UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant | |
Check the appropriate box:
|X| PRELIMINARY PROXY STATEMENT
| | Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
| | Definitive Proxy Statement
| | Definitive Additional Materials
| | Soliciting Material Pursuant to Sec.240.14a-11(c) or Sec.240.14a-12
SPACEDEV, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
| | Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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| | Fee paid previously with preliminary materials.
| | Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
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PAGE 1
SPACEDEV
13855 Stowe Drive
Poway, California 92064
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD AUGUST 5, 2004
TO THE STOCKHOLDERS OF SPACEDEV, INC.:
The annual meeting of the stockholders of SpaceDev, Inc. (the "Company")
will be held at 13855 Stowe Drive, Poway, California 92064, on August 5, 2004,
at 11:00 A.M. for the following purpose:
1. To elect a Board of Directors for the Company.
2. To ratify the appointment of PKF, Certified Public Accountants, as the
Company's independent public accountants for the fiscal year ending
December 31, 2004.
3. To approve the Company's 2004 Equity Incentive Plan.
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR EACH OF
THE NOMINEES TO THE BOARD OF DIRECTORS AND RECOMMENDS THAT YOU VOTE "FOR"
APPROVAL OF EACH OTHER ITEM LISTED ON THIS NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS.
Stockholders of record at the close of business on June 24, 2004, are the
only persons entitled to notice of and to vote at the meeting.
Your attention is directed to the attached Proxy Statement. WHETHER OR NOT
YOU EXPECT TO BE PRESENT AT THE ANNUAL MEETING, PLEASE FILL IN THE INFORMATION
COMPLETLY. PLEASE SIGN, DATE AND MAIL THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE
IN ORDER TO SAVE THE COMPANY FURTHER SOLICITATION EXPENSE. If you are present at
the meeting, you may then revoke your proxy and vote in person, as explained in
the Proxy Statement in the section entitled "ANNUAL MEETING OF STOCKHOLDERS -
AUGUST 5, 2004." A return envelope is enclosed for your convenience.
/s/ Richard B. Slansky
--------------------------
Richard B. Slansky
Corporate Secretary
Dated: June 24, 2004
PAGE 2
________________________________________
PROXY STATEMENT
________________________________________
SPACEDEV, INC.
13855 Stowe Drive
Poway, California 92064
ANNUAL MEETING OF STOCKHOLDERS - AUGUST 5, 2004
The enclosed Proxy is solicited by the Board of Directors of SpaceDev, Inc.
(the "Board") in connection with the annual meeting of stockholders of SpaceDev,
Inc. (the "Company") to be held on August 5, 2004 at 11:00 A.M. at 13855 Stowe
Drive, Poway, California 92064, and at any adjournments thereof. The Company
will pay the cost of solicitation, including the cost of preparing and mailing
the Notice of Stockholders' Meeting and this Proxy Statement. Such mailing took
place on approximately July 12, 2004. Representatives of the Company may,
without cost to the Company, solicit Proxies for the management of the Company
by means of mail, telephone or personal calls.
A Proxy may be revoked before the meeting by giving written notice of revocation
to the Secretary of the Company, or may be revoked at the meeting, prior to
voting. Unless revoked, properly executed Proxies with respect to the Company
will be voted as indicated in this Proxy Statement. Should any other matters
come before the meeting, it is the intention of the persons named as Proxies in
the enclosed Proxy to act upon them according to their best judgment. In
instances where choices are specified by the stockholders in the Proxy, those
Proxies will be voted or the vote will be withheld in accordance with each
stockholder's choice. An "abstention" on any proposal will be counted as
present for purposes of determining whether a quorum of shares is present at the
meeting with respect to the proposal on which the abstention is noted, but will
be counted as a vote "against" such proposal.
Only stockholders of record at the close of business on June 24, 2004 may vote
at the meeting or any adjournments thereof. As of that date there were issued
and outstanding approximately 18,935,285 common shares of all classes, $.0001
par value, of the Company. Each stockholder is entitled to one vote for each
common share held. Voting for the election of directors is not cumulative, which
means that the holders of a majority of the Company's outstanding shares have
the power to elect the entire Board of Directors. None of the matters to be
presented at the meeting will entitle any stockholder to appraisal rights. In
the event that Proxies, which are sufficient in number to constitute a quorum,
are not received by August 5, 2004, we may propose one or more adjournments of
the meeting to permit further solicitation of Proxies. Such adjournments will
require the affirmative vote of the holders of a majority of the shares present
in person or by Proxy at the meeting. The persons named as Proxies will vote in
favor of such adjournment. At the annual meeting, the stockholders will be asked
to re-elect the current members of our Board of Directors, to approve the
selection of the independent public accountant for the Company and to approve
the Company's 2004 Equity Incentive Plan.
PAGE 3
STOCK OWNERSHIP
The following table provides information as of June 11, 2004 concerning the
beneficial ownership of our common stock by (i) each director, (ii) each named
executive officer, (iii) each shareholder known by us to be the beneficial owner
of more than 5% of our outstanding Common Stock, and (iv) the directors and
officers as a group. Except as otherwise indicated, the persons named in the
table have sole voting and investing power with respect to all shares of Common
Stock owned by them.
Title of Name and Address of Amount and Percent of
Class Beneficial Owner Nature of Class(1)
Beneficial
Ownership(1)
---------- ---------------------- ---------------- -----------
..0001 par James W. Benson, CEO 9,748,373(2) 50.72%
value and Chairman
common 13855 Stowe Drive
stock Poway, California 92064
..0001 par Richard B. Slansky 208,357(3) 1.13%
value 13855 Stowe Drive
common Poway, California 92064
stock
..0001 par Randall K. Simpson 12,500(11) 0.07%
value 13855 Stowe Drive
common Poway, California 92064
stock
..0001 par J. Mark Grosvenor 1,330,376(4) 7.30%
value 13855 Stowe Drive
common Poway, California 92064
stock
..0001 par Curt Dean Blake 138,430(5) 0.76%
value Director
common 13855 Stowe Drive
stock Poway, California 92064
..0001 par Wesley T. Huntress Jr. 88,015(6) 0.48%
value Director
common 13855 Stowe Drive
stock Poway, California 92064
..0001 par General Howell M. 61,667(7) 0.34%
value Estes III, Director
common 13855 Stowe Drive
stock Poway, California 92064
PAGE 4
..0001 par Robert S. Walker 59,167(8) 0.32%
value Director
common 13855 Stowe Drive
stock Poway, California 92064
..0001 par Stuart Schaffer, Director 218,206(9) 1.19%
value 13855 Stowe Drive
common Poway, California 92064
stock
..0001 par Scott McClendon 20,230(10) 0.11%
value Director
common 13855 Stowe Drive
stock Poway, California 92064
---------- ---------------------- ---------------- -----------
..0001 par Officers and Directors as 10,554,945(11) 53.09%
value a group (9 Persons)
common
stock
---------- ---------------------- ---------------- -----------
---------- ---------------------- ---------------- -----------
(1) Where persons listed on this table have the right to obtain additional
shares of our common stock through the exercise of outstanding options or
warrants or the conversion of convertible securities within 60 days from June
11, 2004, these additional shares are deemed to be beneficially owned for the
purpose of computing the amount and percentage of common stock owned by such
persons. Percentages are based on total outstanding shares on June 11, 2004
plus options and warrants that will become exercisable for that individual
within 60 days of June 11, 2004.
(2) Represents 8,257,647 shares held directly by Mr. Benson and his wife,
Susan Benson, (including 486,647 shares as part of the Company's convertible
debt repayment when he converted $187,500 of his debt into shares in 2003);
497,413 shares transferred from SD Holdings, LLC to Space Development Institute,
a 501(c)(3) corporation; plus vested options on 506,666 shares; and, warrants on
486,647 shares (Mr. Benson forgave half of his warrants on 973,294 shares as
part of the convertible debt repayment). In addition, Mr. Benson has unvested
options on 2,003,334 shares. In 2003, 8,245,000 shares were transferred from SD
Holdings, LLC, an entity previously controlled by Mr. Benson, directly to Mr.
Benson and his children. Mr. Benson's children now hold 1,312,000 shares. Mr.
Benson disclaims ownership of shares held by his children.
(3) Mr. Slansky owns 40,895 shares of which 38,462 shares he purchased for
cash in a private transaction with Mr. Skarupa, the Company's former Vice
President of Operations; 38,462 warrants which were also purchased from Mr.
Skarupa; and, vested options on 129,000 shares. Mr. Slansky also holds 621,000
unvested options.
(4) Mr. Grosvenor owns 665,188 shares of our common stock plus 665,188
vested warrants that he purchased in our private placement. On May 6, 2003, Mr.
Grosvenor was granted options on 19,615 shares, which he forfeited upon his
resignation from the Board on September 15, 2003.
(5) Mr. Blake owns 30,612 shares of our common stock plus 30,612 vested
warrants that he purchased in our private placement. Mr. Blake also owns 77,206
vested options, which he received as compensation for his participation on our
Board of Directors. In addition, Mr. Blake has unvested options on 69,500
shares.
PAGE 5
(6) Mr. Huntress owns 8,868 shares of our common stock. Mr. Huntress also
owns 79,147 vested options, which he received as compensation for his
participation on our Board of Directors. In addition, Mr. Huntress has unvested
options on 75,500 shares.
(7) General Estes III owns 61,667 vested options, which he received as
compensation for his participation on our Board of Directors. In addition,
General Estes III has unvested options on 43,000 shares.
(8) Mr. Walker owns 59,167 vested options, which he received as compensation
for his participation on our Board of Directors. In addition, Mr. Walker has
unvested options on 28,500 shares.
(9) Mr. Schaffer owns 64,103 warrants, however in 2003 as part of the
Company's convertible debt repayment, Mr. Schaffer forgave 64,103 warrants and
converted $25,000 of his debt to the Company into 64,103 shares. Mr. Schaffer
also owns 90,000 vested options, which he received as part of his compensation
package as Vice President of Product Development and Marketing.
(10) Mr. McClendon owns 20,230 vested options, which he received as
compensation for his participation on our Board of Directors. In addition, Mr.
McClendon has unvested options on 78,230 shares.
(11) Officers and directors as a group include our seven Board members, one of
whom is also an officer of the Company, Messrs. Slansky and Simpson.
ANNUAL REPORT OF THE COMPANY
The annual report of the Company containing audited financial statements
for the twelve-months ending December 31, 2003 was mailed to the stockholders on
or about July 12, 2004.
PROPOSAL 1
ELECTION OF DIRECTORS
It is intended that the enclosed Proxy will be voted for the election of
the seven (7) persons named below as directors for the Company unless such
authority has been withheld in the respective Proxy. The term of office of each
person elected to our Board of Directors will be until the next regular or
annual meeting of the stockholders at which election of directors is an agenda
item and until his successor is duly elected and shall qualify. Each of our
current directors is a nominee for director. Pertinent information regarding
each nominee for the past five years is set forth following his name below.
PAGE 6
NAME AND AGE POSITION WITH THE COMPANY AND PRINCIPAL OCCUPATIONS ADDRESS
---------------------- ------------------------------------------------------- -------------------
James W. Benson (59) Mr. Benson is the founder and has served as our 13855 Stowe Dr.
Chief Executive Officer and Chairman of the Board Poway, CA 92064
since inception, and started the trend of
successful computer entrepreneurs moving into the
entrepreneurial space arena. In 1984, Mr. Benson
founded Compusearch Corporation (later renamed
Compusearch Software Systems), in McLean,
Virginia. The company was based on the first
development of software algorithms and
applications for personal computers and networked
servers to create full text indexes of massive
government procurement regulations and to provide
instant full text searches for any word or phrase;
the first instance of large scale, commercial
implementation of PC-based full text searching,
which later grew to encompass such systems as
worldwide web search engines. Seeing related
opportunities in document and image management,
Mr. Benson started the award-winning ImageFast
Software Systems in 1989, which later merged with
Compusearch. In 1995, Mr. Benson sold Compusearch
and ImageFast, and retired at age fifty. After
months of research, Mr. Benson started SpaceDev,
Inc., a Nevada corporation, which was acquired by
us in October 1997. Mr. Benson holds a Bachelor of
Science degree in Geology from the University of
Missouri. He founded the non-profit Space
Development Institute, and introduced the $5,000
Benson Prize for Amateur Discovery of Near Earth
Objects. He is also Vice-Chairman and private
sector representative on NASA's national Space
Grant Review Panel, and is a member of the
American Society of Civil Engineers subcommittee
on Near Earth Object Impact Prevention and
Mitigation.
---------------------- ------------------------------------------------------- -------------------
Scott McClendon (65) Scott McClendon was appointed to our Board of 13855 Stowe Dr.
Directors as an independent director on July 19, Poway, CA 92064
2002. McClendon currently sits on the Board of
Directors for Overland Storage, Inc., a public
company, where he acts as chairman of the Board.
He became the chairman after serving as president
and chief executive officer from October 1991 to
March 2001. Prior to joining Overland Storage,
Inc., Mr. McClendon was employed by
Hewlett-Packard Company for over 32 years in
various positions of engineering, manufacturing,
sales and marketing. In addition to SpaceDev and
Overland Storage, Mr. McClendon is currently
serving on the Board of Directors of Procera
Networks, Inc., a public company, and Sicommnet,
Inc., privately held high technology company. Mr.
McClendon received a Bachelor of Science degree in
electrical engineering in June 1960, and a Master
of Science degree in electrical engineering in
June 1962 from Stanford University School of
Engineering.
---------------------- ------------------------------------------------------- -------------------
PAGE 7
Curt Dean Blake(46) Curt Dean Blake was appointed to our Board of 13855 Stowe Dr.
Directors as an independent director on September Poway, CA 92064
5, 2000. Mr. Blake is CEO of GotVoice, Inc., a
startup company in the voicemail consolidation and
messaging business. From 1999 to 2002, Mr. Blake
provided consulting services to various technology
companies, including Apex Digital, Inc. and
SceneIt.com. Mr. Blake acted as the Chief
Operating Officer of the Starwave Corporation from
1993 until 1999, where he managed business
development, finance, legal and business affairs,
and operations for the world's most successful
collection of content sites on the Internet.
During that time, he developed business
strategies, financial models, and structured and
negotiated venture agreements for Starwave's
flagship site, ESPN Sportszone, at that time the
highest traffic destination site on the Internet.
He also developed and negotiated venture
agreements with the NBA, NFL, Outside Magazine and
NASCAR to create sites around these brands. Mr.
Blake negotiated sale of controlling interest in
Starwave Corporation to Disney/ABC. Prior to
Starwave, Mr. Blake worked at Corbis from 1992 to
1993, where he led the acquisitions and licensing
effort to fulfill Bill Gates' vision of creating
the largest taxonomic database of digital images
in the world. Mr. Blake acted as General Counsel
to Aldus Corporation from 1989 to 1992, where he
was responsible for all legal matters of the $125
million public corporation and its subsidiaries.
Prior to that, Mr. Blake was an attorney at
Shidler, McBroom, Gates and Lucas, during which
time he was assigned as onsite counsel to the
Microsoft Corporation, where he was primarily
responsible for the domestic OEM/Product Support
and Systems Software divisions. Mr. Blake has an
MBA and JD from the University of Washington.
---------------------- ------------------------------------------------------- -------------------
Howell M. Estes, III(63) General Howell M. Estes, III (USAF Retired) was 13855 Stowe Dr.
appointed to our Board of Directors as an Poway, CA 92064
independent director on April 2, 2001. General
Estes retired from the United States Air Force in
1998 after serving for 33 years. At that time he
was the Commander-in-Chief of the North American
Aerospace Defense Command ("CINCNORAD") and the
United States Space Command ("CINCSPACE"), and the
Commander of the Air Force Space Command
("COMAFSPC") headquartered at Peterson AFB,
Colorado. In addition to a Bachelor of Science
Degree from the Air Force Academy, he holds a
Master of Arts Degree in Public Administration
from Auburn University and is a graduate of the
Program for Senior Managers in Government at
Harvard's JFK School of Government. Gen. Howell
Estes is the President of Howell Estes &
Associates, Inc., a wholly owned consulting firm
to CEOs, Presidents and General Managers of
aerospace and telecommunications companies
worldwide. He serves as Vice Chairman of the Board
of Trustees at The Aerospace Corporation. He
served as a consultant to the Defense Science
Board Task Force on SPACE SUPERIORITY and more
recently as a commissioner on the U.S.
Congressional Commission to Assess United States
National Security Space Management and
Organization (the "Rumsfeld Commission").
---------------------- ------------------------------------------------------- -------------------
PAGE 8
---------------------- ------------------------------------------------------- -------------------
Robert S. Walker(62) Robert S. Walker was appointed to our Board of 13855 Stowe Dr.
