INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant X
Filed by a Party other than the Registrant /_/
Check the appropriate box:
/_/ Preliminary Proxy Statement
/_/ Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/_/ Definitive Additional Materials
/_/ Soliciting Material Pursuant toss.240.14a-12
ENVISION SOLAR INTERNATIONAL, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/_/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
/_/ Fee paid previously with preliminary materials.
/_/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 25, 2012
DEAR STOCKHOLDER:
Notice is hereby given that the 2012 Annual Meeting of Stockholders
("Annual Meeting") of Envision Solar International, Inc. ("ESI" or the
"Company") will be held at 4:00 p.m. Pacific Time, on Wednesday, July 25, 2012
at 7675 Dagget Street, Suite 150, San Diego, California 92111.
At the Annual Meeting, you will be asked to consider and vote upon the
following:
1. Election of four members of the Board of Directors to hold
office until the next annual meeting of stockholders or until
their respective successors have been elected and qualified.
2. Ratification of the adoption of the 2011 Stock Incentive Plan
for the Company.
3. Ratification of the appointment of Salberg & Company, P.A. as
ESI's independent registered public accounting firm for the
fiscal year ending December 31, 2012.
4. Transaction of such other business as may properly come before
the annual meeting or action on any adjournment or
postponement of the meeting.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on June 8, 2012
as the record date for the determination of stockholders entitled to notice of
and to vote at this 2012 Annual Meeting and at any adjournment or postponement
of it.
A copy of the Company's Form 10-K for the fiscal year ended December
31, 2011 is included with this Proxy Statement. A copy of the Annual Report and
Proxy Statement can also be found on the Internet at www.envisionsolar.com.
Sincerely,
/s/ Desmond Wheatley
Desmond Wheatley
Chief Executive Officer and President
IMPORTANT
PLEASE REGISTER AND VOTE ELECTRONICALLY ACCORDING TO THE DIRECTIONS OR SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING POSTAGE-PAID RETURN
ENVELOPE SO THAT YOUR SHARES MAY BE VOTED IF YOU ARE UNABLE TO ATTEND THE ANNUAL
MEETING.
ENVISION SOLAR INTERNATIONAL, INC.
7675 DAGGET STREET, SUITE 150
SAN DIEGO, CALIFORNIA 92111
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PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
JULY 25, 2012
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INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy ("Proxy") is solicited on behalf of the Board of
Directors (the "Board") of Envision Solar International, Inc., a Nevada
corporation ("ESI" or the "Company"), for use at its 2012 Annual Meeting of
Stockholders (the "Annual Meeting") to be held 4:00 p.m. Pacific Time, on
Wednesday, July 25, 2012 at 7675 Dagget Street, Suite 150, San Diego, California
92111 and at any adjournment or postponement of such meeting.
This Proxy Statement and the accompanying form of Proxy were first
mailed to all stockholders entitled to vote at the Annual Meeting on or about
June 8, 2012.
The Company's principal executive offices are located at 7675 Dagget
Street, Suite 150, San Diego, California 92111. Its telephone number is (858)
799-4583.
RECORD DATE AND VOTING
Stockholders of record at the close of business on June 8, 2012 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting. As
of the close of business on the Record Date, there were 57,153,323 shares of the
Company's common stock (the "Common Stock") outstanding and entitled to vote.
Each stockholder is entitled to one vote for each share of Common Stock held by
such stockholder as of the Record Date.
The required quorum for the transaction of business at the Annual
Meeting is a majority of the shares of Common Stock issued and outstanding on
the Record Date. Shares that are voted "FOR," "AGAINST," or "ABSTAIN" on a
matter are treated as being present at the meeting for purposes of establishing
a quorum. Broker non-votes (i.e., the submission of a Proxy by a broker or
nominee specifically indicating the lack of discretionary authority to vote on
the matter) are also counted for purposes of determining the presence of a
quorum for the transaction of business. Shares voted "FOR" or "AGAINST" a
particular matter presented to stockholders for approval at the Annual Meeting
will be treated as shares entitled to vote ("Votes Cast") with respect to such
matter. Abstentions also will be counted toward the tabulation of Votes Cast on
proposals presented to the stockholders and will have the same effect as
negative votes. Broker non-votes will not be counted for purposes of determining
the number of Votes Cast with respect to the particular proposal on which the
broker has expressly not voted. Accordingly, broker non-votes will not affect
the outcome of the voting on a proposal that requires a majority of the Votes
Cast (such as an amendment to, or adoption of, a stock purchase plan).
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All votes will be tabulated by the inspector of election appointed for
the Annual Meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Stockholders may not cumulate votes in the
election of directors. If a choice as to the matters coming before the Annual
Meeting has been specified by a stockholder on the Proxy, the shares will be
voted accordingly. If a Proxy is returned to the Company and no choice is
specified, the shares will be voted "FOR" each of the Company's nominees for
director and "FOR" the approval of each of the proposals described in the Notice
of Annual Meeting of Stockholders and in this Proxy Statement.
Any stockholder or stockholder's representative who, because of a
disability, may need special assistance or accommodation to allow him or her to
participate at the Annual Meeting may request reasonable assistance or
accommodation from the Company by contacting the Corporate Secretary, in writing
at 7675 Dagget Street, Suite 150, San Diego, California 92111 or by telephone at
(858) 799-4583. To provide the Company sufficient time to arrange for reasonable
assistance, please submit such requests by July 15, 2012.
REVOCABILITY OF PROXIES
Any stockholder giving a Proxy pursuant to this solicitation, and any
beneficial owner of the stock who has voting power over it for which a Proxy has
been submitted, may revoke it at any time prior to the meeting. Revocation is
accomplished by filing with the Secretary of the Company at its principal
executive offices at 7675 Dagget Street, Suite 150, San Diego, California 92111,
a written notice of such revocation or a duly executed Proxy bearing a later
date, or by attending the Annual Meeting and voting in person.
SOLICITATION
The Company will bear the entire cost of this solicitation, including
the preparation, assembly, printing and mailing of the Notice of Annual Meeting,
this Proxy Statement, the Proxy and any additional solicitation materials
furnished to stockholders. Copies of solicitation materials will be furnished to
brokerage houses, fiduciaries and custodians holding shares in their names that
are beneficially owned by others so that they may forward this solicitation
material to such beneficial owners. To assure that a quorum will be present in
person or by proxy at the Annual Meeting, it may be necessary for certain
officers, directors, employees or other agents of the Company to solicit proxies
by telephone, facsimile or other means or in person. The Company will not
compensate such individuals for any such services. Except as described above,
the Company does not presently intend to solicit proxies other than by mail.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 2013 annual
meeting of stockholders must be received by the Company no later than March 26,
2013 to be eligible for inclusion in the Company's proxy statement and form of
proxy for next year's meeting. If any stockholder intends to present a proposal
at the 2013 annual meeting of stockholders without inclusion of such proposal in
our proxy materials, including director nominations, we must receive notice of
such proposal no earlier than March 26, 2013 and no later than April 25, 2013.
Proposals must concern a matter that may be properly considered and acted upon
at the Annual Meeting in accordance with applicable laws, regulations and the
Company's Bylaws and policies, and must otherwise comply with Rule 14a-8 of the
Exchange Act, and we reserve the right to reject, rule out of order, or take
other appropriate action with respect to any proposal that does not comply with
these requirements. Proposals should be addressed to Envision Solar
International, Inc., Attention: Corporate Secretary, 7675 Dagget Street, Suite
150, San Diego, California 92111.
* * * * *
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PROPOSALS TO BE VOTED ON
PROPOSAL NO. 1
RATIFICATION OF THE ADOPTION OF THE
2011 STOCK INCENTIVE PLAN FOR THE COMPANY
Our board of directors voted unanimously to adopt the 2011 Stock
Incentive Plan for the directors, officers, employees and key consultants of
Envision Solar International, Inc., as amended, effective on August 11, 2011
(the "Plan"). Our board believes that the adoption of the Plan will be critical
to us attracting, retaining, and motivating employees and other eligible
persons.
A summary of the principal provisions of the Plan are set forth in the
following paragraphs. The summary is not necessarily complete, and reference is
made to the full text of the Plan attached as Exhibit A to this proxy statement.
Capitalized terms used, but not defined herein, have the same meaning as set
forth in the Plan.
TYPES OF AWARDS. The Plan allows any of the following types of awards,
to be granted alone or in tandem with other awards:
STOCK OPTIONS. Stock options granted under the Plan may be either
incentive stock options ("ISOs"), which are intended to satisfy the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
nonstatutory stock options ("NSOs"), which are not intended to meet those
requirements. Award agreements for stock options may include rules for exercise
of the stock options after termination of service. Options may not be exercised
unless they are vested, and no option may be exercised after the end of the term
set forth in the award agreement.
STOCK APPRECIATION RIGHTS. A stock appreciation right entitles the
grantee to receive, with respect to a specified number of shares of common
stock, any increase in the value of the shares from the date the award is
granted to the date the right is exercised. Under the Plan, all stock
appreciation rights must be settled in common stock except as provided by the
Committee. Award agreements for stock appreciation rights may include rules for
exercise of the stock appreciation rights after termination of service.
STOCK AWARDS AND RESTRICTED STOCK. A stock award consists of the
transfer by us to a grantee of shares of our common stock, without other payment
for it, as additional compensation for services to us. Restricted stock is
common stock that is subject to restrictions, including a prohibition against
transfer and a substantial risk of forfeiture, until the end of a "restricted
period" during which the grantee must satisfy certain vesting conditions. If the
grantee does not satisfy the vesting conditions by the end of the restricted
period, the restricted stock is forfeited or will be repurchased by us at the
lower of the stock's fair market value or issuance price if the restricted stock
was originally purchased by the grantee. During the restricted period, the
holder of restricted stock has the rights and privileges of a regular
stockholder, except that the restrictions set forth in the applicable award
agreement apply.
PERFORMANCE SHARES. A performance share consists of an award of common
stock to a participant based upon the achievement of performance objectives
determined by the Committee.
ADMINISTRATION. The Plan will be administered by our board of directors
and our compensation committee ("Committee"). The Committee will at all times be
composed of not less than two members of the board of directors who are not our
employees. The Plan gives the Committee discretion, subject in certain cases to
approval of our full board of directors, to make awards under the Plan, to set
the terms of award agreements (including the type and amount of any award), to
establish rules for the interpretation and administration of the Plan, and to
make other determinations and take other actions consistent with the terms and
purposes of the Plan.
ELIGIBILITY. Any officer, employee, or director of, or consultant or
other independent contractor for us or any of our subsidiaries will be eligible
to receive awards under the Plan.
SHARES AVAILABLE FOR AWARDS. The Plan authorizes 30,000,000 shares of
our common stock to be reserved for awards under the Plan. In addition, on each
anniversary of the Plan's effective date on or before the fifth anniversary of
the effective date of the Plan (i.e., August 11, 2011), the aggregate number of
shares of our common stock available for issuance under the Plan will be
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increased by the lesser of (a) 5% of the total number of shares of our common
stock authorized but not issued under the Plan as of the December 31 immediately
preceding the anniversary of the effective date of the Plan, (b) 300,000 shares,
or (c) a lesser number of shares of our common stock as our board, in its sole
discretion, determines. In general, shares reserved for awards that lapse or are
cancelled will be added back to the pool of shares available for awards under
the Plan. In any year, an eligible employee, consultant, or director may receive
awards with respect to no more than 10,000,000 shares. If an award is to be
settled in a medium other than common stock, the number of shares on which the
award is based will count toward the limit. In response to certain extraordinary
events (such as merger, exchange, reorganization, or liquidation), the Committee
may provide for cash payments or award substitutions to reflect consideration
received by stockholders.
VESTING AND PERFORMANCE OBJECTIVES. Awards under the Plan are
forfeitable until they become vested. An award will become vested only if the
vesting conditions set forth in the award agreement (as determined by the
Committee) are satisfied. The vesting conditions may include performance of
services for a specified period, achievement of performance objectives, or a
combination of both criteria. Performance objectives selected by the Committee
as vesting conditions will be based on one or more of the following performance
measures: net earnings or net income (before or after taxes); earnings per
share; net sales or revenue growth; net operating profit; return measures
(including, but not limited to, return on assets, capital, equity, sales, or
revenue); cash flow (including, but not limited to, operating cash flow, free
cash flow, cash flow return on equity, and cash flow return on investment);
earnings before or after taxes, interest, depreciation, and/or amortization;
gross or operating margins; productivity ratios; share price (including, but not
limited to, growth measures and total shareholder return); expense targets;
margins; operating efficiency; market share; working capital targets; cash value
added; economic value added; market penetration; and product introductions, in
each case determined in accordance with generally accepted accounting principles
subject to modifications approved by the Committee) consistently applied on a
business unit, divisional, subsidiary or consolidated basis or any combination
of those levels.
