As
filed with the Securities and Exchange Commission on May 22,
2008
Registration
Statement No. 333-_
______
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-8
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
GTX
CORP
(Exact
name of registrant as specified in its charter)
|
Nevada
(State
or other jurisdiction of
incorporation
or organization)
|
98-0493446
(IRS
Employer Identification
Number)
|
117
West 9th Street, Suite 1214, Los Angeles, CA 90015
(Address
of principal executive offices, including zip code)
2008
EQUITY COMPENSATION PLAN
(Full
title of the plan)
Patrick
E. Bertagna, Chief Executive Officer
117
West 9th Street, Suite 1214, Los Angeles, CA 90015
(Name
and
address of agent for service)
(213)
489-3019
(Telephone
number, including area code, of agent for service)
copies
to:
Mark
Abdou
Richardson
& Patel, LLP
10900
Wilshire Boulevard, Suite 500
Los
Angeles, California 90024
(310)
208-1182
CALCULATION
OF REGISTRATION FEE
|
Title of securities to be
registered
|
|
Amount to be
registered
(1)
|
|
Proposed
maximum
offering price
per share
|
|
Proposed
maximum
aggregate
offering
price
|
|
Amount of
registration
fee
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock, $0.001 par value
|
|
|
480,000 shares
|
(2)
|
$
|
2.34
|
(5)
|
$
|
6,025,500
|
|
$
|
236.80
|
|
|
Common
Stock, $0.001 par value
|
|
|
2,575,000 shares
|
|
$
|
2.34
|
(5)
|
$
|
1,123,200
|
|
$
|
44.14
|
|
|
Common
Stock, $0.001 par value
|
|
|
3,945,000 shares
|
(4)
|
$
|
0.75
|
(6)
|
$
|
2,958,750
|
|
$
|
116.28
|
|
|
Total
|
|
|
7,000,000 shares
|
|
|
|
|
$
|
10,107,450
|
|
$
|
397.22
|
|
|
(1)
|
Pursuant
to Rule 416 of the Securities Act, this registration statement shall
also
cover any additional shares of common
stock
that shall become issuable by reason of any stock dividend, stock
split,
recapitalization, or other similar transaction by the
Registrant.
|
|
(2)
|
Represents
shares of common stock reserved for issuance and granted under our
2008
Equity
Compensation
Plan.
|
|
(3)
|
Represents
shares of common stock reserved for issuance and available for grant
under
our 2008 Equity Compensation Plan.
|
|
(4)
|
Represents
shares of common stock underlying options granted under our 2008
Equity
Compensation Plan.
|
|
(5)
|
Estimated
solely for the purpose of calculating the amount of the registration
fee
pursuant to Rule 457(c) of the Securities Act of 1933, as amended,
the price per share and aggregate offering price are based upon the
average closing bid and ask prices of the Common Stock of the Registrant
as listed on the OTC Bulletin Board on May 20,
2008.
|
|
(6)
|
Estimated
solely for the purpose of calculating the amount of the registration
fee
pursuant to Rule 457(h) of the Securities
Act.
|
EXPLANATORY
NOTE
GTX
Corp
has prepared this Registration Statement in accordance with the requirements
of
Form S-8 under the Securities Act of 1933, as amended (the “Securities Act”), to
register shares of its common stock, $0.001 par value per share. Under cover
of
this Form S-8 is a reoffer prospectus that GTX Corp prepared in accordance
with Part I of Form S-3 under the Securities Act. The reoffer prospectus may
be
utilized for reofferings and resales of shares of common stock acquired by
the
Selling Shareholders.
PART
I
INFORMATION
REQUIRED IN SECTION 10(a) PROSPECTUS
This
Registration Statement relates to two separate prospectuses.
Section
10(a) Prospectus
:
Items 1
and 2, on Page iii, and the documents incorporated by reference pursuant to
Part
II, Item 3 of this prospectus, constitute a prospectus that meets the
requirements of Section 10(a) of the
Securities
Act of 1933
,
as
amended (the "Securities Act").
Reoffer
Prospectus
: The material that follows Item 2, beginning on Page 4
through 23, up to but not including Part II of this Registration Statement,
beginning on Page 23, of which the reoffer prospectus is a part, constitutes
a
"reoffer prospectus," prepared in accordance with the requirements of Part
I of
Form S-3 under the Securities Act. Pursuant to Instruction C of Form S-8, the
reoffer prospectus may be used for reoffers or resales of common shares which
are deemed to be "control securities" or "restricted securities" under the
Securities Act that have been acquired by the selling shareholders named in
the
reoffer prospectus.
Item
1. Plan Information.
The
documents containing the information specified in Item 1 will be sent or given
to participants in the 2008 Equity Compensation Plan as specified by Rule
428(b)(1) of the Securities Act. Such documents are not required to be and
are
not filed with the Securities and Exchange Commission (the "SEC") either as
part
of this Registration Statement or as prospectuses or prospectus supplements
pursuant to Rule 424. These documents and the documents incorporated by
reference in this Registration Statement pursuant to Item 3 of Part II of this
Form S-8, taken together, constitute a prospectus that meets the requirements
of
Section 10(a) of the Securities Act.
Item
2. Registrant Information and Employee Plan Annual
Information.*
Upon
written or oral request, any of the documents incorporated by reference in
Item
3 of Part II of this Registration Statement (which documents are incorporated
by
reference in this Section 10(a) Prospectus), other documents required to be
delivered to eligible employees, non-employee directors and consultants,
pursuant to Rule 428(b) are available without charge by contacting:
Patrick
E. Bertagna
Chief
Executive Officer
117
West
9th Street, Suite 1214
Los
Angeles, CA 90015
(213)
489-3019
*
Information
required by Part I to be contained in Section 10(a) prospectus is omitted from
the Registration Statement in accordance with Rule 428 under the Securities
Act
of 1933, and Note to Part I of Form S-8.