Directors as an independent director on April 2, Poway, CA 92064
2001. Mr. Walker has acted as Chairman of Wexler &
Walker Public Policy Associates in Washington,
D.C. since January 1997. As a former Congressman
(1977-1997), Chairman of the House Science
Committee, Vice Chairman of the Budget Committee,
and a long-time member of the House Republican
leadership, Walker became a leader in advancing
the nation's space program, especially the arena
of commercial space, for which he was the first
sitting House Member to be awarded NASA's highest
honor, the Distinguished Service Medal. Bob Walker
is a frequent speaker at conferences and forums.
His main issues include the breadth and scope of
space regulation today, and how deregulation could
unleash the telecommunications, space tourism,
broadcast and Internet industries. Mr. Walker
currently sits on the boards of directors of
Aerospace Corporation, a position he has held
since March 1997. Wexler & Walker is a
Washington-based, full-service government
relations firm founded in 1981. Wexler & Walker
principals have served in Congress, in the White
House and federal agencies, as congressional
staff, in state and local governments and in
political campaigns. Wexler & Walker is a leader
on the technology issues of the twenty-first
century. During 2002, we incurred consulting fees
with Hill and Knowlton, Inc., an affiliate of
Wexler & Walker, in an aggregate amount of
approximately $56,000. No fees were paid to Hill
and Knowlton in 2003.
---------------------- ------------------------------------------------------- -------------------
Wesley T. Huntress (62) Wesley T. Huntress was elected to our Board of 13855 Stowe Dr.
Directors as an independent director at our annual Poway, CA 92064
stockholder meeting held June 30, 1999. Dr.
Huntress is currently Director of the Geophysical
Laboratory at the Carnegie Institution of
Washington in Washington, DC, where he leads an
interdisciplinary group of scientists in the
fields of high-pressure science, astrobiology,
petrology and biogeochemistry. Prior to his
appointment at Carnegie, Dr. Huntress served the
Nation's space program as the Associate
Administrator for Space Science at NASA from
October 1993 through September 1998 where he was
responsible for NASA's programs in astrophysics,
planetary exploration, and space physics. During
his tenure, NASA space science produced numerous
major discoveries, and greatly increased the
launch rate of missions. These discoveries include
the discovery of possible ancient microbial life
in a Mars meteorite; a possible subsurface ocean
on Jupiter's moon Europa; the finding that gamma
ray bursts originate at vast distances from the
Milky Way and are extraordinarily powerful;
discovery of massive rivers of plasma inside the
Sun; and a wealth of announcements and images from
the Hubble Space Telescope, which have
revolutionized astronomy as well as increased
public interest in the cosmos. Dr. Huntress also
served as a Director of NASA's Solar System
Exploration Division from 1990 to 1993, and as
special assistant to NASA's Director of the Earth
Science and Applications from 1988 to 1990. Dr.
Huntress came to NASA Headquarters from Caltech's
Jet Propulsion Laboratory ("JPL"). Dr. Huntress
joined JPL as a National Research Council resident
associate after receiving is B.S. in Chemistry
from Brown University in 1964 and his Ph.D. in
Chemical Physics from Stanford in 1968. He became
a permanent research scientist at JPL in 1969. He
and his JPL team gained an international
reputation for their pioneering studies of
chemical evolution in interstellar clouds, comets
and planetary atmospheres. At JPL Dr. Huntress
served as co-investigator for the ion mass
spectrometer experiment in the Giotto Halley's
Comet mission, and as an interdisciplinary
scientist for the Upper Atmosphere Research
Satellite and Cassini missions. He also assumed a
number of line and research program management
assignments while at JPL, and spent a year as a
visiting professor in the Department of Planetary
Science and Geophysics at Caltech.
---------------------- ------------------------------------------------------- -------------------
PAGE 9
---------------------- ------------------------------------------------------- -------------------
Stuart E. Schaffer (44) Stuart Schaffer was appointed to our Board of 13855 Stowe Dr.
Directors on May 17, 2002. Mr. Schaffer is Poway, CA 92064
currently VP of Marketing, for Overture
Performance Marketing -- a business unit of
Overture Services, which is a subsidiary of Yahoo!
Mr. Schaffer was our vice president of product
development and marketing from May 2002 to August
2003. From 1998 to 2001, Mr. Schaffer acted as
vice president of marketing for Infocus
Corporation, a fully reporting company, where he
managed all aspects of the marketing mix for
market-share leading digital projection business
throughout the Americas region. In that position,
Mr. Schaffer revitalized the Proxima brand,
managed a multi-million dollar annual advertising,
communications and program budgets, directed
multiple outside and in-house agencies, led
product marketing teams in defining and delivering
both mobile and conference room digital projector
product lines, developed channel strategies and
programs for both value-added and volume channels,
served as primary press spokesperson for the
company, established a market intelligence
structure focused on developing customer and
industry knowledge and spearheaded merger teams to
ensure the smooth transition of the merger between
the Infocus and Proxima marketing organizations.
Prior to Infocus, Mr. Schaffer worked for the
Hewlett-Packard Company from 1985 to 1998, where
he held various positions in Business Development,
Marketing and Business Planning. Mr. Schaffer has
worked with the Leukemia & Lymphoma Society, on a
volunteer basis, as an Assistant Coach and Mentor.
Mr. Schaffer has an MBA from Harvard University
and a BS degree in physics from Harvey Mudd
College.
---------------------- ------------------------------------------------------- -------------------
One of our independent directors currently sits on the board of directors
of another Reporting Company. "Reporting Companies" include companies with a
class of securities registered pursuant to Section 12 of the Securities Exchange
Act of 1934, as amended (the "1934 Act") or subject to the requirements of
Section 15(d) of the 1934 Act, or any company registered as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act").
COMMITTEES OF THE BOARD OF DIRECTORS AND MEETING ATTENDANCE
We have a standing audit committee comprised of Messrs. Blake, McClendon
and Dr. Huntress. On March 25, 2004, the Board established two new committees
of the Board of Directors: the Compensation Committee and the Nominating and
Governance Committee. Mr. McClendon chairs the Compensation Committee with
General Estes and Mr. Blake as members. General Estes chairs the Nominating and
Governance Committee with Dr. Huntress and Mr. Walker as members. Each
committee is required to have a minimum of three (3) independent members. Each
member of the Compensation Committee and the Nominating and Governance Committee
are "independent" as defined by applicable listing standards of The Nasdaq Stock
Market and SEC rules.
PAGE 10
No charter has been adopted for our Nominating and Governance Committee to
date, although the Board intends to adopt one. The Board has no established
policy with regard to the consideration of any director or candidate recommended
by shareholders of the Company, although the Committee intends to adopt
standards at its next meeting. Until recently, our Chief Executive Officer held
more than 50% of our outstanding capital stock. Because of the practical
necessity that a candidate for director must be acceptable to Mr. Benson, in his
capacity as holder of a majority of the Company's voting stock, in order to be
elected, the Board did not believe that such a policy was necessary until such
ownership percentage was diluted or a committee had been appointed.
The Nominating and Governance Committee has the responsibility to identify,
evaluate, recruit and recommend qualified candidates to the Board of Directors
for nomination or election. Each of the director nominees included in this
Proxy Statement were recommended by the Nominating and Governance Committee.
The Board of Directors has as an objective that its membership be composed of
experienced and dedicated individuals with diversity of backgrounds,
perspectives and skills. The Nominating and Governance Committee will select
candidates for director based on their character, judgment, diversity of
experience, business acumen, and ability to act on behalf of all shareholders
based on standards that will be further outlined in a written charter, to be
adopted by the Board of Directors at it's next regular meeting. Each of the
director nominees set forth on the Proxy were selected by the Nominating and
Governance Committee based on his experience in management or accounting and
finance, or industry and technology knowledge, personal and professional ethics,
and the willingness and ability to devote sufficient time to effectively carry
out his duties as a director.
The Company does not maintain any pension, retirement or other arrangements
other than as disclosed in the following table for compensating its Directors.
Our Board of Directors took action seven (7) times during the last fiscal year:
six (6) times at regular or special meetings attended by all of the members of
the Board either personally or telephonically, and one (1) time by unanimous
written consent. Our Audit Committee took separate action four (4) times during
the last fiscal year, each time at a regular or special meeting attended by all
of the members of the committee either personally or telephonically.
DIRECTOR COMPENSATION
At our annual meeting on July 16, 2000, our Board of Directors adopted a
compensation plan for independent directors whereby they received options for
attending meetings of the Board as follows: each such director received an
option to purchase 5,000 shares for each of two telephonic meetings attended per
year, and an option to purchase 10,000 shares for each of two meetings attended
in person per year. These directors did not receive additional compensation for
attending meetings in excess of those described above. In addition to the
above, independent directors received $5,000 in options on the date of election
or appointment. All such options were issued pursuant to our 1999 Incentive
Stock Option Plan at fair market value as of the date of the meeting attended,
were set up to vest 50% on the first anniversary date of the date of grant and
50% on the second anniversary date of the date of grant and expire on the
five-year anniversary of the grant date. The following table sets forth the
remuneration paid to our directors during the fiscal year ended December 31,
2003 under this compensation plan. We do not pay directors, who are also our
officers, additional compensation for their service as directors.
PAGE 11
Cash Compensation Security Grants
--------------------------------- ---------------
Annual Meeting Consulting Number of Number of
Retainer Fees Fees/Other Shares Securities
Fees Fees Underlying
Options/SARs
----------------------------- -------- ------- ---------- --------- ------------
Name
----------------------------- -------- ------- ---------- --------- ------------
James W. Benson . . . . . . . - - - - -
----------------------------- -------- ------- ---------- --------- ------------
J. Mark Grosvenor (1) . . . . - - - - -
----------------------------- -------- ------- ---------- --------- ------------
Stuart Schaffer . . . . . . . - - - - -
----------------------------- -------- ------- ---------- --------- ------------
Wesley T. Huntress. . . . . . - - - - 30,000
----------------------------- -------- ------- ---------- --------- ------------
Curt Dean Blake . . . . . . . - - - - 20,000
----------------------------- -------- ------- ---------- --------- ------------
General Howell M. Estes, III. - - - - 30,000
----------------------------- -------- ------- ---------- --------- ------------
Robert S. Walker. . . . . . . - - - - 30,000
----------------------------- -------- ------- ---------- --------- ------------
Scott McClendon . . . . . . . - - - - 30,000
----------------------------- -------- ------- ---------- --------- ------------
(1) Mr. Grosvenor was issued options to purchase 19,615 shares of our common
stock upon joining the Board of Directors on May 6, 2003. Mr. Grosvenor
forfeited the right to those options when he resigned from the Board on
September 15, 2003. Mr. Grosvenor continues to be one of our investors with
ownership of 665,188 shares and warrants to purchase 665,188 shares.
On March 25, 2004, our Board of Directors modified our compensation plan
for independent directors. Under the modified plan, independent directors will
receive options for attending meetings of the Board as follows: each director
shall receive an option to purchase 6,000 shares for each telephonic meeting
attended and an option to purchase 12,000 shares for each meeting attended in
person, with a cap of options on 36,000 shares per year. Our directors will
also receive compensation for attending committee meetings as follows: each
director shall receive an option to purchase 5,000 shares for each Audit
Committee meeting attended, each director shall receive an option to purchase
2,500 shares for each Compensation Committee meeting attended and each director
shall receive an option to purchase 2,500 shares for each Nominating/Governance
Committee meeting attended, which options shall not be subject to a cap. In
addition to the above, independent directors will receive 5,000 options on the
date of election or appointment. All such options will be issued pursuant to the
Plan at fair market value as of the date of the meeting attended, will vest 50%
on the first anniversary date of the date of grant and 50% on the second
anniversary date of the date of grant and will expire on the
three-year anniversary of the grant date.
EXECUTIVE OFFICERS
Certain information about the current executive officers of the Company is
set forth below. Each executive officer of the Company may be removed from
office at any time by a majority of the Company's Board of Directors with or
without cause.
PAGE 12
James W. Benson, age 59, is our founder and has served as our Chief
Executive Officer and Chairman of the Board since inception, and started the
trend of successful computer entrepreneurs moving into the entrepreneurial space
arena. In 1984, Mr. Benson founded Compusearch Corporation (later renamed
Compusearch Software Systems), in McLean, Virginia. The company was based on
the first development of software algorithms and applications for personal
computers and networked servers to create full text indexes of massive
government procurement regulations and to provide instant full text searches for
any word or phrase; the first instance of large scale, commercial implementation
of PC-based full text searching, which later grew to encompass such systems as
worldwide web search engines. Seeing related opportunities in document and
image management, Mr. Benson started the award-winning ImageFast Software
Systems in 1989, which later merged with Compusearch. In 1995, Mr. Benson sold
Compusearch and ImageFast, and retired at age fifty. After months of research,
Mr. Benson started SpaceDev, Inc., a Nevada corporation, which was acquired by
us in October 1997. Mr. Benson holds a Bachelor of Science degree in Geology
from the University of Missouri. He founded the non-profit Space Development
Institute, and introduced the $5,000 Benson Prize for Amateur Discovery of Near
Earth Objects. He is also Vice-Chairman and private sector representative on
NASA's national Space Grant Review Panel, and is a member of the American
Society of Civil Engineers subcommittee on Near Earth Object Impact Prevention
and Mitigation.
Richard B. Slansky, age 47, is our Chief Financial Officer and Corporate
Secretary and joined us on February 10, 2003. Mr. Slansky served as interim
Chief Executive Officer and Chief Financial Officer of Quick Strike Resources,
Inc., an IT training, services and consulting firm, from July 2002 to February
2003. Previously, Mr. Slansky served as Chief Financial Officer, Vice President
of Finance, Administration and Operations and Corporate Secretary for Path 1
Network Technologies, Inc., a company focused on merging broadcast and cable
quality video transport with IP networks from May 2000 to July 2002. Before his
tenure at Path 1, Mr. Slansky served as President, Chief Financial Officer and
member of the Board of Directors of Nautronix, Inc., a marine
electronics/engineering services company, from January 1999 to May 2000. Prior
to Nautronix, Mr. Slansky served as Chief Financial Officer of Alexis
Corporation, an international pharmaceutical research products technology
company, from August 1995 to January 1999. He also served as President and
Chief Financial Officer of C-N Biosciences, formerly Calbiochem, from July 1989
to July 1995. Mr. Slansky is currently serving on the Board of Directors of two
privately held high technology companies and one closely held, private real
estate company. Mr. Slansky earned a bachelor's degree in economics and science
from the University of Pennsylvania's Wharton School of Business and a master's
degree in business administration in finance and accounting from the University
of Arizona.
Randall K. Simpson, age 57, is our Vice President of Engineering and joined
us in January 2004. Mr. Simpson has over 30 years of diversified experience in
business development, product definition, engineering development and support
for aerospace, commercial and international customers. From October 2000 to
January 2004, Mr. Simpson served as AVP of Program Management for Alvarion,
Inc., a high technology commercial communications firm. From March 1997 to
September 2000, Mr. Simpson was Vice President of Engineering for Cubic Defense
Systems, an engineering and production company providing military training
ranges, laser instrumentation products, space avionics and battlefield
communications equipment. From November 1992 to February 1997, Mr. Simpson
was Program Director for Advanced Test Systems and Engineering Director for GDE
Systems, which develops, integrates and produces test equipment for advanced
electronic aircraft, munitions, space launch, satellite and telecommunications
systems. Mr. Simpson began his career at General Dynamics/Convair where he held
various positions. Mr. Simpson received both his BSEE and MSEE from San Diego
State University.
PAGE 13
EXECUTIVE OFFICER COMPENSATION
During the fiscal years ended December 31, 2001, 2002 and 2003, the Company
granted options to certain of its officers as compensation for their services
pursuant to the Company's Stock Option Plan. Total compensation paid to
officers of the Company for its past three fiscal years is set forth below:
SUMMARY COMPENSATION TABLE
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
---------------------- ---------- ---------
Name and Principal Position(1) Restricted Stock Award(s) ($)
Name and Principal Position(1) Year Salary Bonus Other Annual Restricted Securities LTIP Payouts All Other
($) ($) Compensation Stock Award(s) Underlying ($) Compensation
($) ($) Options/ SARs # ($)
------------------------------ ---- ------- ----- ------------- -------------- ------------ ------------ ------------
James W. Benson, CEO (2) . . . 2001 147,923 - - - - - -
.. . . . . . . . . . . . . . . 2002 141,325 - - - 10,000(2) - -
.. . . . . . . . . . . . . . . 2001 150,000 - - - - - -
Richard B. Slansky, CFO. . . . 2001 - - - - - - -
.. . . . . . . . . . . . . . . 2001 - - - - - - -
.. . . . . . . . . . . . . . . 2001 94,625 - 1,183 - 355,000(3) - -
------------------------------ ---- ------- ----- ------------- -------------- ------------ ------------ ------------
------------------------------ ---- ------- ----- ------------- -------------- ------------ ------------ ------------
(1) The table includes information as to the Chief Executive Officer
and our highest paid officers for the last fiscal year, including persons whose
information would have been required but for the fact that they were not serving
as our officers at its fiscal year end. For purposes of the table, only persons
whose total annual salary and bonus exceeded $100,000 have been included.
