UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-12
PROFILE TECHNOLOGIES, 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:
PROFILE TECHNOLOGIES, INC.
2 Park Avenue, Suite 201
Manhasset, New York 11030
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NOTICE OF 2008 ANNUAL MEETING OF STOCKHOLDERS
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The Annual Meeting of Stockholders (the "Annual Meeting") of Profile
Technologies, Inc. (the "Company") will be held at 10:00 a.m., local time, on
Monday, November 17, 2008, at the offices of McGuireWoods LLP, located at 1345
Avenue of the Americas, Seventh Floor, New York, New York, 10105, for the
following purposes:
1. To elect a Board of Directors consisting of four persons to serve for
a term of one year (until the next annual meeting of the stockholders)
or until their respective successors are elected and have been
qualified.
2. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized common shares from 35,000,000 to
40,000,000.
3. To approve the adoption of the Company's 2008 Stock Ownership
Incentive Plan authorizing the issuance of stock options committing up
to 3,500,000 shares of the Company's common stock.
4. To transact such other business as may properly come before the Annual
Meeting and any postponement or adjournment thereof.
The Board of Directors (the "Board") has fixed September 25, 2008 as the
record date (the "Record Date") for determining the stockholders of the Company
entitled to notice of, and to vote at, the Annual Meeting and any adjournment of
the Annual Meeting. The transfer books of the Company will not be closed, but
only stockholders of the Company of record on such date will be entitled to
notice of, and to vote at, the Annual Meeting or any adjournment of the Annual
Meeting.
Stockholders are cordially invited to attend the meeting in person. Whether
or not you plan to attend the meeting in person, please complete, sign and date
the accompanying proxy card as promptly as possible and return the proxy card to
the Company in the enclosed envelope. No additional postage is required if the
envelope is mailed in the United States. The giving of a proxy will not affect
your right to vote in person if you attend the meeting and will assure that your
shares are voted if you are unable to attend.
By Order of the Board of Directors
/s/ Henry E. Gemino
-------------------
Henry E. Gemino
Chief Executive Officer
October __, 2008
PROFILE TECHNOLOGIES, INC.
2 Park Avenue, Suite 201
Manhasset, New York 11030
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PRELIMINARY PROXY STATEMENT
2008 ANNUAL MEETING OF STOCKHOLDERS
November 17, 2008
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INTRODUCTION
The enclosed proxy is solicited by and on behalf of the Board of Directors
(the "Board") of Profile Technologies, Inc., a Delaware corporation (the
"Company"), to be voted at the Annual Meeting of Stockholders (the "Annual
Meeting") to be held at the offices of McGuireWoods LLP, 1345 Avenue of the
Americas, Seventh Floor, New York, New York, 10105, at 10:00 a.m. local time on
Monday, November 17, 2008, and at any and all adjournments of the Annual
Meeting.
The Definitive Proxy Statement and the enclosed proxy card will be mailed
to our stockholders of the Company (the "Stockholders") on or about October 20,
2008.
The Company anticipates that the Stockholders will consider and vote upon
the following matters at the Annual Meeting:
1. To elect four persons as directors each to serve a term of one year
(until the next annual meeting of Stockholders) or until their
respective successors are elected and have been qualified.
2. To approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized common shares from 35,000,000 to
40,000,000.
3. To approve the adoption of the Company's 2008 Stock Ownership
Incentive Plan authorizing the issuance of stock options committing up
to 3,500,000 shares of the Company's common stock.
4. To transact such other business as may properly come before the Annual
Meeting and any postponement or adjournment thereof.
VOTING OF PROXIES
Shares are represented by proxies set forth in properly signed and returned
proxy cards in substantially the form of Appendix C to this Proxy Statement.
Unless subsequently revoked, proxies will be voted at the Annual Meeting in
accordance with the instructions marked on the proxy card. If a proxy card is
signed and returned without indicating any voting instructions, the shares
represented by the proxy will be voted FOR approval of the proposals stated in
this proxy statement, and in the discretion of the holders of the proxies on
other matters that may properly come before the Annual Meeting.
If you have executed and delivered a proxy card, you may revoke your proxy
at any time before it is voted by attending the Annual Meeting and voting in
person, by giving the Company written notice of revocation of the proxy, or by
submitting a signed proxy card bearing a later date. To revoke the prior proxy,
the notice of revocation or later proxy card must be received by the Company
before the vote of Stockholders at the Annual Meeting. Unless you vote at the
Annual Meeting or take other action, your attendance at the Annual Meeting will
not revoke your proxy.
VOTING PROCEDURES
The Company's state of incorporation is Delaware. Under Delaware law and
the Company's bylaws, the holders of a majority of the outstanding shares of the
common stock (the "Common Stock") of the Company entitled to vote constitute a
quorum at any meeting of stockholders. Votes cast by proxy or in person at the
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Annual Meeting will be counted by the inspector of elections appointed by the
Company. The inspector of elections will treat shares of Common Stock
represented by proxies that reflect abstentions as shares that are present and
entitled to vote for purposes of determining the presence of a quorum. Under
Delaware law and the Company's bylaws, directors are elected by a plurality of
the votes cast by the holders of shares entitled to vote at a meeting at which a
quorum is present. Therefore, Proposal 1 will be adopted if a plurality of the
shares present at the Annual Meeting in person or by proxy vote to elect the
directors nominated for election at the Annual Meeting. Other matters are
approved if affirmative votes cast by the holders of the shares entitled to vote
at a meeting at which a quorum is present exceed the number of votes opposing
the action, unless Delaware law or the Company's Certificate of Incorporation or
bylaws require a greater number of affirmative votes or voting by classes.
Abstentions and broker non-votes have no effect and will be disregarded.
Proposal 3 will be adopted if a majority of the shares of common stock present
at the Annual Meeting vote "For" Proposal 3 and a quorum is present. Abstentions
and broker non-votes have no effect and will be disregarded.
Under the General Corporation Law of the State of Delaware, the affirmative
vote of the holders of a majority of the issued and outstanding shares of common
stock of the Company is required to amend the Company's Certificate of
Incorporation to increase the number of authorized shares of common stock.
Therefore, to be approved, Proposal 2 must receive "For" votes from a majority
of the shares of common stock on the record date of the Annual Meeting. If
Stockholders select "Abstain" on their proxy cards for Proposal 2, or if
Stockholders attend the Annual Meeting and abstain from voting, it will have the
same effect as an "Against" vote for Proposal 2.
All of the officers and directors have informed the Company that they
intend to vote in favor of the proposals to be considered for the vote of the
Stockholders at the Annual Meeting.
VOTING SECURITIES
The Board has fixed the close of business on September 25, 2008 as the
record date (the "Record Date") for determining the Stockholders entitled to
receive notice of, and to vote at, the Annual Meeting. At the close of business
on the Record Date, there were _____________ issued and outstanding shares of
Common Stock entitled to vote at the Annual Meeting, held by approximately _____
Stockholders. As of the Record Date, the only outstanding voting security of the
Company is Common Stock. As a Stockholder as of the Record Date, you are
entitled to one vote for each share held on each matter properly submitted at
the Annual Meeting.
4
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PROPOSAL 1
ELECTION OF DIRECTORS
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Four nominees are standing for election as directors on the Board to hold
office until the next annual meeting of Stockholders is held and their
successors are duly elected and qualified. All of the nominees are current
directors of the Company standing for re-election and were previously elected by
the Stockholders. If one or more of the nominees is unable to serve, or for good
cause will not serve at the time of the Annual Meeting, the shares represented
by the proxies solicited by the Board will be voted for the other nominees and
for any substitute nominee(s) designated by the Board. As of the date of this
proxy statement, the Board has no reason to believe that any of the nominees
named will be unable or unwilling to serve. In the election of directors, those
nominees receiving the greatest number of votes shall be elected, even if such
votes do not constitute a majority. Certain information regarding each nominee
follows. Each nominee has consented to being named in the proxy statement and to
serve if elected.
INFORMATION ON DIRECTORS AND NOMINEES
The directors nominated for election at the Annual Meeting are as follows:
DIRECTOR
NAME AND AGE AGE PRINCIPAL OCCUPATION SINCE
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Henry E. Gemino 57 Chief Executive Officer, Chief Financial Officer, 1988
Profile Technologies, Inc.
Murphy Evans 76 President, Profile Technologies, Inc. 1994
Charles Christenson 78 Professor Emeritus 1999
Harvard Graduate School of Business Administration
Richard L. Palmer 64 President, Richard L. Palmer, P.C. 2007
THE BOARD RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH OF THE NOMINEES.
Henry E. Gemino. Mr. Gemino, a co-founder of the Company, has served as a
director and the Chief Financial Officer of the Company since 1988. From 1988
through October 2000, he served as Executive Vice President and Chief Operating
Officer of the Company. Since October 2000, he has served as Chief Executive
Officer of the Company.
Murphy Evans. Since 1994 Mr. Evans has served as President and a director
of the Company. Mr. Evans also serves as the President of L & S Holding Co., a
family-owned holding company that is engaged in several different businesses and
as President and Director of Falco Enterprises, Inc., Arran Corporation, Spring
Hill Homes, Inc. and Spring Hill Water Co., none of which are reporting
companies under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Mr. Evans received an AB degree in history from Princeton University in
1954 and an MBA degree from the Harvard Graduate School of Business
Administration in 1958.
Charles Christenson. Professor Christenson has been a director of the
Company since 1999. He is the Royal Little Professor of Business Administration,
Emeritus, at the Graduate School of Business Administration at Harvard
University and served as faculty chairman of both the MBA and Doctoral Programs.
He received his B.Sc. degree in Industrial and Labor Relations from Cornell
University in 1952, his MBA degree with high distinction from Harvard University
in 1954 and his DBA degree in Managerial Economics from Harvard University in
1961. While on leave of absence from the Harvard University faculty, he also
served as Deputy to the Assistant Secretary of the Air Force (Financial
Management) during the Kennedy Administration. He is a member of the American
Association for the Advancement of Science. Professor Christenson has also
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authored or co-authored a number of books and articles on quantitative methods,
management control and philosophy of science. Professor Christenson served as a
director of KENETECH Corporation from 1981-2001 and also serves as a director of
Boston Baroque, Inc., a not-for-profit organization performing and recording
music of the Baroque and Classical periods.
