, 2007 |
By: |
/s/ Eiichi
Kanemoto |
| |
EIICHI
KANEMOTO
Corporate
Secretary
|
EXHIBIT
A
AUDIT
COMMITTEE CHARTER
PGMI,
Inc.
Charter
of the Audit Committee of the Board of Directors
(Adopted
October 14, 2006)
|
|
| Notice
of Proprietary Information |
|
This
Charter is the property of PGMI, Inc., and any of its subsidiaries.
The
information contained herein is proprietary to this Company and
may not be
copied or reproduced without the express written permission of
the
Company’s President & Chief Executive Officer.
|
Purpose
The
primary function of the Audit Committee is to assist the Board of Directors
in
fulfilling its oversight responsibilities by reviewing (i) the Company’s
financial statements provided to stockholders, the public and others, (ii)
the
Company’s system of internal controls regarding finance, accounting, legal
compliance and ethical behavior and (iii) the Company’s auditing,
accounting and financial reporting process. Consistent with this function,
the
Audit Committee shall encourage continuous improvement of, and foster adherence
to, the Company’s policies, procedures and practices at all levels.
In
meeting its responsibilities, the Audit Committee is expected to:
| · |
serve
as an independent and objective party to review the Company’s financial
reporting process and internal control
system;
|
| · |
review
and evaluate the audit activities of the Company’s outside auditors;
and
|
| · |
provide
an open avenue of communication among the outside auditors, management
and
the Board of Directors.
|
Without
limiting the foregoing, and in recognition of the fact that the Company’s
outside auditors are ultimately accountable to the Audit Committee, the Audit
Committee has the sole authority and responsibility to select, evaluate,
oversee, determine the compensation of and, where appropriate, replace the
outside auditors and/or nominate the outside auditors for stockholder approval.
The Audit Committee shall consult with management, but shall not delegate
these
responsibilities. The Audit Committee is responsible for resolving disputes
between management and the outside auditor regarding financial reporting
issues.
The
Audit
Committee shall primarily fulfill these responsibilities by carrying out
the
activities enumerated under the heading “Responsibilities and Duties” in this
Charter. In carrying out its responsibilities, the Audit Committee has the
authority (i) to investigate any matter brought to its attention with full
access to all books, records, facilities, and personnel of the Company and
(ii)
to retain independent legal, accounting and other consultants to advise the
Audit Committee, at the Company's expense, as it deems necessary.
Organization
The
Audit
Committee shall be appointed by the Board of Directors and shall be comprised
of
three or more directors as determined by the Board of Directors, each of
whom
shall be an independent director (as defined by all applicable AMEX and SEC
rules and regulations) and each of whom is free from any relationship that,
in
the opinion of the Board of Directors, would interfere with the exercise
of the
director’s independent judgment as a member of the Audit Committee.
All
members of the Audit Committee shall have a working familiarity with basic
finance and accounting practices and be able to read and understand fundamental
financial statements, including the Company’s balance sheet, income statement,
and cash flow statement or shall become able to do so within a reasonable
time
after his or her appointment to the Audit Committee. At least one member
of the
Audit Committee shall have past employment experience in finance or accounting,
requisite professional certification in accounting, or any other comparable
experience or background which results in that member’s financial
sophistication, including being or having been a chief executive officer,
chief
financial officer or other senior officer with financial oversight
responsibilities. No member of the Audit Committee shall have participated
in
the preparation of the financial statements of the Company or any current
subsidiary at any time during the previous three (3) years.
Charter
of the Audit Committee
-
PGMI,
Inc.
Meetings
The
Audit
Committee shall meet as circumstances require. The Audit Committee may require
any officer or employee of the Company or its subsidiaries, the Company’s
outside auditors or outside counsel or others to attend its meetings or to
meet
with any members of, or consultants to, the Audit Committee, and to provide
pertinent information as necessary. As part of its job to foster open
communication, the Audit Committee shall meet at least annually with management
and the Company's outside auditors in separate executive sessions to discuss
any
matters that the Audit Committee or any of these groups believe should be
discussed privately.
Responsibilities
and Duties
To
fulfill its responsibilities and duties, the Audit Committee shall:
| 1. |
Review
with financial management and the Company’s outside auditors the Company’s
annual audited financial statements, including disclosures made in
"Management’s Discussion and Analysis of Financial Condition and Results
of Operations", prior to the filing of such statements with the Securities
and Exchange Commission. This review should include a discussion
of the
outside auditors' judgments about the quality and appropriateness
of the
Company’s accounting principles and financial disclosure practices, as
applied in its financial reporting, including review of estimates,
reserves and accruals, review of judgmental areas, review of audit
adjustments whether or not recorded and such other inquiries as may
be
appropriate. Based on this review, the Audit Committee shall make
its
recommendation to the Board of Directors as to the inclusion of the
Company’s audited financial statements in the Company’s Annual Report on
Form 10-K.
|
| 2. |
Review
with financial management and the Company’s outside auditors the Company's
quarterly financial statements and Form 10-Q, including disclosures
made
in "Management’s Discussion and Analysis of Financial Condition and
Results of Operations", and the independent auditors' review of the
quarterly financial statements (including a review of the matters
included
in the paragraph immediately above), prior to the submission of such
statements to the Securities and Exchange Commission or the public.