(2) Mr. Benson was awarded 10,000 options in 2001 as a part of an annual
award of options to our employees.
(3) Mr. Slansky was awarded up to 385,000 options in 2003 as part of
his employment agreement, with 25,000 vested immediately, 180,000 vesting in
six-month increments over five years and the remaining based on performance
criteria established by the CEO. The timeframe for certain performance criteria
lapsed in 2003 and 30,000 options not earned were forfeited; thereby, reducing
Mr. Slansky's potential securities underlying options to a maximum of 355,000,
as illustrated above.
During the last fiscal year and as of December 31, 2003, we granted stock
options to executive officers as set forth in the following table:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
------------------
Name . . . . . . . Number of Securities % of Total Options/SARs Exercise of Base Expiration
Underlying Granted to Employees in Price ($/Sh) Date
Options/SARs Fiscal Year
Granted (#)
------------------ -------------------- ----------------------- ---------------- ------------
James W. Benson 0 0 0 0
Richard B. Slansky 355,000 29% 0.51 2/10/2009
PAGE 14
As of December 31, 2003, the Company had vested and unvested securities
underlying stock options to executive officers as set forth in the following
table:
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of Securities Underlying Value of Unexercised In-the-Money
Unexercised Options/SARs at FY-End (#) Options/SARs at FY- End ($)
-------------------------------------- ---------------------------------
Exercisable/ Exercisable/
Name . . . . . . . Shares Acquired on Value Realized Unexercisable Unexercisable(1)
Exercise (#) ($)
------------------ ------------------ -------------- -------------------------------------- ---------------------------------
James W. Benson. . 0 0 506,666/ 506,312/
------------------ ------------------ -------------- -------------------------------------- ---------------------------------
2,003,334 3,157
------------------ ------------------ -------------- -------------------------------------- ---------------------------------
Richard B. Slansky 0 0 83,000/ 42,330/
------------------ ------------------ -------------- -------------------------------------- ---------------------------------
272,000 138,720
------------------ ------------------ -------------- -------------------------------------- ---------------------------------
(1) For purposes of determining whether options are "in-the-money," we
defined fair market value as the five-day weighted average of the closing price
of our common stock on the Over-The-Counter Bulletin Board as of March 4, 2004,
or $1.05 per share. All the options listed on the table are "in-the-money,"
except unvested options on 2,000,000 of Mr. Benson's shares.
EMPLOYMENT AGREEMENTS
On November 21, 1997, we entered into a five-year employment agreement with
our CEO, Mr. Benson. This agreement provides for compensation of salary and
stock as well as stock options. This agreement also prohibits Mr. Benson from
competing with us, disclosing any confidential information, or soliciting any of
our employees or customers for one year after termination of employment. Our
Board of Directors revised Mr. Benson's employment agreement at its meeting on
July 16, 2000. This employment contract supercedes the previous agreement. The
term of this revised employment contract is for a period of five (5) years from
July 16, 2000. The revised agreement provides for the grant of options to
purchase up to 4,000,000 shares of our common stock upon the occurrence of
certain events, of which options to purchase 500,000 shares are currently
vested.
On May 17, 2002, we entered into an "at-will" employment agreement with Mr.
Schaffer. The agreement provided for Mr. Schaffer's compensation of salary,
benefits and options to purchase up to 450,000 shares of our common stock. On
July 2, 2003, we entered into a Confidential Separation Agreement and General
Release with Mr. Schaffer. The agreement provided for Mr. Schaffer to receive
salary and benefits until August 8, 2003 and for the resignation of Mr. Schaffer
as an officer, but not as a director. In exchange for a release of claims and
other promises set forth in the agreement, Mr. Schaffer retained certain
exercise rights on his vested options of 90,000 shares until the earlier of (i)
eighteen (18) months from his resignation as a member of our Board of Directors
or other subsequent consulting relationship with us, or (ii) July 19, 2008.
On May 31, 2002, we entered into a Confidential Separation Agreement and
General Release of Claims with Mr. Lloyd, our former Chief Operating Officer and
Chief Financial Officer. The agreement provided for the resignation of Mr.
Lloyd as an officer and director of SpaceDev, Inc. and Integrated Space Systems,
Inc., effective June 14, 2002. In exchange for a release of claims and other
promises set forth in the agreement, Mr. Lloyd received $36,000 and an extension
of the exercise period of each of his non-statutory stock options for a
five-year period from the original date of grant. Until May 31, 2003, the
agreement also prohibits Mr. Lloyd from soliciting our employees, inducing any
customer away from us or representing himself on our behalf.
PAGE 15
On February 14, 2003, we entered into an "at-will" employment agreement
with Mr. Slansky. The agreement provided for Mr. Slansky's compensation of
salary, benefits and options to purchase up to 385,000 shares of our common
stock. The agreement also provided for severance under certain termination
provisions and prohibits Mr. Slansky from soliciting our employees or competing
with us, if he were to leave the Company.
On November 17, 2003, we entered into an "at-will" employment relationship
with Mr. Dario ("Dan") DaPra to become our Vice President of Engineering. Our
offer letter provided for Mr. DaPra's compensation of salary, benefits and
options to purchase up to 250,000 shares of our common stock. The offer letter
also provided for severance under certain termination provisions and prohibits
Mr. DaPra from soliciting our employees or competing with us. Mr. DaPra
resigned on March 5, 2004 and subsequently entered into a Confidential
Separation Agreement and General Release with us. The Agreement provides for
Mr. DaPra to receive one-half pay through April 30, 2004 in lieu of severance,
and to retain options on 40,000 shares of our stock with the ability to exercise
those options until October 31, 2004.
On January 16, 2004, we entered into an "at-will" employment relationship
with Mr. Randall K. Simpson to become our Vice President of New Business
Development. Our offer letter provided for Mr. Simpson's compensation of
salary, benefits and options to purchase up to 250,000 shares of our common
stock. Mr. Simpson assumed the additional position of Vice President of
Engineering with the departure of Mr. DaPra on March 5, 2004.
EMPLOYEE BENEFITS
At our 1999 Annual Stockholder Meeting, the stockholders adopted an
Incentive Employee Stock Option Plan under which its Board of Directors may
grant our employees, directors and affiliates Incentive Stock Options,
Supplemental Stock Options and other forms of stock-based compensation,
including bonuses or stock purchase rights. Incentive Stock Options, which
provide for preferential tax treatment, are only available to employees,
including officers and affiliates, and may not be issued to non-employee
directors. The exercise price of the Incentive Stock Options must be 100% of the
fair market value of the stock on the date the option is granted. Pursuant to
our plan, the exercise price for the Supplemental Stock Options will not be less
than 85% of the fair market value of the stock on the date the option is
granted. We are required to reserve an amount of common shares equal to the
number of shares, which may be purchased as a result of awards made under the
Plan at any time.
At the 2000 Annual Stockholder Meeting, the stockholders approved an
amendment to the Stock Option Plan of 1999, increasing the number of shares
eligible for issuance under the Plan to 30% of the then outstanding common stock
and allowing the Board of Directors to make annual adjustments to the Plan to
maintain a 30% ratio to outstanding common stock at each annual meeting of the
Board of Directors. The Board, at its annual meetings in 2001 and 2002, made no
adjustment, as a determination was made that the number of shares then available
under the Plan was sufficient to meet the Company's needs. As of December 31,
2003, 4,184,698 shares were authorized for issuance under the Plan, 3,124,807 of
which are currently subject to outstanding options and awards and options on
37,000 shares were exercised in 2003. The Stock Option Plan of 1999 was
registered with the U.S. Securities & Exchange Commission on Form S-8.
PAGE 16
During 2003, we issued non-statutory options to purchase 140,000 shares to
our independent directors for attendance at our 2003 Board of Directors
meetings. In addition to the Stock Option Plan of 1999, our stockholders
adopted the 1999 Employee Stock Purchase Plan, which authorized our Board of
Directors to make twelve consecutive offerings of our common stock to our
employees. The 1999 Employee Stock Purchase Plan has been instituted and the
first employees enrolled in the plan in August 2003. The first shares of common
stock were issued under the Plan in February 2004. We also offer a variety of
health, dental, vision, 401(k) and life insurance benefits to our employees in
conjunction with our co-employment partner, Administaff.
On June 11, 2204, we had 140,926 shares available under our 1999 Stock
Option Plan. The 1999 Stock Option Plan will be retired except with respect to
outstanding options and awards once those shares have been issued pursuant to
stock options or other awards. We are proposing the adoption of a new plan, as
outlined in Proposition 3 below.
EQUITY COMPENSATION PLAN INFORMATION
(a) (b) (c)
--------------------------- ------------------- --------------------------
Plan category. . . Number of securities Weighted-average Number of securities
to be issued upon exercise price of remaining available for
exercise of outstanding outstanding future issuance under
issuance options, warrants options, warrants equity compensation plans
and rights and rights (excluding securities
reflected in column (a))
Equity
compensation plans 3,124,807 $ 0.93 1,022,891
approved by
security holders
Equity . . . . . . 2,500,000 $ 2.00 0
compensation plans
not approved by
security holders
Total. . . . . . . 5,624,807 $ 1.47 1,022,891
------------------ --------------------------- ------------------- --------------------------
PAGE 17
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
James W. Benson, our Chief Executive Officer and Chairman of the Board of
Directors, and Susan Benson, our former Corporate Secretary, are husband and
wife. Mr. Benson has personally guaranteed the building lease on our facility.
One of our independent directors, Robert S. Walker, is a principal of
Wexler & Walker Public Policy Associates, a Washington-based, full-service
government relations firm founded in 1981. Wexler & Walker principals have
served in Congress, in the White House and federal agencies, as congressional
staff, in state and local governments and in political campaigns. Wexler &
Walker is a leader on the technology issues of the twenty-first century. During
2003, we did not incur any consulting fees from Wexler & Walker or any of its
affiliates; however, during 2002, we incurred consulting fees with Hill and
Knowlton, Inc., an affiliate of Wexler & Walker, in an aggregate amount of
approximately $56,000.
In December 2001, we entered into a consulting agreement with one of our
independent directors, Curt D. Blake, pursuant to which Mr. Blake agreed to
perform certain services for us and identify and qualify significant investors
and potential acquisition targets for us. Under the agreement, Mr. Blake was to
receive compensation, in cash and non-statutory stock options, for his services.
In addition, Mr. Blake was to receive a cash finder's fee plus a common stock
grant for all monies raised as a result of introductions made by him. However,
as a result of the independence rules imposed by the Sarbanes-Oxley Act of 2002,
Mr. Blake voluntarily terminated his agreement with us on November 25, 2002. We
made no payments to Mr. Blake in 2003 and 2002, other than reimbursement of
Board-related travel expenses.
In September and October 2002, certain of our officers provided personal
interest-free short-term loans to support our working capital needs. The
officer loans were paid with the proceeds from imminently pending contract
payments and the proceeds of the convertible note program sales.
From October 14, 2002 through November 14, 2002, we sold an aggregate of
$475,000 of 2.03% convertible debentures to two of our directors, officers and
Mr. Skarupa, a former officer. Mr. Benson purchased $375,000 of Series A
Subordinated Convertible Notes and Mr. Shaffer purchased $50,000. The total
funding was completed on November 14, 2002. The convertible debentures entitled
the holder to convert the principal and unpaid accrued interest into our common
stock when the note matured. The notes originally were set to mature six (6)
months from issue date and were subsequently extended to twelve (12) months from
issue date on March 19, 2003. Unless paid, extended or re-negotiated, the
convertible debentures are exercisable into a number of our common shares at a
conversion price that equals the 20-day average asking price less 10%, which was
established when the note was issued, or the initial conversion price.
Concurrent with the issuance of the convertible debentures, we issued to the
subscribers, warrants to purchase up to 1,229,705 shares of our common stock.
These warrants are exercisable for three (3) years from the date of issuance at
the initial exercise price, which equals to the 20-day average asking price less
10% which was established when the note was issued, or the initial conversion
price. Upon issuance, the warrants were valued using the Black-Scholes pricing
model based on the expected fair value at issuance and the estimated fair value
was recorded as debt discount. See Note 8(c) to our Consolidated Financial
Statements for discussion of the terms of the warrants. The debt discount was
being amortized as additional interest expense over the term of the convertible
debentures.
PAGE 18
On September 5, 2003, we repaid one-half of the convertible notes, with the
condition that the note holders would convert the other half. Also, as a
condition of the partial repayment, the note holders were required to relinquish
one-half of the previously issued warrants. Finally, as additional
consideration for the transaction, the note holders were offered 5% interest on
their notes, rather than the stated 2.03% for a total of $18,161 of interest
expense. All the note holders accepted the offer and the convertible notes were
retired. In order for Mr. Skarupa, our former Vice President of Operations, to
accept the offer, he entered into a private transaction with Mr. Slansky, our
Chief Financial Officer. Mr. Slansky purchased 60% of Mr. Skarupa's note
conversion for $15,000 in cash and received 38,462 shares of common stock on the
conversion as well as warrants on an additional 38,462 shares of common stock.
As of December 31, 2003, we recorded a credit of $88,408, as debt discount
recovery; therefore, for the year ending December 31, 2003, the debt discount
expense was $112,500. The Company also expensed $131,411 for non-cash loan fee
expense related to the convertible note. Fair market value of the stock was
determined by discounting the closing market price on the date of the
transaction by 20%, based on the nature of the restricted securities.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based upon a review on the Forms 3 and 4 furnished to us with respect to
our most recent fiscal year, each of the Directors and/or Executive Officers
timely filed his initial Form 3 and Form 4 under Section 16(a) of the Securities
and Exchange Act of 1934 during 2003 with the following exceptions: Mr. Slansky
filed his Form 3 on March 28, 2003 after the Board approved his contract and
options. Prior to March 28, 2003, Mr. Slansky had no beneficial ownership in us
but should have filed a Form 3 on or before February 21, 2003. Messrs. Blake,
Estes, Grosvenor, Huntress, McClendon and Walker filed their Form 4 related to
options granted at the May Board meeting on June 4, 2003, a few days late.
Messrs. Benson, Schaffer and Slansky filed their Form 4 related to retirement of
our convertible debt program on September 15, 2003, a few days late due to the
delay in getting signatures from all parties to the transaction. Mr. DaPra
filed his Form 3 on December 22, 2003, one day late.
REQUIRED VOTE
In voting for directors, you must vote all of your shares noncumulatively.
This means that the owners of a majority of the Company's outstanding common
shares have the power to elect the entire Board of Directors. The vote of a
majority of shares of the Company represented at the meeting, provided at least
a quorum (a majority of the outstanding shares) is represented in person or by
proxy, is sufficient for the election of the above nominees. By completing the
Proxy, you give the named Proxies the right to vote for the persons named in the
table above. If you elect to withhold authority for any individual nominee or
nominees, you may do so by making an "X" in the box marked "VOTE FOR NOMINEE(S)
NOT LINED OUT," and by striking a line through the nominees' name or names on
the Proxy that you do not vote for.
Each of the nominees for director has agreed to serve as a director of the
Company until his replacement is elected and qualified. If any unforeseen event
prevents one or more of the nominees from serving as a director, your votes will
be cast for the election of a substitute or substitutes selected by the Board.
In no event, however, can the Proxies be voted for a greater number of persons
than the number of nominees named. Unless otherwise instructed, the Proxies
will vote for the election of each nominee to serve as a director of the
Company.
OUR BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE
NOMINEES TO THE BOARD OF DIRECTORS OF THE COMPANY.
PAGE 19
PROPOSAL 2
RATIFICATION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Sarbanes-Oxley Act of 2002 ("Act") established the Public Company
Accounting Oversight Board ("PCAOB") and charged it with the responsibility of
overseeing the audits of public companies that are subject to the federal
securities laws. Under the Act, the PCAOB's duties include the establishment of
a registration system for public accounting firms. The PCAOB proposed rules for
the registration process, which required approval of the U.S. Securities
Commission ("SEC") prior to enforcement. All public accounting firms were
required to register with the PCAOB in order to prepare or issue audit reports
on U.S. public companies, or to play a substantial role in the preparation or
issuance of such reports. Public accounting firms are required to file periodic
reports with the PCAOB. At this time last year, the cost of compliance with
these new rules was not determined, and, as a result of the legislation, it
appeared that the cost of professional liability insurance for public accounting
firms would be dramatically increased. We were informed by our prior
independent auditor, Nation Smith Hermes Diamond, Accountants and Consultants,
P.C. ("Nation Smith"), that they did not intend to register with the PCAOB at
that time and, as a result, would not be able to continue to act as our
independent auditors.