Richard L. Palmer. Mr. Palmer has served as a director of the Company since
2007. He has been a practicing attorney since 1972 with a primary emphasis on
litigation. He received his undergraduate degree from Texas Tech University in
1966 and his Doctor of Jurisprudence degree from Texas Tech University in 1972.
Mr. Palmer is licensed to practice in Texas State courts, U.S. District Courts
for the Northern, Western and Southern Districts of Texas, and the U.S. Fifth
Circuit Court of Appeals.
There are no family relationships among the directors. There are no
arrangements or understandings between any director and any other person,
pursuant to which any director was elected.
COMPENSATION OF NON-EMPLOYEE DIRECTORS
The Company's Board of Directors determines the non-employee directors'
compensation for serving on the Board and its committees. In establishing
director compensation, the Board is guided by the following goals:
o Compensation should consist of a combination of cash and equity awards
that are designed to fairly pay the directors for work required for a
company of Profile Technologies' size and scope;
o Compensation should align the directors' interests with the long-term
interests of stockholders; and
o Compensation should assist with attracting and retaining qualified
directors.
The Company does not pay director compensation to directors who are also
employees of the Company.
The Company pays to all non-employee directors a director's fee in the
amount of $1,000 per month. Directors are entitled to participate in, and have
been issued options under, the Company's 1999 Stock Plan. The Company also
reimburses directors for any actual expenses incurred to attend meetings of the
Board.
Due to the Company's critical need for cash, the Company has deferred all
payments owed to the directors for directors' fees until the Company has
sufficient resources to pay such fees. As of June 30, 2008, the Company owed
$144,000 in deferred directors' fees. On March 18, 2002, the Board approved a
conversion right on all directors' fees deferred as of March 18, 2002 (the
"Directors' Conversion Right"). Pursuant to the Directors' Conversion Right,
directors may elect to convert $1.00 of directors' fees owed to them as of March
18, 2002 for an option to purchase two shares of the Company's common stock, at
an exercise price of $1.00 per share for a term of five years. As of June 30,
2008, deferred directors' fees subject to the Directors' Conversion Right were
$9,000, resulting in the potential issuance of 18,000 options under the terms
described above. To date, none of the directors have elected to exercise their
Directors' Conversion Right.
In accordance with applicable SEC rules and regulations, the following
table reports all compensation the Company paid to non-employee directors during
the fiscal year ended June 30, 2008:
Fees
Earned or
Paid in Stock
Name Cash ($) (1) Awards ($) (2) Total ($)
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Charles Christenson $ 12,000 $ 72,150 $ 84,150
Richard Palmer (3) 10,000 76,350 86,350
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6
(1) The amounts in this column represent the monthly cash meeting fee earned by
or paid to the Company's non-employee directors for service during the
fiscal year ended June 30, 2008.
(2) This column reflects the dollar amount recognized for financial statement
reporting purposes for the fiscal year ended June 30, 2008 in accordance
with FAS 123R for stock option awards. For information regarding
significant factors, assumptions and methodologies used in determining the
fair value of the Company's stock options, see Note 4 to the Profile
Technologies, Inc. Financial Statements contained in the Company's Form
10-KSB for the fiscal year ended June 30, 2008. The grant date fair value
computed in accordance with FAS 123R was the same as that reported in the
table above. The stock options were fully vested upon grant.
(3) Mr. Palmer was nominated by the Board on August 20, 2007 to fill the
vacancy on the Board created by the death of Mr. Krivsky. Effective
September 1, 2007, Mr. Palmer began receiving the non-employee director's
fee of $1,000 per month.
BOARD OF DIRECTORS AND COMMITTEES
During the fiscal year ended June 30, 2008, the Board held a total of
fifteen meetings. All members of the Board attended at least 75% of all meetings
of the Board and all meetings held by all committees of the Board on which he
served.
Audit Committee.
The Board maintains an Audit Committee composed of Charles Christenson and
Richard Palmer. The principal functions of the Audit Committee are to monitor
the Company's financial reporting process and internal control system, to review
and appraise the audit efforts of the Company's independent accountants and the
internal audit function, to provide a means of communication among the
independent accountants, financial and senior management, the internal audit
function, and the Board, and to communicate with the Company's independent
accountants outside of the presence of management, when necessary. The Audit
Committee is also responsible for all matters set forth in its written charter,
a copy of which was attached as Appendix B to the Company's proxy statement for
the 2004 annual meeting. The Audit Committee held four meetings during the
fiscal year ended June 30, 2008.
The Board has determined that based on his experience and knowledge in
financial and auditing matters Dr. Christenson is an "audit committee financial
expert" as defined by Securities and Exchange Commission ("SEC") rules. Dr.
Christenson meets the standards of independence under the applicable National
Association of Securities Dealers ("NASD") listing standards.
Under the Company's Audit Committee Charter, the Audit Committee is
required to pre-approve all auditing services and permissible non-audit
services, including related fees and terms, to be performed for the Company by
its independent auditor, subject to the de minimus exceptions for non-audit
services described under the Securities Exchange Act of 1934 (the "Exchange
Act") which are approved by the Audit Committee prior to the completion of the
audit.
Compensation Committee.
The Board has a Compensation Committee composed of Murphy Evans and Richard
Palmer. The principle functions of the Compensation Committee are to establish
overall compensation policies for the Company and to review the recommendations
submitted by the Company's management. The Compensation Committee did not hold
any meetings during the year ended June 30, 2008.
Nominating Committee.
The Board does not have a standing nominating committee. The Company does
not maintain a policy for considering nominees. The Board must consist of at
least two independent directors. Director nominees are recommended, reviewed and
approved by the entire Board. The Board believes that this process is
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appropriate due to the relatively small number of directors on the Board and the
opportunity to benefit from a variety of opinions and perspectives in
determining director nominees by involving the full Board.
While the Board is solely responsible for the selection and nomination of
directors, the Board may consider nominees recommended by Stockholders as it
deems appropriate. Stockholders who wish to recommend a nominee should send
nominations to the Company's Chief Executive Officer, Henry E. Gemino, 2 Park
Avenue, Suite 201, Manhasset, New York, 11030 that include all information
relating to such person that is required to be disclosed in solicitations of
proxies for the election of directors. The recommendation must be accompanied by
a written consent of the individual to stand for election if nominated by the
Board and to serve if elected by the Stockholders.
Stockholder Communications to the Board.
The Board has established a process for Stockholders to communicate with
members of the Board. If you would like to contact the Board you can do so by
forwarding your concern, question or complaint to the Company's Chief Executive
Officer, Henry E. Gemino, 2 Park Avenue, Suite 201, Manhasset, New York, 11030.
Legal Proceedings.
There are no material proceedings to which any director, officer, or
affiliate of the issuer, any owner of record or beneficial owner of more than
five percent of any class of voting securities of the small business issuer, or
security holder, is a party adverse to the small business issuer or has a
material interest adverse to the small business issuer.
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of September 2, 2008
by (i) all persons who are known to the Company to beneficially own more than 5%
of the outstanding shares of the Company's common stock, and (ii) by each
director, director nominee, and executive officer and (iii) by all executive
officers and directors as a group:
Name and Address of Amount of Common Percent
Beneficial Owner Positions and Offices Held Stock Ownership(1) of Class(1)
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Henry E. Gemino Chief Executive Officer, Chief 1,765,433(2) 11.33%
5 Strickland Place Financial Officer, Director
Manhasset, NY 11030
Murphy Evans President, Director 5,583,334(3) 35.83%
204 Railroad Street
P.O. Box 688
Laurinburg, NC 28532
Philip L. Jones Executive Vice President 408,286(4) 2.62%
203 Beaver Road
Sewickley, PA 15143
Robert C. Geib Chief Operating Officer 37,500(5) 0.24%
21 Warren Court
Sparta, NJ 07871
Charles Christenson Director 610,666(6) 3.92%
1 Chauncy Lane
Cambridge, MA 02238
Richard L. Palmer Director 176,300(7) 1.13%
3316 88th Street
Lubbock, TX 79423
Gale and Sonya Burnett Stockholder 828,000(8) 5.31%
9191 Northwood Rd.
Lynden, WA 98264
8,581,519(9) 55.07%
All Directors and Officers
as a Group (6 persons)
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(1) Calculated pursuant to rule 13d-3(d) of the Exchange Act. Beneficial
ownership is calculated based on 15,584,160 shares of Common Stock issued
and outstanding on a fully diluted basis as of September 2, 2008. Unless
otherwise stated below, each such person has sole voting and investment
power with respect to all such shares. Under Rule 13d-3(d) of the Exchange
Act, shares not outstanding which are subject to options, warrants, rights
or conversion privileges exercisable within 60 days are deemed outstanding
for the purpose of calculating the number and percentage owned by such
person, but are not deemed outstanding for the purpose of calculating the
percentage owned by each other person listed.
(2) Includes 6,000 shares held by the wife of Mr. Gemino, includes warrants to
purchase 300,000 shares of the Company's common stock, and options to
purchase 985,000 shares of the Company's common stock, 155,000 of which are
held by the wife of Mr. Gemino.
9
(3) Includes 30,000 shares held by the wife of Mr. Evans, 391,667 shares held
in the name of Falco Enterprises, Inc., a company controlled by Mr. Evans,
230,500 shares held by L&S Holding Co., a company controlled by Mr. Evans,
210,000 shares held by Arran Corporation, a company controlled by Mr.
Evans, and 750,000 shares held by EnviroResources, LLC, a company
controlled by Mr. Evans. Also includes warrants to purchase 2,545,000
shares of the Company's common stock, 305,000 of which are held in the name
of Falco Enterprises, Inc., 205,000 in the name of L&S Holding Co., and
210,000 in the name of Arran Corporation. Also includes options to purchase
450,000 shares of the Company's common stock.
(4) Includes options to purchase 385,000 shares of the Company's common stock.
(5) Represents options to purchase 37,500 shares of the Company's common stock.
(6) Includes warrants to purchase 50,000 shares of the Company's common stock
and options to purchase 415,000 shares of the Company's common stock.
(7) Includes options to purchase 65,000 shares of the Company's common stock.
(8) Represents 578,000 shares held by the wife of Mr. Burnett and options to
purchase 250,000 shares of the Company's common stock.
(9) Assumes exercise of all warrants and options exercisable within 60 days
that are owned by all officers and directors.