The
Chairman of the Audit Committee or any subcommittee of the Audit
Committee
may represent the entire Audit Committee for the purpose of this
review.
Based on this review, the Audit Committee (or the Chairman or a
subcommittee of the Audit Committee) shall make a recommendation
as to the
filing of the Form 10-Q.
|
| 3. |
Review
the performance of the outside auditors and make determinations regarding
the appointment, replacement or rotation of the outside
auditors.
|
| 4. |
On
an annual basis, review and discuss with the outside auditors all
relationships the outside auditors have or have had during the current
year with the Company to determine the outside auditors' continued
independence. In connection with the foregoing, the Audit Committee
shall
request that the outside auditors submit to the Audit Committee on
an
annual basis a written statement delineating all such relationships.
The
Audit Committee shall discuss with the outside auditors any disclosed
relationship or services that may impact the objectivity and independence
of the outside auditors and shall, if appropriate, recommend that
the
Board of Directors take appropriate action in response to the written
statement to satisfy itself of the outside auditors'
independence.
|
| 5. |
Review
and reassess the adequacy of the Audit Committee’s Charter annually and
recommend to the Board of Directors any changes deemed appropriate
by the
Audit Committee. The Chairman of the Audit Committee may represent
the
entire Audit Committee for purposes of this
review.
|
Charter
of the Audit Committee
-
PGMI,
Inc.
| 6. |
Consider
and pre-approve all auditing services and non-audit services to be
provided to the Company by its outside auditor, and establish policies
and
procedures for the pre-approval of such services,
including
the fees and terms thereof. All non-audit services permitted pursuant
to
law to be provided by the outside auditors must be considered and
pre-approved by the Audit Committee and such approvals must be disclosed
in the Company’s applicable periodic public filings. The Audit Committee
may delegate to one or more designated members of the Audit Committee
who
are independent directors of the Company the authority to grant
pre-approvals as required by this item, provided that the decisions
of any
such designated members to whom such authority is delegated will
be
presented to the full Audit Committee at its scheduled
meetings.
|
| 7. |
Prepare
any reports of the Audit Committee required by applicable securities
laws
or stock market listing requirements or rules to be included in any
proxy
statements, information statements or other documents, and approve
disclosures required to be included in periodic filings with the
Securities and Exchange Commission with respect to audit, audit-related
and non-audit services, and reports and attestations regarding internal
controls.
|
| 8. |
Approve
the fees to be paid to the outside auditors in connection with the
Company’s annual audit and any approved auditing and non-audit
services.
|
| 9. |
Review
with the outside auditors their audit plan, the scope of their audit,
the
auditors’ report and their
recommendations.
|
| 10. |
Discuss
with the outside auditors matters identified by the auditors for
discussion with the Audit Committee in accordance with applicable
AICPA
statements on auditing standards (particularly
Statement on Auditing Standards No. 61),
securities
laws or stock market listing requirements or
rules.
|
| 11. |
Review
and discuss with management and the Company’s outside auditors, the
integrity of the Company’s financial reporting
process.
|
| 12. |
Review
and discuss with management and the Company’s outside auditors, the
quality and adequacy of the Company’s internal accounting controls. Review
and discuss with management and the Company’s outside auditors any
material communications between them, including any management
letter.
|
| 13. |
Review
and discuss reports from the outside auditors concerning all critical
accounting policies and practices used by the Company and alternative
accounting treatments within GAAP related to material items that
have been
discussed with management, including the ramifications of the use
of the
alternative treatments and the treatment preferred by the outside
auditor.
|
| 14. |
Establish
procedures for (i) the receipt, retention and treatment of complaints
received by the Company regarding accounting, internal accounting
controls
or auditing matters, and (ii) the confidential, anonymous submission
by
employees of the Company of concerns regarding questionable accounting
or
auditing matters.
|
| 15. |
Discuss
with the outside auditors whether they are aware of any action by
an
officer, director, or person acting under their direction which would
violate Rule 13b2-2(b)(1) under the Securities Exchange Act of 1934
which
prohibits improper influence on the conduct of
audits.
|
| 16. |
Review
and approve (a) any change or waiver in the Company’s Code of Business
Conduct and Ethics for executive officers, including the president
and
chief executive officer, the chief operating officer and senior financial
officers (including the chief financial officer) and (b) any public
disclosure made regarding such change or
waiver.
|
Charter
of the Audit Committee
-
PGMI,
Inc.
| 17. |
Review
and approve related-party and conflict of interest
transactions.
|
| 18. |
Review,
at least annually, with management, the outside auditors and the
Company’s
outside counsel, as appropriate, any material pending or threatened
litigation, and any legal, accounting, regulatory or compliance matters
that could have a significant impact on the Company’s financial position
or results of operations.
|
| 19. |
Report
regularly to the full Board of Directors and review with the full
Board of
Directors any issues that have arisen with respect to the quality
or
integrity of the Company’s financial statements, the Company’s compliance
with legal or regulatory requirements, the performance and independence
of
the Company’s outside auditors.
|
| 20. |
Establish
policies for the hiring of employees and former employees of the
independent auditor.
|
| 21. |
Perform
any other activities consistent with this Charter, the Company’s By-laws
and governing law, as the Audit Committee or the Board of Directors
deems
necessary or appropriate.