CHANGE IN CONTROL. Any stock option or restricted stock award granted
to any participant under the Plan that would have become vested upon continued
employment by the grantee will immediately vest in full and become exercisable
upon a change in control as that term is defined in the Plan.
NONTRANSFERABILITY. In general, awards under the Plan may not be
assigned or transferred except by will or the laws of descent and distribution.
The Committee may, however, allow the transfer of NSOs to members of a Plan
participant's immediate family or to a trust, partnership, or corporation in
which the parties in interest are limited to the participant and members of the
participant's immediate family.
AMENDMENT AND TERMINATION. Our board of directors may amend, alter,
suspend, or terminate the Plan at any time. If necessary to comply with any
applicable law (including stock exchange rules), we will first obtain
stockholder approval. Amendments, alterations, suspensions, and termination of
the Plan generally may not impair a participant's (or a beneficiary's) rights
under an outstanding award. The rights may, however, be impaired if necessary to
comply with an applicable law or accounting principles (including a change in
the law or accounting principles) pursuant to a written agreement with the
participant.
DURATION. Unless it is terminated sooner, the Plan will terminate upon
the earlier of August 11, 2021 or the date all shares available for issuance
under the Plan have been issued and vested.
REQUIRED VOTE
Ratification of the adoption of the Company's 2011 Stock Incentive Plan
requires the affirmative "FOR" vote of a majority of the Votes Cast on the
proposal. Unless marked to the contrary, proxies received will be voted "FOR"
approval of the ratification of the adoption of the Company's 2011 Stock
Incentive Plan.
RECOMMENDATION
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE
RATIFICATION OF THE ADOPTION OF THE COMPANY'S 2011 STOCK INCENTIVE PLAN.
* * * * *
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PROPOSAL NO. 2
ELECTION OF DIRECTORS
The Board recommended and nominated Robert Noble, Desmond Wheatley, Jay
S. Potter and John Evey as nominees for election at the Annual Meeting. At the
Annual Meeting, four directors will be elected to the Board of Directors. Except
as set forth below, unless otherwise instructed, the persons appointed in the
accompanying form of proxy will vote the proxies received by them for the
nominees named below, who are all presently directors of ESI. Your proxies
cannot be voted for a greater number of persons than the number of nominees
named in the proxy statement. In the event that any nominee becomes unavailable,
the proxy holders will vote in their discretion for a substitute nominee. The
term of office of each person elected as a director will continue until the next
annual meeting or until a successor has been elected and qualified, or until the
director's earlier death, resignation or removal.
After the Annual Meeting, the Company's Board of Directors will still
have three vacancies. The existing directors have not at this time identified
any candidates to fill those vacancies, but will have the right to fill them
until the next Annual Meeting of Stockholders. Accordingly, the vacancies may be
filled by resolution of the Company's Board of Directors, or may be filled by
election at the next Annual Meeting of Stockholders in 2013.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
The following information provided with respect to the principal occupation,
affiliations and business experience during the last five years for each of the
nominees has been furnished to us by such nominees. We identify and describe the
key experience, qualifications and skills our directors bring to the Board that
are important in light of the Company's business and structure. The directors'
experiences, qualifications and skills that the Board considered in their
nomination are included in their individual biographies.
o Leadership experience. We believe that directors with experience in
significant leadership positions such as chief executive officer and
chief financial officer provide the Company with special insights.
These people generally possess leadership qualities and the ability to
identify and develop those qualities in other people. They demonstrate
a practical understanding of organizations, processes, strategy, risk
management and the methods to drive change and growth. Through their
service as leaders in other organizations, they also have access to
important sources of market intelligence, analysis and relationships
that may benefit the Company.
o Finance experience. We believe that an understanding of finance and
financial reporting processes is important for our directors. The
Company measures its operating and strategic performance by reference
to financial targets. We seek to have directors who are financially
knowledgeable.
o Industry experience. We seek to have directors with experience as
executives, directors or in other leadership positions in the industry
in which we participate.
o Government experience. We seek directors with governmental experience
because of our interactions with a variety of governing agencies, both
as customers and regulatory bodies. The Company recognizes the
importance of working constructively with governments and values
directors with this experience.
o Technology and education experience; As a technology based company, we
seek directors with backgrounds in technology and education because
our success depends in part on developing and accessing new ideas.
The name and certain information regarding each nominee are set forth
below as of June 8, 2012. There are no family relationships among directors or
executive officers of ESI.
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NAME AGE CURRENT POSITION WITH ESI
------------------ --------- ---------------------------------------------------
Desmond Wheatley 46 Chief Executive Officer, President and Director
Robert Noble 59 Chairman of the Board of Directors
Jay S. Potter 47 Director
John Evey 62 Director
------------------ --------- ---------------------------------------------------
DESMOND WHEATLEY has served as our President and Chief Operating
Officer since September 2010 and was named Chief Executive Officer and a
Director in August 2011. Mr. Wheatley has two decades of senior international
management experience in technology systems integration, energy management,
communications and Renewable Energy. Mr. Wheatley is a founding partner in the
international consulting practice Crichton Hill LLC. Prior to founding Crichton
Hill, Mr. Wheatley was CEO of iAxis FZ LLC, a Dubai based alternative energy and
technology systems integration company. From 2000 to 2007 Mr. Wheatley held a
variety of senior management positions at San Diego based Kratos Defense and
Security Solutions (Nasdaq: KTOS), fka Wireless Facilities with the last five
years as President of ENS, the largest independent security and energy
management systems integrator in the United States. Prior to forming ENS in 2002
Mr. Wheatley held senior management positions in the cellular and broadband
wireless industries; deploying infrastructure and lobbying in Washington DC on
behalf of major wireless service providers. Mr. Wheatley's teams led turnkey
deployments of thousands of cellular sites and designed and deployed broadband
wireless networks in many MTAs across the USA. Mr. Wheatley has founded, funded
and operated four profitable start-up companies and was previously engaged in
M&A activities. Mr. Wheatley evaluated acquisition opportunities, conducted due
diligence and raised commitments of $500M in debt and equity. Mr. Wheatley sits
on the boards of Admonsters, San Francisco CA and the Human Capital Group, Los
Angeles, CA and was formerly a board member at DNI in Dallas, Texas.
Mr. Wheatley's qualifications are:
o Leadership experience - Mr. Wheatley has been our Chief
Executive Officer since August 2011 and President since
September 2010. He has held numerous executive positions in
international organizations including five years as President
of a publically traded technology and energy management
company.
o Industry experience - Mr. Wheatley was founding member of an
international consulting company with expertise in the
renewable and energy sectors. He has held various executive
level positions in multiple infrastructure deployment
companies and has been involved in energy management and
renewable since 2002.
o Finance Experience - Mr. Wheatley was founding partner in
multiple companies with direct responsibilities for their
financial success and stability. He has participated in $500
million of capital raises and held full profit and loss
responsibility for a public company with approximately $70
million of revenues.
o Education experience - Mr. Wheatley was educated in his native
Scotland.
ROBERT NOBLE has served as our Chairman of the Board of Directors since
2006 and is our prior Chief Executive Officer and Chief Financial Officer,
resigning both positions in August 2011. Prior to founding ESI, Mr. Noble served
as the Chief Executive Officer of Tucker Sandler Architects, an architecture
firm located in San Diego, California, from 2000 through 2007. Mr. Noble has
served as the Chairman of Noble Environmental Technologies, Inc., a materials
company, since 1998, Ecoinvestment Network, a California company, since 2007,
Envision Regenerative Health, a California company, since 2008 and the Noble
Group, Inc., a California company, since 2007. Mr. Noble is an accomplished
architect, environmental designer, industrial designer and environmental
technology entrepreneur. Mr. Noble and his work have won numerous awards,
including awards from Popular Science Magazine (Best of What's New),
Entrepreneur Magazine (Innovator of the Year, Environmental Category), National
Public Radio (E-chievement Environmental Award), the Urban Land Institute (San
Diego Smart Growth Award, Innovation Category) and The American Institute of
Architects - San Diego Chapter (Energy Efficiency Award). He received his
undergraduate degree in architecture from the University of California -
Berkeley, and his Master of Architecture from Harvard University Graduate School
of Design. Mr. Noble also completed graduate work at Cambridge University and
Harvard Business School.
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Mr. Noble's qualifications:
o Leadership experience - Mr. Noble has been our chairman and
chief executive officer since inception and has held similar
positions in multiple other companies.
o Finance experience - Mr. Noble was our founder and has been
chief executive officer of our company as well as other
companies supervising the financial management of such as a
part of his responsibilities.
o Industry experience - Mr. Noble is an accomplished and award
winning architect and has served as a community leader in the
eco-friendly space. He is an international speaker on the
subject.
o Education experience - Mr. Noble received his undergraduate
degree in architecture from the University of California -
Berkeley, and a Master of Architecture from Harvard University
Graduate School of Design. Mr. Noble also completed graduate
work at Cambridge University and Harvard Business School.
JAY S. POTTER has served as a Director of ESI since 2007. Mr. Potter
has been active in the financial and energy industries for over 25 years and has
successfully participated, directed or placed over two hundred million dollars
of capital in start-up and early stage companies. Mr. Potter is an entrepreneur
and understands the needs of early stage and start-up companies. He takes an
active role in the development of the funded companies and to that end has
participated as advisor, director and officer to defend shareholder positions.
He founded an early stage venture fund in GreenCore Capital, Inc. and serves as
that company's Chairman and Chief Executive Officer. He has served as Chairman,
President and Chief Executive Officer of several financial service operations.
Mr. Potter is a registered representative with Allied Beacon Partners, Inc., a
registered securities broker dealer firm that has served as the placement agent
on certain of the Company's private placements of securities. Mr. Potter serves
as a Director of Envision, Sterling Energy Resources and Noble Environmental
Technologies.
Mr. Potter's qualifications are:
o Leadership experience - Mr. Potter has held various executive
positions at multiple companies and is a Board member of
Envision, Noble environmental technologies and Sterling Energy
Resources.
o Industry experience - Mr. Potter has held numerous executive
level positions for companies focusing on renewable energies
and pother environmentally focused ventures.
o Finance Experience - Mr. Potter raised and placed over $200
million of capital into early stage companies.
o Education experience - Mr. Potter attended San Diego State
University for an aeronautical engineering degree.
JOHN EVEY has served as a Director of ESI since April 2010. He is
Executive Vice President of Nature and Culture International, an organization
that has conserved more than 8.7 million acres of tropical forest to protect
species, watersheds and ecosystems with and to support human communities in
Latin America. Prior to accepting that role, Mr. Evey served for four years as
Vice President for Development at the J. Craig Venter Institute ("JCVI"), for
which he was responsible for generating collaborative partnerships and financial
resources from all sources except federal research agencies for this major
institute that is advancing genomic research to benefit human health and the
environment. From 2002 to 2007, Mr. Evey served as Assistant Director of the
Scripps Institution of Oceanography and Executive Director of Development for
the Marine Sciences at University of California, San Diego ("UCSD"). Prior, he
was Vice President for Institutional Advancement at University of the Pacific
and served also served for more than a decade as Director of Development at
Oregon State University. His earlier experience includes roles as founding
director of the Office for Resource Development at the Oregon Shakespeare
Festival and as the initial association executive for the statewide arts lobby,
Oregon Advocates for the Arts. As a volunteer, he catalyzed creation of the
Southern Oregon Land Conservancy. As an officer of the Travel Industry Council
of Oregon, Mr. Evey and two colleagues successfully advocated the creation and
funding of a Tourism Division in the Oregon Department of Economic Development.
Mr. Evey is a member of the Host Committee for the Kyoto Prize Symposium in San
Diego, which helps to host the Kyoto Prize laureates each spring. During a
thirty-five year professional career--including thirty years directing
development programs--Mr. Evey has personally generated more than $100 million
in gifts and matching funds.
Mr. Evey's qualifications are:
o Leadership experience - Mr. Evey has held multiple executive
positions, including as Vice President for Advancement for the
three-campus University of the Pacific.