EXECUTIVE OFFICERS OF THE COMPANY
Certain information regarding the executive officers of the Company
follows:
Name Age Position Held With Company
--------------------------------------------------------------------------------
Henry E. Gemino 57 Chief Executive Officer, Chief Financial Officer
Murphy Evans 76 Chairman and President
Philip L. Jones 66 Executive Vice President
Robert C. Geib 37 Chief Operating Officer
Philip L. Jones has been serving as Executive Vice President since
September 2001. For one year previous to his employment by the Company, he
provided energy consulting services to certain utility companies. Prior to that,
Mr. Jones served in various capacities with Consolidated Natural Gas Company, a
large integrated energy company, for more than 30 years, including six years as
Vice President for Marketing with CNG's exploration and production subsidiary,
CNG Producing Company. He received his law degree from West Virginia College of
Law in 1967 and his B.A. from Princeton University in 1964. Mr. Jones was a
Captain in the U.S. Army, 142nd JAG Detachment.
Robert C. Geib has been serving as the Company's Chief Operating Officer
since September 2007. Prior to joining the Company, Mr. Geib was the Director of
Operations Services for the Northeast Gas Association in New York, NY. His
duties included oversight of programs and projects relating to pipeline
integrity and security, and he served as liaison between the association's
member companies and federal and state regulators. Prior to this, from 1999 to
2005, Mr. Geib worked at Southwest Gas Corporation in Las Vegas, NV as a
supervisor and a distribution engineer. While there, his duties included the
development of the corporate pipeline integrity program and supervising the
implementation of new technologies for pipeline inspection and pipeline risk
algorithms. Mr. Geib holds a B.S. in electronics engineering.
There are no family relationships among the executive officers. There are
no arrangements or understandings between any officers and any other person,
pursuant to which any officer was selected.
10
EXECUTIVE COMPENSATION
Employment Contracts.
On August 20, 2007, the Board elected Robert C. Geib as the Company's Chief
Operating Officer, effective September 4, 2007. Mr. Geib's annual base salary
was set by the Board at $115,000. In addition, the Board agreed to grant Mr.
Geib on September 4, 2007 an option to purchase 50,000 shares of the Company's
common stock, under the Company's 1999 Stock Plan, and on March 4, 2008 to grant
him an additional option to purchase 50,000 shares of common stock. The exercise
prices of the grants on September 4, 2007 and March 4, 2008, were $1.05 and
$1.13 per share, the closing price of the common stock on the date of grant, or,
if the Company's stock was not traded on the date of grant, the first day of
active trading following each respective grant date. Each of the two option
grants vest 25% on the first anniversary of the grant dates, with the remainder
vesting at 25% on each of the three subsequent anniversaries of the grant dates
until the options are fully vested.
Summary Compensation Table
--------------------------
The following table sets forth information concerning the compensation of
the Company's Chief Executive Officer and Chief Financial Officer and the
highest paid executive officers of the Company as of the end of the Company's
last fiscal year ended June 30, 2008 whose salary and bonus for such period in
all capacities in which the executive officer served exceeded $100,000.
Year Option Non-Equity
Name and Principal Ended Awards ($) Incentive Plan
Position June 30, Salary ($) Bonus ($) (5) Compensation ($) Total ($)
-----------------------------------------------------------------------------------------------------------------
Henry E. Gemino, 2008 $120,000 (1),(2) $- $111,000 $- $231,000
Chief Executive
Officer and Chief 2007 120,000 (1),(2) - 277,200 - 397,200
Financial Officer
2006 120,000 (1),(2) 5,000 - - 125,000
-----------------------------------------------------------------------------------------------------------------
Murphy Evans, 2008 30,000 (1),(3) - 111,000 - 141,000
President
2007 - (1),(3) - 177,100 - 177,100
2006 - (1),(3) - - - -
-----------------------------------------------------------------------------------------------------------------
Robert C. Geib, 2008 95,833 (4) - 16,625 (4) - 112,458
Chief Operating
Officer
----------
(1) Due to the Company's need for cash, the Company has deferred compensation
owed to certain officers of the Company. Such amounts will continue to be
deferred until the Company has sufficient resources to pay such amounts
owed. On March 18, 2002, the Board approved a conversion right on all
deferred wages due to officers as of March 18, 2002 (the "Officers'
Conversion Right"). Pursuant to the Officers' Conversion Right, officers
may elect to convert $1.00 of compensation owed to them as of March 18,
2002 for an option to purchase two shares of the Company's common stock, at
an exercise price of $1.00 per share for a term of five years. Pursuant to
the Officers' Conversion Right, as of June 30, 2008, the Company owed Mr.
Gemino and Mr. Evans $11,500 and $20,500, resulting in the potential
issuance of 23,000 and 41,000 options under the Officers' Conversion Right
terms described above. To date, Mr. Gemino and Mr. Evans have not elected
to exercise their Officers' Conversion Right.
11
(2) The Company did not defer any salary payments owed to Mr. Gemino during the
years ended June 30, 2008, 2007 and 2006. As of June 30, 2008 total
deferred compensation owed to Mr. Gemino was $184,600.
(3) In November 2007, the Board approved that Mr. Evans receive a monthly
salary of $4,000 of which $2,000 be paid in cash and the remaining $2,000
be deferred until the Company has significant resources to repay any
deferred amounts. During the year ended June 30, 2008, the Company deferred
$14,000. As of June 30, 2008 total deferred compensation owed to Mr. Evans
was $46,500.
(4) On August 20, 2007, the Board elected Robert C. Geib as the Company's Chief
Operating Officer, effective September 4, 2007. Mr. Geib's annual base
salary was set by the Board at $115,000. In addition, the Board agreed to
grant Mr. Geib on September 4, 2007 an option to purchase 50,000 shares of
the Company's common stock, under the Company's 1999 Stock Plan, and on
March 4, 2008 to grant him an additional option to purchase 50,000 shares
of common stock. The exercise prices of the grants on September 4, 2007 and
March 4, 2008, were $1.05 and $1.13 per share, the closing price of the
common stock on the date of grant, or, if the Company's stock was not
traded on the date of grant, the first day of active trading following each
respective grant date. Each of the two option grants vest 25% on the first
anniversary of the grant dates, with the remainder vesting at 25% on each
of the three subsequent anniversaries of the grant dates until the options
are fully vested.
(5) This column reflects the dollar amount recognized for financial statement
reporting purposes in accordance with applicable SEC rules and guidance and
FAS 123R for stock options and warrants, which may include amounts from
awards made in and prior to the years shown. For information regarding
significant factors, assumptions and methodologies used in determining the
fair value of the Company's stock options and warrants, see Note 4 to the
Profile Technologies, Inc. Financial Statements contained in the Company's
Form 10-KSB for the fiscal year ended June 30, 2008. Prior to January 1,
2006, the Company accounted for stock-based awards under the recognition
and measurement principles of APB Opinion No. 25, Accounting for Stock
Issued to Employees ("APB 25"), and related Interpretations, as permitted
by SFAS 123. In accordance with APB 25, no compensation expense was
required to be recognized for stock options granted that had an exercise
price equal to or greater than the fair market value of the underlying
common stock on the date of grant.
Grants of Plan-Based Awards
---------------------------
The following table sets forth information regarding stock options granted
to our Named Executive Officers during the fiscal year ended June 30, 2008. The
Company does not have any performance-based equity incentive award or non-equity
incentive plans and has therefore omitted the corresponding columns.
All Other Option Awards: Exercise or Base Grant Date Fair
Number of Shares of Stock Price of Option Value of Option
Name Grant Date or Units (#) Awards ($/Sh.) Awards ($)(3)
------------------------------------------------------------------------------------------------------------
Henry E. Gemino 11/16/07 100,000 (1) $1.32 $111,000
Chief Executive Officer and
Chief Financial Officer
Murphy Evans 11/16/07 100,000 (1) 1.32 111,000
President
Philip L. Jones 11/16/07 50,000 (1) 1.20 55,500
Executive Vice President
Robert C. Geib 9/4/07 50,000 (2) 1.05 44,000
Chief Operating Officer 11/16/07 25,000 (1) 1.20 27,750
3/4/07 50,000 (2) 1.13 45,000
12
----------
(1) Consists of options that expire in November 2017.
(2) Pursuant to Mr. Geib's employment contract, on September 4, 2007 the Board
granted Mr. Geib an option to purchase 50,000 shares of the Company's
common stock, under the Company's 1999 Stock Plan, and on March 4, 2008
granted him an additional option to purchase 50,000 shares of common stock.
The exercise prices of the grants on September 4, 2007 and March 4, 2008,
were $1.05 and $1.13 per share, the closing price of the common stock on
the date of grant, or, if the Company's stock was not traded on the date of
grant, the first day of active trading following each respective grant
date. Each of the two option grants vest 25% on the first anniversary of
the grant dates, with the remainder vesting at 25% on each of the three
subsequent anniversaries of the grant dates until the options are fully
vested. The options expire five years from the date of grant.
(3) The grant date fair value of these options and warrants was determined in
accordance with FAS 123R, using a Black-Scholes option pricing model. For
information regarding significant factors, assumptions and methodologies
used in determining the fair value of the Company's stock options and
warrants, see Note 4 to the Profile Technologies, Inc. Financial Statements
contained in the Company's Form 10-KSB for the fiscal year ended June 30,
2008. The grant date fair value computed in accordance with FAS 123R was
the same as that reported in the table above.
Outstanding Equity Awards at Fiscal Year-End
--------------------------------------------
The following table sets forth information regarding equity awards that
have been previously awarded to each of the Named Executives and which remained
outstanding as of June 30, 2008.
Option Awards Option Awards
Number of Securities Number of Securities
Underlying Unexercised Underlying Unexercised
Name Options (#) Options (#) Option Exercise Option Expiration
Exercisable Unexercisable Price ($) Date
------------------------------------------------------------------------------------------------------------------
Henry E. Gemino 20,000 - 0.70 12/15/08
600,000 - 1.16 2/15/15
50,000 - 1.21 12/12/15
60,000 - 0.95 11/12/16
100,000 - 1.32 11/15/17
Murphy Evans 20,000 - 0.70 12/15/08
200,000 - 1.16 2/15/15
50,000 - 1.21 12/12/15
80,000 - 0.95 11/12/16
100,00 - 1.32 11/15/17
Philip L. Jones 20,000 - 0.70 12/15/08
200,000 - 1.16 2/15/15
50,000 - 1.12 12/12/15
65,000 - 0.86 11/12/16
50,000 - 1.20 11/15/17
Robert C. Geib 25,000 - 1.20 11/15/17
- 50,000 (1) 1.05 9/3/12
- 50,000 (1) 1.13 3/3/12
13
----------
(1) Pursuant to Mr. Geib's employment contract, on September 4, 2007 the Board
granted Mr. Geib an option to purchase 50,000 shares of the Company's
common stock, under the Company's 1999 Stock Plan, and on March 4, 2008
granted him an additional option to purchase 50,000 shares of common stock.