|
*
*
*
While
the
Audit Committee has the responsibilities and powers set forth in this Charter,
the Company’s management is responsible for preparing the Company’s financial
statements and the outside auditors are responsible for auditing them. The
Audit
Committee is responsible for overseeing the conduct of these activities and
is
not expected to audit the Company, to define the scope of the audit, to control
the Company’s accounting practices or to define the standards to be used in the
preparation of the Company’s financial statements. Nor is it the duty of the
Audit Committee to conduct investigations or to assure compliance with laws
and
regulations or the Company’s Code of Business Conduct and Ethics. The Audit
Committee may rely, without independent verification, on the information
provided to it and on the representations made by management that the financial
statements have been prepared in conformity with generally accepted accounting
principles and the corresponding reports of the outside auditors prepared
in
connection with their reviews and audits. Consequently, in carrying out its
responsibilities, the Audit Committee is not determining that the Company’s
financial statements are complete and accurate and are in accordance with
generally accepted accounting principles, nor is the Audit Committee providing
any expert or special assurance as to the Company’s financial statements or any
professional certification as to the outside auditors’ work.
EXHBIT
B
2006
STOCK INCENTIVE PLAN
PGMI,
INC.
2006
STOCK INCENTIVE PLAN
ARTICLE
ONE
GENERAL
PROVISIONS
I.
PURPOSE
OF THE PLAN
This
2006
Stock Incentive Plan (the “Plan”) is intended to promote and advance the
interests of PGMI, Inc., a Utah corporation (the “Corporation”), and its
stockholders by strengthening the Corporation’s ability to attract and retain
individuals of training, experience and ability as officers, employees,
non-employee directors and consultants and to furnish additional incentives
to
such key individuals to promote the Corporation’s financial success by providing
them with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation.
Capitalized
terms shall have the meanings assigned to such terms in the attached
Appendix.
II.
STRUCTURE OF THE PLAN
A. The
Plan
shall be divided into two separate equity programs:
(i)
the
“Discretionary Option Grant Program” under which eligible persons may, at the
discretion of the Plan Administrator, be granted options to purchase shares
of
Common Stock, and
(ii)
the
“Stock Issuance Program” under which eligible persons may, at the discretion of
the Plan Administrator, be issued shares of Common Stock directly, either
through the immediate purchase of such shares or as a bonus for services
rendered to the Corporation (or any Parent or Subsidiary).
B. The
provisions of Articles One and Four shall apply to all equity programs under
the
Plan and shall govern the interests of all persons under the Plan.
III.
ADMINISTRATION
OF THE PLAN
A. The
Plan
will be administered by the Compensation Committee, composed of not less
than
two directors appointed by the Board. Each member of the Compensation Committee
shall, at all times during their service as such, be a "non-employee director"
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934.
The
Compensation Committee (hereinafter also referred to as the “Plan
Administrator”) shall have conclusive authority to construe and interpret the
Plan and any award agreement entered into thereunder, and to establish, amend
and rescind administrative policies for the administration of the Plan and
such
additional authority as the Board may from time to time determine is necessary
or desirable.
B. The
Plan
Administrator shall, within the scope of its administrative functions under
the
Plan, have full power and authority (subject to the provisions of the Plan)
to
establish such rules and regulations as it may deem appropriate for proper
administration of the Discretionary Option Grant Program and the Stock Issuance
Program and to make such determinations under, and issue such interpretations
of, the provisions of such programs and any outstanding options or stock
issuances thereunder as it may deem necessary or advisable. Decisions of
the
Plan Administrator within the scope of its administrative functions under
the
Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant Program and/or the Stock Issuance Program under
its
jurisdiction or any option or stock issuance thereunder.
C. Service
on the Compensation Committee shall constitute service as a Board member,
and
members of each such committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service on such
committee. No member of the Compensation Committee shall be liable for any
act
or omission made in good faith with respect to the Plan or any option grants
or
stock issuances under the Plan.
IV.
ELIGIBILITY
A. The
persons eligible to participate in the Discretionary Option Grant Program
and
the Stock Issuance Program are as follows:
(i)
Employees,
(ii)
non-employee members of the Board or the board of directors of any Parent
or
Subsidiary of the Corporation, and
(iii)
consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary of the Corporation).
B. The
Plan
Administrator shall, within the scope of its administrative jurisdiction
under
the Plan, have full authority to determine:
(i)
with
respect to option grants under the Discretionary Option Grant Program, which
eligible persons are to receive option grants, the time or times when such
option grants are to be made, the number of shares to be covered by each
such
grant, the status of the granted option as either an Incentive Option or
a
Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares
and
the maximum term for which the option is to remain outstanding, and
(ii)
with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
C. The
Plan
Administrator shall have the absolute discretion either to grant options
in
accordance with the Discretionary Option Grant Program or to effect stock
issuances in accordance with the Stock Issuance Program.
V.
STOCK
SUBJECT TO THE PLAN
A. The
stock
issuable under the Plan shall be shares of authorized but unissued or reacquired
Common Stock, including shares repurchased by the Corporation on the open
market. The maximum number of shares of Common Stock initially reserved for
issuance over the term of the Plan shall not exceed 25,000,000 shares. Such
authorized share reserve includes the number of shares subject to the
outstanding options, which are hereby incorporated into the Plan.