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o Industry experience - Mr. Evey has served as Director of
Development for Oregon State University, a Carnegie Tier I
research university with statewide services.
o Finance Experience - Mr. Evey has personally generated over
$100 million in gifts and matching funds to charitable
organizations.
o Education experience - Mr. Evey has a B.S. from Oregon State
University and an M.S. from the University of Oregon as well
as many professional development courses and seminars.
No officer or director is required to make any specific amount or
percentage of his business time available to us. Each of our officers intends to
devote such amount of his or her time to our affairs as is required or deemed
appropriate by us.
REQUIRED VOTE
The four nominees receiving the highest number of affirmative "FOR"
votes shall be elected as directors. Stockholders may not cumulate votes in the
election of directors. Unless marked to the contrary, proxies received will be
voted "FOR" these nominees.
RECOMMENDATION
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION TO THE
BOARD OF DIRECTORS OF EACH OF THE FOREGOING NOMINEES.
* * * * *
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PROPOSAL NUMBER 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The Audit Committee of the Board of Directors has appointed Salberg &
Company, P.A. as the independent registered public accounting firm to audit our
consolidated financial statements for the year ending December 31, 2012.
Notwithstanding its selection, the Board of Directors, in its discretion, may
appoint another independent registered public accounting firm at any time during
the year if the Board of Directors believes that such a change would be in the
best interest of ESI and its stockholders. If the appointment is not ratified by
our stockholders, the Board of Directors may reconsider whether it should
appoint another independent registered public accounting firm.
REQUIRED VOTE
Ratification of the appointment of Salberg & Company, P.A. as our
independent registered public accounting firm for the year ending December 31,
2012 requires the affirmative "FOR" vote of a majority of the Votes Cast on the
proposal. Unless marked to the contrary, proxies received will be voted "FOR"
ratification of the appointment of Salberg & Company, P.A.
RECOMMENDATION
OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF SALBERG & COMPANY, P.A. AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2012.
* * * * *
-9-
BOARD OF DIRECTORS AND CORPORATE GOVERNANCE MATTERS
We are committed to maintaining the highest standards of business
conduct and corporate governance, which we believe are essential to running our
business efficiently, serving our stockholders well and maintaining our
integrity in the marketplace. We intend to adopt a code of ethics that applies
to our officers, directors and employees, including our Chief Executive Officer
and Chief Financial Officer, but have not done so to date due to our relatively
small size.
Our Board of Directors held a total of four meetings during our fiscal
year ended December 31, 2011. Each director attended all of the fiscal year 2011
meetings of our Board of Directors and each committee on which he served. We
have no formal policy regarding attendance by our directors at Board meetings,
although we encourage attendance and most of our directors have historically
attended the meetings. Our executive officers are appointed by our Board of
Directors and serve at the discretion of the Board of Directors. Our directors
hold office until the expiration of their respective terms or until their
successors have been duly elected and qualified.
BOARD OF DIRECTORS INDEPENDENCE
The Board of Directors has determined that two of our director nominees
standing for election are "independent directors" as defined in Rule 4200 of
Financial Industry Regulatory Authority's ("FINRA") listing standards. In
determining the independence of our directors, the Board of Directors has
adopted independence standards that mirror exactly the criteria specified by
applicable laws and regulations of the Securities and Exchange Commission (the
"SEC") and FINRA rules. In making the determination of the independence of our
directors, the Board of Directors considered all transactions in which ESI and
any director had any interest, including those discussed under "Certain
Relationships and Related Transactions" below, and transactions involving
payments made by ESI to companies in the ordinary course of business where the
candidate serves on the board of directors or as a member of the executive
management of the other company.
BOARD LEADERSHIP STRUCTURE AND COMMITTEE COMPOSITION
Mr. Robert Noble serves as our Chairman of the Board. At this time, the
Board of Directors believes that Mr. Noble's role as our Chairman serves the
best interests of the Company and our stockholders. As Chairman of the Board,
Mr. Noble consults with the chairpersons of the committees of the Board of
Directors and establishes the agenda for each meeting of the Board of the
Directors. As our founder and Chairman of the Board since inception and our
former Chief Executive Officer, Mr. Noble is uniquely suited to lead our Board
of Directors and to ensure that critical business issues are brought before the
Board of Directors. We believe that Mr. Noble's guidance enables the Board of
Directors to efficiently and effectively develop and implement business
strategies and oversee our risk management efforts.
The Board of Directors appreciates that the advantages gained by having
ESI's founder as the Chairman of the Board must be viewed in light of potential
independence concerns. The Board of Directors believes that we have adequate
safeguards in place to address those concerns. The Board of Directors meets
regularly, and each director is an equal participant in each discussion made by
the full Board of Directors.
One of our directors is also involved in our management. As necessary
or appropriate, the Board of Directors and its committees may also retain
outside legal, financial or other advisors.
We intend to establish an audit committee of the Board of Directors,
which will consist of independent directors of which at least one will qualify
as a qualified financial expert as defined in Item 407(d)(5)(ii) of Regulation
S-K. The audit committee's duties will be to recommend to our Board of Directors
the engagement of independent auditors to audit our consolidated financial
statements and to review our accounting and auditing principles. The audit
committee will review the scope, timing and fees for the annual audit and the
results of audit examinations performed by the internal auditors and independent
public accountants, including their recommendations to improve the system of
accounting and internal controls. The audit committee would at all times be
composed exclusively of directors who are, in the opinion of our Board of
Directors, free from any relationship that would interfere with the exercise of
independent judgment as a committee member and who possess an understanding of
consolidated financial statements and generally accepted accounting principles.
-10-
The Company has established a compensation committee on which consists
of our two independent directors. The compensation committee is responsible for
reviewing general policy matters relating to compensation and benefits of
directors and officers, determining the total compensation of our officers and
directors. The Board of Directors does not have a nominating committee.
Therefore, the selection of persons for election to the Board of Directors was
neither independently made nor negotiated at arm's length.
BOARD ROLE IN RISK OVERSIGHT
The Board of Directors carries out its role in the oversight of risk
both directly and through its compensation committee. The Board of Directors'
direct role includes the consideration of risk in the strategic and operating
plans that are presented to it by management. The compensation committee
established by the Board of Directors carries out the Board of Directors'
oversight of risk as follows:
o The Compensation Committee determines the compensation of our
executive officers and directors, administers benefit plans
and policies with respect to our executive officers and
considers whether any of those plans or policies create risks
that are likely to have a material adverse effect on the
Company.
The Company intends to try to expand the Board of Directors and its
committees in the future by appointing and nominating for election new
independent members to fill the vacancies that currently exist on the Board of
Directors. While our Board of Directors oversees our management of risk as
outlined above, management is responsible for identifying and managing risks.
NOMINATIONS PROCESS AND DIRECTOR QUALIFICATIONS
The Board of Directors has not yet established a Nominating and
Corporate Governance Committee. The current small size of the Board has not yet
made the formation of those committees feasible. Accordingly, the Board of
Directors reviews the skills and characteristics required of Board members. All
of the current members of the Board of Directors are involved in the nomination
consideration process. The Board will consider a candidate's independence, as
well as the perceived needs of the Board and the candidate's background, skills,
business experience and expected contributions. At a minimum, members of the
Board must possess the highest professional ethics, integrity and values, and be
committed to representing the long-term interests of our shareholders. The
Company does not have a particular policy regarding considering potential
candidates for nomination for election as directors that may be suggested by our
shareholders. We believe that we would give them the same consideration as other
candidates.
They must also have an inquisitive and objective perspective, practical
wisdom and mature judgment. The Board may also take into account the benefits of
diverse viewpoints, as well as the benefits of constructive working
relationships among directors. The Board considers diverse viewpoints based on
the diversity of the career experiences among potential candidates, diversity of
their respective expertise, diversity of their respective educational
backgrounds, and the diversity of their respective charitable, cultural and
social interests as those interests may pertain to the advice they render and
the network of relationships they bring for the benefit of the Company. The
success of the nomination process, and in particular its achieving diversity, is
evaluated by the whole Board based on whether its members fulfill the Company's
needs for advice, expertise, guidance and relationships, or whether and to what
extent the Company must hire outside professionals to fulfill those needs.
The Board of Directors also reviews and determines whether existing
members of the Board should stand for re-election, taking into consideration
matters relating to the number of terms served by individual directors and the
changing needs of the Board.
We do not have a limit on the number of terms an individual may serve as a
director on our Board.
The Board of Directors utilizes a variety of methods for identifying
and evaluating nominees for director. The Board regularly assesses the
appropriate composition, size and independence of the Board, and whether any
vacancies are expected due to change in employment or otherwise. In the event
that vacancies are anticipated, or otherwise arise, the Board considers various
potential candidates for director. Candidates are evaluated at regular or
special meetings of the Board of Directors, and may be considered at any point
during the year. The Board will consider shareholder recommendations for
candidates for the Board that are properly submitted in the same manner it
-11-
considers nominees from other sources. In evaluating such recommendations, the
Board will use the qualifications standards described above and will seek to
achieve a balance of knowledge, experience and capability on the Board.
In the future the Company will seek to add new independent directors to
its Board of Directors by appointing or nominating them for election to fill
vacancies that now exist on the Board. When making determinations regarding
independence, the Board of Directors will periodically evaluate the independence
of each member and prospective member of the Board of Directors. The Board of
Directors will analyze whether a director or candidate is independent by
evaluating, among other factors, the following:
1. whether the person, or any of such person's family members, has
accepted any compensation from us in excess of $120,000 during any
period of twelve consecutive months within the three years preceding
the determination of independence, other than (i) as compensation for
Board or Board committee service, (ii) compensation paid to a family
member who is employed by us other than as an executive officer, or
(iii) benefits under a tax-qualified retirement plan or
non-discretionary compensation;
2. whether the person has any material relationship with us, either
directly, or as a partner, stockholder or officer of an organization
with which we have a relationship;
3. whether the person is our current employee or was one of our employees
within three years preceding the date of determination;
4. whether the person is, or in the three years preceding the date of
determination has been, affiliated with or employed by (i) a present
internal or external auditor of ours or any affiliate of such auditor
or (ii) any former internal or external auditor of ours or any
affiliate of such auditor, which performed services for us within
three years preceding the date of determination;
5. whether the person is, or in the three years preceding the date of
determination has been, part of an interlocking directorate, in which
one of our executive officers serves on the compensation committee of
another company that concurrently employs the director as an executive
officer;
6. whether the person receives any compensation from us, other than fees
or compensation for service as a member of the Board of Directors and
any of its committees, including reimbursement for reasonable expenses
incurred in connection with such service, and for reasonable
educational expenses associated with Board of Directors or committee
membership matters;
7. whether an immediate family member of the person is one of our current
executive officers or was an executive officer within three years
preceding the date of determination;
8. whether an immediate family member of the person is, or in the three
years preceding the date of determination has been, affiliated with or
employed in a professional capacity by (i) a present internal or
external auditor of ours or any of our affiliates or (ii) any of our
former internal or external auditors or any affiliate of ours which
performed services for us within three years preceding the date of
determination; and
9. whether an immediate family member of the person is or in the three
years preceding the date of determination has been part of an
interlocking directorate in which one of our executive officers serves
on the compensation committee of another company that concurrently
employs the immediate family member of the member of the Board of
Directors as an executive officer.
The above list is not exhaustive and the Board of Directors considers
all other factors which could assist it in its determination that a person has
no material relationship with us that could compromise that person's
independence.
RISK CONSIDERATIONS IN OUR COMPENSATION PROGRAMS
We have reviewed our compensation structures and policies as they
pertain to risk and have determined that our compensation programs do not create
or encourage the taking of risks that are reasonably likely to have a material
-12-
adverse effect on the Company. In reaching this conclusion, the Board examined
all of its compensation arrangements and the authority and autonomy of its
employees and consultants who receive the compensation. The Board assesses
whether the compensation arrangement is excessively weighted towards incentives
that would encourage an autonomous employee or consultant to endanger the
Company. Based on a review of these factors, the small size of the Company, the
limited autonomy of its employees and consultants, and the fact that bonuses are
discretionary and subject to the approval of the whole Board, the Board has
determined that our compensation programs do not encourage the taking of excess
risk.