The exercise prices of the grants on September 4, 2007 and March 4, 2008,
were $1.05 and $1.13 per share, the closing price of the common stock on
the date of grant, or, if the Company's stock was not traded on the date of
grant, the first day of active trading following each respective grant
date. Each of the two option grants vest 25% on the first anniversary of
the grant dates, with the remainder vesting at 25% on each of the three
subsequent anniversaries of the grant dates until the options are fully
vested. The options expire five years from the date of grant.
Option Exercises
----------------
During the fiscal year ended June 30, 2008 none of the Named Executives
exercised any stock options.
14
--------------------------------------------------------------------------------
PROPOSAL 2
AMENDMENT TO CERTIFICATE OF INCORPORATION
--------------------------------------------------------------------------------
The Board is proposing an amendment to Paragraph 4 of the Company's
Certificate of Incorporation to increase the number of authorized shares of
common stock, par value $0.001 per share, of the Company from 35,000,000 shares
of common stock to 40,000,000 shares of common stock (the "Amendment") for
approval by the Stockholders. A copy of the form of the Amendment is attached to
this proxy statement as Appendix A.
The Board believes that the flexibility provided by the increase in the
authorized shares of common stock, which will permit the Board, in its
discretion, to issue or reserve additional shares of common stock without the
delay or expense of a meeting of Stockholders, is in the best interests of the
Company and the Stockholders. Shares of common stock may be used for general
corporate purposes, including possible financing activities. Possible financing
activities might include raising additional capital funds through offerings of
shares of the common stock. The Board has no current plan, understanding or
arrangement to issue any of the additional shares of common stock.
The issuance of any additional shares of common stock may have the effect
of diluting the percentage of stock ownership, book value and voting rights of
the present holders of the common stock. The increase in the authorized common
stock of the Company also may have the effect of discouraging attempts to take
over control of the Company, as additional shares of common stock could be
issued to dilute the stock ownership and voting power of, or increase the cost
to, a party seeking to obtain control of the Company. The Amendment is not being
proposed in response to any known effort or threat to acquire control of the
Company and is not part of a plan by management to adopt a series of amendments
to the Company's Certificate of Incorporation and Bylaws having an anti-takeover
effect.
Holders of the Company's common stock are entitled to one vote for each
share held on all matters submitted to a Stockholder vote. Holders of common
stock do not have cumulative voting rights. Therefore, holders of a majority of
the shares of common stock voting for the election of directors can elect all of
the directors. Holders of the common stock representing a majority of the voting
power of the capital stock issued, outstanding and entitled to vote, represented
in person or by proxy, are necessary to constitute a quorum at any meeting of
Stockholders. A vote by the holders of a majority of the outstanding shares of
common stock is required to effectuate certain fundamental corporate changes
such as liquidation, merger or an amendment to the articles of incorporation.
Holders of common stock are entitled to share in all dividends that the
Board, in its discretion, declares from legally available funds. In the event of
a liquidation, dissolution or winding up, each outstanding share entitles its
holder to participate pro rata in all assets that remain after payment of
liabilities and after providing for each class of stock, if any, having
preference over the common stock. Holders of the common stock have no
pre-emptive rights, no conversion rights and there are no redemption provisions
applicable to the common stock.
The Board adopted the Amendment on July 10, 2008 and is seeking approval by
the Stockholders through this proxy solicitation.
THE BOARD RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE AMENDMENT.
15
--------------------------------------------------------------------------------
PROPOSAL 3
ADOPTION OF THE 2008 STOCK OWNERSHIP INCENTIVE PLAN
--------------------------------------------------------------------------------
The Board is proposing approval and adoption of the 2008 Stock Ownership
Incentive Plan ("2008 Stock Plan") by the Stockholders. A copy of the 2008 Stock
Ownership Incentive Plan is attached to this proxy statement as Appendix B.
On November 16, 1998, the Stockholders approved and adopted the Profile
Technologies, Inc. 1999 Stock Plan (the "1999 Stock Plan"). In accordance with
Section 17 of the 1999 Stock Plan, no incentive stock options may be granted
more than ten years after the 1999 Stock Plan's effective date. Upon adoption of
the 2008 Stock Plan by the Stockholders the Company will no longer grant stock
options under the 1999 Stock Plan.
The 2008 Stock Plan is intended to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to employee and consultants, and to promote the success of the
Company's business.
The Board believes that adopting the 2008 Stock Plan will permit the Board,
in its discretion, to make additional grants of stock options without the delay
or expense of a meeting of Stockholders, and is in the best interests of the
Company and the Stockholders. Stock options may be granted as compensation to
consultants for performance of services or in recognition of the ongoing efforts
by employees, executives and Board members.
The issuance of any additional stock options may have the effect of
diluting the percentage of stock ownership, book value and voting rights of the
present holders of the common stock. The increase in the number of stock options
authorized for grant may also have the effect of discouraging attempts to take
over control of the Company, as additional shares of common stock could be
issued to dilute the stock ownership and voting power of, or increase the cost
to, a party seeking to obtain control of the Company.
The Board approved and adopted the 2008 Stock Plan on July 10, 2008 and is
seeking approval by the Stockholders through this proxy solicitation.
Stockholder approval is necessary to permit the 2008 Stock Plan to qualify as an
incentive stock option plan under applicable provisions of the Internal Revenue
Code. The affirmative vote of the holders of a majority of the shares present at
the meeting (in person or by proxy) is required for approval.
Each of the directors and executive officers of the Company is eligible to
participate in, and receive awards through the 2008 Stock Plan.
Description of the 2008 Stock Plan
Under the 2008 Stock Plan, the Board may grant stock options, which are
intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Incentive Stock Options"),
non-qualified stock options (the "Non-Qualified Stock Options"), and restricted
stock (the "Restricted Stock").
The 2008 Stock Plan reserves a total of 3,500,000 shares of the Company's
common stock (the "Shares") for issuance thereunder. The total number of Shares
for which Awards may be granted under the 2008 Stock Plan shall not exceed a
number of shares which is equal to 30% of the outstanding shares of the Company,
unless a percentage higher than 30% is approved by at least two-thirds of the
outstanding shares entitled to vote.
If a stock option granted under the 2008 Stock Plan expires or becomes
unexercisable without having been exercised in full, the unpurchased Shares
shall become available for future grant or sale under the 2008 Stock Plan
(unless the 2008 Stock Plan has terminated); provided, however that Shares that
have actually been issued under the 2008 Stock Plan shall not be returned to the
2008 Stock Plan and shall not become available for future distribution under the
2008 Stock Plan.
If a Share that has been granted as Restricted Stock is forfeited, such
Share shall become available for future grant or sale under the 2008 Stock Plan
(unless the 2008 Stock Plan has been terminated).
16
The following is a description of the material provisions of the 2008 Stock
Plan. The description of the 2008 Stock Plan is qualified in its entirety by
reference to the complete 2008 Stock Plan document, attached as Appendix B to
this Proxy Statement.
Administration
--------------
The 2008 Stock Plan may be administered by different committees of
Directors appointed by the Board (the "Committee") with respect to different
groups of employees, directors or consultants ("Service Providers"). In the
absence of such committee's appointment, the Board will administer the 2008
Stock Plan. The Committee or Board (the Administrator") has the authority, in
its discretion to determine the Service Providers to whom stock options or
Restricted Stock shall be granted, the number of shares of common stock to be
optioned to each, the exercise price of the stock options and the time when such
options shall become exercisable, the amount (if any) of the consideration to be
paid by a Service Provider in respect of a grant of Restricted Stock, any
vesting acceleration or waiver of forfeiture restrictions with respect to
grants, and any restriction or limitation regarding any grant or the shares of
common stock relating thereto. The Committee or Board may make all other
determinations deemed necessary or advisable for administering the 2008 Stock
Plan.
Stock Options
-------------
The per share exercise price of for each stock option shall be determined
by the Administrator and will never be below fair market value on the date of
grant. If at the time an Incentive Stock Option or Non-Qualified Stock Option is
granted, the optionee owns more than 10% of the voting power of all classes of
the Company's stock or any Parent or Subsidiary, the per share exercise price
for any Incentive Stock Option must be at least 110% of fair market value per
share on the date of grant.
The Administrator may determine the term of each stock option granted,
which term may not exceed ten years from the date of grant. In the case of an
Incentive Stock Option granted to an optionee who, at the time the Incentive
Stock Option is granted, owns more than 10% of the voting power of all classes
of the Company's stock or any Parent or Subsidiary, the term of the Incentive
Stock Option may not exceed five years from the date of grant.
To the extent that the aggregate fair market value of the shares with
respect to which Incentive Stock Options are exercisable for the first time by
the optionee during any calendar year exceeds $100,000, such stock options will
be treated as Non-Qualified Stock Options.
The period within which the stock option may be exercised and the
conditions which must be satisfied before the stock option may be exercised is
determined by the Administrator. The Administrator shall also fix the number of
shares granted under the stock option. Notwithstanding the foregoing, the
optionee has the right to exercise the stock options at the rate of at least 20%
over five years from the date of grant, subject to reasonable conditions such as
continued employment, at the discretion of the Administrator.
No shares of common stock will be issued or delivered to an optionee until
the Company receives full payment of the option exercise price. The number of
shares of common stock deliverable with respect to each payment of the option
exercise price is subject to appropriate adjustment upon any stock split or
combination of shares, or upon any stock dividend. Upon the occurrence of any
corporate merger, consolidation, sale of all or substantially all of the
Company's assets, or other reorganization, or a liquidation, any optionee
holding an outstanding option, regardless of the current status of its
exercisability, is entitled to exercise his option in whole or in part and to
receive upon the exercise those shares, securities, assets, or payment which the
optionee would have received if the optionee had exercised the option prior to
such occurrence and had been a stockholder of the Company with respect to such
common stock.
Indemnification
---------------
No member of the Board or any of the Committees administering the 2008
Stock Plan are held liable for any action or determination made with respect to
the 2008 Stock Plan or any grant thereunder.