B. Shares
of
Common Stock subject to outstanding options shall be available for subsequent
issuance under the Plan to the extent those options expire or terminate for
any
reason prior to being exercised in full. Unvested shares issued under the
Plan
and subsequently cancelled or repurchased by the Corporation, at the original
issue price paid per share, pursuant to the Corporation’s repurchase rights
under the Plan shall be added back to the number of shares of Common Stock
reserved for issuance under the Plan.
C. If
any
change is made to the Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration, appropriate adjustments shall be made to:
(i)
the
maximum number and/or class of securities issuable under the Plan;
(ii)
the
number and/or class of securities for which any one person may be granted
stock
options, separately exercisable stock appreciation rights and direct stock
issuances under the Plan per calendar year; and
(iii)
the
number and/or class of securities and the exercise price per share in effect
under each outstanding option under the Plan.
Such
adjustments to the outstanding options are to be effected in a manner, which
shall preclude the enlargement or dilution of rights and benefits under such
options. The adjustments determined by the Plan Administrator shall be final,
binding and conclusive.
ARTICLE
TWO
DISCRETIONARY
OPTION GRANT PROGRAM
I.
OPTION
TERMS
Each
option shall be evidenced by one or more documents in the form approved by
the
Plan Administrator; provided,
however,
that
each such document shall comply with the terms specified below. Each document
evidencing an Incentive Option shall, in addition, be subject to the provisions
of the Plan applicable to such options.
A. Exercise
Price.
1.
The
exercise price per share shall be fixed by the Plan Administrator at a price
not
less than eighty-five percent (85%) of the Fair Market Value per share of
Common
Stock on the option grant date; provided,
however,
that
the Plan Administrator may fix the exercise price at less than 85% if the
Optionee, at the time of the option grant, shall have made a payment to the
Corporation (including payment made by means of a salary reduction) equal
to the
excess of the Fair Market Value of the Common Stock on the option grant date
over such exercise price.
2.
The
exercise price shall become immediately due upon exercise of the option and
may,
subject to the provisions of Section I of Article Four and the
documents evidencing the option, be payable in one or more of the forms
specified below:
(i)
cash
or check made payable to the Corporation,
(ii)
shares of Common Stock held for the requisite period necessary to avoid a
charge
to the Corporation’s earnings for financial reporting purposes and valued at
Fair Market Value on the Exercise Date, or
(iii)
to
the extent the option is exercised for vested shares, through a special sale
and
remittance procedure pursuant to which the Optionee shall concurrently provide
irrevocable written instructions to (a) a Corporation-designated brokerage
firm
to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and employment
taxes
required to be withheld by the Corporation by reason of such exercise, and
(b) the Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.
Except
to
the extent such sale and remittance procedure is utilized, payment of the
exercise price for the purchased shares must be made on the Exercise
Date.
B. Exercise
and Term of Options.
Each
option shall be exercisable at such time or times, during such period and
for
such number of shares as shall be determined by the Plan Administrator and
set
forth in the documents evidencing the option. However, no option shall have
a
term in excess of ten (10) years measured from the option grant
date.
C. Effect
of Termination of Service.
1.
The
following provisions shall govern the exercise of any options held by the
Optionee at the time of cessation of Service or death:
(i)
Any
option outstanding at the time of the Optionee’s cessation of Service for any
reason shall remain exercisable for such period of time thereafter as shall
be
determined by the Plan Administrator and set forth in the documents evidencing
the option (which shall equal 1 year in the case of death or disability and
ninety (90) days in the case of any other cessation of Service), provided
no
such option shall be exercisable after the expiration of the option
term.
(ii)
Any
option exercisable in whole or in part by the Optionee at the time of death
may
be subsequently exercised by the personal representative of the Optionee’s
estate or by the person or persons to whom the option is transferred pursuant
to
the Optionee’s will or in accordance with the laws of descent and
distribution.
(iii)
Subject to clause C.2.(ii) below of this Section I, during the applicable
post-Service exercise period, the option may not be exercised in the aggregate
for more than the number of vested shares for which the option is exercisable
on
the date of the Optionee’s cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding for any vested
shares for which the option has not been exercised.
2.
The
Plan Administrator shall have complete discretion, exercisable either at
the
time an option is granted or at any time while the option remains outstanding,
to:
(i)
extend the period of time for which the option is to remain exercisable
following the Optionee’s cessation of Service from the limited exercise period
otherwise in effect for that option to such greater period of time as the
Plan
Administrator shall deem appropriate, but in no event beyond the expiration
of
the option term, and/or
(ii)
permit the option to be exercised, during the applicable post-Service exercise
period, not only with respect to the number of vested shares of Common Stock
for
which such option is exercisable at the time of the Optionee’s cessation of
Service but also with respect to one or more additional installments in which
the Optionee would have vested had the Optionee continued in
Service.
D. Shareholder
Rights.
The
holder of an option shall have no shareholder rights with respect to the
shares
subject to the option until such person shall have exercised the option,
paid
the exercise price and become a holder of record of the purchased
shares.
E. Repurchase
Rights.