Our Board of Directors selected PKF, Certified Public Accountant a professional
corporation, as the Company's independent accountants for the fiscal year ending
December 31, 2003, and has directed us to submit PKF, Certified Public
Accountant, again, as our selection of independent accountants to the
stockholders for ratification at the Annual Meeting for the fiscal year ending
December 31, 2004. A representative of PKF, Certified Public Accountant, is
expected to be present at the Annual Meeting.
Stockholders are not required to ratify the selection of PKF, Certified Public
Accountant, as the Company's independent accountants. However, our Board of
Directors is submitting the selection of PKF, Certified Public Accountant, to
the stockholders for ratification as a matter of good corporate practice. If the
stockholders fail to ratify the selection, our Board of Directors will
reconsider whether or not to retain that firm. Even if the selection is
ratified, the Board, in its discretion, may direct the appointment of a
different independent accounting firm at any time during the year if it
determines that such a change would be in the best interests of the Company and
its stockholders.
AUDIT FEES
The following are the fees billed us by our auditors, PKF and Nation Smith,
respectively, for services rendered thereby during 2003 and 2002:
2003 2002
------- -------
Audit Fees . . . . $55,025 $54,500
------------------ ------- -------
Audit Related Fees $ - $ -
------------------ ------- -------
Tax Fees . . . . . $ 7,850 $11,734
------------------ ------- -------
All Other Fees . . $ 5,093 $12,712
------------------ ------- -------
Audit Fees consist of the aggregate fees billed for professional services
rendered for the audit of our annual financial statements and the reviews of the
financial statements included in our Forms 10-QSB and for any other services
that are normally provided by PKF and Nation Smith in connection with our
statutory and regulatory filings or engagements.
PAGE 20
Audit Related Fees consist of the aggregate fees billed for professional
services rendered for assurance and related services that were reasonably
related to the performance of the audit or review of our financial statements
and were not otherwise included in Audit Fees.
Tax Fees consist of the aggregate fees billed for professional services
rendered for tax compliance, tax advice and tax planning. Included in such Tax
Fees were fees for preparation of our tax returns and consultancy and advice on
other tax planning matters.
All Other Fees consist of the aggregate fees billed for products and
services provided by PKF and Nation Smith and not otherwise included in Audit
Fees, Audit Related Fees or Tax Fees. Included in such Other Fees were fees for
services rendered by PKF or Nation Smith in connection with our private and
public offerings conducted during such periods.
Our Audit Committee has considered whether the provision of the non-audit
services described above is compatible with maintaining PKF's and Nation Smith's
independence and determined that such services are appropriate.
Before the auditors are engaged to provide us audit or non-audit services,
such engagement is approved by the Audit Committee of our Board of Directors.
The affirmative vote of the holders of a majority of the common shares
represented and voting at the meeting will be required to ratify the selection
of PKF, Certified Public Accountant a professional corporation.
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
RATIFY SELECTION OF THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR
ENDING DECEMBER 31, 2004.
PROPOSAL 3
APPROVAL OF
2004 EQUITY INCENTIVE PLAN
On June 11, 2004, we had only 140,926 options remaining available for grant
under our 1999 Stock Option Plan. The Board of Directors is asking stockholders
to approve the proposed 2004 Equity Incentive Plan, which is attached to this
Proxy Statement as Appendix A. The 2004 Equity Incentive Plan would authorize
and reserve for issuance under the Plan 2,000,000 shares of the Company's common
stock. We have used our 1999 plan to provide employees, directors and
consultants an incentive for continued and future service. The 2004 Equity
Incentive Plan is an important part of the Company's total compensation program
because competitive benefit programs are a critical component of our efforts to
attract and retain qualified employees, directors and consultants. We are
asking for the approval of this plan to continue providing this benefit to new
and current employees, directors and consultants.
The 2004 Equity Incentive Plan is described below.
PAGE 21
DESCRIPTION OF THE PLAN
The purpose of the Company's 2004 Equity Incentive Plan (the "Plan") is to
provide selected eligible employees, directors and certain types of consultants
of and to the Company, its subsidiaries, and affiliates an opportunity to
participate in the Company's future by offering them an opportunity to acquire
stock in the Company so as to retain, attract and motivate them. Options
granted under the Plan may be Incentive Stock Options or Non-statutory Stock
Options, as determined by the Board of Directors or a committee appointed by the
Board of Directors at the time of grant. Limited rights and stock awards may
also be granted under the Plan. The options, limited rights and awards are
collectively referred to in this discussion as "Awards."
A stock option is the right to purchase a certain number of shares of
stock, at a certain exercise price, in the future. The exercise price of
Incentive Stock Options may not be less than 100% of the fair market value of
the common stock as of the date of grant (110% of the fair market value if the
grant is to an employee who owns more than 10% of the total combined voting
power of all classes of our capital stock). The Code currently limits to
$100,000 the aggregate value of common stock for which incentive stock options
may first become exercisable in any calendar year under the Plan or any other
option plan adopted by the Company. Non-statutory Stock Options may be granted
under the Plan at an exercise price of not less than 85% of the fair market
value of the common stock on the date of grant. Non-Statutory Stock Options also
may be granted without regard to any restriction on the amount of common stock
to which the option may first become exercisable in any calendar year.
Regardless of which type of option is granted to an employee of the Company, the
option will expire ninety (90) days after termination of employment for any
reason other than death, disability or retirement; provided, however, that all
rights under any options expire immediately upon termination of an employee for
cause.
A limited right is the right to receive the net of the market price of
a share of stock and the exercise price of the right, either in cash or in
stock, in the future. In no event may a limited right issued under the Plan be
exercisable in whole or in part before the expiration of six (6) months from the
date of grant, and the right may only be exercise in the event of a change in
control of the Company. In addition, limited rights issued under our plan may be
exercised only when the underlying option is exercisable and the fair market
value of the shares on the date of exercise is greater than the exercise price
of the underlying option. The limited right and the option terminate
simultaneously upon exercise of one or the other. Limited rights issued under
the plan may be for no more than 100% of the difference between the purchase
price and the fair market value of the stock subject to the underlying option.
The Committee may issue restricted stock awards under the Plan to employees
and independent directors. The Committee has discretion to determine the dates
on which stock awards will vest and any specific conditions or performance goals
which must be satisfied prior to vesting of any portion of the Award. Stock
awards which are not fully vested at the time of termination of the employee for
any reason other than death, disability or retirement or as a result of
termination for cause, the unvested portion of the award will be forfeit as of
the date of termination.
The Committee has discretion to accelerate the vesting of any Award issued
under the Plan.
The Committee may award Incentive Stock Options only to full-time employees
(including officers) of the Company and its affiliates under the Plan. A
non-employee director, as well as part-time employees and certain consultants,
of the Company are not eligible to receive Incentive Stock Options, but may
receive Non-Statutory Stock Options under the Plan.
PAGE 22
ADMINISTRATION
The Plan shall be administered by the Compensation Committee. Subject to
the provisions of the Plan, the specific duties of the Compensation Committee,
and subject to the approval of any relevant authorities, the Compensation
Committee shall have the authority in its discretion:
(i) to determine the fair market value;
(ii) to select the employees, directors and consultants to whom Awards may
from time to time be granted hereunder;
(iii) to approve forms of agreement for use under the Plan;
(iv) to determine the terms and conditions of any Award granted under the
Plan, including, but not limited to, the exercise price, the time or times
when Awards may be exercised (which may be based on performance criteria),
any vesting and any restriction or limitation regarding any Award or the
common stock relating thereto, based in each case on such factors as the
Committee, in its sole discretion, shall determine;
(v) to reduce the exercise price of any Option to the then current Fair
Market Value if the Fair Market Value of the common stock covered by the
Option has declined since the grant date;
(vi) to prescribe, amend and rescind rules and regulations relating to the
Plan, including rules and regulations relating to sub-plans established for
the purpose of qualifying for preferred tax treatment under foreign tax
laws;
(vii) to allow participants in the Plan to satisfy withholding tax
obligations on options by electing to have the Company withhold from the
common stock to be issued upon exercise of an option that number of shares
having a fair market value equal to the amount required to be withheld. The
fair market value to be withheld will be determined on the date that the
amount of tax to be withheld is to be determined; and
(viii) to construe and interpret the terms of the Plan and Awards granted
pursuant to the Plan.
All determinations and interpretations made by the Compensation Committee
shall be binding and conclusive on all participants in the Plan and on their
legal representatives and beneficiaries. Because option grants and other Awards
under the Plan are subject to the discretion of the Committee, awards under the
Plan for the current year are indeterminable. Future option exercise prices
under the Plan are also indeterminable because they will be based upon the fair
market value of the common stock on the date of grant.
PAGE 23
SHARES SUBJECT TO THE PLAN
Subject to adjustment, the maximum number of shares of common stock
reserved for Awards under the Plan is 2,000,000 shares. These shares of common
stock may be either authorized but unissued shares or authorized shares
previously issued and reacquired by the Company. To the extent that options and
stock awards are granted under the Plan, the shares underlying such Awards will
be unavailable for any other use including future grants under the Plan except
that, to the extent that stock awards or options terminate, expire, or are
forfeited without having been exercised (or in cases where a limited right has
been granted in connection with an option, the amount of such limited right
received in lieu of the exercise of such option), new Awards may be made with
respect to those shares underlying such terminated, expired or forfeited options
or stock awards.
ADJUSTMENTS
The Committee will make adjustments to the number of shares subject to
any award based on any change in the outstanding shares of common stock of the
Company resulting from any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
any similar corporate change, or other increase or decrease in such shares
without receipt or payment of consideration by the Company.
AMENDMENT OR TERMINATION
The Board of Directors may amend or modify the Plan in any or all respects
whatsoever. However, certain amendments may require shareholder approval
pursuant to applicable laws and regulations. In order for the Plan to become
effective for the purpose of obtaining preferential tax treatment for Incentive
Stock Options, we require approval of the stockholders of the Company.
Once approved by both the stockholders and the Board of Directors, the Plan
shall continue in effect for a term of ten (10) years unless sooner terminated.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Incentive stock options granted under the Plan will be afforded favorable
federal income tax treatment under the U.S. Internal Revenue Code of 1986, as
amended (the "Code"). If an option is treated as an Incentive Stock Option, the
recipient will recognize no income upon grant or exercise of the option unless
the alternative minimum tax rules apply. Upon an recipient's sale of the shares
(assuming that the sale occurs more than two years after grant of the option and
more than one year after exercise of the option), any gain will be taxed to the
recipient as long-term capital gain. If the recipient disposes of the shares
prior to the expiration of either of the above holding periods, then the
recipient will recognize ordinary income in an amount generally measured as the
difference between the exercise price and the lower of the fair market value of
the shares at the exercise date or the sale price of the shares. Any gain
recognized on such a premature sale of the shares in excess of the amount
treated as ordinary income will be characterized as capital gain.
PAGE 24
All other options granted under the Plan will be Non-Statutory Stock
Options and will not qualify for any special tax benefits to the recipient. A
recipient will not recognize any taxable income at the time he or she is granted
a Non-Statutory Stock Option. However, upon exercise of the Non-Statutory Stock
Option, the recipient will recognize ordinary income for federal income tax
purposes in an amount generally measured as the excess of the then fair market
value of each share over its exercise price. Upon a recipient's resale of such
shares, any difference between the sale price and the fair market value of such
shares on the date of exercise will be treated as capital gain or loss and will
generally qualify for long term capital gain or loss treatment if the shares
have been held for more than one year. The Code provides for reduced tax rates
for long-term capital gains based on the taxpayer's income and the length of the
taxpayer's holding period.
The recipient of a restricted stock award will generally recognize
ordinary compensation income when such shares are no longer subject to a
substantial risk of forfeiture, based on the excess of the value of the shares
at that time over the price, if any, paid for such shares. However, if the
recipient makes a timely election under the Code to be subject to tax upon the
receipt of the shares, the recipient will recognize ordinary compensation income
at that time equal to the fair market value of the shares over the price paid,
if any, and no further ordinary compensation income will be recognized when the
shares vest.
No taxable income is recognized upon the receipt of a limited right.
The recipient will recognize ordinary income, in the year in which the right is
exercised, equal to the excess of the fair market value of the underlying shares
of common stock on the exercise date over the base price in effect for the
exercised right, and the recipient will be required to satisfy the tax
withholding requirements applicable to such income. The Company will be entitled
to an income tax deduction equal to the amount of ordinary income recognized by
the recipient in connection with the exercise of the limited right. The
deduction will be allowed for the taxable year of the Company in which such
ordinary income is recognized.
We are generally entitled to a deduction for federal income tax
purposes equal to the amount of ordinary compensation income recognized by the
recipient of an award at the time such income is recognized.
The foregoing does not purport to be a complete summary of the federal
income tax considerations that may be relevant to holders of options or
restricted shares, or to us. It also does not reflect provisions of the income
tax laws of any municipality, state or foreign country in which a recipient may
reside, nor does it reflect the tax consequences of a recipient's death.
REQUIRED VOTE
Approval of the Plan requires the affirmative vote of a majority of the
shares present and entitled to vote on this Proposal 3, and such affirmative
vote must also constitute at least a majority of the required quorum for the
meeting. In determining whether this Proposal 3 has been approved, abstentions
and broker non-votes are not counted as votes for or against this proposal.
RECOMMENDATION
OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE COMPANY'S 2004 EQUITY INCENTIVE PLAN.
PAGE 25
OTHER MATTERS
We do not intend to present any business at the meeting not mentioned in
this Proxy Statement, and currently know of no other business to be presented.
If any other matters are brought before the meeting, the appointed Proxies will
vote on all such matters in accordance with their judgment of the best interests
of the Company.
AUDIT COMMITTEE REPORT
Following is the report of the Audit Committee with respect to the
Company's audited consolidated financial statements for the fiscal year ended
December 31, 2003, which include the consolidated balance sheets of the Company
as of December 31, 2003 and 2002 and the related consolidated statements of
operations, stockholders' equity and cash flow for each of the fiscal years
ended December 31, 2003 and 2002, and the notes thereto.
The Audit Committee of the Company's Board of Directors currently consists
of three directors, none of which are employees of the Company or any of its
subsidiaries. Pursuant to an Audit Committee Charter adopted on April 19, 2002,
the Audit Committee is required to be comprised of at least three directors.
The Board believes that the current members of the committee, Mr. Blake, Mr.
McClendon and Dr. Huntress, are "independent" directors as that term is defined
under the Nasdaq listing standards.
The primary responsibility of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities related to corporate
accounting, financial reporting practices, and the quality and integrity of the
Company's financial reports. In that respect, the Audit Committee has reviewed
and discussed the audited financial statements and the footnotes thereto with
management and the independent auditors. The Audit Committee has not been
apprised of any misstatements or omissions in the financial statements. In
addition, the Audit Committee discussed with the independent auditors the
matters required to be discussed by Statement of Auditing Standard No. 61,
Communication with Audit Committees, including, among other items, matters
related to the conduct of the audit of the Company's financial statements.
The Audit Committee has received from the independent accountants, as
required by Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committee, (i) a written disclosure, indicating all
relationships, if any, between the independent auditor and its related entities
and the Company and its related entities which, in the auditor's professional
judgment, reasonably may be thought to bear on the auditor's independence, and
(ii) a letter from the independent auditor confirming that, in its professional
judgment, it is independent of the Company; and the Audit Committee has
discussed with the auditor the auditor's independence from the Company.
Based on the reviews and discussions referred to above, we recommended to
the Board of Directors that the audited consolidated financial statements be
included in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 2003.
PAGE 26
Submitted by the Audit Committee of the Company's Board of Directors:
Curt Dean Blake
Scott McClendon
Wesley T. Huntress
AUDIT COMMITTEE CHARTER
Our Audit Committee currently consists of three independent members of the
Board of Directors: Messrs. Blake, McClendon and Dr. Huntress. On April 19,
2002, the Board of Directors adopted and approved a charter for the Audit
Committee, which is attached to this Proxy Statement as Appendix B. The primary
function of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities by reviewing the financial information
that will be provided to the stockholders and others, the preparation of the
Company's internal financial statements, and the Company's audit and financial
reporting process. In addition, our Audit Committee is responsible for
maintaining free and open lines of communication among the committee, the
independent auditors and management. Our Audit Committee consults with the
Company's management and independent auditors prior to the presentation of
financial statements to stockholder and, as appropriate, initiates inquiries
into various aspects of the Company's financial affairs. The committee is also
responsible for considering and recommending the appointment of and reviewing
fee arrangements with our independent auditors. It is not responsible for
preparing the Company's financial statements or for planning or conducting the
audits.
STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's next Annual Meeting of Stockholders must
be received by the Company no later than March 1, 2005 in order to be considered
for inclusion in the Company's proxy statement and form of proxy relating to
that meeting.
/s/ Richard B. Slansky
-------------------------
Richard B. Slansky,
Corporate Secretary
Dated: June 24, 2004
PAGE 27
APPENDIX A
SPACEDEV, INC.
2004 EQUITY INCENTIVE PLAN
1. PURPOSES OF PLAN. The purpose of this Equity Incentive Plan (the "Plan")
is to provide selected eligible Employees, directors and Consultants of and to
the Company, its Subsidiaries, and Affiliates an opportunity to participate in
the Company's future by offering them an opportunity to acquire stock in the
Company so as to retain, attract and motivate them. Options granted under the
Plan may be Incentive Stock Options or Non-statutory Stock Options, as
determined by the Board of Directors or a committee appointed by the Board of
Directors at the time of grant. Limited Rights and Stock Awards may also be
granted under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Affiliate" means (i) a member of a controlled group of corporations of
which the Company is a member or (ii) an unincorporated trade or business
which is under common control with the Company as determined in accordance
with Section 414(c) of the Code and the regulations issued thereunder. For
purposes hereof, a "controlled group of corporations" shall mean a
controlled group of corporations as defined in Section 1563(a) of the Code
determined without regard to Section 1563(a)(4) and (e)(3)(C).
(b) "Alternate Option Payment Mechanism" refers to one of several methods
available to a Participant to fund the exercise of a stock option set out
in Section 13 hereof. These mechanisms include: broker assisted cashless
exercise and stock for stock exchange.
(c) "Award" means a grant of one or some combination of one or more
Non-statutory Stock Options, Incentive Stock Options, Limited Rights and/or
Stock Awards under the provisions of this Plan.
(d) "Board of Directors" or "Board" means the board of directors of the
Company.
(e) "Change in Control" means a change in control of the Company of a
nature that; (i) would be required to be reported in response to Item 5.01
of the current report on Form 8-K, as in effect as of August 23, 2004,
pursuant to Section 13 or 15(d) of the Exchange Act; or (ii) without
limitation such a Change in Control shall be deemed to have occurred at
such time as (A) any "person" (as the term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 20% or more of the Company's
outstanding securities; or (B) individuals who constitute the Board of
Directors of the Company on the date hereof (the "Incumbent Board") cease
for any reason to constitute at least a majority thereof, provided that any
person becoming a director subsequent to the date hereof whose election was
approved by a vote of at least three-quarters of the directors comprising
the Incumbent Board, or whose nomination for election by the Company's
stockholders was approved by a Nominating Committee serving under an
Incumbent Board, shall be, for purposes of this clause (B), considered as
though he were a member of the Incumbent Board; or (C) a plan of
reorganization, merger, consolidation, sale of all or substantially all the
assets of the Company or similar transaction occurs in which the Company is
not the resulting entity; or (D) after a solicitation of shareholders of
the Company, by someone other than current management of the Company,
stockholders approve a plan of reorganization, merger or consolidation of
the Company or similar transaction with one or more corporations, as a
result of which the outstanding shares of the class of securities then
subject to the plan would be exchanged for or converted into cash or
property or securities not issued by the Company; or (E) a tender offer is
made for 20% or more of the voting securities of the Company.
PAGE 1
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the Compensation Committee or, if no Compensation
Committee is sitting at any time, then a committee consisting of the entire
Board of Directors or consisting solely of two or more members of the Board
of Directors who are defined as Non-Employee Directors, as such term is
defined under Rule 16b-3(b)(3)(i) under the Exchange Act as promulgated by
the Securities and Exchange Commission.
(h) "Common Stock" means the $0.0001 par value Common Stock of the Company,
or any stock exchanged for shares of Common Stock pursuant to Section 17
hereof.
(i) "Company" means SpaceDev, Inc., a Colorado corporation.
(j) "Consultant" means any person who is engaged by the Company or
Subsidiary to render consulting or advisory services to such entity.
(k) "Continuous Employment" means "continuous employment" as defined in
Section 422 of the Code.
(l) "Date of Grant" means the effective date of an Award.
(m) "Disability" means the permanent and total inability by reason of
mental or physical infirmity, or both, of a Participant to perform the work
customarily assigned to him or, in the case of a Director, to serve on the
Board. Additionally, a medical doctor selected or approved by the Board of
Directors must advise the Committee that it is either not possible to
determine when such Disability will terminate or that it appears probable
that such Disability will be permanent during the remainder of said
Participant's lifetime.
(n) "Effective Date" means August 5, 2004, the effective date of the Plan.
(o) "Employee" means any person who is currently employed by the Company or
an Affiliate, including Officers, but such term shall not include Outside
Directors.
(p) "Employee Participant" means an Employee, including an Officer, who
holds an outstanding Award under the terms of the Plan.
(q) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
PAGE 2
(r) "Exercise Price" means the purchase price per share of Common Stock
deliverable upon the exercise of each Option in order for the Option to be
exchanged for shares of Common Stock.
(s) "Fair Market Value" shall be determined as follows:
(i) By multiplying the closing sales price for the Common Stock (or
the closing bid, if no sales were reported) by the total volume of
sales for the day (the "Product"). The Product shall then be
calculated for the five (5) days preceding the time of determination.
The Fair Market Value shall then be the sum of the Products for each
of the five (5) days preceding the time of determination divided by
the total volume of sales for the five (5) days preceding the time of
the determination.
(ii) The volume of sales and the closing price (or the closing bid, if
no sales were reported) shall be as reported in The Wall Street
Journal or such other source as the Committee deems reliable
(t) "Incentive Stock Option" means an Option granted by the Committee to a
Participant, which Option is designated by the Committee as an Incentive
Stock Option pursuant to Section 9 hereof and is intended to be such under
Section 422 of the Code.
(u) "Limited Right" means the right to receive an amount of cash based upon
the terms set forth in Section 10 hereof.
(v) "Non-statutory Stock Option" means an Option to a Participant pursuant
to Section 8 hereof, which is not designated by the Committee as an
Incentive Stock Option or which is redesignated by the Committee as a
Non-statutory Stock Option or which is designated an Incentive Stock Option
under Section 9 hereof, but does not meet the requirements of such under
Section 422 of the Code.
(w) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(x) "Option" means the right to buy a fixed amount of Common Stock at the
Exercise Price within a limited period of time designated as the term of
the option as granted under Section 8 or 9 hereof.
(y) "Outside Director" means a member of the Board of Directors or a
director emeritus of the Company or its Affiliates, who is not also an
Employee.
(z) "Outside Director Participant" means an Outside Director who holds an
outstanding Award under the terms of the Plan.
(aa) "Participant(s)" means collectively an Employee Participant and/or an
Outside Director Participant who hold(s) outstanding Awards under the terms
of the Plan.
PAGE 3
(bb) "Retirement" with respect to an Employee Participant means termination
of employment which constitutes retirement under any tax qualified plan.
However, "Retirement" will not be deemed to have occurred for purposes of
this Plan if a Participant continues to serve as a Consultant to or on the
Board of Directors of the Company or its Affiliates even if such
Participant is receiving retirement benefits under any retirement plan of
the Company or its Affiliates. With respect to an Outside Director
Participant, "Retirement" means the termination of service from the Board
of Directors of the Company or its Affiliates following written notice to
the Board as a whole of such Outside Director's intention to retire, except
that an Outside Director Participant shall not be deemed to have "retired"
for purposes of the Plan in the event he continues to serve as a Consultant
to the Board or as an advisory director or director emeritus, including
pursuant to any retirement plan of the Company.
(cc) "Stock Awards" are Awards of Common Stock which may vest immediately
or over a period of time. Vesting of Stock Awards under Section 11 hereof
may be contingent upon the occurrence of specified events or the attainment
of specified performance goals as determined by the Committee.
(dd) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(ee) "Termination for Cause" shall mean, in the case of a director, removal
from the Board of Directors, or, in the case of an Employee, termination of
employment, in both such cases as determined by the Board of Directors,
because of Participant's personal dishonesty, incompetence, willful
misconduct, any breach of fiduciary duty involving personal profit,
intentional failure to perform stated duties, willful violation of any law,
rule or regulation (other than traffic violations or similar offenses).
3. ADMINISTRATION.
(a) The Plan shall be administered by the Committee, which shall be
constituted to comply with applicable laws. Subject to the provisions of
the Plan, the specific duties of the Committee, and subject to the approval
of any relevant authorities, the Committee shall have the authority in its
discretion:
(i) to determine the Fair Market Value;
(ii) to select the Employees, directors and Consultants to whom Awards
may from time to time be granted hereunder;
(iii) to approve forms of agreement for use under the Plan;
(iv) to determine the terms and conditions of any Award granted
hereunder, subject to the provisions hereof. Such terms and conditions
include, but are not limited to, the exercise price, the time or times
when Awards may be exercised (which may be based on performance
criteria), any vesting and any restriction or limitation regarding any
Award or the Common Stock relating thereto, based in each case on such
factors as the Committee, in its sole discretion, shall determine;
PAGE 4
(v) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;
(vi) to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment
under foreign tax laws;
(vii) to allow Participants to satisfy withholding tax obligations on
Options by electing to have the Company withhold from the Common Stock
to be issued upon exercise of an Option that number of shares having a
Fair Market Value equal to the amount required to be withheld. The
Fair Market Value of the Common Stock to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined. All elections by optionees to have shares withheld for
this purpose shall be made in such form and under such conditions as
the Committee may deem necessary or advisable; and
(viii) to construe and interpret the terms of the Plan and Awards
granted pursuant to the Plan.
(b) All determinations and interpretations made by the Committee shall be
binding and conclusive on all Employee Participants, Outside Director
Participants and Consultants in the Plan and on their legal representatives
and beneficiaries.
4. TYPES OF AWARDS AND RELATED RIGHTS.
The following Awards and related rights as described below in Paragraphs 8
through 11 hereof may be granted under the Plan:
(a) Non-statutory Stock Options
(b) Incentive Stock Options
(c) Limited Rights
(d) Stock Awards
5. STOCK SUBJECT TO THE PLAN.
Subject to adjustment as provided in Section 17 hereof, the maximum number
of shares of Common Stock reserved for Awards under the Plan is 2,000,000
shares. These shares of Common Stock may be either authorized but unissued
shares or authorized shares previously issued and reacquired by the Company. To
the extent that Options and Stock Awards are granted under the Plan, the shares
underlying such Awards will be unavailable for any other use including future
grants under the Plan except that, to the extent that Stock Awards or Options
terminate, expire, or are forfeited without having been exercised (or in cases
where a Limited Right has been granted in connection with an Option, the amount
of such Limited Right received in lieu of the exercise of such Option), new
Awards may be made with respect to those shares underlying such terminated,
expired or forfeited Options or Stock Awards.
PAGE 5
6. ELIGIBILITY.
(a) Non-statutory Stock Options, Limited Rights and Stock Awards may be
granted to Outside Directors and Consultants of the Company by the
Committee, pursuant to the terms of this Plan.
(b) Incentive Stock Options may be granted only to Employees.
(c) Each Option shall be designated in the grant notice as either an
Incentive Stock Option or a Non-statutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair
Market Value of the shares of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by the optionee during any
calendar year (under all plans of the Company and any parent or Subsidiary)
exceeds $100,000, such Options shall be treated as Non-statutory Stock
Options. For purposes of this Section, Incentive Stock Options shall be
taken into account in the order in which they were granted. The Fair Market
Value of the shares of Common Stock shall be determined as of the time the
Option with respect to such shares is granted.
7. TERM.
(a) The Plan shall become effective upon the Effective Date and shall
continue in effect for a term of ten (10) years unless sooner terminated
under Section 20 of the Plan.
(b) The Plan shall become effective upon being presented to shareholders
for ratification for the purpose of obtaining preferential tax treatment
for Incentive Stock Options. The failure to obtain shareholder ratification
for such purpose will not effect the validity of the Plan and the Options
thereunder; provided, however, that if the Plan is not ratified, the Plan
shall remain in full force and effect, and any Incentive Stock Options
granted under the Plan shall be deemed to be Non-statutory Stock Options.
8. NON-STATUTORY STOCK OPTIONS.
The Committee may, subject to the limitations of the Plan and the
availability of shares reserved but unawarded under the Plan, from time to time,
grant Non-statutory Stock Options to Employees, Outside Directors, advisors and
Consultants upon such terms and conditions as the Committee may determine and
grant Non-statutory Stock Options in exchange for and upon surrender of
previously granted Awards under this Plan under such terms and conditions as the
Committee may determine. Non-statutory Stock Options granted under this Plan are
subject to the following terms and conditions:
(a) EXERCISE PRICE. The Exercise Price of each Non-statutory Stock Option
shall be determined by the Committee. Such Exercise Price shall not be less
than 85% of the Fair Market Value of the Company's Common Stock on the Date
of Grant. Shares of Common Stock underlying a Non-statutory Stock Option
may be purchased only upon full payment of the Exercise Price or upon
operation of an Alternate Option Payment Mechanism set out in Section 13
hereof.
PAGE 6
(b) TERMS OF NON-STATUTORY STOCK OPTIONS. The term during which each
Non-statutory Stock Option may be exercised shall be determined by the
Committee, but in no event shall a Non-statutory Stock Option be
exercisable in whole or in part more than ten (10) years from the Date of
Grant. The Committee shall determine the date on which each Non-statutory
Stock Option shall become exercisable. The Committee may also determine as
of the Date of Grant any other specific conditions or specific performance
goals which must be satisfied prior to the Non-statutory Stock Option
becoming exercisable. The shares of Common Stock underlying each
Non-statutory Stock Option installment may be purchased in whole or in part
by the Participant at any time during the term of such Non-statutory Stock
Option after such installment becomes exercisable. The Committee may, in
its sole discretion, accelerate the time at which any Non-statutory Stock
Option may be exercised in whole or in part, subject to applicable rules
and regulations. The acceleration of any Non-statutory Stock Option under
the authority of this paragraph shall create no right, expectation or
reliance on the part of any other Participant or that certain Participant
regarding any other unaccelerated Non-statutory Stock Options. Unless
determined otherwise by the Committee and except in the event of the
Participant's death or pursuant to a domestic relations order, a
Non-statutory Stock Option is not transferable and may be exercisable in
his or her lifetime only by the Participant to whom it is granted. Upon the
death of a Participant, a Non-statutory Stock Option is transferable by
will or the laws of descent and distribution.
(c) NSO AGREEMENT. The terms and conditions of any Non-statutory Stock
Option granted shall be evidenced by a written agreement (the "NSO
Agreement") which shall be subject to the terms and conditions of the Plan.
(d) TERMINATION OF EMPLOYMENT OR SERVICE. Unless otherwise determined by
the Committee, upon the termination of a Participant's employment or
service for any reason other than Disability, death or Termination for
Cause, the Participant's Non-statutory Stock Options shall be exercisable
only as to those shares that were immediately exercisable by the
Participant at the date of termination and only for a period of three (3)
months following termination; provided that in the event of termination of
a Participant's employment or service due to Retirement, the Participant
shall have up to one (1) year following the Participant's cessation of
employment or service to exercise the Participant's immediately exercisable
Non-statutory Options. Notwithstanding any provisions set forth herein or
contained in any NSO Agreement relating to an award of a Non-statutory
Stock Option, in the event of termination of the Participant's employment
or service for Disability or death, all Non-statutory Stock Options held by
such Participant shall be exercisable, as to the then vested portion, for
one (1) year after such termination of service, and, in the event of a
Termination for Cause, all rights under the Participant's Non-statutory
Stock Options shall expire immediately upon such Termination for Cause.
Notwithstanding the above, in no event shall any Non-statutory Stock
Options be exercisable beyond the expiration of the Non-Statutory
Stock Option term.
(e) PROCEDURE FOR EXERCISE. Any Non-statutory Stock Option granted under
this Section 9 shall be exercisable according to the terms hereof at such
times and under such conditions as determined by the Committee and set
forth in the notice of grant. An Option may not be exercised for a fraction
of a share. An Option shall be deemed exercised when the Company receives:
PAGE 7
(i) written notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option; and
(ii) full payment for the shares of Common Stock with respect to which
the Option is exercised. Full payment may consist of any consideration
and method of payment authorized by the Committee and permitted by the
Option Agreement and the Plan. Common Stock issued upon exercise of an
Option shall be issued in the name of the Optionee or, if requested by
the Optionee, in the name of the Optionee and his or her spouse. Until
the Common Stock is issued (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as
a shareholder shall exist with respect to the shares of Common Stock,
notwithstanding the exercise of the Option. The Company shall issue
(or cause to be issued) such shares of Common Stock promptly after the
Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the shares
of Common Stock are issued, except as provided in Section 17 of the
Plan. Exercise of an Option in any manner shall result in a decrease
in the number of shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of shares as to
which the Option is exercised.