17
Duration, Amendment and Termination
-----------------------------------
The Board may amend, alter, suspend or terminate the 2008 Stock Plan
without Stockholder approval or ratification, unless required to comply with
applicable laws, at any time or from time to time, Unless sooner terminated, the
2008 Stock Plan will terminate on November 17, 2018. No change may be made that
increases the total number of shares of common stock reserved for issuance under
the 2008 Stock Plan unless such change is authorized by our Stockholders. An
amendment, alteration, suspension or termination of the 2008 Stock Plan will
not, without the written consent of the optionee, adversely affect an optionee's
rights under a previously granted stock option.
Transferability of Awards
-------------------------
Stock options shall not be transferable except by will or by the laws of
descent and distribution.
THE BOARD RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE 2008 STOCK OWNERSHIP
INCENTIVE PLAN.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In September, 1988, at the time Gale D. Burnett, a beneficial stockholder
of more than 10% of the Company's common stock, first transferred certain
technology, know-how and patent rights to the Company, a royalty interest of 4%
of all pre-tax profits derived from the technology and know-how transferred was
granted to Northwood Enterprises, Inc., a family-owned company controlled by Mr.
Burnett. Northwoods Enterprises subsequently assigned such royalty interest back
to Mr. Burnett. On April 8, 1996, Mr. Burnett assigned 2% of this royalty
interest to certain stockholders of the Company, 1 1/4% of which was assigned to
Henry Gemino, currently the Chief Executive Officer and Chief Financial Officer,
and a director of the Company. This royalty arrangement also applies to all
future patent rights and technology developed by Mr. Burnett and assigned to the
Company. To date, no royalty payments have been made or earned under the above
described arrangement.
OTHER MATTERS TO BE VOTED UPON
As of the date of this proxy statement, the Board does not know of or
anticipate that any other matters will be brought before the Stockholders at the
Annual Meeting. If, however, any other matters not mentioned in the proxy
statement are properly brought before the Stockholders at the Annual Meeting,
the persons appointed as proxies will have the discretion to vote or act in
accordance with their best judgment.
SECTION 16(a): BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to Section 16(a) of the Exchange Act of 1934, the executive
officers and directors of the Company in addition to any person who owns more
than 10% of the common stock of the Company are required to report their
ownership of the common stock of the Company and changes to such ownership with
the SEC. Based on a review of such reports and information provided to the
Company, the Company believes that during the most recent fiscal year the
executive officers and directors of the Company have complied with applicable
filing requirements under Section 16(a), except that three Form 4s were not
filed within the reporting time frame required by the SEC.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board selected Peterson Sullivan PLLC ("Peterson Sullivan") as the
independent certified public accountants to audit the financial statements of
the Company for its fiscal year ended June 30, 2008. To the knowledge of
management, neither such firm nor any of its members has any direct or material
indirect financial interest in the Company or any connection with the Company in
any capacity otherwise than as independent accountants.
18
A representative of Peterson Sullivan will be present via telephone at the
Annual Meeting of Stockholders, will have the opportunity to make a statement if
they so desire, and will be available to respond to appropriate questions
submitted to the Secretary of Profile Technologies in advance of the Annual
Meeting.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Aggregate fees for professional services rendered to the Company by
Peterson Sullivan for the years ended June 30, 2008 and 2007 were as follows:
Year Ended Year Ended
June 30, 2008 June 30, 2007
-------------------- ---------------------
Audit Fees $35,600 $34,500
Audit-related Fees - -
Tax Fees - -
All Other Fees - -
------- -------
TOTAL $35,600 $34,500
Audit Fees
Audit Fees consisted of fees related to the audit of the Company's annual
financial statements for the years ended June 30 2008 and 2007, and reviews of
the financial statements included in the Company's Quarterly Reports on Form
10-QSB for those years.
AUDIT COMMITTEE PRE-APPROVAL POLICY
Generally, the Audit Committee must approve all audit and non-audit
services to be provided to the Company. The Audit Committee may implement
policies and procedures by which such services are approved other than by the
full Committee, but has not yet done so.
The Audit Committee approved 100% of the Audit Fees for the years ended
June 30, 2008 and 2007.
The Audit Committee shall not approve non-audit services that the Audit
Committee believes may impair the independence of the independent registered
public accounting firm. As of the date of the approval of the Audit Committee
Charter, permissible non-audit services include any professional services
(including tax services), that are not prohibited services as described below,
provided to the Company by the independent registered public accounting firm,
other than those provided to the Company in connection with an audit or a review
of the financial statements of the Company. Permissible non-audit services may
not include: (i) bookkeeping or other services related to the accounting records
or financial statements of the Company; (ii) financial information systems
design and implementation; (iii) appraisal or valuation services, fairness
opinions or contribution-in-kind reports; (iv) actuarial services (v) internal
audit outsourcing services; (vi) management functions or human resources; (vii)
broker or dealer, investment adviser or investment banking services; (viii)
legal services and expert services unrelated to the audit; and (ix) any other
service the Public Company Accounting Oversight Board determines, by regulation,
is impermissible.
Pre-approval by the Audit Committee of any permissible non-audit services
is not required so long as the aggregate amount of all such permissible
non-audit services provided to the Company constitutes not more than 5% of the
total amount of revenues paid to the Company's independent registered public
accounting firm during the fiscal year in which the permissible non-audit
services are provided to the Company.
AUDIT COMMITTEE REPORT
The Board maintains an Audit Committee composed of Charles Christenson and
Richard Palmer who have been found by the Board of Directors to be both
independent and financially literate as required by the listing standards of the
NASD. In addition, based on his experience and knowledge in financial and
19
auditing matters, the Board has determined that Dr. Christenson is an Audit
Committee Financial Expert under the rules of the SEC. The Audit Committee
operates under a written charter adopted by the Board of Directors.
As set forth in its charter, the Audit Committee assists the Board by
reviewing financial reports we provide to governmental bodies or the public,
monitoring the adequacy of our internal controls regarding finance and
accounting, reviewing our auditing, accounting, and financial reporting
processes generally, and verifying the independence of our independent auditors.
All auditors employed or engaged by us report directly to the Audit Committee.
To fulfill its responsibilities, the Audit Committee recommends the selection of
auditors and reviews reports of auditors and examiners, as well as management's
responses to such reports, to ensure the effectiveness of internal controls and
the implementation of remedial action. The Audit Committee also recommends to
the Board whether to include the audited financial statements in our Annual
Report and Form 10-KSB.
In discharging its responsibility, the Audit Committee will review and
discuss the Company's audited financial statements with management. The Audit
Committee will discuss with the independent auditors the matters required to be
discussed by Statement on Auditing Standards No. 61, as amended (AICPA,
Professional Standards, Vol.1, AU Section 380) as adopted by the Public Company
Accounting Oversight Board in Rule 3200T. The Audit Committee intends to receive
the written disclosures and letter from the Company's independent auditors as
required by Independence Standards Board Standard No. 1 (Independence Standards
Board Standard No. 1, Independence Discussions with Audit Committees), and will
discuss with the independent auditors their independence.
Prior to the filing of the Definitive Proxy Statement, the Audit Committee
intends to review and discuss our audited financial statements as of and for the
year ended June 30, 2008, with management and the independent auditors.
Management has the responsibility for preparation of our financial statements,
and the independent auditors have the responsibility for examination of those
statements. Pending the review of the financial statements, discussions with
management and the independent auditors, the Audit Committee intends to
recommend to the Board of Directors that the audited financial statements be
included in our Annual Report and Form 10-KSB for the year ended June 30, 2008,
for filing with the SEC.
Audit Committee
/s/ Charles Christenson /s/ Richard Palmer
----------------------- ------------------
Charles Christenson Richard Palmer
STOCKHOLDER PROPOSALS
Stockholders who wish to include a proposal in the Company's proxy
statement for the 2009 annual meeting must deliver a written copy of their
proposal to the Company's principal executive offices no later than June 30,
2009. Proposals must comply with the SEC proxy rules relating to stockholder
proposals to be included in the Company's proxy materials. Except for
stockholder proposals to be included in the Company's proxy statement, the
deadline for nominations for director or other proposals made by a Stockholder
is five days before the date of the 2009 Annual Meeting. Proposals should be
directed to Henry E. Gemino, Chief Executive Officer, Profile Technologies,
Inc., 2 Park Avenue, Suite 201, Manhasset, New York 11030.
ANNUAL REPORT ON FORM 10-KSB; DELIVERY TO STOCKHOLDERS SHARING ADDRESS
The Company will provide Stockholders with a copy of its Annual Report on
Form 10-KSB for the fiscal year ended June 30, 2008 simultaneously with delivery
of the Definitive Proxy Statement. You may obtain additional copies of the
Annual Report, without charge, by writing to Henry E. Gemino, Chief Executive
Officer, Profile Technologies, Inc., 2 Park Avenue, Suite 201, Manhasset, New
York 11030.
The Company is delivering only one proxy statement and Annual Report to
multiple Stockholders sharing an address unless the Company has received
contrary instructions from one or more of the Stockholders. The Company will
20
promptly deliver upon written or oral request a separate copy of this proxy
statement or the Annual Report to a Stockholder at a shared address to which a
single copy was sent. If you are a Stockholder residing at a shared address and
would like to request an additional copy of the proxy statement or Annual Report
now or with respect to future mailings (or to request to receive only one copy
of the proxy statement or Annual Report if you are currently receiving multiple
copies), please send your request to our Chief Executive Officer at the address
noted above.
FINANCIAL INFORMATION
We intend to incorporate by reference our Annual Report on Form 10-KSB for
the fiscal year ended June 30, 2008 with the filing of the Definitive Proxy
Statement.
COST OF SOLICITATION
The Company will bear the cost of solicitation of proxies, including
expenses in connection with the preparation and mailing of this proxy statement.
The Company will solicit primarily through the mail, and the Company's officers,
directors, and employees may solicit by personal interview, telephone,
facsimile, or e-mail proxies. These people will not receive additional
compensation for such solicitations, but the Company may reimburse them for
their reasonable out-of-pocket expenses.