The
Plan
Administrator shall have the discretion to grant options which are exercisable
for unvested shares of Common Stock and to reserve the right to repurchase
any
or all of those unvested shares should the Optionee thereafter cease to be
in
Service to the Corporation. The terms upon which such repurchase right shall
be
exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase
right.
F. Limited
Transferability of Options.
During
the lifetime of the Optionee, options shall be exercisable only by the Optionee
and shall be assignable or transferable other than by will or by the laws
of
descent and distribution following the Optionee’s death.
II. INCENTIVE
OPTIONS
The
terms
specified below shall be applicable to all Incentive Options. Except as modified
by the provisions of this Section II, all the provisions of Articles One,
Two
and Four shall be applicable to Incentive Options. Options that are specifically
designated as Non-Statutory Options when issued under the Plan shall
not
be
subject to the terms of this Section II.
A. Eligibility.
Incentive Options may only be granted to Employees.
B. Exercise
Price.
The
exercise price per share shall not be less than one hundred percent (100%)
of
the Fair Market Value per share of Common Stock on the option grant
date.
C. Dollar
Limitation.
The
aggregate Fair Market Value of the shares of Common Stock (determined as
of the
respective date or dates of grant) for which one or more options granted
to any
Employee under the Plan (or any other option plan of the Corporation or any
Parent or Subsidiary) may for the first time become exercisable as Incentive
Options during any one calendar year shall not exceed the sum of One Hundred
Thousand Dollars ($100,000). To the extent the Employee holds two (2) or
more
such options that become exercisable for the first time in the same calendar
year, the foregoing limitation on the exercisability of such options, as
Incentive Options shall be applied on the basis of the order in which such
options are granted.
D. 10%
Shareholder.
If any
Employee to whom an Incentive Option is granted is a 10% Shareholder, then
the
exercise price per share shall not be less than one hundred ten percent (110%)
of the Fair Market Value per share of Common Stock on the option grant date,
and
the option term shall not exceed five (5) years measured from the option
grant
date.
III.
CANCELLATION
AND REGRANT OF OPTIONS
The
Plan
Administrator shall have the authority to effect, at any time and from time
to
time, with the consent of the affected option holders, the cancellation of
any
or all outstanding options under the Discretionary Option Grant Program and
to
grant in substitution new options covering the same or a different number
of
shares of Common Stock but with an exercise price per share based on the
Fair
Market Value per share of Common Stock on the new grant date.
ARTICLE
THREE
STOCK
ISSUANCE PROGRAM
I.
STOCK
ISSUANCES
Shares
of
Common Stock may be issued under the Stock Issuance Program through direct
and
immediate issuances without any intervening option grants. Each such stock
issuance shall be evidenced by a Stock Issuance Agreement that complies with
the
terms specified below.
II.
STOCK
ISSUANCE TERMS
A. Purchase
Price.
1.
The
purchase price per share shall be fixed by the Plan Administrator, but shall
not
be less than eighty-five percent (85%) of the Fair Market Value per share
of
Common Stock on the issuance date.
2.
Subject to the provisions of Section I of Article Four, shares of Common
Stock
may be issued under the Stock Issuance Program for any of the following items
of
consideration that the Plan Administrator may deem appropriate in each
individual instance:
(i)
cash
or check made payable to the Corporation,
(ii)
past
services rendered to the Corporation (or any Parent or Subsidiary),
or
(iii)
any
other valid consideration for the issuance of shares of Common Stock under
Applicable Laws.
B. Vesting
Provisions.
1.
Shares
of Common Stock issued under the Stock Issuance Program may, in the discretion
of the Plan Administrator, be fully and immediately vested upon issuance
or may
vest in one or more installments over the Participant’s period of Service or
upon attainment of specified performance objectives. The elements of the
vesting
schedule applicable to any unvested shares of Common Stock issued under the
Stock Issuance Program, namely:
(i)
the
Service period to be completed by the Participant or the performance objectives
to be attained,
(ii)
the
number of installments in which the shares are to vest,
(iii)
the
interval or intervals (if any) which are to lapse between installments,
and
(iv)
the
effect which death, Permanent Disability or other event designated by the
Plan
Administrator is to have upon the vesting schedule, shall be determined by
the
Plan Administrator and incorporated into the Stock Issuance
Agreement.
2.
Any
new, substituted or additional securities or other property (including money
paid other than as a regular cash dividend) which the Participant may have
the
right to receive with respect to the Participant’s unvested shares of Common
Stock by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation’s receipt of
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participant’s unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem
appropriate.
3.
The
Participant shall have full shareholder rights with respect to any shares
of
Common Stock issued to the Participant under the Stock Issuance Program,
whether
or not the Participant’s interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares.
4.
Should
the Participant cease to remain in Service while holding one or more unvested
shares of Common Stock issued under the Stock Issuance Program or should
the
performance objectives not be attained with respect to one or more such unvested
shares of Common Stock, then those shares shall be immediately surrendered
to
the Corporation for cancellation, and the Participant shall have no further
shareholder rights with respect to those shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid in
cash
or cash equivalent (including the Participant’s purchase-money indebtedness),
the Corporation shall repay to the Participant the cash consideration paid
for
the surrendered shares and shall cancel the unpaid principal balance of any
outstanding purchase-money note of the Participant attributable to the
surrendered shares.
5.