9. INCENTIVE STOCK OPTIONS.
The Committee may, subject to the limitations of the Plan and the
availability of shares reserved but unawarded under the Plan, from time to time,
grant Incentive Stock Options to Employees upon such terms and conditions as the
Committee may determine. Incentive Stock Options granted pursuant to the Plan
shall be subject to the following terms and conditions:
(a) EXERCISE PRICE. The Exercise Price of each Incentive Stock Option shall
be not less than 100% of the Fair Market Value of the Common Stock on the
Date of Grant. However, if at the time an Incentive Stock Option is granted
to an Employee Participant, such Employee Participant owns Common Stock
representing more than 10% of the total combined voting securities of the
Company (or, under Section 424(d) of the Code, is deemed to own Common
Stock representing more than 10% of the total combined voting power of all
classes of stock of the Company, by reason of the ownership of such classes
of stock, directly or indirectly, by or for any brother, sister, spouse,
ancestor or lineal descendent of such Employee Participant, or by or for
any corporation, partnership, estate or trust of which such Employee
Participant is a shareholder, partner or beneficiary) ("10% Owner"), the
Exercise Price per share of Common Stock deliverable upon the exercise of
each Incentive Stock Option shall not be less than 110% of the Fair Market
Value of the Common Stock on the Date of Grant. Shares may be purchased
only upon payment of the full Exercise Price or upon operation of an
Alternate Option Payment Mechanism set out in Section 13 hereof.
PAGE 8
(b) AMOUNTS OF INCENTIVE STOCK OPTIONS. Subject to Section 6(b) hereof,
Incentive Stock Options may be granted to any Employee in such amounts as
determined by the Committee; provided that the amount granted is consistent
with the terms of Section 422 of the Code. The provisions of this Section
9(b) shall be construed and applied in accordance with Section 422(d) of
the Code and the regulations, if any, promulgated thereunder. To the extent
an Award of an Incentive Stock Option under this Section 9 exceeds this
$100,000 limit, the portion of the Award in excess of such limit shall be
deemed a Non-statutory Stock Option. The Committee shall have discretion to
redesignate Options granted as Incentive Stock Options as Non-statutory
Stock Options. Such Non-statutory Stock Options shall be subject to Section
8 hereof.
(c) TERMS OF INCENTIVE STOCK OPTIONS. The term during which each Incentive
Stock Option may be exercised shall be determined by the Committee, but in
no event shall an Incentive Stock Option be exercisable in whole or in part
more than ten (10) years from the Date of Grant. If, at the time of grant,
an Incentive Stock Option is granted to an Employee Participant who is a
10% Owner, the Incentive Stock Option granted to such Employee Participant
shall not be exercisable after the expiration of five (5) years from the
Date of Grant. No Incentive Stock Option is transferable except by will or
the laws of descent and distribution and is exercisable in his or her
lifetime only by the Employee Participant to whom it is granted. The
designation of a beneficiary does not constitute a transfer.
Notwithstanding the provisions of Section 8 of this Plan, the Committee
shall have the authority to determine the date on which each Incentive
Stock Option shall become exercisable. The Committee may also determine as
of the Date of Grant any other specific conditions or specific performance
goals which must be satisfied prior to the Incentive Stock Option becoming
exercisable. The shares comprising each installment may be purchased in
whole or in part at any time during the term of such Incentive Stock Option
after such installment becomes exercisable. The Committee may, in its sole
discretion, accelerate the time at which any Incentive Stock Option may be
exercised in whole or in part, subject to applicable rules and regulations.
The acceleration of any Incentive Stock Option under the authority of this
paragraph shall not create a right, expectation or reliance on the part of
any other Participant or that certain Participant regarding any other
unaccelerated Incentive Stock Options.
(d) ISO AGREEMENT. The terms and conditions of any Incentive Stock Option
granted shall be evidenced by a written agreement (the "ISO Agreement"),
which shall be subject to the terms and conditions of the Plan.
(e) TERMINATION OF EMPLOYMENT. Unless otherwise determined by the
Committee, upon the termination of an Employee Participant's Continuous
Service for any reason other than Disability, death or Termination for
Cause, the Employee Participant's Incentive Stock Options shall be
exercisable only as to those shares that were immediately exercisable by
the Participant at the date of termination and only for a period of three
(3) months following termination, except that in the event of the
termination of an Employee Participant's Continuous Service due to
Retirement, the Participant shall have up to one (1) year following the
Participant's cessation of employment to exercise any Incentive Stock
Options exercisable on that date. Notwithstanding any provision set forth
herein or contained in any ISO Agreement relating to an award of an
Incentive Stock Option, in the event of termination of the Employee
Participant's Continuous Service for Disability or death, all Incentive
Stock Options held by such Employee Participant shall be exercisable, as to
the then vested portion, for one (1) year after such termination, and, in
the event of Termination for Cause, all rights under the Employee
Participant's Incentive Stock Options shall expire immediately upon
termination. Notwithstanding anything contained herein to the contrary, no
Incentive Stock Option shall be eligible for treatment as an Incentive
Stock Option in the event such Incentive Stock Option is exercised more
than three (3) months following the date of a Participant's cessation of
employment. In no event shall an Incentive Stock Option be exercisable
beyond the expiration of the Incentive Stock Option term.
PAGE 9
(f) COMPLIANCE WITH CODE. The Incentive Stock Options granted under this
Section 9 are intended to qualify as "incentive stock options" within the
meaning of Section 422 of the Code, but the Company makes no warranty as to
the qualification of any Option as an incentive stock option within the
meaning of Section 422 of the Code. All Options that do not so qualify
shall be treated as Non-statutory Stock Options.
(g) PROCEDURE FOR EXERCISE. Any Incentive Stock Option granted under this
Section 9 shall be exercisable according to the terms hereof at such times
and under such conditions as determined by the Committee and set forth in
the notice of grant. Unless the Committee provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a share. An
Option shall be deemed exercised when the Company receives:
(i) written notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option; and
(ii) full payment for the shares of Common Stock with respect to which
the Option is exercised. Full payment may consist of any consideration
and method of payment authorized by the Committee and permitted by the
Option Agreement and the Plan. Common Stock issued upon exercise of an
Option shall be issued in the name of the Optionee or, if requested by
the Optionee, in the name of the Optionee and his or her spouse. Until
the Common Stock is issued (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as
a shareholder shall exist with respect to the shares of Common Stock,
notwithstanding the exercise of the Option. The Company shall issue
(or cause to be issued) such shares of Common Stock promptly after the
Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the shares
of Common Stock are issued, except as provided in Section 17 of the
Plan. Exercise of an Option in any manner shall result in a decrease
in the number of shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of shares as to
which the Option is exercised.
10. LIMITED RIGHT.
Simultaneously with the grant of any Option to a Participant, the Committee
may grant a Limited Right with respect to all or some of the shares covered by
such Option. Limited Rights granted under this Plan are subject to the following
terms and conditions:
PAGE 10
(a) TERMS OF RIGHTS. In no event shall a Limited Right be exercisable in
whole or in part before the expiration of six (6) months from the Date of
Grant of the Limited Right. A Limited Right may be exercised only in the
event of a Change in Control.
The Limited Right may be exercised only when the underlying Option is
eligible to be exercised, and only when the Fair Market Value of the
underlying shares on the day of exercise is greater than the Exercise Price
of the underlying Option.
Upon exercise of a Limited Right, the underlying Option shall cease to be
exercisable. Upon exercise or termination of an Option, any related Limited
Rights shall terminate. The Limited Rights may be for no more than 100% of
the difference between the purchase price and the Fair Market Value of the
Common Stock subject to the underlying option. The Limited Right is
transferable only when the underlying option is transferable and under the
same conditions.
(b) PAYMENT. Upon exercise of a Limited Right, the holder shall promptly
receive from the Company an amount of cash equal to the difference between
the Exercise Price of the underlying Option and the Fair Market Value of
the Common Stock subject to the underlying Option on the date the Limited
Right is exercised, multiplied by the number of shares with respect to
which such Limited Right is exercised. Payments shall be less any
applicable tax withholding as set forth in Section 18 hereof.
11. STOCK AWARD.
The Committee (or in the case of an Outside Director Participant, the Board
of Directors) may, subject to the limitations of the Plan, from time to time,
make an Award of shares of Common Stock to Employees and Outside Directors
("Stock Awards"). The Stock Awards shall be made subject to the following terms
and conditions:
(a) PAYMENT OF THE STOCK AWARD. The Stock Award may only be made in whole
shares of Common Stock. Stock Awards may only be granted from shares
reserved under the Plan but unawarded at the time the new Stock Award is
made.
(b) TERMS OF THE STOCK AWARDS. The Committee shall determine the dates on
which Stock Awards granted to a Participant shall vest and any specific
conditions or performance goals which must be satisfied prior to the
vesting of any installment or portion of the Stock Award. Notwithstanding
other paragraphs in this Section 11, the Committee may, in its sole
discretion, accelerate the vesting of any Stock Award. The acceleration of
any Stock Award under the authority of this paragraph shall create no
right, expectation or reliance on the part of any other Participant or that
certain Participant regarding any other unaccelerated Stock Awards.
(c) STOCK AWARD AGREEMENT. The terms and conditions of any Stock Award
shall be evidenced by an agreement (the "Stock Award Agreement"), which
such Stock Award Agreement will be subject to the terms and conditions of
the Plan. Each Stock Award Agreement shall set forth:
(i) the period over which the Stock Award will vest; and
PAGE 11
(ii) the performance goals, if any, which must be satisfied prior to
the vesting of any installment or portion of the Stock Award. The
performance goals may be set by the Committee on an individual level,
for all Participants, for all Awards made during a given period of
time, or for all Awards for indefinite periods;
(d) CERTIFICATION OF ATTAINMENT OF THE PERFORMANCE GOAL. No Stock Award or
portion thereof that is subject to a performance goal is to be distributed
to the Participant until the Committee certifies that the underlying
performance goal has been achieved.
(e) TERMINATION OF EMPLOYMENT OR SERVICE. Unless otherwise determined by
the Committee, upon the termination of a Participant's employment or
service for any reason other than Disability, death or Termination for
Cause, the Participant's unvested Stock Awards as of the date of
termination shall be forfeited and any rights the Participant had to such
unvested Stock Awards shall become null and void. Notwithstanding any
provisions set forth herein or contained in any Agreement relating to an
award of a Stock Option or Stock Award, in the event of termination of the
Participant's service due to Disability or death, all unvested Stock Awards
held by such Participant shall immediately vest and, in the event of the
Participant's Termination for Cause, the Participant's unvested Stock
Awards as of the date of such termination shall be forfeited and any rights
the Participant had to such unvested Stock Awards shall become null and
void.
(f) NON-TRANSFERABILITY. Except to the extent permitted by the Code, the
rules promulgated under Section 16(b) of the Exchange Act or any successor
statutes or rules:
(i) The recipient of a Stock Award shall not sell, transfer, assign,
pledge, or otherwise encumber shares subject to the Stock Award until
full vesting of such shares has occurred. For purposes of this
Section, the separation of beneficial ownership and legal title
through the use of any "swap" transaction is deemed to be a prohibited
encumbrance.
(ii) Unless determined otherwise by the Committee and except in the
event of the Participant's death or pursuant to a domestic relations
order, a Stock Award is not transferable and may be earned in his or
her lifetime only by the Participant to whom it is granted. Upon the
death of a Participant, a Stock Award is transferable by will or the
laws of descent and distribution. The designation of a beneficiary
does not constitute a transfer.
(iii) If a recipient of a Stock Award is subject to the provisions of
Section 18 of the Exchange Act, shares of Common Stock subject to such
Stock Award may not, without the written consent of the Committee
(which consent may be given in the Stock Award Agreement), be sold or
otherwise disposed of within six (6) months following the date of
grant of the Stock Award.
PAGE 12
(g) ACCRUAL OF DIVIDENDS. Whenever shares of Common Stock underlying a
Stock Award are distributed to a Participant or beneficiary thereof under
the Plan, such Participant or beneficiary shall also be entitled to
receive, with respect to each such share distributed, a payment equal to
any cash dividends or distributions (other than distributions in shares of
Common Stock) and the number of shares of Common Stock equal to any stock
dividends, declared and paid with respect to a share of the Common Stock if
the record date for determining shareholders entitled to receive such
dividends falls between the date the relevant Stock Award was granted and
the date the relevant Stock Award or installment thereof is issued.
(h) VOTING OF STOCK AWARDS. After a Stock Award has been granted but for
which the shares covered by such Stock Award have not yet been earned and
distributed to the Participant pursuant to the Plan, the Participant shall
be entitled to direct the Company's Secretary as to the voting of such
shares of Common Stock which the Stock Award covers subject to the rules
and procedures adopted by the Committee for this purpose. All shares of
Common Stock as to which Participants are not entitled to direct, or have
not directed, the voting, shall be voted by the Company's Secretary in the
same proportion as the Common Stock covered by Stock Awards which have been
awarded is voted.
12. PAYOUT ALTERNATIVES.
Payments due to a Participant upon the exercise or redemption of an Award,
may be made subject to the following terms and conditions:
(a) DISCRETION OF THE COMMITTEE. The Committee has the sole discretion to
determine what form of payment (whether monetary, Common Stock, a
combination of payout alternatives or otherwise) it shall use in making
distributions of payments for all Awards. If the Committee requests any or
all Participants to make an election as to form of distribution or payment,
it shall not be considered bound by the election.
(b) PAYMENT IN THE FORM OF COMMON STOCK. Any shares of Common Stock
tendered in satisfaction of an obligation arising under this Plan shall be
valued at the Fair Market Value of the Common Stock on the day preceding
the date of the issuance of such stock to the Participant.
13. ALTERNATE OPTION PAYMENT MECHANISM.
The Committee has sole discretion to determine what form of payment it will
accept for the exercise of an Option. The Committee may indicate acceptable
forms in the ISO or NSO Agreement covering such Options or may reserve its
decision to the time of exercise. No Option is to be considered exercised until
payment in full is accepted by the Committee or its agent.
(a) CASH PAYMENT. The exercise price may be paid in cash or by certified
check.
(b) BORROWED FUNDS. To the extent permitted by law, the Committee may
permit all or a portion of the exercise price of an Option to be paid
through borrowed funds.
(c) EXCHANGE OF COMMON STOCK.
PAGE 13
(i) The Committee may permit payment by the tendering of previously
acquired shares of Common Stock. This includes the use of "pyramiding
transactions" whereby some number of Options are exercised; then the
shares gained through the exercise are tendered back to the Company as
payment for a greater number of Options. This transaction may be
repeated as needed to exercise all of the Options available.
(ii) Any shares of Common Stock tendered in payment of the exercise
price of an Option shall be valued at the Fair Market Value of the
Common Stock on the date prior to the date of exercise.
14. RIGHTS OF A SHAREHOLDER: NONTRANSFERABILITY.
No Participant shall have any rights as a shareholder with respect to any
shares of Common Stock covered by an Option until the date of issuance of a
stock certificate for such shares. Nothing in this Plan or in any Award granted
confers on any person any right to continue in the employ or service of the
Company or its Affiliates or interferes in any way with the right of the Company
or its Affiliates to terminate a Participant's services as an Officer or other
employee at any time.
Except as permitted under the Code (with respect to Incentive Stock
Options) and the rules promulgated pursuant to Section 16(b) of the Exchange Act
or any successor statutes or rules, no Award under the Plan shall be
transferable by the Participant other than by will or the laws of intestate
succession or pursuant to a domestic relations order or unless determined
otherwise by the Committee.
15. AGREEMENT WITH GRANTEES.
Each Award will be evidenced by a written agreement(s) (whether
constituting an NSO Agreement, ISO Agreement, Stock Award Agreement or any
combination thereof), executed by the Participant and the Company or its
Affiliates that describes the conditions for receiving the Awards including the
date of Award, the Exercise Price if any, the terms or other applicable periods,
and other terms and conditions as may be required or imposed by the Plan, the
Committee, or the Board of Directors, and may describe or specify tax law
considerations or applicable securities law considerations.
16. DESIGNATION OF BENEFICIARY.
A Participant may, with the consent of the Committee, designate a person or
persons to receive, in the event of death, any Award to which the Participant
would then be entitled. Such designation will be made upon forms supplied by and
delivered to the Company and may be revoked in writing. If a Participant fails
effectively to designate a beneficiary, then the Participant's estate will be
deemed to be the beneficiary.