Stockholders are requested to complete, sign, and date the accompanying
proxy card and promptly return it to the Company's transfer agent, Continental
Stock Transfer & Trust Company, in the enclosed addressed, postage paid
envelope.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Henry E. Gemino
-------------------
Henry E. Gemino
Chief Executive Officer
October __, 2008
21
APPENDIX A
----------
AMENDMENT TO CERTIFICATE OF INCORPORATION OF
PROFILE TECHNOLOGIES, INC. INCREASING NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK
Profile Technologies, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"),
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Profile Technologies,
Inc. resolutions were duly adopted setting forth a proposed amendment to the
Certificate of Incorporation of the Corporation, declaring said amendment to be
advisable and calling a meeting of the stockholders of the Corporation for
consideration thereof. The resolution setting forth the proposed amendment is as
follows:
RESOLVED, that Paragraph 4 of the Company's Certificate of Incorporation
shall be deleted in its entirety and replaced with the following:
The total number of shares of stock which the corporation shall have
the authority to issue is 40,000,000 shares of common stock, $0.001
par value.
SECOND: That thereafter, pursuant to resolution of its Board of Directors,
an annual meeting of the stockholders of the Corporation was duly called and
held upon notice in accordance with Section 222 of the General Corporation Law
of the State of Delaware, at which meeting the necessary number of shares as
required by statute were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the
provisions of Section 243 of the General Corporation Law of the State of
Delaware.
IN WITNESS WHEREOF, said Profile Technologies, Inc. has caused this
certificate to be signed by Philip L. Jones, its Secretary, this __th day of
October, 2008.
PROFILE TECHNOLOGIES, INC.
/s/ Philip L. Jones
-------------------
Philip L. Jones
Secretary
APPENDIX B
----------
PROFILE TECHNOLOGIES, INC.
2008 STOCK OWNERSHIP INCENTIVE PLAN
1. Establishment; Purposes.
(a) Establishment of the Plan. Profile Technologies, Inc., a Delaware
corporation (the "Company"), hereby establishes this stock option plan
to be known as the Profile Technologies, Inc. 2008 Stock Ownership
Incentive Plan (the "2008 Plan"). The 2008 Plan was duly adopted by
the Board of Directors of the Company (the "Board") on July 10, 2008
(the "Effective Date").
(b) Purposes of the 2008 Plan. The purposes of this 2008 Plan are to
attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to
Employees, Directors and Consultants, and to promote the success of
the Company's business.
(c) Types of Awards. Options granted under the 2008 Plan may be Incentive
Stock Options or Nonstatutory Stock Options, as determined by the
Administrator at the time of grant. Restricted Stock may also be
granted under the 2008 Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall be
administering the 2008 Plan, in accordance with Section 4 of the 2008
Plan.
(b) "Applicable Laws" means the requirements relating to the
administration of stock ownership plans under U.S. state corporate
laws, rules and regulations, U.S. federal and state securities laws,
rules and regulations, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Awards
are, or will be, granted under the 2008 Plan.
(c) "Award" means an Option or Restricted Stock granted under the 2008
Plan.
(d) "Award Agreement" means an Option Agreement or a Restricted Stock
Agreement.
(e) "Awardee" means the holder of an outstanding Option or Restricted
Stock Award granted under the 2008 Plan.
(f) "Board" means the Board of Directors of the Company.
(g) "Cause" means, unless otherwise defined for a particular Awardee in an
Award Agreement or in an employment agreement between the Company and
such Awardee which addresses the effect of a termination for Cause (as
therein defined) on benefits hereunder:
(i) an Awardee's commission of a felony or other crime involving
fraud, dishonesty or moral turpitude;
(ii) an Awardee's willful or reckless misconduct in the performance of
the Awardee's duties;
(iii) an Awardee's habitual neglect of duties; provided, however that
the Awardee is given at least ten (10) days prior written notice
of such habitual neglect and the opportunity to cure any curable
neglect; or
(iv) an Awardee's breach or violation of any agreement between the
Awardee and the Company, including but not limited to any
noncompetition, nonsolicitation, or nondisclosure undertaking, or
of any Company policy; provided, however, that for purposes of
clauses (ii) and (iii), Cause shall not include bad judgment or
negligent acts not amounting to habitual neglect of duties. An
Awardee who agrees to resign his affiliation with the Company or
a Subsidiary in lieu of being terminated for Cause may be deemed
to have been terminated for Cause for purposes of this Plan.
(h) "Code" means the Internal Revenue Code of 1986, as amended, and any
regulations and rulings thereunder.
(i) "Committee" means a committee of Directors appointed by the Board in
accordance with Section 4 of the Plan.
(j) "Common Stock" means the common stock, no par value, of the Company.
(k) "Company" means Profile Technologies, Inc., a Delaware corporation.
(l) "Consultant" means any person, including an advisor, engaged by the
Company or a Parent or Subsidiary to render services to such entity.
(m) "Director" means a member of the Board.
(n) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(o) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee for the purposes of
this 2008 Plan in the case of (i) any leave of absence approved by the
Company or (ii) transfers between locations of the Company or between
the Company, its Parent, any Subsidiary, or any successor. For
purposes of Incentive Stock Options, no such leave may exceed ninety
(90) days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration of
a leave of absence approved by the Company is not so guaranteed, on
the one hundred eighty-first (181st) day of such leave, any Incentive
Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Neither service as a Director nor payment
of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(p) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
and any regulations and rulings thereunder.
(q) "Fair Market Value" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system its Fair Market Value shall be the
closing sales price for such stock on the date of determination.
If the common stock is not traded on the date of determination,
its Fair Market Value shall be the closing sales price as quoted
on such exchange or system on the first day of active market
trading following each respective grant determination. The
closing sales price shall be determined as reported in The Wall
Street Journal or such other source as the Administrator deems
reliable; or
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between
the high bid and low asked prices for the Common Stock on the
last market trading day prior to the day of determination, as
reported in The Wall Street Journal or such other source as the
Administrator deems reliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the
Administrator.
(r) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(s) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(t) "Notice of Grant" means a written or electronic notice evidencing
certain terms and conditions of an individual Award grant. The Notice
of Grant is part of the Award Agreement.
(u) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act.
(v) "Option" means a stock option granted pursuant to the 2008 Plan.
(w) "Option Agreement" means an agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of
the Plan.
(x) "Optioned Stock" means the Common Stock subject to an Option.
(y) "Optionee" means the holder of an outstanding Option granted under the
2008 Plan.
(z) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(aa) "2008 Plan" means this 2008 Stock Ownership Incentive Plan, as amended
from time to time.
(bb) "Restricted Stock" means Shares granted under the terms and conditions
of Section 9.
(cc) "Restricted Stock Agreement" means an agreement between the Company
and an Awardee evidencing the terms and conditions of an individual
Restricted Stock grant. The Restricted Stock Agreement is subject to
the terms and conditions of the 2008 Plan.
(dd) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with
respect to the 2008 Plan.
(ee) "SEC" means the United States Securities and Exchange Commission, or
any successor thereto.
(ff) "Section 16(b)" means Section 16(b) of the Exchange Act.
(gg) "Securities Act" means the Securities Act of 1933, as amended, and any
regulations and rulings thereunder.
(hh) "Service Provider" means an Employee, Director or Consultant.
(ii) "Share" means a share of the Common Stock of the Company, as adjusted
in accordance with Section 10 of the 2008 Plan. No other type of stock
of the Company other than Common Stock of the Company shall be issued
under any Option under the 2008 Plan. A Share awarded under the 2008
Plan can only be stock of the corporation that the Service Provider or
Employee directly provides services for, or its Parent.
(jj) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Shares Subject to the 2008 Plan. Subject to the provisions of Section 10 of
the 2008 Plan, the maximum aggregate number of Shares which may be awarded
and sold under the 2008 Plan is 3,500,000 Shares. The Shares may be
authorized, but unissued, or reacquired Common Stock. The total number of
Shares for which Awards may be granted under the 2008 Plan shall not exceed
a number of shares which is equal to thirty percent (30%) of the
outstanding shares of the Company, unless a percentage higher than thirty
percent (30%) is approved by at least two-thirds (2/3) of the outstanding
shares entitled to vote.
If an Option expires or becomes unexercisable without having been exercised
in full, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the 2008 Plan (unless the 2008
Plan has terminated); provided, however, that Shares that have actually
been issued under the 2008 Plan shall not be returned to the 2008 Plan and
shall not become available for future distribution under the Plan.
If a Share that has been granted as Restricted Stock is forfeited, such
Share shall become available for future grant or sale under the 2008 Plan
(unless the 2008 Plan has been terminated).
4. Administration of the 2008 Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. The 2008 Plan may be administered
by different Committees with respect to different groups of
Service Providers.
(ii) Section 162(m). To the extent that the Administrator determines
it to be desirable to qualify Awards granted hereunder as
"performance-based compensation" within the meaning of Section
162(m) of the Code, the 2008 Plan shall be administered by a
Committee of two or more "outside directors" within the meaning
of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent that the Administrator determines it
to be desirable to qualify transactions hereunder as exempt under
Rule 16b-3, the transactions contemplated hereunder shall be
structured to satisfy the requirements for exemption under Rule
16b-3.
(iv) Other Administration. Other than as provided above, the 2008 Plan
shall be administered by (A) the Board or (B) a Committee, which
Committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the 2008
Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have
the authority, in its discretion:
(i) to determine type of Awards (i.e., Options and/or Restricted
Stock) to be granted hereunder;
(ii) to determine the Fair Market Value;
(iii) to select the Service Providers to whom Awards may be granted;
(iv) to determine the number of shares of Common Stock to be covered
by each Award granted hereunder;
(v) to approve forms of agreement for use under the 2008 Plan;
(vi) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any Award granted hereunder. Such terms and
conditions include, but are not limited to, an Option's price,
the time or times when Options may be exercised (which may be
based on performance criteria), the amount (if any) of the
consideration to be paid by a Service Provider in respect of a
grant of Restricted Stock, any vesting acceleration or waiver of
forfeiture restrictions with respect to Awards, and any
restriction or limitation regarding any Award or the shares of
Common Stock relating thereto, based in each case on such factors
as the Administrator, in its sole discretion, shall determine;
(vii) to construe and interpret the terms of the 2008 Plan and Awards
granted pursuant to the 2008 Plan;
(viii) to prescribe, amend and rescind rules and regulations relating
to the 2008 Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred
tax treatment under foreign tax laws;
(ix) to modify or amend each Award (subject to Section 12(c) of the
2008 Plan);
(x) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be
issued upon exercise of an Award that number of Shares having a
Fair Market Value equal to the amount required to be withheld.