The
Plan Administrator may in its discretion waive the surrender and cancellation
of
one or more unvested shares of Common Stock that would otherwise occur upon
the
cessation of the Participant’s Service or the non-attainment of the performance
objectives applicable to those shares. Such waiver shall result in the immediate
vesting of the Participant’s interest in the shares as to which the waiver
applies. Such waiver may be effected at any time, whether before or after
the
Participant’s cessation of Service or the attainment or non-attainment of the
applicable performance objectives.
ARTICLE
FOUR
MISCELLANEOUS
I.
FINANCING
The
Plan
Administrator may permit any Optionee or Participant to pay the option exercise
price under the Discretionary Option Grant Program or the purchase price
of
shares issued under the Stock Issuance Program by delivering a full-recourse,
interest bearing promissory note payable in one or more installments. The
terms
of any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. In no event may the maximum credit available to the Optionee
or
Participant exceed the sum of
(i)
the
aggregate option exercise price or purchase price payable for the purchased
shares plus
(ii)
any
Federal, state and local income and employment tax liability incurred by
the
Optionee or the Participant in connection with the option exercise or share
purchase.
The
foregoing shall not be applicable to any executive officer or director of
the
Corporation where the extension of such credit would result in a violation
of
Section 402 of the Sarbanes-Oxley Act of 2002.
II.
SHARE
ESCROW/LEGENDS
Unvested
shares issued under the Plan may, in the Plan Administrator’s discretion, be
held in escrow by the Corporation until the Participant’s interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing those unvested shares.
III. CHANGE
IN CONTROL
A. In
the
event of any Change in Control, each outstanding option under the Discretionary
Option Grant Program shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Change in Control,
become
fully exercisable with respect to the total number of shares of Common Stock
at
the time subject to such option and may be exercised for any or all of those
shares as fully-vested shares of Common Stock.
B. Outstanding
repurchase rights, if any, shall terminate automatically, and the shares
of
Common Stock subject to those terminated rights shall immediately vest in
full,
in the event of any Change in Control.
IV.
VESTING
Notwithstanding
any other provision of this agreement, the vesting schedule imposed with
respect
to any option grant or share issuance shall not result in the Optionee or
Participant vesting in fewer than 20% per year for five years from the date
of
the option grant or share issuance.
V.
TAX
WITHHOLDING
A. The
Corporation’s obligation to deliver shares of Common Stock upon the exercise of
options or the issuance or vesting of such shares under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
B. The
Plan
Administrator may, in its discretion, provide any or all holders of
Non-Statutory Options or unvested shares of Common Stock under the Plan with
the
right to use shares of Common Stock in satisfaction of all or part of the
Taxes
incurred by such holders in connection with the exercise of their options
or the
vesting of their shares. Such right may be provided to any such holder in
either
or both of the following formats:
1.
Stock
Withholding:
The
election to have the Corporation withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such Non-Statutory Option or the
vesting
of such shares, a portion of those shares with an aggregate Fair Market Value
equal to the percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.
2.
Stock
Delivery:
The
election to deliver to the Corporation, at the time the Non-Statutory Option
is
exercised or the shares vest, one or more shares of Common Stock previously
acquired by such holder (other than in connection with the option exercise
or
share vesting triggering the Taxes) with an aggregate Fair Market Value equal
to
the percentage of the Taxes (not to exceed one hundred percent (100%))
designated by the holder.
VI.
EFFECTIVE
DATE AND TERM OF THE PLAN
A. The
Plan
shall become effective immediately upon the Plan Effective Date. Options
may be
granted under the Discretionary Option Grant Program at any time on or after
the
Plan Effective Date. However, no options granted under the Plan may be
exercised, and no shares shall be issued under the Plan, until the Corporation’s
shareholders approve the Plan. If such shareholder approval is not obtained
within twelve (12) months after the Plan Effective Date, then all options
previously granted under this Plan shall terminate and cease to be outstanding,
and no further options shall be granted and no shares shall be issued under
the
Plan.
B. All
options outstanding as of the Plan Effective Date shall be incorporated into
the
Plan at that time and shall be treated as outstanding options under the Plan.
However, each outstanding option so incorporated shall continue to be governed
solely by the terms of the documents evidencing such option, and no provision
of
the Plan shall be deemed to affect or otherwise modify the rights or obligations
of the holders of such incorporated options with respect to their acquisition
of
shares of Common Stock.
C. The
Plan
shall terminate upon the earliest
of
(i) the
tenth anniversary of the Plan Effective Date, and
(ii)
the
date on which all shares available for issuance under the Plan shall have
been
issued as fully-vested shares.
Upon
such
plan termination, all outstanding option grants and unvested stock issuances
shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such grants or issuances.
VII. AMENDMENT
OF THE PLAN
A. The
Board
shall have complete and exclusive power and authority to amend or modify
the
Plan in any or all respects. However, no such amendment or modification shall
adversely affect the rights and obligations with respect to stock options
or
unvested stock issuances at the time outstanding under the Plan unless the
Optionee or the Participant consents to such amendment or modification. In
addition, certain amendments may require shareholder approval if so determined
by the Board or pursuant to applicable laws or regulations.