COMMUNICATIONS WITH THE BOARD OF DIRECTORS
Stockholders may contact the Board of Directors about bona fide issues or
questions regarding ESI by sending an email to Desmond Wheatley at
desmond.wheatley@envisionsolar.com or by writing the Corporate Secretary at the
following address:
Envision Solar International, Inc.
Attn: Corporate Secretary
7675 Dagget Street, Suite 150
San Diego, California 92111
EXECUTIVE OFFICERS
Executive officers of the Company, and their ages as of June 8, 2012,
are as follows:
NAME AGE CURRENT POSITION WITH ESI
------------------------ --------- ---------------------------------------------
Desmond Wheatley 46 Chairman and Chief Executive Officer
Chris Caulson 43 Executive Vice President, Chief Financial
Officer, Corporate Secretary and Director
------------------------ --------- ---------------------------------------------
See section entitled "Nominees" under Proposal 2, Election of Directors
above, for a brief description of the business experience and educational
background of Mr. Wheatley.
CHRIS CAULSON has been our Chief Financial Officer since August 2011
and previously led our accounting and finance functions since November 2010. Mr.
Caulson brings over 20 years of financial management experience including
security infrastructure and technology integration, wireless communications, and
telecommunications industries. From 2004 through 2009, Mr. Caulson held various
positions including Vice President of Operations and Finance of ENS, the largest
independent technology systems integrator in the United States and a
wholly-owned division of Kratos Defense & Security Solutions, Inc. In this role,
Mr. Caulson was responsible for the operational and financial execution of
multiple subsidiaries and well over $100 million of integration projects
including networks for security, voice and data, video, life safety and other
integrated applications. Prior to 2004, Mr. Caulson was CFO of Titan Wireless,
Inc., a $200 million international telecommunications division of Titan Corp
(subsequently purchased by L-3.). Mr. Caulson, who has a Bachelors of
Accountancy from the University of San Diego, began his career with the public
accounting firm Arthur Andersen.
Mr. Caulson's qualifications:
o Leadership experience - Mr. Caulson has been our Chief
Financial Officer since August 2011 and has held similar
positions in multiple other companies.
o Finance experience - Mr. Caulson has over 20 years experience
in financial related positions and was an external auditor in
the public accounting firm of Arthur Andersen.
o Industry experience - Mr. Caulson has held multiple financial
related executive positions in publically traded companies.
o Education experience - Mr. Caulson has his bachelors of
accountancy degree from the University of San Diego.
-13-
EXECUTIVE COMPENSATION
COMPENSATION DISCUSSION AND ANALYSIS
The following Compensation Discussion and Analysis describes the
material elements of compensation for our executive officers identified in the
Summary Compensation Table ("Named Executive Officers"), and executive officers
that we may hire in the future. As more fully described below, our board's
compensation committee reviews and recommends policies, practices, and
procedures relating to the total direct compensation of our executive officers,
including the Named Executive Officers, and the establishment and administration
of certain of our employee benefit plans to our board of directors.
COMPENSATION PROGRAM OBJECTIVES AND REWARDS
Our compensation philosophy is based on the premise of attracting,
retaining, and motivating exceptional leaders, setting high goals, working
toward the common objectives of meeting the expectations of customers and
stockholders, and rewarding outstanding performance. Following this philosophy,
we consider all relevant factors in determining executive compensation,
including the competition for talent, our desire to link pay with performance,
the use of equity to align executive interests with those of our stockholders,
individual contributions, teamwork, and each executive's total compensation
package. We strive to accomplish these objectives by compensating all executives
with compensation packages consisting of a combination of competitive base
salary and incentive compensation.
The compensation received by our Named Executive Officers is based
primarily on the levels at which we can afford to retain them and their
responsibilities and individual contributions. Our compensation policy also
reflects our strategy of minimizing general and administration expenses and
utilizing independent professional consultants. To date, we have not applied a
formal compensation program to determine the compensation of the Named
Executives Officers. In the future, our compensation committee and board of
directors expect to apply the compensation philosophy and policies described in
this section of our annual report.
The primary purpose of the compensation and benefits we consider is to
attract, retain, and motivate highly talented individuals who will engage in the
behavior necessary to enable us to succeed in our mission, while upholding our
values in a highly competitive marketplace. Different elements are designed to
engender different behaviors, and the actual incentive amounts which may be
awarded to each Named Executive Officer are subject to the annual review of our
compensation committee who will make recommendations regarding compensation to
our board of directors. The following is a brief description of the key elements
of our planned executive compensation structure.
o Base salary and benefits are designed to attract and retain
employees over time.
o Incentive compensation awards are designed to focus employees
on the business objectives for a particular year.
o Equity incentive awards, such as stock options and non-vested
stock, focus executives' efforts on the behaviors within the
recipients' control that they believe are designed to ensure
our long-term success as reflected in increases to our stock
prices over a period of several years, growth in our
profitability and other elements.
o Severance and change in control plans are designed to
facilitate a company's ability to attract and retain
executives as we compete for talented employees in a
marketplace where such protections are commonly offered.
BENCHMARKING
We have not yet adopted benchmarking but may do so in the future. When
making compensation decisions, our compensation committee and board of directors
may compare each element of compensation paid to our Named Executive Officers
against a report showing comparable compensation metrics from a group that
includes both publicly-traded and privately-held companies. Our board believes
that while such peer group benchmarks are a point of reference for measurement,
they are not necessarily a determining factor in setting executive compensation.
Each executive officer's compensation relative to the benchmark varies based on
the scope of responsibility and time in the position. We have not yet formally
established our peer group for this purpose.
-14-
THE ELEMENTS OF ESI'S COMPENSATION PROGRAM
BASE SALARY
Executive officer base salaries are based on job responsibilities and
individual contribution. Our compensation committee or board of directors review
the base salaries of our executive officers, including our Named Executive
Officers, considering factors such as corporate progress toward achieving
objectives (without reference to any specific performance-related targets) and
individual performance experience and expertise. Additional factors reviewed by
our compensation committee and board of directors in determining appropriate
base salary levels and raises include subjective factors related to corporate
and individual performance. For the year ended December 31, 2011, all executive
officer base salary decisions were approved by the board of directors.
INCENTIVE COMPENSATION AWARDS
The Named Executives have not been paid bonuses and our compensation
committee has not yet recommended a formal compensation policy for the
determination of bonuses. If our revenue grows and bonuses become affordable and
justifiable, we expect to use the following parameters in justifying and
quantifying bonuses for our Named Executive Officers and other officers of
Envision: (1) the growth in our revenue, (2) the growth in our gross profit (3)
the growth in our earnings before interest, taxes, depreciation and
amortization, as adjusted ("EBITDA"), (4) achievement of other corporate goals
as outlined by the board and (5) our stock price. The board has not adopted
specific performance goals and target bonus amounts, but may do so in the
future.
EQUITY INCENTIVE AWARDS
In order to provide an incentive to attract and retain directors,
officers, and other employees whose services are considered valuable, to
encourage a sense of proprietorship and to stimulate an active interest of such
persons in our development and financial success, on August 10, 2011, the board
approved and caused the Company to adopt, a new equity incentive plan (the "2011
Plan"), pursuant to which 30,000,000 shares of our common stock are reserved for
issuance as awards to employees, directors, consultants and other service
providers. This 2011 Plan will be presented to our shareholders for ratification
during 2012.
From January 1, 2011 through December 31, 2011, the Company granted
16,582,856 stock options under the 2011 Plan with a total valuation of
$2,578,418 to certain executives and board members. Of these amounts, 9,162,856
options were granted to Robert Noble, executive chairman, in exchange for the
cancellation of 6,027,663 options previously granted to him in accordance with
the terms of an earlier agreement executed by Mr. Noble and the Company in
connection with the Company's 2010 merger transaction.
Additionally, although there were no new awards under the 2007 or 2008
Plans granted during 2011, there are prior awards outstanding under ESI's 2008
Plan to former officers and advisors. The 2007 Plan was terminated in March
2012.
BENEFITS AND PREREQUISITES
At this stage of our business we have limited benefits and no
prerequisites for our employees other than vacation benefits. We do not have a
401(k) Plan or any other retirement plan for our Named Executive Officers. We
may adopt these plans and confer other fringe benefits for our executive
officers in the future if our business grows sufficiently to enable us to afford
them.
SEPARATION AND CHANGE IN CONTROL ARRANGEMENTS
On August 10, 2011, the Company entered into employment agreements with
its Chief Executive Officer and its Chief Financial Officer. The term of the
agreements is through January 1, 2016. The agreements call for a payment to the
executive employee equal to one year of salary plus 100% of his bonus potential
if the executive is terminated for reasons other than mutual agreement,
executive's death, executive's breach, or upon disability of the executive, as
defined. If the executive is terminated as a result of a change of control, as
-15-
defined, then the executive would receive a payment equal to two years of annual
compensation and 100% of his bonus potential for such two year period.
There were no other employment agreements outstanding as of December
31, 2011.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth, for the years
indicated, all cash compensation paid, distributed or accrued for services
rendered in all capacities by our Chief Executive Officer and all other
compensated executive officers, as determined by reference to total compensation
for the fiscal years ended December 31, 2011 and 2010, who were serving as
executive officers at the end of the 2011 and former executive officers, who
received or are entitled to receive remuneration in excess of $100,000 during
each of those fiscal years.
SUMMARY COMPENSATION TABLE
---------------------- ------- ---------- ------- ------------ ------------- -------------- --------------- -----------
Non-Equity Non-Qualified
Name and Incentive Deferred
Principal Position Option Plan Compensation All Other
(1) Year Salary Bonus Awards (1) Compensation Earnings Compensation Total
---------------------- ------- ---------- ------- ------------ ------------- -------------- --------------- -----------
Robert Noble (2), 2011 $257,000 0 1,153,472 0 0 0 $1,410,472
Former Chief 2010 $192,000 0 0 0 64,500 0 $256,500
Executive Officer
Former Chief
Financial Officer
Desmond Wheatley (3), 2011 $200,000 0 859,997 0 0 0 $1,059,997
Chief Executive 2010 $93,467 0 0 0 66,960 0 $160,427
Officer
Chris Caulson (4), 2011 $161,667 0 537,498 0 0 0 $699,165
Chief Financial 2010 $61,867 0 0 0 42,185 0 $104,052
Officer
Officers as a Group 2011 $618,667 0 2,550,967 0 0 0 $3,169,634
2010 $347,334 0 0 0 173,645 0 $520,979
-----------------------------------------------------------------------------------------------------------------------
---------------------
(1) The amounts in this column reflect the grant-date fair value of stock
options with respect to the years ended December 31, 2011 and 2010, in
accordance with applicable accounting guidance related to stock based
compensation. For a description of the assumptions used in determining the
value of the options, see the notes to the consolidated financial
statements.
(2) Mr. Noble was our Chief Executive Officer and Chief Financial Officer until
he resigned both positions on August 10, 2011. He remained Executive
Chairman until he resigned from that position effective December 31, 2011.
He is currently our Chairman of the Board.
(3) Mr. Wheatley joined the Company as a consultant in April 2010 and was
compensated through the consulting company. Accordingly, a large portion of
the 2010 salary figure in the above table includes amounts billed to the
Company by the consulting company for his services. Mr. Wheatley joined the
Company full time in December 2010 and was not paid a direct salary until
this time. On August 10, 2011, Mr. Wheatley was appointed Chief Executive
Officer.
(4) Mr. Caulson joined the Company as a consultant in June 2010 and was
compensated through the consulting company. Accordingly, a large portion of
the 2010 salary figure in the above table includes amounts billed to the
Company by the consulting company for his services. Mr. Caulson joined the
Company full time in November 2010 and was not paid a direct salary until
this time. On August 10, 2011, Mr. Caulson was appointed Chief Financial
Officer.
-16-
AGREEMENTS WITH EXECUTIVE OFFICERS
ROBERT NOBLE
On August 10, 2011, the Company entered into an employment agreement
with Robert Noble pursuant to which his appointment as Executive Chairman is
confirmed. The employment agreement calls for annual compensation, including
auto allowance, of $258,000 which is consistent with his current compensation.
Further, in accordance with an earlier understanding involving stock
compensation agreed to in connection with the Company's 2010 merger transaction
where Mr. Noble had agreed to terminate earlier awarded options for newly issued
options, Mr. Noble was granted 9,162,856 stock options with an exercise price of
$0.33 per share and a ten (10) year term. All of these options will vest
immediately upon the Company's achievement of cumulative gross revenues of
$30,000,000 prior to December 31, 2014. Upon the grant of the options, all
outstanding options held by Robert Noble that were granted under the Company's
predecessor's 2007 Unit Option Plan and 2008 Equity Incentive Plan were
immediately cancelled and terminated. As of December 31, 2011, and the date of
this report, the vesting milestones discussed above have not been met.