The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is
to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or
advisable;
(xi) to authorize any person to execute on behalf of the Company any
instrument required to effect the grant of an Award previously
granted by the Administrator;
(xii) to cancel any unexpired or unpaid Options if at any time the
Administrator determines the Optionee is not in compliance with
the terms and conditions (including, but not limited to any
noncompete or nonsolicitation provisions) of the Option Agreement
related to such Options; and
(xiii) to make all other determinations deemed necessary or advisable
for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's decisions,
determinations and interpretations shall be final and binding on all
Awardees and any other holders of Awards. No member of the Board or of
any of the Committees administering the 2008 Plan shall be liable for
any action or determination made with respect to the 2008 Plan or any
grant thereunder.
5. Eligibility. Nonstatutory Stock Options and Restricted Stock may be granted
to Service Providers. Incentive Stock Options may be granted only to
Employees. All directors of the Company who are not employees of the
Company shall automatically receive Nonstatutory Stock Options.
6. Restrictions on Share Transferability. The Administrator may include in the
Award Agreement such restrictions on any Shares acquired pursuant to the
exercise or vesting of an Award as it may deem advisable, including
restrictions under applicable federal securities laws.
7. Term of 2008 Plan. Subject to Section 17 of the Plan, the 2008 Plan shall
become effective upon its adoption by the Board. It shall continue in
effect for a term of ten (10) years unless terminated earlier under Section
12 of the Plan.
8. Options.
(a) Designation As Either An ISO or As A Nonstatutory Stock Option;
$100,000 Limitation. Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designation, to the extent that
the aggregate Fair Market Value of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by the
Optionee during any calendar year (under all plans of the Company and
any Parent or Subsidiary) exceeds One Hundred Thousand Dollars
($100,000), such Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 8(a), Incentive Stock Options
shall be taken into account in the order in which they were granted.
The Fair Market Value of the Shares shall be determined as of the time
the Option with respect to such Shares is granted.
(b) Option Term. The term of each Option shall be ten (10) years from the
date of grant or such shorter term as may be provided in the Option
Agreement. In the case of an Incentive Stock Option granted to an
Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5)
years from the date of grant or such shorter term as may be provided
in the Option Agreement.
(c) Exercise Price. The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator, will never be below Fair Market Value and subject to
the following:
(i) In the case of an Incentive Stock Option,
(A) granted to an Employee who, at the time the Incentive Stock
Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of
the Company or any Parent or Subsidiary, the per Share
exercise price shall be no less than one hundred ten percent
(110%) of the Fair Market Value per Share on the date of
grant.
(B) granted to any Employee other than an Employee described in
paragraph (A) immediately above, the per Share exercise
price shall be no less than one hundred percent (100%) of
the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator;
provided, however, that the per Share exercise price shall not be
less than one hundred percent (100%) of the Fair Market Value per
Share on the date of grant and in the case of an Employee who, at
the time the Nonstatutory Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of
all classes of stock of the Company or any Parent or Subsidiary,
the per Share exercise price shall be no less than one hundred
ten percent (110%) of the Fair Market Value per Share on the date
of grant.
(d) Vesting Period and Exercise Dates. At the time an Option is granted,
the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied
before the Option may be exercised. The Administrator shall also fix
the number of shares under the Option, subject to Section 10 of the
2008 Plan. Notwithstanding the foregoing, Optionees shall have the
right to exercise Options at the rate of at least twenty percent (20%)
over five (5) years from the date of grant, subject to reasonable
conditions such as continued employment, at the discretion of the
Administrator.
(e) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including
the method of payment. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired upon
exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (B) have a Fair
Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be
exercised;
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the 2008
Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the issuance
of Shares to the extent permitted by Applicable Laws.
In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of
grant.
(f) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable according to the terms of the 2008 Plan
and at such times and under such conditions as determined by the
Administrator and set forth in the Option Agreement. Unless the
Administrator provides otherwise, vesting of any Option granted
hereunder shall be tolled during any unpaid leave of absence. An
Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives: (i)
written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option,
(ii) full payment for the Shares with respect to which the Option is
exercised, and (iii) any other written representations, covenants, and
undertakings that the Company may prescribe in the Option Agreement.
Full payment may consist of any consideration and method of payment
authorized by the Administrator and permitted by the Option Agreement
and the 2008 Plan. Shares issued upon exercise of an Option shall be
issued in the name of the Optionee or, if requested by the Optionee,
in the name of the Optionee and his or her spouse. Until the Shares
are issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no
right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue
(or cause to be issued) such Shares promptly after the Option is
exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued,
except as provided in Section 10 of the 2008 Plan.
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the 2008 Plan and for sale
under the Option, by the number of Shares as to which the Option is
exercised.
(g) Notification under Code Section 83(b). If the Optionee, in connection
with the exercise of any Option, makes the election permitted under
Section 83(b) of the Code to include in such Optionee's gross income
in the year of transfer the amounts specified in Section 83(b) of the
Code, then such Optionee shall notify the Company of such election
within ten (10) days of filing the notice of the election with the
Internal Revenue Service, in addition to any filing and notification
required pursuant to regulations issued under Section 83(b) of the
Code. The Administrator may, in connection with the grant of an Option
or at any time thereafter prior to such an election being made,
prohibit an Optionee from making the election described above.
(h) Buyout Provisions. The Administrator may at any time offer to buy out,
at a price determined at Fair Market Value at the time of such buy
out, for a payment in cash or Shares an Option previously granted
based on such terms and conditions as the Administrator shall
establish and communicate to the Optionee at the time that such offer
is made.
(i) Non-Transferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may
be exercised, during the lifetime of the Optionee, only by the
Optionee.
(j) Termination of Service Provider For Cause. If a Service Provider is
terminated for Cause, any unexercised Option shall terminate effective
immediately upon such termination.
(k) Disability of Optionee. If an Optionee ceases to be a Service Provider
as a result of the Optionee's Disability, the Optionee may exercise
his or her Option within such period of time as is specified in the
Option Agreement to the extent the Option is vested on the date of
termination (but in no event later than the expiration of the term of
such Option as set forth in the Option Agreement); provided, however,
that the time specified in the Option Agreement shall not be less than
six (6) months. In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months
following the Optionee's termination. If, on the date of termination,
the Optionee is not vested as to his or her entire Option, the Shares
covered by the unvested portion of the Option shall revert to the 2008
Plan. If, after termination, the Optionee does not exercise his or her
Option within the time specified herein, the Option shall terminate,
and the Shares covered by such Option shall revert to the 2008 Plan.
(l) Death of Optionee. If an Optionee dies while a Service Provider, the
Option may be exercised within such period of time as is specified in
the Option Agreement (but in no event later than the expiration of the
term of such Option as set forth in the Notice of Grant), by the
Optionee's estate or by a person who acquires the right to exercise
the Option by bequest or inheritance, but only to the extent that the
Option is vested on the date of death; provided, however, that the
time specified in the Option Agreement shall not be less than six (6)
months. In the absence of a specified time in the Option Agreement,
the Option shall remain exercisable for six (6) months following the
Optionee's death. If, at the time of death, the Optionee is not vested
as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall immediately revert to the 2008 Plan. The
Option may be exercised by the executor or administrator of the
Optionee's estate or, if none, by the person(s) entitled to exercise
the Option under the Optionee's will or the laws of descent or
distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares covered
by such Option shall revert to the 2008 Plan.
(m) For Any Other Reason. If an Optionee ceases to be a Service Provider,
other than for Cause or upon the Optionee's death or Disability, the
Optionee may exercise his or her Option within such period of time as
is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option
Agreement); provided, however, that the time specified in the Option
Agreement shall not be less than thirty (30) days. In the absence of a
specified time in the Option Agreement, the Option shall remain
exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his
or her entire Option, the Shares covered by the unvested portion of
the Option shall revert to the 2008 Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified
by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the 2008 Plan.
9. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be granted either alone
or in addition to other Awards granted under the 2008 Plan. The
Administrator shall determine the Service Providers to whom, and the
time(s) at which grants of Restricted Stock will be made, the number
of shares to be awarded to any Service Provider, the amount of the
consideration (if any) that is to be paid, the time(s) within which,
and the conditions under which such Restricted Stock may be subject to
forfeiture, and any other terms and conditions of the Awards, in
addition to those contained in this Section 9. The provisions of
Restricted Stock Awards need not be the same with respect to each
recipient. Each grant of Restricted Stock shall be confirmed by, and
subject to the terms of a Restricted Stock Agreement.
(b) Awards and Certificates. As a condition to the grant of Restricted
Stock under the 2008 Plan, each Awardee shall execute and deliver to
the Company (i) an agreement in form and substance satisfactory to the
Administrator reflecting the conditions and restrictions imposed upon
the Shares awarded, (ii) the consideration, if any, to be paid for the
Shares, and (iii) any other written representations, covenants, and
undertakings that the Administrator may prescribe in the Restricted
Stock Agreement. Certificates for Shares delivered pursuant to such
Awards may, if the Administrator so determines, bear a legend
referring to the restrictions and the instruments to which such Shares
of Restricted Stock are subject.
(c) Form of Consideration. The consideration for Restricted Stock (if any)
shall consist entirely of cash.
(d) Notification under Code Section 83(b). If, in connection with a grant
of Restricted Stock, the Awardee makes the election permitted under
Section 83(b) of the Code to include in such Awardee's gross income in
the year of transfer the amounts specified in Section 83(b) of the
Code, then such Awardee shall notify the Company of such election
within ten (10) days of filing the notice of the election with the
Internal Revenue Service, in addition to any filing and notification
required pursuant to regulations issued under Section 83(b) of the
Code. The Administrator may, in connection with the grant of
Restricted Stock or at any time thereafter prior to such an election
being made, prohibit an Awardee from making the election described
above.
(e) Buyout Provisions. The Administrator may at any time offer to buy out,
at a price determined at Fair Market Value at the time of such buy
out, for a payment in cash, Restricted Stock previously granted based
on such terms and conditions as the Administrator shall establish and
communicate to the Awardee at the time that such offer is made.
(f) Terms and Conditions. Subject to the provisions of the 2008 Plan and
the applicable Restricted Stock Agreement, during a period set by the
Administrator, commencing with the date of such Award (the
"Restriction Period"), the Awardee shall not be permitted to sell,
assign, transfer, pledge or otherwise encumber shares of Restricted
Stock. The Administrator may provide for the lapse of such
restrictions in installments or otherwise and may accelerate or waive
such restrictions, in whole or in part, in each case based on period
of service, performance of the Awardee or of the Company for which the
Awardee is employed or such other factors or criteria as the
Administrator may determine.