B. Options
to purchase shares of Common Stock may be granted under the Discretionary
Option
Grant Program and shares of Common Stock may be issued under the Stock
Issuance Program that are in each instance in excess of the number of shares
then available for issuance under the Plan, provided any excess shares actually
issued under those programs shall be held in escrow until there is obtained
any
required approval of an amendment sufficiently increasing the number of shares
of Common Stock available for issuance under the Plan. If such approval is
not
obtained within twelve (12) months after the date the first such excess
issuances are made, then (i) any unexercised options granted on the basis
of
such excess shares shall terminate and cease to be outstanding and (ii) the
Corporation shall promptly refund to the Optionees and the Participants the
exercise or purchase price paid for any excess shares issued under the Plan
and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow, and such shares shall
thereupon be automatically cancelled and cease to be outstanding.
VIII.
USE
OF PROCEEDS
Any
cash
proceeds received by the Corporation from the sale of shares of Common Stock
under the Plan shall be used for general corporate purposes.
IX.
REGULATORY
APPROVALS
A. The
implementation of the Plan, the granting of any stock option under the Plan
and
the issuance of any shares of Common Stock (i) upon the exercise of any granted
option or (ii) under the Stock Issuance Program shall be subject to the
Corporation’s procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the stock options granted
under
it and the shares of Common Stock issued pursuant to it.
B. No
shares
of Common Stock or other assets shall be issued or delivered under the Plan
unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the shares of Common
Stock issuable under the Plan, and all applicable listing requirements of
any
stock exchange (or the Nasdaq Stock Market, if applicable) on which Common
Stock
is then listed for trading.
X.
NO
EMPLOYMENT/SERVICE RIGHTS
Nothing
in the Plan shall confer upon the Optionee or the Participant any right to
continue in Service for any period of specific duration or interfere with
or
otherwise restrict in any way the rights of the Corporation (or any Parent
or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person’s Service at any time for any reason, with or without
cause.
APPENDIX
The
following definitions shall be in effect under the Plan:
A. Applicable
Laws
shall
mean the legal requirements relating to the administration of stock option
plans
and the issuance of stock and stock options under federal securities laws,
Delaware General Corporate Laws and securities laws, the Code, and the
applicable laws of any foreign country or jurisdiction where options will
be or
are being granted under the Plan.
B. Board
shall
mean the Corporation’s Board of Directors.
C. Change
in Control shall
mean the occurrence of any one of the following events:
(a) Any
“person,” as such term is used in Sections 13(d) and 14(d) of the Exchange Act
(other than the Company, any of its Affiliates or any trustee, fiduciary
or
other person or entity holding securities under any employee benefit plan
or
trust of the Company or any of its Affiliates) together with all “affiliates”
and “associates” (as such terms are defined in Rule 12b-2 under the Exchange
Act) of such person, shall become the “beneficial owner” (as such term is
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing twenty percent (20%) or more of either
(i) the combined voting power of the Company’s then outstanding securities
having the right to vote in an election of the Board (“voting securities”) or
(ii) the then outstanding Shares (in either such case other than as a result
of
an acquisition of securities directly from the Company); or
(b) When,
during any period of 24 consecutive months during the existence of the Plan,
the
individuals who, at the beginning of such period, constitute the Board (the
“Incumbent Directors”) cease or any reason other than death to constitute at
least a majority thereof, provided, however, that a director who was not
a
director at the beginning of such 24-month period shall be deemed to have
satisfied such 24-month period) or by prior operation of this subsection
(b);
or
(c) The
shareholders of the Company shall approve (i) any consolidation or merger
of the
Company or any Subsidiary where the shareholders of the Company, immediately
prior to the consolidation or merger, would not immediately after the
consolidation or merger, beneficially own (as such term is defined in Rule
13d-3
under the Exchange Act), directly or indirectly, shares representing in the
aggregate eighty percent (80%) or more of the voting securities of the
corporation issuing cash or securities in the consolidation or merger (or
of its
ultimate parent corporation, if any), (ii) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company or (iii) any plan or proposal for the liquidation or
dissolution of the Company.
(d) Notwithstanding
the foregoing, a “Change of Control” shall not be deemed to have occurred for
purposes of the foregoing clause (i) solely as the result of an acquisition
of
securities by the Company which, by reducing the number of Shares or other
voting securities outstanding, increases (i) the proportionate number of
Shares
beneficially owned by any person to twenty percent (20%) or more of the Shares
then outstanding or (ii) the proportionate voting power represented by the
voting securities beneficially owned by any person to twenty percent (20%)
or
more of the combined voting power of all then outstanding voting securities;
provided, however, that if any person referred to in clause (i) or (ii) of
this
sentence shall thereafter become the beneficial owner of any additional Shares
or other voting securities (other than pursuant to a stock split, stock
dividend, or similar transaction), then a “Change of Control” shall be deemed to
have occurred.
D. Code shall
mean the Internal Revenue Code of 1986, as amended.
E. Common
Stock
shall
mean the Corporation’s common stock.
F. Corporation shall
mean PGMI, Inc., a Utah corporation, and its successors.
G. Discretionary
Option Grant Program shall
mean the discretionary option grant program in effect under the
Plan.
H. Employee shall
mean an individual who is in the employ of the Corporation (or any Parent
or
Subsidiary), subject to the control and direction of the employer entity
as to
both the work to be performed and the manner and method of
performance.