In December 2011, Mr. Noble resigned as Executive Chairman. In
conjunction with this resignation, the Company issued 1,138,120 warrants, each
with a five year term and exercise price of $0.24 (market price at day of
issuance) to Mr. Noble in exchange for the cancellation of debts owed to Mr.
Noble for vacation and deferred salary liabilities. These warrants were valued
at $209,006 using the Black-Scholes valuation methodology and there was no gain
or loss on the transaction.
DESMOND WHEATLEY
Mr. Wheatley began providing services to us in April 2010 as a
consultant. In September 2010, Mr. Wheatley was named President and continued
providing services in this capacity as a consultant. In December 2010, we added
Mr. Wheatley to full time employment status. On August 10, 2011, the Board of
Directors appointed Desmond Wheatley (then the Company's President and Chief
Operating Officer) as its new Chief Executive Officer, President and Corporate
Secretary and approved and entered into an employment agreement with him,
effective on August 10, 2011. This agreement calls for an annual salary of
$200,000. Further, Mr. Wheatley is granted 4,320,000 stock options with an
exercise price of $0.27 per share and a ten (10) year term. One third of these
options vested immediately, while one third vested on November 1, 2011 and one
third will vest on November 1, 2012, provided Mr. Wheatley is then serving the
Company as an employee, officer or director. The term of the employment
agreement ends on January 1, 2016. Robert Noble resigned as the Company's Chief
Executive Officer and corporate Secretary, effective August 10, 2011, to vacate
those positions for Mr. Wheatley.
CHRIS CAULSON
On August 10, 2011, the Company appointed Chris Caulson as its new
Chief Financial Officer and approved and entered into an employment agreement
with him, effective on August 10, 2011. This agreement calls for an annual
salary of $165,000. Further, Mr. Caulson is granted 2,700,000 stock options with
an exercise price of $0.27 per share and a ten (10) year term. One third of
these options vested immediately, while one third vested on November 1, 2011 and
one third will vest on November 1, 2012, provided Mr. Caulson is then serving
the Company as an employee, officer or director. The term of the employment
agreement ends on January 1, 2016.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR END
The following table summarizes the total outstanding non-incentive
equity awards as of December 31, 2011, for each named executive officer:
-17-
OUTSTANDING EQUITY AWARD TABLE
---------------------- ----------------------- --------------------------- ------------------ -----------------
Number of securities Number of securities
underlying underlying
unexercised-number unexercised-number Option exercise Option
Name exercisable unexercisable price($) expiration date
---------------------- ----------------------- --------------------------- ------------------ -----------------
Desmond Wheatley
(3), Chief Executive
Officer 2,880,000 1,440,000 $0.27 August 9, 2021
Chris Caulson (4),
Chief Financial
Officer 1,800,000 900,000 $0.27 August 9, 2021
---------------------------------------------------------------------------------------------------------------
INCENTIVE PLAN AWARDS
On February 12, 2010, we entered into a letter agreement with Robert
Noble, pursuant to which Mr. Noble agreed to terminate all of his options under
Envision's 2007 Unit Option Plan and 2008 Equity Incentive Plan upon the
issuance to Mr. Noble of a new option to purchase an aggregate of 9,162,856
shares of common stock at an exercise price of $0.33 per share, which option
shall vest immediately upon our achievement of cumulative gross revenues of
either (i) $15,000,000 during the fiscal year ended December 31, 2010 or (ii)
$30,000,000 prior to December 31, 2014. Effective August 10, 2011, the new stock
options were issued to Mr. Noble under the 2011 Plan. These milestones had not
been met as of the date of this filing.
On August 10, 2011, the Board of Directors appointed Desmond Wheatley
(then the Company's President and Chief Operating Officer) as its new Chief
Executive Officer, President and Corporate Secretary and approved and entered
into an employment agreement with him, effective on August 10, 2011. This
agreement calls for an annual salary of $200,000. Further, Mr. Wheatley is
granted 4,320,000 stock options with an exercise price of $0.27 per share and a
ten (10) year term. One third of these options vested immediately, while one
third vested on November 1, 2011 and one third is scheduled to vest on November
1, 2012.
On August 10, 2011, the Board of Directors appointed Chris Caulson as
its new Chief Financial Officer and approved and entered into an employment
agreement with him, effective on August 10, 2011. This agreement calls for an
annual salary of $165,000. Further, Mr. Caulson is granted 2,700,000 stock
options with an exercise price of $0.27 per share and a ten (10) year term. One
third of these options vested immediately, while one third vested on November 1,
2011 and one third is scheduled to vest on November 1, 2012.
2007 UNIT OPTION PLAN
On February 12, 2010, in connection with our reverse merger with
Envision Solar International, Inc. a California corporation, we adopted the 2007
Unit Option Plan. Pursuant to the 2007 Unit Option Plan, 100,000 units of
Envision LLC were reserved for issuance as awards to employees, members of
Envision LLC's board of managers, consultants and other service providers. The
purpose of the 2007 Plan was to provide an incentive to attract and retain
directors, officers, consultants, advisors and employees whose services are
considered valuable, to encourage a sense of proprietorship and to stimulate an
active interest of such persons in Envision LLC's development and financial
success. The 2007 Plan will be administered by our board of directors until such
time as such authority has been delegated to a committee of the board of
directors. As of December 31, 2011 there are no options that remain outstanding
on this plan. In March 2012, the Board of Directors effectively terminated the
2007 Plan.
2008 STOCK OPTION PLAN
On February 12, 2010, in connection with our reverse merger with
Envision Solar International, Inc. a California corporation, we adopted the 2008
Stock Option Plan pursuant to which 200,000 shares of Envision CA common stock
were reserved for issuance as awards to employees, directors, consultants and
other service providers. The purpose of the 2008 Plan is to provide an incentive
to attract and retain directors, officers, consultants, advisors and employees
whose services are considered valuable, to encourage a sense of proprietorship
and to stimulate an active interest of such persons in our development and
financial success. Under the 2008 Plan, we are authorized to issue incentive
stock options intended to qualify under Section 422 of the Code and
non-qualified stock options. The incentive stock options may only be granted to
employees. Nonstatutory stock options may be granted to employees, directors and
consultants. The 2008 Plan will be administered by our board of directors until
such time as such authority has been delegated to a committee of the board of
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directors. On a post-Merger basis, 6,172,435 stock options have been granted to
date and remain outstanding under the 2008 Plan. Of these, 63,735 stock options
have been issued outside of the 2008 Plan.
2011 EQUITY INCENTIVE PLAN
On August 10, 2011, in order to provide an incentive to attract and
retain directors, officers, consultants, advisors and employees whose services
are considered valuable, to encourage a sense of proprietorship and to stimulate
an active interest of such persons in our development and financial success, the
Company, through its board of directors, adopted a new equity incentive plan
(the "2011 Plan"), pursuant to which 30,000,000 shares of our common stock will
be reserved for issuance as awards to employees, directors, consultants and
other service providers. Under the 2011 Plan, we are authorized to issue
incentive stock options intended to qualify under Section 422 of the Code and
non-qualified stock options. The incentive stock options may only be granted to
employees. Nonstatutory stock options may be granted to employees, directors and
consultants. The 2011 Plan will be administered by our board of directors until
such time as such authority has been delegated to a committee of the board of
directors. The Company will present the 2011 Plan to our shareholders for
ratification in 2012.
DIRECTOR COMPENSATION
There was no compensation to board members in 2010.
On August 10, 2011, the Board of Directors approved compensation for
non executive board members amounting to 200,000 stock options per year of
service, effective and commencing on August 10, 2011. Accordingly, the Company
has granted 200,000 stock options to each of Jay Potter and John Evey, effective
August 10, 2011 for the year of service during the year ending December 31,
2011. The stock options have an exercise price of $0.27 per share and a term of
ten (10) years. These options will vest on a prorated basis over the year of
service.
The following Summary Compensation Table sets forth all compensation
paid, distributed or accrued for services rendered in the capacities of non
executive board members.
Option
Name Year Awards ($)(1) Total ($)
----------------- ---- ------------- ---------
Jay S. Potter 2011 79,651 79,651
John Evey 2011 79,651 79,651
(1) This represents the fair value of the award as of the grant
date in accordance with FASB ASC Topic 718
On January 1, 2012, in accordance with the provisions of the board
compensation plan adopted in 2011, the Company granted 200,000 stock options to
each of its three non executive directors, for a total of 600,000 stock options
valued at $101,632, for their service as members of the board of directors. Jay
Potter and John Evey were granted options with an exercise price of $0.23 per
share and a term of ten (10) years. Because of the restrictions in our 2011 Plan
that limit the issuance of stock options to anyone who holds more than 10% of
the voting power of all classes of stock, Robert Noble was granted 200,000 stock
options with an exercise price of $0.25 per share and a term of five (5) years.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of March 23, 2012
regarding the beneficial ownership of our common stock by (i) each person or
entity who, to our knowledge, beneficially owns more than 5% of our common
stock; (ii) each executive officer and named officer; (iii) each director; and
(iv) all of our officers and directors as a group. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission. In computing the number of shares beneficially owned by a person and
the percentage of ownership of that person, shares of common stock subject to
options or warrants held by that person that are currently exercisable or become
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exercisable within 60 days of March 23, 2012 are deemed outstanding even if they
have not actually been exercised. Those shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person. Unless otherwise indicated in the footnotes to the following table, each
of the stockholders named in the table has sole voting and investment power with
respect to the shares of our common stock beneficially owned. Except as
otherwise indicated, the address of each of the stockholders listed below is:
c/o 7675 Dagget Street, Suite 150, San Diego, California 92111.
-------------------------------------------------------------------------------
Number of Shares Percentage Beneficially
Name of Beneficial Owner Beneficially Owned (1) Owned (2)
-------------------------------------------------------------------------------
Robert Noble 12,775,560 (3) 24.08%
Jay Potter 2,075,078 (4) 3.91%
John Evey 805,027 (5) 1.52%
Desmond Wheatley 2,880,000 (6) 5.43%
Chris Caulson 1,800,000 (6) 3.39%
Gemini Master Fund 6,279,712 (7) 11.84%
Gerald Hickson 4,347,591 (8) 8.19%
All officers and directors
as a group (5 persons) 20,335,665 38.33%
-------------------------------------------------------------------------------
--------------
*Less than 1%.
(1) Shares of common stock beneficially owned and the respective percentages of
beneficial ownership of common stock assume the exercise by such person of
all options, warrants and other securities convertible into common stock
beneficially owned by such person or entity currently exercisable or
exercisable within 60 days of March 23, 2012.
(2) Based on 53,053,323 shares of our common stock outstanding as of March 23,
2012.
(3) Includes 50,000 shares of common stock issuable upon the exercise of
options and 1,138,120 shares of common stock issuable upon the exercise of
warrants.
(4) Includes 791,167 shares of common stock, 250,000 shares of common stock
issuable upon the exercise of options, 432,143 shares of common stock
issuable upon the exercise of warrants and 600,000 shares issuable upon the
exercise of warrants held by Fulcrum Enterprises, Inc. Mr. Potter is the
chairman and president of Fulcrum Enterprises, Inc.
(5) Includes 183,261 shares of common stock, 250,000 shares of common stock
issuable upon the exercise of options and 371,766 shares of common stock
issuable upon the conversion of balances owed through convertible note.
(6) Includes shares of common stock issuable upon exercise of options.
(7) Includes shares issuable upon the conversion of outstanding amounts owed on
convertible notes. The provisions of the convertible notes prohibit the
investor from obtaining any ownership interest in excess of 9.9% of the
total outstanding shares of voting stock of the Company. The address for
this note holder is 619 S. Vulcan Ave, #203, Encinitas, California 92024.
(8) Includes 3,647,591 shares issued effective March 22, 2012 related to the
conversion into shares of a $1,000,000 convertible note and its associated
accrued interest. The address for this holder is 403 Hazeltine Drive,
Austin Texas 78734.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our officers and directors,
and certain persons who own more than 10% of a registered class of our equity
securities (collectively, "Reporting Persons"), to file reports of ownership and
changes in ownership ("Section 16 Reports") with the Securities and Exchange
Commission. Reporting Persons are required by the SEC to furnish us with copies
of all Section 16 Reports they file.