17. DILUTION AND OTHER ADJUSTMENTS.
In the event of any change in the outstanding shares of Common Stock by
reason of any stock dividend or split, recapitalization, merger, consolidation,
spin-off, reorganization, combination or exchange of shares, or other similar
corporate change, or other increase or decrease in such shares without receipt
or payment of consideration by the Company, or in the event a capital
distribution is made, the Committee will make such adjustments to Awards to
prevent dilution, diminution or enlargement of the rights of the Participant, as
the Committee deems appropriate, including any or all of the following:
PAGE 14
(a) adjustments in the aggregate number or kind of shares of Common Stock
or other securities that may underlie future Awards under the Plan;
(b) adjustments in the aggregate number or kind of shares of Common Stock
or other securities underlying Awards already made under the Plan; or
(c) adjustments in the exercise price of outstanding Incentive and/or
Non-statutory Stock Options, or any Limited Rights attached to such
Options.
Alternatively, the Committee could provide the Participant with a cash
benefit for shares underlying vested, but unexercised Options, in order to
achieve the aforementioned effect. All Awards under this Plan shall be binding
upon any successors or assigns of the Company.
18. TAX WITHHOLDING.
Awards under this Plan shall be subject to tax withholding to the extent
required by any governmental authority. Any withholding shall comply with Rule
16b-3 or any amendment or successive rule. Shares of Common Stock withheld to
pay for tax withholding amounts shall be valued at their Fair Market Value on
the date the Award is deemed taxable to the Participant.
19. AMENDMENT OF THE PLAN.
The Board of Directors may at any time, and from time to time, subject to
applicable rules and regulations, modify or amend the Plan or any Award granted
under the Plan, in any respect, prospectively or retroactively; provided
however, that provisions governing grants of Incentive Stock Options, unless
permitted by the rules and regulations or staff pronouncements promulgated under
the Code, shall be submitted for shareholder approval to the extent required by
such law, regulation or interpretation.
Failure to ratify or approve amendments or modifications by shareholders
shall be effective only as to the specific amendment or modification requiring
such ratification. Other provisions, sections, and subsections of this Plan will
remain in full force and effect.
No such termination, modification or amendment may adversely affect the
rights of a Participant under an outstanding Award without the written
permission of such Participant.
20. TERMINATION OF THE PLAN.
The right to grant Awards under the Plan will terminate upon the earlier
of: (i) ten (10) years after the Effective Date; or (ii) the issuance of a
number of shares of Common Stock pursuant to the exercise of Options or the
distribution of Stock Awards which together with the exercise of Limited Rights
is equivalent to the maximum number of shares reserved under the Plan as set
forth in Section 5. The Board of Directors has the right to suspend or terminate
the Plan at any time, provided that no such action will, without the consent of
a Participant, adversely affect a Participant's vested rights under a previously
granted Award.
PAGE 15
21. APPLICABLE LAW.
The Plan will be administered in accordance with the laws of the State of
Colorado and applicable federal law.
22. DELEGATION OF AUTHORITY.
The Committee may delegate all authority for: the determination of forms of
payment to be made by or received by the Plan; the execution of Award
agreements; the determination of Fair Market Value; the determination of all
other aspects of administration of the plan to the Officers of the Company. The
Committee may rely on the descriptions, representations, reports and estimate
provided to it by the management of the Company for determinations to be made
pursuant to the Plan, including the attainment of performance goals. However,
only the Committee or a portion of the Committee may certify the attainment of a
performance goal.
PAGE 16
RESTRICTED STOCK AWARD AGREEMENT FOR
SPACEDEV, INC.
2004 EQUITY INCENTIVE PLAN
THIS RESTRICTED STOCK AWARD AGREEMENT (the "Agreement") is entered into as
of the ____ day of ________ 200__, by and between SPACEDEV, INC., a Colorado
corporation (the "Company"), and ____________________________ (herein referred
to as the "Participant");
W I T N E S S E T H:
WHEREAS, the Participant has entered into an Employment Agreement with the
Company on __________________, pursuant to which he or she will serve the
Company as ____________________ (the "Employment Agreement"); and
WHEREAS, the Company has previously adopted the SpaceDev. Inc. 2004 Equity
Incentive Plan (the "Plan"); and
WHEREAS, pursuant to the Employment Agreement, the Company has awarded the
Participant _________________ shares of common stock under the Plan subject to
the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and covenants herein contained, the Participant and the Company agree as follows
(all capitalized terms used herein, unless otherwise defined, have the meaning
ascribed to such terms as set forth in the Plan):
1. THE PLAN. The Plan, a copy of which is attached hereto as Exhibit
A, is hereby incorporated by reference herein and made a part hereof for all
purposes, and when taken with this Agreement shall govern the rights of the
Participant and the Company with respect to the Award (as defined below).
2. GRANT OF AWARD. The Company hereby grants to the Participant an
award (the "Award") of ________________ (_________) shares of Company common
stock, par value $0.0001 (the "Stock"), on the terms and conditions set forth
herein and in the Plan.
3. TERMS OF AWARD.
(a) Escrow of Shares. A certificate representing the shares of Stock
subject to the Award (the "Restricted Stock") shall be issued in the
name of the Participant and, to the extent unvested, shall be escrowed
with the Secretary of the Company (the "Escrow Agent") subject to
removal of the restrictions placed thereon or forfeiture pursuant to
the terms of this Agreement.
(b) Vesting. 1/8th of the shares vest six (6) months after the Vesting
Commencement Date. 1/8th of the shares shall vest at the end of each
subsequent six month period over the course of the following four (4)
years. Once vested pursuant to the terms of this Agreement, the
Restricted Stock shall be deemed Vested Stock. In the event the
Participant's employment or service with the Company is terminated by
reason of (i) death, (ii) disability, or (iii) without "Cause" (as
such term is defined in the Employment Agreement), then all remaining
shares of Restricted Stock (including any "Accrued Dividends," as such
term is hereafter defined) which have not yet been vested shall
immediately become null and void.
PAGE 1
(c) Voting Rights and Dividends. The Participant shall have all of the
voting rights attributable to the shares of Restricted Stock issued to
him or her. Cash dividends declared and paid by the Company with
respect to the shares of Restricted Stock shall be paid to the
Participant. Any extraordinary dividends declared and paid by the
Company with respect to shares of Restricted Stock ("Accrued
Dividends") shall not be paid to the Participant until such Restricted
Stock becomes Vested Stock. Such Accrued Dividends shall be held by
the Company as a general obligation and paid to the Participant at the
time the underlying Restricted Stock becomes Vested Stock.
(d) Vested Stock - Removal of Restrictions. Subject to the requirements of
applicable securities laws, including but not limited to Rule 144 of
the Securities Act of 1933, upon Restricted Stock becoming Vested
Stock, all restrictions indicating that the Restricted Stock is
unvested shall be removed from the certificates representing such
Stock and the Secretary of the Company shall deliver to the
Participant certificates representing such Vested Stock free and clear
of such restrictions together with a check in the amount of all
Accrued Dividends attributed to such Vested Stock without interest
thereon.
(e) Forfeiture. In the event the Participant's employment with the Company
is terminated for any reason other than (i) death, (ii) disability, or
(iii) without Cause prior to all shares of Restricted Stock becoming
Vested Stock, then, all remaining shares of Restricted Stock which
have not yet been vested (including any Accrued Dividends) shall be
absolutely forfeited and the Participant shall have no further
interest therein of any kind whatsoever.
4. LEGENDS. In addition to the legend requirements of applicable
securities laws, including but not limited to Rule 144 of the Securities Act of
1933, the shares of Stock which are the subject of the Award shall be subject to
the following legend:
"THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO AND ARE
TRANSFERRABLE ONLY IN ACCORDANCE WITH THAT CERTAIN RESTRICTED STOCK AWARD
AGREEMENT FOR SPACEDEV, INC. EQUITY INCENTIVE PLAN DATED THE ____ DAY OF
________________, 200__. ANY ATTEMPTED TRANSFER OF THE SHARES OF STOCK
EVIDENCED BY THIS CERTIFICATE IN VIOLATION OF SUCH AGREEMENT SHALL BE NULL AND
VOID AND WITHOUT EFFECT. A COPY OF THE AGREEMENT MAY BE OBTAINED FROM THE
SECRETARY OF SPACEDEV, INC."
5. STOCK POWERS AND THE BENEFICIARY. The Participant hereby agrees to
execute and deliver to the Secretary of the Company a stock power (endorsed in
blank) in a form of Exhibit B hereto covering his or her Award and authorizes
the Secretary to deliver to the Company any and all shares of Restricted Stock
that are forfeited under the provisions of this Agreement. The Participant
further authorizes the Company to hold as a general obligation of the Company
any Accrued Dividends and to pay such dividends to the Participant at the time
the underlying Restricted Stock becomes Vested Stock. Pursuant to Section 16 of
the Plan, the Participant designates his or her Eligible Spouse as the
Beneficiary under this Agreement.
6. NONTRANSFERABILITY OF AWARD. The Participant shall not have the
right to sell, assign, transfer, convey, dispose, pledge, hypothecate, burden,
encumber or charge any shares of Restricted Stock or any interest therein in any
manner whatsoever.
PAGE 2
7. NOTICES. All notices or other communications relating to the Plan
and this Agreement as it relates to the Participant shall be in writing, shall
be deemed to have been made if personally delivered in return for a receipt, or
if mailed, by regular U.S. mail, postage prepaid, by the Company to the
Participant at the address set forth in the Employment Agreement.
8. BINDING EFFECT AND GOVERNING LAW. This Agreement shall be (i)
binding upon and inure to the benefit of the parties hereto and their respective
heirs, successors and assigns except as may be limited by the Plan and (ii)
governed and construed under the laws of the State of Colorado.
9. WITHHOLDING. The Company and the Participant shall comply with all
federal and state laws and regulations respecting the withholding, deposit and
payment of any income, employment or other taxes relating to the Award
(including Accrued Dividends).
10. AWARD SUBJECT TO CLAIMS OR CREDITORS. The Participant shall not
have any interest in any particular assets of the Company, its parent, if
applicable, or any Subsidiary by reason of the right to earn an Award (including
Accrued Dividends) under the Plan and this Agreement, and the Participant or any
other person shall have only the rights of a general unsecured creditor of the
Company, its parent, if applicable, or a Subsidiary with respect to any rights
under the Plan or this Agreement.
11. CAPTIONS. The captions of specific provisions of this Agreement
are for convenience and reference only, and in no way define, describe, extend
or limit the scope of this Agreement or the intent of any provision hereof.
12. COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, each of which shall be deemed an original for all
purposes, but all of which taken together shall form but one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
"COMPANY"
SPACEDEV, INC.,
A COLORADO CORPORATION
By:---------------------
Its:--------------------
"PARTICIPANT"
--------------------------
Signature of Participant
----------------------------
Print Name of Participant
PAGE 3
EXHIBIT A
SPACEDEV, INC.
2004 EQUITY INCENTIVE PLAN
PAGE 4
EXHIBIT B
STANDARD FORM OF
STOCK POWER
PAGE 5
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and
transfers unto SpaceDev, Inc., a Colorado corporation (the "Company"), pursuant
to the Stock Award Agreement dated _______________ by and between the
undersigned and the Company (the "Agreement"), _______________ (_______________)
shares of Common Stock of the Company standing in the undersigned's name on the
books of the Company represented by Certificate No(s). _______________ and does
hereby irrevocably constitute and appoint the Company's Secretary attorney to
transfer said Common Stock on the books of the Company with full power of
substitution in the premises. This Assignment may be used only in accordance
with and subject to the terms and conditions of the Agreement, in connection
with the forfeiture of shares of Common Stock issued to the undersigned pursuant
to the Agreement, and only to the extent that such shares remain unvested under
the Agreement.
Dated: _______________
---------------------------
(Signature)
---------------------------
(Print Name)
INSTRUCTION: Please do not fill in any blanks other than the "Signature" line
and the "Print Name" line. The purpose of this Assignment is to enable the
Company to exercise its Repurchase Option set forth in the Agreement without
requiring additional signatures on the part of Purchaser.
PAGE 6
SPACEDEV, INC.
STOCK OPTION GRANT NOTICE
SPACEDEV, INC. (the "Company"), pursuant to its 2004 Equity Incentive
Plan (the "Plan") hereby grants to the Optionee named below a stock option to
purchase the number of shares of the Company's common stock as set forth below.
Depending on the box checked below, this stock option either is or is not
intended to qualify for the federal income tax benefits available to an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended. This option is subject to all of the terms and
conditions as set forth in this Grant Notice, the Stock Option Agreement and the
"Plan" which are attached and incorporated herein by reference.
Optionee/Employee: _______________ Employee I.D. #: _____-___-_____
Grant No.: ___ Date of Grant: ___________
Shares Subject to Option: _______ Exercise Price Per Share: $______
Expiration Date: Par Value: .0001
TYPE OF OPTION: [ ] Incentive Stock Option [ ] Non-Statutory Stock
Option
VESTING SCHEDULE:
PAYMENT:
By one or a combination of the following items (described in the Stock Option
Agreement):
[ ] By cash or check
[ ] Pursuant to a Regulation T Program if the Shares are publicly
traded
[ ] By delivery of already-owned shares if the Shares are publicly
traded
[ ] By deferred payment
ADDITIONAL TERMS/ACKNOWLEDGMENTS: Optionee acknowledges that he or she
has received, read, understands, and agrees to the terms of this Grant Notice,
the Stock Option Agreement, and the Plan. Optionee further acknowledges that as
of the Date of Grant, the Grant Notice, the Stock Option Agreement and the Plan
set forth the entire understanding between Optionee and the Company regarding
the acquisition of stock in the Company and supersedes all prior oral and
written agreements pertaining to this particular option.
SPACEDEV, INC. OPTIONEE:
By:_______________________________ ___________________________________
President Signature
Dated: ________________ Date: _______________
PAGE 1
ATTACHMENT I: STOCK OPTION AGREEMENT
SPACEDEV, INC.
STOCK OPTION AGREEMENT
Pursuant to the Grant Notice and this Stock Option Agreement, the Company
has granted you an option to purchase the number of shares of the Company's
common stock ("Common Stock") as set forth in the Grant Notice, at the exercise
price set forth in the Grant Notice. Defined terms not explicitly defined in
this Stock Option Agreement, but defined in the Plan, shall have the same
definitions as in the Plan.
The details of this option are as follows:
1. VESTING. This option will vest as provided in the Grant Notice, provided
that vesting will cease upon the termination of your Continuous Service.
2. METHOD OF PAYMENT. Payment of the exercise price by cash (or check) is
due upon exercise of all or any part of this option. Notwithstanding the
foregoing, this option may be exercised pursuant to a program developed
under Regulation T as promulgated by the Federal Reserve Board which, prior
to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company. Payment of the exercise price may
also be made by a combination of the above methods.
3. EXERCISE FOR MINIMUM NUMBER OF SHARES. The minimum number of options
that may be exercised at any one time is one hundred (100), except (a) if
an installment subject to exercise, as set forth in paragraph 1, amounts to
fewer than one hundred (100) shares, then this smaller number of options
may be exercised, and (b) with respect to the final exercise of this
option, this minimum does not apply. This option may only be exercised for
whole shares.
4. SECURITIES LAW COMPLIANCE. This option may not be exercised unless the
shares issuable upon exercise are then registered under the Securities Act
or, if such shares are not registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of
the Securities Act.
5. TERM.
(a) The term of this option commences on the Date of Grant (as
specified in the Grant Notice) and expires upon the earliest of:
(i) the Expiration Date indicated in the Grant Notice;
(ii) the tenth (10th) anniversary of the Date of Grant; or
(iii) ninety (90) days after the termination of your Continuous
Service for any reason other than Disability, death, or
Termination for Cause provided that if during any part of such
ninety (90) day period the option is not exercisable solely
because of the condition set forth in paragraph 4 (Securities Law
Compliance), then the option shall not expire until the earlier
of the Expiration Date or until it shall have been exercisable
for an aggregate period of ninety (90) days after satisfaction of
the condition set forth in paragraph 4.
PAGE 2
(b) Notwithstanding the foregoing:
(i) If your Continuous Service terminates due to your Disability,
then this option will continue as to vested but unexercised
options for a period of twelve (12) months after the date such
service was terminated, but no later than the Expiration Date.
(ii) If your Continuous Service terminates due to (x) your death,
or (y) your Disability and you subsequently die prior to the
Expiration Date, then this option shall immediately become fully
vested and exercisable for all of the option shares as of the
date of your death. This option will then expire on either the
Expiration Date or twelve (12) months after the date of your
death, whichever occurs earlier.
(iii) If your Continuous Service terminates due to a Termination
for Cause, all rights under this option shall expire immediately
upon such Termination for Cause.