(g) Rights as a Shareholder. Except as otherwise provided in this 2008
Plan and the applicable Restricted Stock Agreement, the Awardee shall
have, with respect to the shares of Restricted Stock, all of the
rights of a stockholder of the Company holding the class or series of
stock that is the subject of the Restricted Stock, including, if
applicable, the right to vote the shares and the right to receive any
cash dividends in accordance with the timing and procedures by which
other shareholders receive dividends.
(h) Termination for Cause. If a Service Provider is terminated for Cause,
any Restricted Stock previously granted to the Service Provider that
remains unvested as of the date of termination shall be forfeited
effective immediately upon such termination.
(i) Termination Other Than for Cause. Except as otherwise provided in the
applicable Restricted Stock Agreement or as determined by the
Administrator, if a Service Provider ceases to be a Service Provider
other than for Cause, any Restricted Stock previously granted to the
Service Provider that remains unvested as of the date of cessation
shall be forfeited immediately upon such cessation.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset
Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of Shares covered by each
outstanding Award, and the number of Shares which have been authorized
for issuance under the 2008 Plan but as to which no Awards have yet
been granted or which have been returned to the 2008 Plan as well as
the price per Share covered by each outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Share, or any other
increase or decrease in the number of issued Shares effected without
receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be
deemed to have been "effected without receipt of consideration";
provided, however, that with respect to Incentive Stock Options, no
such adjustment shall be authorized to the extent that such adjustment
would cause the 2008 Plan to violate Section 422(b)(1) of the Code;
provided further, that with respect to Options, no such adjustment
shall be authorized to the extent such adjustment would cause the
Options to become "deferred compensation" subject to Code Section
409A. Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be
made with respect to, the number or price of Shares subject to an
Award.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify each
Awardee as soon as practicable prior to the effective date of such
proposed transaction. The Administrator in its discretion may provide
for an Optionee to have the right to exercise his or her Option until
ten (10) days prior to such transaction as to all of the Optioned
Stock covered thereby, including Shares as to which the Option would
not otherwise be exercisable. In addition, the Administrator may
provide that any Company repurchase option applicable to any Shares
purchased upon exercise of an Option shall lapse as to all such
Shares, provided the proposed dissolution or liquidation takes place
at the time and in the manner contemplated. To the extent it has not
been previously exercised, each Option will terminate immediately
prior to the consummation of such proposed action. The restrictions
applicable to any outstanding Restricted Stock shall lapse, and such
Restricted Stock shall become free of all restrictions and become
fully vested and transferable to the full extent of the original
grant.
(c) Merger or Asset Sale. In the event of a merger of the Company with or
into another corporation, or the sale of substantially all of the
assets of the Company, each outstanding Award shall be assumed or an
equivalent option or right substituted by the successor corporation or
a Parent or Subsidiary of the successor corporation. In the event that
the successor corporation refuses to assume or substitute for the
Award, the Awardee shall fully vest in the Award and, in the case of
Options have the right to exercise the Option as to all of the
Optioned Stock , including Shares as to which it would not otherwise
be vested or exercisable. If an Award becomes fully vested and, in the
case of Options, exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall
notify the Awardee in writing or electronically that the Award shall
be fully vested and, in the case of Options, exercisable for a period
of fifteen (15) days from the date of such notice, and the Option
shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Award shall be considered assumed if, following
the merger or sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock and Restricted
Stock immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if
holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding
Shares); provided, however, that if such consideration received in the
merger or sale of assets is not solely common stock of the successor
corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration for each
Share of Optioned Stock or Restricted Stock subject to the Award, to
be solely common stock of the successor corporation or its Parent
equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
11. Date of Grant. The date of grant of an Award shall be, for all purposes the
date the Company completes the corporate action necessary to create the
legally binding right constituting the Option. Notice of the determination
shall be provided to each Awardee within a reasonable time after the date
of such grant.
12. Amendment and Termination of the 2008 Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or terminate the 2008 Plan.
(b) Shareholder Approval. The Company shall obtain shareholder approval of
any 2008 Plan amendment to the extent necessary and desirable to
comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the 2008 Plan shall impair the rights of
any Awardee, unless mutually agreed otherwise between the Awardee and
the Administrator, which agreement must be in writing and signed by
the Awardee and the Company. Termination of the 2008 Plan shall not
affect the Administrator's ability to exercise the powers granted to
it hereunder with respect to Awards granted under the 2008 Plan prior
to the date of such termination.
13. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the exercise
of an Award unless the exercise of such Award and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be
further subject to the approval of counsel for the Company with
respect to such compliance. Under no circumstances shall the Company
be obligated to effect or maintain any registration under the
Securities Act or other similar Applicable Laws.
(b) Investment Representations. As a condition to the exercise of an
Award, the Company may require the person exercising such Award to
represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required.
14. No Right to Continue As A Service Provider. Neither the 2008 Plan nor any
Award shall confer upon an Awardee any right with respect to continuing the
Awardee's relationship as a Service Provider with the Company, nor shall
they interfere in any way with the Awardee's right or the Company's right
to terminate such relationship at any time, with or without Cause.
15. Inability to Obtain Authority. The inability or failure of the Company to
obtain authority from any regulatory body having jurisdiction (including,
without limitation, effectiveness of a registration statement under the
Securities Act), which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
16. Reservation of Shares. The Company, during the term of this 2008 Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the 2008 Plan.
17. Shareholder Approval. The 2008 Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months after the date the
2008 Plan is adopted. Such shareholder approval shall be obtained in the
manner and to the degree required under Applicable Laws.
18. No Right to Participation. No employee, director or consultant shall have
the right to be selected to receive an Award, or, having been so selected,
to be selected to receive a future Award.
19. Financial Statements. The Company shall provide Awardees with financial
statements at least annually.
20. Successors. All obligations of the Company under the 2008 Plan with respect
to Awards granted hereunder shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct
or indirect purchase, merger, consolidation, or otherwise of all or
substantially all of the business or assets of the Company.
21. Severability. If any part of the 2008 Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not invalidate any other part of the Plan. Any Section or
part of a Section so declared to be unlawful or invalid shall, if possible,
be construed in a manner which will give effect to the terms of such
Section or part of a Section to the fullest extent possible while remaining
lawful and valid.
22. Section 409A. It not intended that any Award granted under the 2008 Plan
constitute "nonqualified deferred compensation" within the meaning of
Section 409A of the Code. Rather, it is the Company's intention that the
transfer or exercise of any Award granted under the 2008 Plan will be
subject to taxation pursuant to Section 83 of the Code and Treas. Reg.
ss.1.83-7. Notwithstanding any provision of the 2008 Plan to the contrary,
(i) the per share exercise price for Shares to be purchased pursuant to any
Award shall never be less than the "fair market value" (determined in a
manner consistent with standards of Section 409A of the Code and the
guidance and regulations promulgated thereunder of one share of Common
Stock on the date of the grant of the Awards, and (ii) no Award will
include any feature for the deferral of compensation, other than the
deferral of recognition of income until the later of exercise or
disposition of the Award under Treas. Reg. ss.1.83-7, or the time the
Stock, acquired pursuant to the exercise of the Award, first becomes
substantially vested (as defined in Treas. Reg. ss.1.83-3(b)).
23. Governing Law. The 2008 Plan shall be construed in accordance with and
governed by the laws of the State of New York.
[END OF PLAN]
Executed this 10th day of July, 2008.
Profile Technologies, Inc.
By:
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Its:
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APPENDIX C
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PRELIMINARY PROXY CARD
Profile Technologies, Inc.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
I, the undersigned stockholder of Profile Technologies, Inc. (the "Company"), do
hereby nominate, constitute and appoint Henry E. Gemino, my true and lawful
proxy and attorney with full power of substitution for me and in my name, place
and stead, to represent and vote all of the common stock, par value $0.001 per
share, of the Company, held in my name on its books as of September 25, 2008, at
the Annual Meeting of Stockholders to be held on Monday, November 17, 2008, as
directed herein.
PROPOSAL 1. Election of the following Directors:
[ ] FOR all nominees listed below (except [ ] WITHHOLD Authority to vote
as marked to the contrary below) for all nominees listed below
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the name(s) of such nominee(s) below.)
Henry E. Gemino
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Murphy Evans
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Charles Christenson
-----------------------------
Richard L. Palmer
-----------------------------
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THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" THE ELECTION OF
EACH OF THE NOMINEES.
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PROPOSAL 2. Adoption of the Amendment to the Company's Certificate of
Incorporation increasing the authorized shares of common stock from 35,000,000
to 40,000,000:
[ ] FOR adoption of the Amendment [ ] AGAINST Authority to vote [ ] ABSTAIN
for adoption of Amendment
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THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" ADOPTION OF THE
AMENDMENT TO THE COMPANY'S CERTIFICATE OF INCORPORATION INCREASING THE
AUTHORIZED SHARES OF COMMON STOCK FROM 35,000,000 TO 40,000,000.
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PROPOSAL 3. Adoption of the 2008 Stock Ownership Incentive Plan:
[ ] FOR adoption of the 2008 [ ] AGAINST Authority to vote for [ ] ABSTAIN
Stock Plan adoption of the 2008 Stock Plan
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THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS A VOTE "FOR" ADOPTION OF THE
2008 STOCK OWNERSHIP INCENTIVE PLAN AUTHORIZING THE ISSUANCE OF STOCK OPTIONS
COMMITTING UP TO 3,500,000 MILLION SHARES OF THE COMPANY'S COMMON STOCK.
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In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the Annual Meeting of Stockholders.
IMPORTANT: PLEASE SIGN AND DATE ON REVERSE
This proxy, when properly executed, will be voted in the manner directed herein
by the undersigned stockholder. If no direction is made, the proxy will be voted
FOR Proposal 1, FOR Proposal 2, and FOR Proposal 3. Should any other matter
requiring a vote of the stockholders arise, the proxy named above is authorized
to vote in accordance with his best judgment in the interest of the Company.
IMPORTANT: Please sign exactly as your name appears hereon. When shares are held
by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title as such. If a
corporation, please sign the full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ADDRESSED ENVELOPE OR OTHERWISE TO Continental Stock Transfer & Trust Company,
17 Battery Place, New York, New York 10004. IF YOU DO NOT SIGN AND RETURN A
PROXY OR ATTEND THE MEETING AND VOTE, YOUR SHARES CANNOT BE VOTED.
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Date
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Signature
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Signature (if jointly held)
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