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Based solely on our review of the copies of such Section 16 Reports
received by us, or written representations received from certain Reporting
Persons, all Section 16(a) filing requirements applicable to our Reporting
Persons during and with respect to the fiscal year ended December 31, 2011 have
been complied with on a timely basis.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Desmond Wheatley, our current President and Chief Executive Officer, is
the owner of a consulting firm that provided services to the Company during
2010, including his own personal services. During 2010, the Company paid the
consulting firm $121,515 as compensation for services rendered. As of December
31, 2011, the Company has a balance owed to this consulting firm of $109,145
that is included in Accounts Payable -Related Party.
Jay S. Potter, a director of the Company, was engaged through different
organizations to provide capital raising services to the Company as it relates
to the two private offerings that were conducted by us in 2010 and 2011 through
licensed broker-dealer firms with which Mr. Potter was associated as a
registered representative. The Company has paid cash offering costs of $140,766
in 2010 and $254,513 in 2011 to the broker dealers who acted as the placement
agent and investment banker for these offerings, with approximately $70,000 of
these amounts going to an affiliate of Mr. Potter, all of which have been
accounted for as a reduction of APIC (paid in capital) in the applicable year.
Further, the Company paid this same affiliate $40,000 of debt issue costs that
are capitalized on the balance sheet and being amortized over the life of the
applicable loan. In 2012, Allied Beacon Partners, Inc., the registered broker
dealer firm of which Jay S. Potter is a registered representative, was paid
approximately $40,000 in cash and issued 68,966 warrants to purchase 68,966
shares of the Company's common stock for an exercise price of $0.29 per share,
for securities placement services.
In August 2011, the Company issued 600,000 warrants, each with a five
year term and exercise price of $0.25 per share, for investor relations and
financial advisory services to a company controlled by Jay S. Potter, our
director. These warrants, valued at $119,361 using the Black-Scholes valuation
methodology, are being expensed over the six month term of the agreement.
In December 2011, and in conjunction with his resignation as Executive
Chairman, the Company issued 1,138,120 warrants, each with a five year term and
exercise price of $0.24 per share (market price at day of issuance), to Robert
Noble in exchange for the cancellation of debts owed to Mr. Noble for vacation
and deferred salary liabilities. These warrants were valued at $209,006 using
the Black-Scholes valuation methodology and there was no gain or loss on the
transaction.
A company owned in part by the Company's Chief Executive Officer rented
office space from the Company for $500 per month, which amount is deemed to be
the equivalent value for rent paid by the Company for such space. This
arrangement terminated in December 2011.
In 2009, the Company executed a 10% convertible note payable to John
Evey in the amount of $102,236 originally due December 31, 2010 and further
amended to become due December 31, 2012 for amounts loaned to the Company. Mr.
Evey joined the Board of Directors on April 27, 2010. The current amount owed to
Mr. Evey as of December 31, 2011 is $122,683.
AUDIT AND NON-AUDIT FEES
The Company's board of directors reviews and approves audit and
permissible non-audit services performed by its independent registered public
accounting firm, as well as the fees charged for such services. In its review of
non-audit service and its appointment of Salberg & Company, P.A. as our
independent registered public accounting firm, the board considered whether the
provision of such services is compatible with maintaining independence. All of
the services provided and fees charged by Salberg & Company, P.A. in 2010 and
2009 were approved by the board of directors. The following table shows the fees
for the years ended December 31, 2010 and 2009:
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2011 2010
-------- -------
Audit Fees (1) $ 54,600 65,100
Audit Related Fees (2) $ 5,400 $ 195
Tax Fees (3) $ 0 $ 0
All Other Fees $ 0 $ 0
----------------------
(1) Audit fees - these fees relate to the audit of our annual consolidated
financial statements and the review of our interim quarterly financial
statements.
(2) Audit related fees - these fees relate primarily to audit related
consulting projects.
(3) Tax fees - no fees of this sort were billed by Salberg & Company P.A., our
principal accountant during 2010 and 2009.
PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES
The Board's policy is to pre-approve, typically at the beginning of our
fiscal year, all audit and non-audit services, other than de minimis non-audit
services, to be provided by an independent registered public accounting firm.
These services may include, among others, audit services, audit-related
services, tax services and other services and such services are generally
subject to a specific budget. The independent registered public accounting firm
and management are required to periodically report to the full Board regarding
the extent of services provided by the independent registered public accounting
firm in accordance with this pre-approval, and the fees for the services
performed to date. As part of the Board's review, the Board will evaluate other
known potential engagements of the independent auditor, including the scope of
work proposed to be performed and the proposed fees, and approve or reject each
service, taking into account whether the services are permissible under
applicable law and the possible impact of each non-audit service on the
independent auditor's independence from management. At Board meetings throughout
the year, the auditor and management may present subsequent services for
approval. Typically, these would be services such as due diligence for an
acquisition, that would not have been known at the beginning of the year.
The Board has considered the provision of non-audit services provided
by our independent registered public accounting firm to be compatible with
maintaining their independence. The Board will continue to approve all audit and
permissible non-audit services provided by our independent registered public
accounting firm.
INCORPORATION BY REFERENCE
In our filings with the SEC, information is sometimes "incorporated by
reference." This means that we are referring you to information that has
previously been filed with the SEC, so the information should be considered as
part of the filing you are reading. Based on SEC regulations, the "Audit
Committee Report" specifically is not incorporated by reference into any other
filings with the SEC.
This proxy statement is sent to you as part of the proxy materials for the
2012 Annual Meeting of Stockholders. You may not consider this proxy statement
as material for soliciting the purchase or sale of our common stock.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented
for consideration at the 2012 Annual Meeting. If any other matters are properly
brought before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
No person is authorized to give any information or to make any
representation not contained in this Proxy Statement, and, if given or made,
such information or representation should not be relied upon as having been
authorized. This Proxy Statement does not constitute the solicitation of a
proxy, in any jurisdiction, from any person to whom it is unlawful to make such
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proxy solicitation in such jurisdiction. The delivery of this Proxy Statement
shall not, under any circumstances, imply that there has not been any change in
the information set forth herein since the date of the Proxy Statement.
FORWARD LOOKING STATEMENTS
This proxy statement contains "forward-looking statements" as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
statements are based on management's current expectations and involve
substantial risks and uncertainties, which may cause results to differ
materially from those set forth in the statements. The forward-looking
statements may include, but are not limited to, statements made in the
Compensation Discussion and Analysis section of this proxy statement regarding
future actions and benefits relating to our executive compensation programs. The
Company undertakes no obligation to publicly update any forward-looking
statement, whether as a result of new information, future events, or otherwise.
Forward-looking statements should be evaluated together with the many
uncertainties that affect our business, particularly those mentioned under the
heading "Risk Factors" in our annual report on Form 10-K (accompanying this
report), and in the periodic reports that we file with the SEC on Form 10-Q and
Form 8-K.
By Order of the Board of Directors
Desmond Wheatley
Chief Executive Officer
June 8, 2012
In some cases, only one Annual Report or Proxy Statement is being
delivered to multiple stockholders sharing an address unless the Company has
received contrary instructions from one or more of the stockholders. The Company
will furnish, without charge, a copy of its Annual Report on Form 10-K for the
fiscal year ended December 31, 2011 or Proxy Statement, to each stockholder
residing at an address to which only one copy was mailed. Requests for
additional copies should be directed to: Corporate Secretary, Envision Solar
International, Inc., 7675 Dagget Street, Suite 150, San Diego, California
92111or by telephone at (858) 799-4583. Additionally, any stockholders who are
presently sharing an address and receiving multiple copies of the Annual Report
or Proxy Statement and who would rather receive a single copy of these materials
in the future may instruct the Company by directing their request in the same
manner.
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EXHIBIT A
2011 STOCK INCENTIVE PLAN
--------------------------------------------------------------------------------
ENVISION SOLAR INTERNATIONAL, INC.
2011 STOCK INCENTIVE PLAN
(AS ADOPTED ON AUGUST 11, 2011)
1. PURPOSE. The purpose of the 2011 Stock Incentive Plan (the "Plan") of
Envision Solar International, Inc. (the "Company") is to increase stockholder
value and to advance the interests of the Company by furnishing a variety of
economic incentives ("Incentives") designed to attract, retain and motivate
employees, certain key consultants and directors of the Company. Incentives may
consist of opportunities to purchase or receive shares of Common Stock, $.001
par value, of the Company ("Common Stock") on terms determined under this Plan.
2. ADMINISTRATION. The Plan shall be administered by the Board of Directors or
by a stock option or compensation committee (the "Committee") of the Board of
Directors of the Company. The Committee shall consist of not less than one
director of the Company and shall be appointed from time to time by the board of
directors of the Company. Each member of the Committee shall be (i) a
"non-employee director" within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934 (including the regulations promulgated thereunder, the
"1934 Act") (a "Non-Employee Director"), and (ii) shall be an "outside director"
within the meaning of Section 162(m) under the Internal Revenue Code of 1986, as
amended (the "Code") and the regulations promulgated thereunder. The Committee
shall have complete authority to award Incentives under the Plan, to interpret
the Plan, and to make any other determination which it believes necessary and
advisable for the proper administration of the Plan. The Committee's decisions
and matters relating to the Plan shall be final and conclusive on the Company
and its participants. If at any time there is no stock option or compensation
committee, the term "Committee", as used in the Plan, shall refer to the Board
of Directors.
3. ELIGIBLE PARTICIPANTS. Officers of the Company, employees of the Company or
its subsidiaries, members of the Board of Directors, and consultants or other
independent contractors who provide services to the Company or its subsidiaries
shall be eligible to receive Incentives under the Plan when designated by the
Committee. Participants may be designated individually or by groups or
categories (for example, by pay grade) as the Committee deems appropriate.
Participation by officers of the Company or its subsidiaries and any performance
objectives relating to such officers must be approved by the Committee.
Participation by others and any performance objectives relating to others may be
approved by groups or categories (for example, by pay grade) and authority to
designate participants who are not officers and to set or modify such targets
may be delegated.
4. TYPES OF INCENTIVES. Incentives under the Plan may be granted in any one or a
combination of the following forms: (a) incentive stock options and
non-statutory stock options (section 6); (b) stock appreciation rights ("SARs")
(section 7); (c) stock awards (section 8); (d) restricted stock (section 8); and
(e) performance shares (section 9).
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5. SHARES SUBJECT TO THE PLAN.
5.1. NUMBER OF SHARES. Subject to adjustment as provided in Section 10.6,
the number of shares of Common Stock which may be issued under the
Plan shall not exceed 30,000,000 shares of Common Stock. Shares of
Common Stock that are issued under the Plan or are subject to
outstanding Incentives will be applied to reduce the maximum number of
shares of Common Stock remaining available for issuance under the
Plan. In addition, on each anniversary of August 11, 2011 (the
"Effective Date") on or before the fifth anniversary of the Effective
Date, commencing on August 11, 2011, the aggregate number of shares of
the Company's Common Stock reserved for issuance under this Plan shall
be increased automatically by the lesser of: (a) a number of shares
equal to five percent (5%) of the total number of remaining authorized
shares on the immediately preceding December 31st; (b) 300,000 shares;
or (c) such lesser number of shares as the Board of Directors, in its
sole discretion, determines. These limits on the number of shares
subject to the share reserve shall be subject to adjustment under
Section 10.6 of the Plan. Notwithstanding the foregoing, no person
shall receive grants of Incentives under the Plan that exceed
10,000,000 shares during any one fiscal year of the Company.
5.2. CANCELLATION. To the extent that cash in lieu of shares of Common
Stock is delivered upon the exercise of an SAR pursuant to Section
7.4, the Company shall be deemed, for purposes of applying the
limitation on the number of shares, to have issued the greater of the
number of shares of Common Stock which it was entitled to issue upon
such exercise or on the exercise of any related option. In the event
that a stock option or SAR granted hereunder expires or is terminated
or canceled unexercised as to any shares of Common Stock, such shares
may again be issued under the Plan either pursuant to stock options,
SARs or otherwise. In the event that shares of Common Stock are issued
as restricted stock or pursuant to a stock award and thereafter are
forfeited or reacquired by the Company pursuant to rights reserved
upon issuance thereof, such forfeited and reacquired shares may again
be issued under the Plan, either as restricted stock, pursuant to
stock awards or otherwise. The Committee may also determine to cancel,
and agree to the cancellation of, stock options in order to make a
participant eligible for the grant of a stock option at a lower price
than the option to be canceled.