(c) If this option is designated an incentive stock option, then to
obtain the federal income tax advantages associated with an "incentive
stock option," the Code requires that at all times beginning on the
Date of Grant and ending on the day three (3) months before the date
of exercise, you must be an employee of the Company or a "parent
corporation" or a "subsidiary corporation" (as those terms are defined
in Section 424 of the Code), except in the event of your death or your
Disability. The Company has provided for extended exercisability of
this option under certain circumstances for your benefit, but does not
represent or guarantee that this option will necessarily be treated as
an "incentive stock option."
6. EXERCISE.
(a) You may exercise the vested portion of this option during its term
by delivering a notice of exercise (in a form designated by the
Company) together with the exercise price to the Secretary of the
Company, or to another person as the Company may designate, during
regular business hours, together with such additional documents as the
Company may then require pursuant to the Plan.
(b) By exercising this option you agree that as a condition to any
exercise of this option, the Company may require you to enter an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the
exercise of this option; (2) the lapse of any substantial risk of
forfeiture to which the shares are subject at the time of exercise; or
(3) the disposition of shares acquired upon such exercise.
(c) If this option is an incentive stock option, then by exercising
this option you agree to notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the shares of
the Common Stock issued upon exercise of this option that occurs
within two (2) years after the Date of Grant or within one (1) year
after such shares of Common Stock are transferred upon exercise of
this option.
(d) If this option is a non-statutory stock option, it may be subject
to certain terms or restrictions such that shares issued upon exercise
of the option are nontransferable or subject to a substantial risk of
forfeiture (i.e., the stock is not vested). In that event, you may be
eligible for an election under Section 83(b) of the Internal Revenue
Code, which would allow you to report compensation income when you
receive the stock rather than when it becomes vested. If you make an
election pursuant to Section 83(b), the value of the stock is
determined when you receive it, and you will have nothing to report at
the time the stock vests. Because failure to file a Section 83(b)
election may result in adverse tax consequences, you are advised to
consult your personal tax advisor with respect to the advisability of
such an election. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN
30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS
TIME PERIOD CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY
FILING OF A SECTION 83(b) ELECTION IS THE OPTIONEE'S SOLE
RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS
REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
PAGE 3
7. TRANSFERABILITY. This option is not transferable, except by will or by
the laws of descent and distribution or pursuant to a domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Securities Act of 1974, as amended (a "DRO"), or the rules thereunder, and
is exercisable during your life only by you or any transferee pursuant to a
DRO.
8. OPTION NOT A SERVICE CONTRACT. This option is not an employment or
service contract and nothing in this option shall be deemed to create in
any way whatsoever any obligation on your part to continue in the service
of the Company or an Affiliate, or of the Company or an Affiliate to
continue your service with the Company or the Affiliate. In addition,
nothing in this option shall obligate the Company or any Affiliates, their
stockholders, Board of Directors, Officers or Employees to continue any
relationship as a Director or Consultant for the Company or any Affiliate.
9. NOTICES. Any notices provided for in this option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in
the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the
last address you provided to the Company.
10. GOVERNING PLAN DOCUMENT. This option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of this option,
and is further subject to all interpretations, amendments, rules and
regulations that may from time to time be promulgated and adopted pursuant
to the Plan. In the event of any conflict between the provisions of this
option and those of the Plan, the provisions of the Plan shall control.
PAGE 4
APPENDIX B
AUDIT COMMITTEE CHARTER
Primary responsibility for the SpaceDev, Inc. financial reporting lies with
its senior management, with oversight of the Board of Directors. To help the
Board of Directors carry out this oversight responsibility, an Audit Committee
has been established to promote the financial transparency of the corporation
and to ensure the integrity of the corporation's financial reporting processes
and products. This charter is meant to identify the personnel and functions of
the audit committee. These guidelines contemplate the involvement of the outside
counsel and where appropriate, the involvement of the full Board of Directors.
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities related to corporate
accounting, financial reporting practices, quality and integrity of
financial reports as well as legal compliance and business ethics. Key
components of fulfilling this charge include:
a. Facilitating and maintaining an open avenue of communication among the
Board of Directors, Audit Committee, management, the independent
external accountants and the internal audit staff.
b. Oversee the corporation's internal accounting and operational
controls, including assessment of strategic, financial, operational
and compliance risk management, as well as financial and regulatory
reporting.
c. Review the financial statements and audit findings and take actions
considered appropriate by the Audit Committee and the full Board of
Directors.
d. Provide direction to and oversight of the internal audit function.
e. Ascertain any disagreements among audit personnel or between audit
personnel and management.
f. Affirm that accounting policies are consistent with industry
practices, that correct requirements are reflected in accounting
policies and that the accounting policies are consistent with a fair
presentation of financial statements in conformity with generally
accepted accounting principles.
II. ORGANIZATION/COMPOSITION
The chair and members of the Audit Committee shall be elected annually by
the majority vote of the full Board of Directors. The Audit Committee will
be comprised of three or more directors as determined by the Board, the
majority of whom shall be independent directors. For purposes of this
charter, an "independent director" shall be defined as a person other than
an officer or employee of the corporation or its subsidiaries or any other
individual having a relationship which, in the opinion of the full Board of
Directors, would interfere with the exercise of independent judgment in
carrying out the duties and responsibilities set forth in this charter. All
members of the Audit Committee will have a working familiarity with basic
finance and accounting practices and at least one member must have
accounting or related financial management expertise.
PAGE
III. MEETINGS
The Audit Committee will meet on a regular basis (quarterly) and special
meetings will be called as circumstances require. The Audit Committee will
meet privately with the internal auditor and the external accountants to
review their findings and management's action plans to ensure internal
control recommendations made by internal and external auditors have been
appropriately implemented by management. The Audit Committee will request
legal updates from the in-house counsel and outside legal resources as they
determine the need exists. The Audit Committee members will have sole
discretion in determining the meeting attendees and agenda.
IV. RESPONSIBILITIES AND DUTIES
The Audit Committee believes its policies and procedures should remain
flexible in order to best react to changing conditions and provide
reasonable assurance to the Board that the accounting and reporting
practices of the corporation are in accordance with applicable requirements
and that an effective legal compliance program exists.
The functions and responsibilities of the Audit Committee shall be to:
A. GENERAL
-------
1. Adopt a formal written charter that is approved by the full Board of
Directors which specifies scope of responsibility, process,
membership, etc. The Audit Committee will review and update this
charter and receive approval of changes from the full Board of
Directors at least annually.
2. Approve the selection of and the fees paid to the external accountants
for the corporation. The Audit Committee will obtain opinions on the
performance of the external accountants from appropriate management
representatives and the internal auditor, and based upon the
evaluation of the external accountants' performance, recommend that
the Board retain or replace the external accountants.
3. Ensure that the independent auditors understand that they are directly
accountable to the Board of Directors and the Audit Committee.
4. Inquire of management as to the extent to which external accountants
other than the principal auditors are to be used and the rationale for
using them. The Audit Committee will also review management's
evaluation of the factors related to the independence of the external
auditors and review its plans for engaging the external auditors in
performing management advisory services during the year, if any.
5. Maintain minutes or other records of meetings and activities.
Following each meeting, the Audit Committee shall report on the
proceedings of the Committee to the full Board of Directors with such
recommendations as it may deem appropriate.
6. Review with management the Form 10-KSB and the MD&A section of the
annual report, and ask the extent to which the external accountants
reviewed each. The Audit Committee will inquire of the independent
auditor if the other sections of the annual report to shareholders and
Form 10-KSB are consistent with the information reflected in the
financial statements. The Audit Committee shall recommend to the Board
of Directors that the audited financial statements be included in the
corporation's annual report to shareholders and Form 10-KSB for the
last fiscal year for filing with the SEC.
PAGE 2
7. Meet privately with the external accountants to request their opinion
of various matters, including the quality of financial and accounting
personnel and the internal audit staff.
8. Conduct or authorize investigations into any matters within the Audit
Committee's scope of responsibilities. The Audit Committee shall be
empowered to retain independent counsel, accountants, or others to
assist it in the conduct of any investigation.
9. Ascertain the existence of and review any material non-arm's length
transactions.
B. EXTERNAL/INDEPENDENT ACCOUNTANTS
---------------------------------
1. Review with the internal auditor and the external accountants their
integrated annual audit plan, including the degree of coordination and
integration between the respective parties. The Audit Committee will
inquire as to the extent to which the planned audit scope can be
relied upon to detect fraud, non-compliance with state and federal
laws and regulations, non-compliance with the SEC and the National
Association of Securities Dealers, Inc.'s (NASD's) guidelines, or
weaknesses in internal accounting and operational controls.
2. Instruct the internal auditor and the external accountants that the
Audit Committee expects to be advised if there are any areas that
require attention or of occurrences of fraud, illegal acts,
deficiencies in internal control or other irregularities.
3. Discuss with the internal auditor and external accountants what steps
are planned for providing assessment of strategic, financial,
operational and compliance risk management, as well as financial and
regulatory reporting.
4. Ensure its receipt from the independent auditor of a formal written
statement delineating all relationships between the independent
auditors and the corporation. The Audit Committee shall actively
engage in a dialogue with the independent auditors with respect to any
disclosed relationships or services that may impact the objectivity
and independence of the independent auditors and recommend that the
full Board of Directors take appropriate action to ensure the
independence of the independent auditors.
5. Meet with the external accountants and financial management of the
corporation to review the scope of the proposed external audit for the
current year. The external audit scope shall include a requirement
that the external accountants inform the Audit Committee of any
significant changes in the external accountant's original audit plan
and that the external accountants conduct a SAS 71 Interim Financial
Review prior to the company's filing of each quarterly report to
shareholders (Form 10-QSB).
6. Review with the external accountants the corporation's interim
financial results included in the Form 10-QSB prior to filing with the
SEC.
7. Instruct the internal auditor and the external accountants to advise
the Audit Committee when the external accountants are hired to perform
management consulting services, and to report the nature and timing of
such work. The Audit Committee shall consider whether the external
accountants' provision of non-audit services is compatible with
maintaining their independence.
PAGE 3
8. Instruct the internal auditor and the external accountants to advise
the Audit Committee when the corporation seeks a second opinion on a
significant accounting issue.
9. Instruct the external accountants to communicate any other known
matters that require the attention of the Audit Committee or the full
Board of Directors.
C. INTERNAL AUDIT-(AT THIS TIME, THE COMPANY DOES NOT HAVE AN INTERNAL
AUDIT FUNCTION, BUT WE HAVE PREPARED THE CHARTER ANTICIPATING SUCH A
FUNCTION IN THE FUTURE)
--------------------------------------------------------------------------------
1. Review and approve the annual internal audit plan and any significant
changes to the internal plan.
2. Inquire of the internal auditor regarding the adequacy and
effectiveness of accounting and financial controls and the
responsiveness of management in correcting audit-related deficiencies,
and request recommendations for improvements.
3. Review the internal audit function of the corporation including its
independence and the authority of its reporting relationships.
4. Review, at least annually, the then current and future programs of the
corporation's internal audit department, including the procedure for
assuring implementation of accepted recommendations made by the
auditors and the department.
5. Make or cause to be made, from time to time, such other examinations
and reviews as the Audit Committee may deem necessary with respect to
the accounting practices and systems of internal control of the
corporation and with respect to current accounting trends and
developments, and recommend such action with respect thereto as may be
deemed necessary.
6. Inquire of the internal auditor regarding any difficulties encountered
in the course of their audits, including any restrictions on the scope
of their work or access to required information.
7. Review and concur in the appointment, replacement, reassignment, or
dismissal of the internal auditor. The Audit Committee will annually
review and approve the performance evaluation of the internal auditor
after consulting with the Chief Executive Officer and the Chief
Financial Officer.
D. FINANCIAL STATEMENTS/INTERNAL CONTROLS
----------------------------------------
1. Discuss with management and the external accountants the accounting
principles as applied, their quality and significant assumptions,
estimates and judgments used in the preparation of the financial
statements.
2. Obtain from management explanations for all significant variances in
the financial statements between years. The Audit Committee will
consider whether the data is consistent with the MD&A section of the
corporation's annual report and Form 10-KSB.
PAGE 4
3. Inquire from management and the external accountants as to and request
an explanation of any changes in accounting standards or rules
promulgated by the Financial Accounting Standards Board, SEC, NASD or
other governing bodies that have an effect on or oversight over the
financial statements of the corporation.
4. Inquire of management and the external accountants if there were any
significant financial reporting issues discussed during the accounting
period reported and, if so, how they were resolved.
5. Inquire of management and the external accountants about the existence
and substance of any significant accounting accruals, reserves, or
estimates made by management that had a material impact on the
financial statements.
6. Advise financial management and the independent auditor that they are
expected to provide a timely analysis of significant current financial
reporting issues and practices.
7. Advise financial management and the independent auditor to discuss
with the Audit Committee their qualitative judgements about the
appropriateness, not just the acceptability, of accounting principles
and financial disclosure practices used or proposed to be adopted by
the corporation.
8. Consider whether the external accountants should meet with the full
Board of Directors to discuss any matters relative to the financial
statements and to answer any questions that the other directors might
have.
E. AUDIT REPORT
-------------
Prepare, annually, an Audit Committee Report to be included in the
corporation's annual proxy statement stating that the Audit Committee has
reviewed and discussed the audited financial statements with management,
has discussed with the external accountants the materials required by SAS
61, and has received and discussed the written disclosures and letter from
the external accountants required under ISB Statement No. 1 regarding their
independence.
F. LEGAL
-----
1. Meet regularly with corporation's in-house legal counsel, and outside
legal counsel, as appropriate, to review any legal matters that may
have a significant impact on the corporation's overall financial
statements and on risk management.
2. Review outside counsel's letter regarding litigation, claims and
assessments.
3. Discuss with management and the external accountants the substance of
any significant issues raised by in-house or outside legal counsel
concerning litigation, contingencies, claims or assessments, and how
such matters are reflected in the corporation's financial statements.
4. Review matters that have come to the attention of the Audit Committee
through reports of management, legal counsel and others that relate to
the status of compliance and anticipated future compliance with laws,
regulations, internal controls, and that may be expected to be
material to the corporation's financial statements.
PAGE 5
PROXY PROXY
SPACEDEV, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 5, 2004
The undersigned hereby appoints James W. Benson and Richard B. Slansky,
Chief Executive Officer and Corporate Secretary, respectively, or either of
them, as attorneys and Proxies of the undersigned, with full power of
substitution, to vote all of the shares of stock of SpaceDev, Inc. (the
"Company") which the undersigned may be entitled to vote at the Annual Meeting
of Stockholders of the Company to be held at 13855 Stowe Drive, Poway,
California 92064 on August 5, 2004 at 11:00 A.M. local time and at any and all
continuations and adjournments or postponements thereof, with all powers that
the undersigned would possess if personally present, on the following matters,
in accordance with the following instructions, and on all matters that may
properly come before the meeting. With respect to any matter not known to the
Company as of August 5, 2004, such proxies are authorized to vote in their
discretion.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR ALL
NOMINEES LISTED IN PROPOSAL 1, FOR PROPOSAL 2 AND FOR PROPOSAL 3 AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
YOUR VOTE IS IMPORTANT. THEREFORE, YOU ARE URGED TO COMPLETE, SIGN, DATE
AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED ENVELOP.
(Continued and to be signed on the other side)
SPACEDEV, INC.
PLEASE MARK VOTE IN THE FOLLOWING MANNER USING DARK INK ONLY. [X]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES
FOR DIRECTOR AND FOR PROPOSALS 2 AND 3.
1. To elect seven directors to hold office until the 2005 Annual Meeting of
Stockholders.
FOR WITHHELD VOTE FOR NOMINEE(S) NOT LINED OUT
--- -------- --------------------------------------
[ ] [ ] [ ] Strike a line through the nominee(s) name or names
below that you do not vote for
---- ---- --------------------------------------------------------
NOMINEES: James W. Benson, Curt Dean Blake, Gen. Howell M. Estes, III, Wesley T.
Huntress, Scott McClendon, Stuart E. Schaffer and Robert S. Walker.
2. To ratify the appointment of PKF, Certified Public Accountant a professional
corporation, as the Company's independent public accountants for the fiscal year
ending December 31, 2004.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
---- ---- ----
3. To approve the Company's 2004 Equity Incentive Plan.
FOR AGAINST ABSTAIN
--- ------- -------
[ ] [ ] [ ]
---- ---- ----
----------------- --------------------- ------------------------------
Date Shares Held Signature
------------------------------
Print Name
----------------- ------------------------------
Date Signature
------------------------------
Print Name
Please sign exactly as your name appears on your stock certificate. If the
stock is registered in the names of two or more persons, each should sign.
Executors, administrators, trustees, guardians and attorneys-in-fact should add
their titles. If signer is a corporation, please give full corporate name and
have a duly authorized officer sign, stating title. If signer is a partnership
or limited liability company, please sign the company name by authorized person.