I.
Exercise
Date shall
mean the date on which the Corporation shall have received written notice
of the
option exercise.
J.
Fair
Market Value per
share
of Common Stock on any relevant date shall be determined in accordance with
the
following provisions:
(i)
If
the Common Stock is at the time traded on the Nasdaq Stock Market, then the
Fair
Market Value shall be deemed equal to the closing selling price per share
of
Common Stock on the date in question, as such price is reported on the Nasdaq
Stock Market or any successor system. If there is no closing selling price
for
the Common Stock on the date in question, then the Fair Market Value shall
be
the closing selling price on the last preceding date for which such quotation
exists.
(ii)
If
the Common Stock is at the time listed on any Stock Exchange, then the Fair
Market Value shall be deemed equal to the closing selling price per share
of
Common Stock on the date in question on the Stock Exchange determined by
the
Plan Administrator to be the primary market for the Common Stock, as such
price
is officially quoted in the composite tape of transactions on such exchange.
If
there is no closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(iii)
If
the Common Stock is at the time quoted on the OTC Bulletin Board, then the
Fair
Market Value shall be deemed equal to the closing bid price per share of
Common
Stock on the date in question.
(iv)
If
the Common Stock is at the time then reported in the “Pink Sheets,” published by
the National Quotation Bureau Incorporated (or a similar organization or
agency
succeeding to its functions of reporting prices), the Fair Market Value shall
be
deemed equal to the most recent bid price per share of the Common Stock as
of
the date of question.
K. Incentive
Option
shall
mean an option which satisfies the requirements of Code Section
422.
L. Involuntary
Termination shall
mean the termination of the Service of any individual which occurs by reason
of:
(i)
such
individual’s involuntary dismissal or discharge by the Corporation for reasons
other than Misconduct, or
(ii)
such
individual’s voluntary resignation following (A) a change in his or her position
with the Corporation which materially reduces his or her level of
responsibility, (B) a reduction in his or her level of compensation (including
base salary, fringe benefits and participation in any corporate-performance
based bonus or incentive programs) by more than fifteen percent (15%) or
(C) a
relocation of such individual’s place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is effected
by
the Corporation without the individual’s consent.
M. Misconduct shall
mean the commission of any act of fraud or embezzlement by the Optionee or
Participant, any unauthorized use or disclosure by such person of confidential
information or trade secrets of the Corporation (or any Parent or Subsidiary)
which has a material adverse effect on the Corporation. The foregoing definition
shall not be deemed to be inclusive of all the acts or omissions which the
Corporation (or any Parent or Subsidiary) may consider as grounds for the
dismissal or discharge of any Optionee, Participant or other person in the
Service of the Corporation (or any Parent or Subsidiary).
N. 1934
Act
shall
mean the Securities Exchange Act of 1934, as amended.
O. Non-Statutory
Option shall
mean an option not intended to satisfy the requirements of Code Section
422.
P. Optionee shall
mean any person to whom an option is granted under the Discretionary Option
Grant Program.
Q. Parent shall
mean any corporation (other than the Corporation) in an unbroken chain of
corporations ending with the Corporation, provided each corporation in the
unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
R. Participant shall
mean any person who is issued shares of Common Stock under the Stock Issuance
Program.
S. Permanent
Disability or Permanently Disabled shall
mean the inability of the Optionee or the Participant to engage in any
substantial gainful activity by reason of any medically determinable physical
or
mental impairment expected to result in death or to be of continuous duration
of
twelve (12) months or more.
T. Plan shall
mean the Corporation’s 2006 Stock Incentive Plan, as set forth in this
document.
U. Plan
Administrator shall
mean the Organization and Compensation Committee of the Board, which is
authorized to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to one or more classes of eligible persons, to the
extent
such entity is carrying out its administrative functions under those programs
with respect to the persons under its jurisdiction.
V. Plan
Effective Date
shall
mean the date on which the Board adopted the Plan.
W. Section
16 Insider shall
mean an officer or director of the Corporation subject to the short-swing
profit
liabilities of Section 16 of the 1934 Act.
X. Service shall
mean the performance of services for the Corporation (or any Parent or
Subsidiary) by a person in the capacity of an Employee, a non-employee member
of
the board of directors or a consultant or independent advisor, except to
the
extent otherwise specifically provided in the documents evidencing the option
grant or stock issuance.
Y. Stock
Exchange shall
mean either the American Stock Exchange or the New York Stock
Exchange.
Z. Stock
Issuance Agreement shall
mean the agreement entered into by the Corporation and the Participant at
the
time of issuance of shares of Common Stock under the Stock Issuance
Program.
AA.
Stock
Issuance Program shall
mean the stock issuance program in effect under the Plan.
BB.
Subsidiary
shall
mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with the Corporation, provided each corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
CC.
Taxes
shall
mean the Federal, state and local income and employment tax liabilities incurred
by the holder of Non-Statutory Options or unvested shares of Common Stock
in
connection with the exercise of those options or the vesting of those
shares.
DD.
10%
Shareholder
shall
mean the owner of stock (as determined under Code Section 424(d)) possessing
more than ten percent (10%) of the total combined voting power of all classes
of
stock of the Corporation (or any Parent or Subsidiary).
10