5.3. TYPE OF COMMON STOCK. Common Stock issued under the Plan in connection
with stock options, SARs, performance shares, restricted stock or
stock awards, may be authorized and unissued shares or treasury stock,
as designated by the Committee.
6. STOCK OPTIONS. A stock option is a right to purchase shares of Common Stock
from the Company. Each stock option granted by the Committee under this Plan
shall be subject to the following terms and conditions:
6.1. PRICE. The option price per share shall be determined by the
Committee, subject to adjustment under Section 10.6.
6.2. NUMBER. The number of shares of Common Stock subject to the option
shall be determined by the Committee, subject to adjustment as
provided in Section 10.6. The number of shares of Common Stock subject
to a stock option shall be reduced in the same proportion that the
holder thereof exercises a SAR if any SAR is granted in conjunction
with or related to the stock option.
6.3. DURATION AND TIME FOR EXERCISE. Subject to earlier termination as
provided in Section 10.4, the term of each stock option shall be
determined by the Committee but shall not exceed ten years and one day
from the date of grant. Each stock option shall become exercisable at
such time or times during its term as shall be determined by the
Committee at the time of grant. The Committee may accelerate the
exercisability of any stock option. Subject to the foregoing and with
the approval of the Committee, all or any part of the shares of Common
Stock with respect to which the right to purchase has accrued may be
purchased by the Company at the time of such accrual or at any time or
times thereafter during the term of the option.
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6.4. MANNER OF EXERCISE. A stock option may be exercised, in whole or in
part, by giving written notice to the Company, specifying the number
of shares of Common Stock to be purchased and accompanied by the full
purchase price for such shares. The option price shall be payable (a)
in United States dollars upon exercise of the option and may be paid
by cash, uncertified or certified check or bank draft; (b) at the
discretion of the Committee, by delivery of shares of Common Stock in
payment of all or any part of the option price, which shares shall be
valued for this purpose at the Fair Market Value on the date such
option is exercised; or (c) at the discretion of the Committee, by
instructing the Company to withhold from the shares of Common Stock
issuable upon exercise of the stock option shares of Common Stock in
payment of all or any part of the exercise price and/or any related
withholding tax obligations, which shares shall be valued for this
purpose at the Fair Market Value or in such other manner as may be
authorized from time to time by the Committee. The shares of Common
Stock delivered by the participant pursuant to Section 6.4(b) must
have been held by the participant for a period of not less than six
months prior to the exercise of the option, unless otherwise
determined by the Committee. Prior to the issuance of shares of Common
Stock upon the exercise of a stock option, a participant shall have no
rights as a stockholder.
6.5. INCENTIVE STOCK OPTIONS. Notwithstanding anything in the Plan to the
contrary, the following additional provisions shall apply to the grant
of stock options which are intended to qualify as Incentive Stock
Options (as such term is defined in Section 422 of the Code):
(a) The aggregate Fair Market Value (determined as of the time the
option is granted) of the shares of Common Stock with respect to
which Incentive Stock Options are exercisable for the first time
by any participant during any calendar year (under all of the
Company's plans) shall not exceed $100,000. The determination
will be made by taking incentive stock options into account in
the order in which they were granted. If such excess only applies
to a portion of an Incentive Stock Option, the Committee, in its
discretion, will designate which shares will be treated as shares
to be acquired upon exercise of an Incentive Stock Option.
(b) Any Incentive Stock Option certificate authorized under the Plan
shall contain such other provisions as the Committee shall deem
advisable, but shall in all events be consistent with and contain
all provisions required in order to qualify the options as
Incentive Stock Options.
(c) All Incentive Stock Options must be granted within ten years from
the earlier of the date on which this Plan was adopted by Board
of Directors or the date this Plan was approved by the
stockholders.
(d) Unless sooner exercised, all Incentive Stock Options shall expire
no later than 10 years after the date of grant.
(e) The option price for Incentive Stock Options shall be not less
than the Fair Market Value of the Common Stock subject to the
option on the date of grant.
(f) If Incentive Stock Options are granted to any participant who, at
the time such option is granted, would own (within the meaning of
Section 422 of the Code) stock possessing more than 10% of the
total combined voting power of all classes of stock of the
employer corporation or of its parent or subsidiary corporation,
(i) the option price for such Incentive Stock Options shall be
not less than 110% of the Fair Market Value of the Common Stock
subject to the option on the date of grant and (ii) such
Incentive Stock Options shall expire no later than five years
after the date of grant.
7. STOCK APPRECIATION RIGHTS. An SAR is a right to receive, without payment to
the Company, a number of shares of Common Stock, cash or any combination
thereof, the amount of which is determined pursuant to the formula set forth in
Section 7.4. An SAR may be granted (a) with respect to any stock option granted
under this Plan, either concurrently with the grant of such stock option or at
such later time as determined by the Committee (as to all or any portion of the
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shares of Common Stock subject to the stock option), or (b) alone, without
reference to any related stock option. Each SAR granted by the Committee under
this Plan shall be subject to the following terms and conditions:
7.1. NUMBER. Each SAR granted to any participant shall relate to such
number of shares of Common Stock as shall be determined by the
Committee, subject to adjustment as provided in Section 10.6. In the
case of an SAR granted with respect to a stock option, the number of
shares of Common Stock to which the SAR pertains shall be reduced in
the same proportion that the holder of the option exercises the
related stock option.
7.2. DURATION. Subject to earlier termination as provided in Section 10.4,
the term of each SAR shall be determined by the Committee but shall
not exceed ten years and one day from the date of grant. Unless
otherwise provided by the Committee, each SAR shall become exercisable
at such time or times, to such extent and upon such conditions as the
stock option, if any, to which it relates is exercisable. The
Committee may in its discretion accelerate the exercisability of any
SAR.
7.3. EXERCISE. An SAR may be exercised, in whole or in part, by giving
written notice to the Company, specifying the number of SARs which the
holder wishes to exercise. Upon receipt of such written notice, the
Company shall, within 90 days thereafter, deliver to the exercising
holder certificates for the shares of Common Stock or cash or both, as
determined by the Committee, to which the holder is entitled pursuant
to Section 7.4.
7.4. PAYMENT. Subject to the right of the Committee to deliver cash in lieu
of shares of Common Stock (which, as it pertains to officers and
directors of the Company, shall comply with all requirements of the
1934 Act), the number of shares of Common Stock which shall be
issuable upon the exercise of an SAR shall be determined by dividing:
(a) the number of shares of Common Stock as to which the SAR is
exercised multiplied by the amount of the appreciation in such
shares (for this purpose, the "appreciation" shall be the amount
by which the Fair Market Value of the shares of Common Stock
subject to the SAR on the exercise date exceeds (1) in the case
of an SAR related to a stock option, the purchase price of the
shares of Common Stock under the stock option or (2) in the case
of an SAR granted alone, without reference to a related stock
option, an amount which shall be determined by the Committee at
the time of grant, subject to adjustment under Section 10.6); by
(b) the Fair Market Value of a share of Common Stock on the exercise
date.
In lieu of issuing shares of Common Stock upon the exercise of a SAR,
the Committee may elect to pay the holder of the SAR cash equal to the
Fair Market Value on the exercise date of any or all of the shares
which would otherwise be issuable. No fractional shares of Common
Stock shall be issued upon the exercise of an SAR; instead, the holder
of the SAR shall be entitled to receive a cash adjustment equal to the
same fraction of the Fair Market Value of a share of Common Stock on
the exercise date or to purchase the portion necessary to make a whole
share at its Fair Market Value on the date of exercise.
8. STOCK AWARDS AND RESTRICTED STOCK. A stock award consists of the transfer by
the Company to a participant of shares of Common Stock, without other payment
therefor, as additional compensation for services to the Company. A share of
restricted stock consists of shares of Common Stock which are sold or
transferred by the Company to a participant at a price determined by the
Committee (which price shall be at least equal to the minimum price required by
applicable law for the issuance of a share of Common Stock) and subject to
restrictions on their sale or other transfer by the participant. The transfer of
Common Stock pursuant to stock awards and the transfer and sale of restricted
stock shall be subject to the following terms and conditions:
8.1. NUMBER OF SHARES. The number of shares to be transferred or sold
by the Company to a participant pursuant to a stock award or as
restricted stock shall be determined by the Committee.
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8.2. SALE PRICE. The Committee shall determine the price, if any, at
which shares of restricted stock shall be sold to a participant,
which may vary from time to time and among participants and which
may be below the Fair Market Value of such shares of Common Stock
at the date of sale.
8.3. RESTRICTIONS. All shares of restricted stock transferred or sold
hereunder shall be subject to such restrictions as the Committee
may determine, including, without limitation any or all of the
following:
(a) a prohibition against the sale, transfer, pledge or other
encumbrance of the shares of restricted stock, such
prohibition to lapse at such time or times as the Committee
shall determine (whether in annual or more frequent
installments, at the time of the death, disability or
retirement of the holder of such shares, or otherwise);
(b) a requirement that the holder of shares of restricted stock
forfeit, or (in the case of shares sold to a participant)
resell back to the Company at his or her cost, all or a part
of such shares in the event of termination of his or her
employment or consulting engagement during any period in
which such shares are subject to restrictions;
(c) such other conditions or restrictions as the Committee may
deem advisable.
8.4. ESCROW. In order to enforce the restrictions imposed by the
Committee pursuant to Section 8.3, the participant receiving
restricted stock shall enter into an agreement with the Company
setting forth the conditions of the grant. Shares of restricted
stock shall be registered in the name of the participant and
deposited, together with a stock power endorsed in blank, with
the Company. Each such certificate shall bear a legend in
substantially the following form:
The transferability of this certificate and the shares of Common
Stock represented by it are subject to the terms and conditions
(including conditions of forfeiture) contained in the 2011 Stock
Incentive Plan of Envision Solar International, Inc. (the
"Company"), and an agreement entered into between the registered
owner and the Company. A copy of the Plan and the agreement is on
file in the office of the secretary of the Company.
8.5. END OF RESTRICTIONS. Subject to Section 10.5, at the end of any
time period during which the shares of restricted stock are
subject to forfeiture and restrictions on transfer, such shares
will be delivered free of all restrictions to the participant or
to the participant's legal representative, beneficiary or heir.
8.6. STOCKHOLDER. Subject to the terms and conditions of the Plan,
each participant receiving restricted stock shall have all the
rights of a stockholder with respect to shares of stock during
any period in which such shares are subject to forfeiture and
restrictions on transfer, including without limitation, the right
to vote such shares. Dividends paid in cash or property other
than Common Stock with respect to shares of restricted stock
shall be paid to the participant currently.
9. PERFORMANCE SHARES. A performance share consists of an award which shall be
paid in shares of Common Stock, as described below. The grant of performance
shares shall be subject to such terms and conditions as the Committee deems
appropriate, including the following:
9.1. PERFORMANCE OBJECTIVES. Each performance share will be subject to
performance objectives for the Company or one of its operating
units to be achieved by the end of a specified period. The number
of performance shares granted shall be determined by the
Committee and may be subject to such terms and conditions as the
Committee shall determine. If the performance objectives are
achieved, each participant will be paid in shares of Common Stock
or cash. If such objectives are not met, each grant of
performance shares may provide for lesser payments in accordance
with formulas established in the award.
9.2. NOT STOCKHOLDER. The grant of performance shares to a participant
shall not create any rights in such participant as a stockholder
of the Company until the payment of shares of Common Stock with
respect to an award.
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9.3. NO ADJUSTMENTS. No adjustment shall be made in performance shares
granted on account of cash dividends which may be paid or other
rights which may be issued to the holders of Common Stock prior
to the end of any period for which performance objectives were
established.
9.4. EXPIRATION OF PERFORMANCE SHARE. If any participant's employment
or consulting engagement with the Company is terminated for any
reason other than normal retirement, death or disability prior to
the achievement of the participant's stated performance
objectives, all the participant's rights on the performance
shares shall expire and terminate unless otherwise determined by
the Committee. In the event of termination of employment or
consulting by reason of death, disability, or normal retirement,
the Committee, in its own discretion may determine what portions,
if any, of the performance shares should be paid to the
participant.
10. GENERAL.
10.1.EFFECTIVE DATE. The Plan will become effective upon its approval
by the Company's stockholders. Unless approved within one year
after the date of the Plan's adoption by the board of directors,
the Plan shall not be effective for any purpose.
10.2.DURATION. The Plan shall remain in effect until all Incentives
granted under the Plan have either been satisfied by the issuance
of shares of Common Stock or the payment of cash or been
terminated under the terms of the Plan and all restrictions
imposed on shares of Common Stock in connection with their
issuance under the Plan have lapsed. No Incentives may be granted
under the Plan after the tenth anniversary of the date the Plan
is approved by the stockholders of the Company.
10.3.NON-TRANSFERABILITY OF INCENTIVES. No stock option, SAR,
restricted stock or performance award may be transferred, pledged
or assigned by the holder thereof (except, in the event of the
holder's death, by will or the laws of descent and distribution
to the limited extent provided in the Plan or the Incentive), or
pursuant to a qualified domestic relations order as defined by
the Code or Title I of the Employee Retirement Income Security
Act, or the rules thereunder, and the Company shall not be
required to recognize any attempted assignment of such rights by
any participant. Notwithstanding the preceding sentence, stock
options may be transferred by the holder thereof to Employee's
spouse, children, grandchildren or parents (collectively, the
"Family Members"), to trusts for the benefit of Family Members,
to partnerships or limited liability companies in which Family
Members are the only partners or shareholders, or to entities
exempt from federal income taxation pursuant to Section 501(c)(3)
of the Internal Revenue Code of 1986, as amended. During a
participant's lifetime, a stock option may be exercised only by
him or her, by his or her guardian or legal representative or by
the transferees permitted by the preceding sentence.
10.4.EFFECT OF TERMINATION OR DEATH. In the event that a participant
ceases to be an employee of or consultant to the Company for any
reason, including death or disability, any Incentives may be
exercised or shall expire at such times as may be determined by
the Committee.
10.5.ADDITIONAL CONDITION. Notwithstanding anything in this Plan to
the contrary: (a) the Company may, if it shall determine it
necessary or desirable for any reason, at the time of award of
any Incentive or the issuance of any shares of Common Stock
pursuant to any Incentive, require the recipient of the
Incentive, as a condition to the receipt thereof or to the
receipt of shares of Common Stock issued pursuant thereto, to
deliver to the Company a written representation of present
intention to acquire the Incentive or the shares of Common Stock
issued pursuant thereto for his or her own account for investment
and not for distribution; and (b) if at any time the Company
further determines, in its sole discretion, that the listing,
registration or qualification (or any updating of any such
document) of any Incentive or the shares of Common Stock issuable
pursuant thereto is necessary on any securities exchange or under
any federal or state securities or blue sky law, or that the
consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with
the award of any Incentive, the issuance of shares of Common
Stock pursuant thereto, or the removal of any restrictions
imposed on such shares, such Incentive shall not be awarded or
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such shares of Common Stock shall not be issued or such
restrictions shall not be removed, as the case may be, in whole
or in part, unless such listing, registration, qualification,
consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Company.
10.6.ADJUSTMENT. In the event of any recapitalization, stock
dividend, stock split, combination of shares or other change in
the Common Stock, the number of shares of Common Stock then
subject to the Plan, including shares subject to restrictions,
options or achievements of performance shares, shall be adjusted
in proportion to the change in outstanding shares of Common
Stock. In the event of any such adjustments, the purchase price
of any option, the performance objectives of any Incentive, and
the shares of Common Stock issuable pursuant to any Incentive
shall be adjusted as and to the extent appropriate, in the
discretion of the Committee, to provide participants with the
same relative rights before and after such adjustment.
10.7.INCENTIVE PLANS AND AGREEMENTS. Except in the case of stock
awards or cash awards, the terms of each Incentive shall be
stated in a plan or agreement approved by the Committee. The
Committee may also determine to enter into agreements with
holders of options to reclassify or convert certain outstanding
options, within the terms of the Plan, as Incentive Stock Options
or as non-statutory stock options and in order to eliminate SARs
with respect to all or part of such options and any other
previously issued options.
10.8. WITHHOLDING.
(a) The Company shall have the right to withhold from any
payments made under the Plan or to collect as a condition of
payment, any taxes required by law to be withheld. At any
time when a participant is required to pay to the Company an
amount required to be withheld under applicable income tax
laws in connection with a distribution of Common Stock or
upon exercise of an option or SAR, the participant may
satisfy this obligation in whole or in part by electing (the
"Election") to have the Company withhold from the
distribution shares of Common Stock having a value up to the
minimum amount of withholding taxes required to be collected
on the transaction. The value of the shares to be withheld
shall be based on the Fair Market Value of the Common Stock
on the date that the amount of tax to be withheld shall be
determined ("Tax Date").
(b) Each Election must be made prior to the Tax Date. The
Committee may disapprove of any Election, may suspend or
terminate the right to make Elections, or may provide with
respect to any Incentive that the right to make Elections
shall not apply to such Incentive. An Election is
irrevocable.
10.9.NO CONTINUED EMPLOYMENT, ENGAGEMENT OR RIGHT TO CORPORATE ASSETS.
No participant under the Plan shall have any right, because of
his or her participation, to continue in the employ of the
Company for any period of time or to any right to continue his or
her present or any other rate of compensation. Nothing contained
in the Plan shall be construed as giving an employee, a
consultant, such persons' beneficiaries or any other person any
equity or interests of any kind in the assets of the Company or
creating a trust of any kind or a fiduciary relationship of any
kind between the Company and any such person.
10.10. DEFERRAL PERMITTED. Payment of cash or distribution of any
shares of Common Stock to which a participant is entitled under
any Incentive shall be made as provided in the Incentive. Payment
may be deferred at the option of the participant if provided in
the Incentive.
10.11. AMENDMENT OF THE PLAN. The Board may amend or discontinue the
Plan at any time. However, no such amendment or discontinuance
shall adversely change or impair, without the consent of the
recipient, an Incentive previously granted. Further, no such
amendment shall, without approval of the shareholders of the
Company, (a) increase the maximum number of shares of Common
Stock which may be issued to all participants under the Plan, (b)
change or expand the types of Incentives that may be granted
under the Plan, (c) change the class of persons eligible to
receive Incentives under the Plan, or (d) materially increase the
benefits accruing to participants under the Plan.
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10.12 SALE, MERGER, EXCHANGE OR LIQUIDATION. Unless otherwise provided
in the agreement for an Incentive, in the event of an acquisition
of the Company through the sale of substantially all of the
Company's assets or through a merger, exchange, reorganization or
liquidation of the Company or a similar event as determined by
the Committee (collectively a "transaction"), the Committee shall
be authorized, in its sole discretion, to take any and all action
it deems equitable under the circumstances, including but not
limited to any one or more of the following:
(1) providing that the Plan and all Incentives shall terminate
and the holders of (i) all outstanding vested options shall
receive, in lieu of any shares of Common Stock they would be
entitled to receive under such options, such stock,
securities or assets, including cash, as would have been
paid to such participants if their options had been
exercised and such participant had received Common Stock
immediately prior to such transaction (with appropriate
adjustment for the exercise price, if any), (ii) performance
shares and/or SARs that entitle the participant to receive
Common Stock shall receive, in lieu of any shares of Common
Stock each participant was entitled to receive as of the
date of the transaction pursuant to the terms of such
Incentive, if any, such stock, securities or assets,
including cash, as would have been paid to such participant
if such Common Stock had been issued to and held by the
participant immediately prior to such transaction, and (iii)
any Incentive under this Agreement which does not entitle
the participant to receive Common Stock shall be equitably
treated as determined by the Committee.
(2) providing that participants holding outstanding vested
Common Stock based Incentives shall receive, with respect to
each share of Common Stock issuable pursuant to such
Incentives as of the effective date of any such transaction,
at the determination of the Committee, cash, securities or
other property, or any combination thereof, in an amount
equal to the excess, if any, of the Fair Market Value of
such Common Stock on a date within ten days prior to the
effective date of such transaction over the option price or
other amount owed by a participant, if any, and that such
Incentives shall be cancelled, including the cancellation
without consideration of all options that have an exercise
price below the per share value of the consideration
received by the Company in the transaction.
(3) providing that the Plan (or replacement plan) shall continue
with respect to Incentives not cancelled or terminated as of
the effective date of such transaction and provide to
participants holding such Incentives the right to earn their
respective Incentives on a substantially equivalent basis
(taking into account the transaction and the number of
shares or other equity issued by such successor entity) with
respect to the equity of the entity succeeding the Company
by reason of such transaction.
(4) providing that all unvested, unearned or restricted
Incentives, including but not limited to restricted stock
for which restrictions have not lapsed as of the effective
date of such transaction, shall be void and deemed
terminated, or, in the alternative, for the acceleration or
waiver of any vesting, earning or restrictions on any
Incentive.
The Board may restrict the rights of participants or the
applicability of this Section 10.12 to the extent necessary to
comply with Section 16(b) of the Securities Exchange Act of 1934,
the Internal Revenue Code or any other applicable law or
regulation. The grant of an Incentive award pursuant to the Plan
shall not limit in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes
of its capital or business structure or to merge, exchange or
consolidate or to dissolve, liquidate, sell or transfer all or
any part of its business or assets.
10.13. DEFINITION OF FAIR MARKET VALUE. For purposes of this
Plan, the "Fair Market Value" of a share of Common Stock at
a specified date shall, unless otherwise expressly provided
in this Plan, be the amount which the Committee or the Board
of Directors determines in good faith to be 100% of the fair
market value of such a share as of the date in question;
provided, however, that notwithstanding the foregoing, if
such shares are listed on a U.S. securities exchange or are
quoted on the Nasdaq National Market or Nasdaq Small-Cap
Market ("Nasdaq"), then Fair Market Value shall be
determined by reference to the last sale price of a share of
Common Stock on such U.S. securities exchange or Nasdaq on
the applicable date. If such U.S. securities exchange or
Nasdaq is closed for trading on such date, or if the Common
Stock does not trade on such date, then the last sale price
used shall be the one on the date the Common Stock last
traded on such U.S. securities exchange or Nasdaq.
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10.14. CHANGE IN CONTROL. (a) Upon a Change in Control, as
defined in paragraph (b) of this Section 10.14, any stock
option or restricted stock award granted to any Participant
under this Plan that would have become vested upon continued
employment by the Participant shall immediately vest in full
and become exercisable, notwithstanding any provision to the
contrary of such award, and notwithstanding the discretion
of the Committee pursuant to Section 10.12.
(b) For purposes of this Section 10.14, "Change in Control"
means:
(1) The acquisition by any person, entity or "group",
within the meaning of Section 13(d) (3) or 14(d) (2) of
the Securities Exchange Act of 1934 (the "Exchange
Act") (excluding, for this purpose, (A) the Company,
(B) any employee benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of
voting securities of the Company, or (C) Lyle Berman,
Bradley Berman, Bradley Berman Irrevocable Trust, Julie
Berman Irrevocable Trust, Jessie Lynn Berman
Irrevocable Trust, Amy Berman Irrevocable Trust and
Steven Lipscomb) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange
Act) of 33% or more of either the then outstanding
shares of common stock or the combined voting power of
the Company's then outstanding voting securities
entitled to vote generally in the election of
directors; or
(2) Individuals who, as of August 9, 2011, constitute the
Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board, provided
that any person becoming a director subsequent to
August 9, 2011 whose election, or nomination for
election by the Company's stockholders, was approved by
a vote of at least a majority of the directors then
comprising the Incumbent Board (other than an election
or nomination of an individual whose initial assumption
of office is in connection with an actual or threatened
election contest relating to the election of the
Directors of the Company, as such terms are used in
Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall be, for purposes of this Agreement,
considered as though such person were a member of the
Incumbent Board; or
(3) Approval by the stockholders of the Company of (A) a
reorganization, merger or consolidation, in each case,
with respect to which persons who were the stockholders
of the Company immediately prior to such
reorganization, merger or consolidation do not,
immediately thereafter, own more than 50% of the
combined voting power of the reorganized, merged or
consolidated company's then outstanding voting
securities entitled to vote generally in the election
of directors of the reorganized, merged or consolidated
company, or (B) a liquidation or dissolution of the
Company or (C) the sale of all or substantially all of
the assets of the Company.
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Please Refer to Exhibit 99.1 for the Proxy Card