REOFFER
PROSPECTUS
4,425,000
SHARES OF COMMON STOCK
GTX
CORP
This
reoffer prospectus relates to the sale of up to 4,425,000 shares of the common
stock of GTX Corp, a Nevada corporation (together with its subsidiaries, “we,”
“our,” or “Company”), which includes 3,945,000 shares of common stock issuable
upon the exercise of options, that may be offered and resold from time to time
by certain Selling Shareholders identified in this prospectus for their own
account issuable pursuant to our 2008 Equity Compensation Plan. It is
anticipated that the Selling Shareholders will offer common shares for sale
at
prevailing prices on the OTC Bulletin Board on the date of sale. The Selling
Shareholders will bear all sales commissions and similar expenses. Any other
expenses incurred by us in connection with the registration and offering and
not
borne by the Selling Shareholders will be borne by us.
We
will pay all expenses, except for any brokerage expenses, fees, discounts and
commissions, which will all be paid by the Selling Shareholders, incurred in
connection with the offering described in this prospectus. Our common stock
is
more fully described in the section of this prospectus entitled “Description of
Securities.”
Our
common stock is quoted on the OTC Bulletin Board (“OTCBB”) under the symbol
“GTXO.” The closing price of our common stock as reported on the OTCBB on May
20, 2008, was $2.31 per share.
The
prices at which the Selling Shareholders may sell the shares of common stock
that are part of this offering will be determined by the prevailing market
price
for the shares at the time the shares are sold, or at such a price negotiated
price or prices determined, from time to time, by the Selling Shareholders.
See
“Plan of Distribution.” The Selling Shareholders may be deemed “underwriters”
within the meaning of the Securities Act of 1933, as amended, in connection
with
the sale of their common stock under this prospectus.
We
will
not receive any of the
proceeds
from the sale of the shares of common stock owned by the Selling Shareholders,
but we may receive proceeds
of
up to
$2,958,750
from
the
exercise of their options upon exercise. Any proceeds received will be used
by
us for working capital and general corporate purposes. Prospective investors
should read this prospectus and any amendment or supplement hereto together
with
additional information described under the heading “Where You Can Find More
Information.”
Our
principal executive offices are located at 117 W. 9th Street, Suite 1214, Los
Angeles, CA 90015, and our telephone number is (213) 489-3019. Our home page
on
the Internet can be located at www.gtxcorp.com. Information included on our
website is not part of this prospectus.
Since
our Company does not currently meet the registrant requirements for use of
Form
S-3, the amount of common shares which may be resold by means of this reoffer
prospectus by each of the Selling Shareholders, and any other person with whom
he or she is acting in concert for the purpose of selling securities of our
company, must not exceed, in any three month period, the amount specified in
Rule 144(e) promulgated under the Securities Act.
SEE
THE SECTION OF THIS DOCUMENT TITLED “
RISK
FACTORS
” BEGINNING ON PAGE
5
FOR CERTAIN FACTORS RELATING TO AN INVESTMENT IN THE SHARES OF COMMON STOCK
OFFERED HEREBY.
NEITHER
THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION
HAS
APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS
IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The
date
of this prospectus is May 22, 2008.
TABLE
OF CONTENTS
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Page
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Prospectus
Summary
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3
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Risk
Factors
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5
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Cautionary
Note Regarding Forward-Looking Statements
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14
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Use
of Proceeds
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15
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Selling
Shareholders
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15
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Plan
of Distribution
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17
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Legal
Matters
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20
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Experts
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20
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Disclosure
Of Commission Position On Indemnification For Securities Act
Liabilities
|
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20
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Incorporation
of Certain Information By Reference
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22
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Where
You Can Find More Information
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23
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Description
of Securities to be Registered
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24
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NO
PERSON
HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS,
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFERING
MADE HEREBY, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION
IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION
IS
NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION.
Forward
Looking Statements
This
prospectus contains
forward-looking
statements based upon current expectations that involve risks and uncertainties,
such as our plans, objectives, expectations and intentions. Actual results
and
the timing of events could differ materially from those anticipated in these
forward-looking statements as a result of a number of factors, including those
set forth under the Risk in this prospectus. We use words such as “anticipate,”
“estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,”
“intend,” or similar expression, variations of those terms or the negative of
those terms to identify forward-looking statements.
The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The
assumptions used for purposes of the forward-looking statements specified in
the
following information represent estimates of future events and are subject
to
uncertainty as to possible changes in economic, legislative, industry, and
other
circumstances. As a result, the identification and interpretation of data and
other information and their use in developing and selecting assumptions from
and
among reasonable alternatives require the exercise of judgment. To the extent
that the assumed events do not occur, the outcome may vary substantially from
anticipated or projected results, and, accordingly, no opinion is expressed
on
the achievability of those forward-looking statements. No assurance can be
given
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.
PROSPECTUS
SUMMARY
As
used
herein, the terms “prospectus” and “herein” mean this prospectus including the
documents incorporated or deemed to be incorporated herein by reference, as
the
same may be amended, supplemented or otherwise modified from time to time.
This
summary highlights information contained elsewhere in this prospectus. It does
not contain all of the information that you should consider before investing
in
our common stock. You should read the entire prospectus carefully, including
the
section entitled "Risk Factors" and our consolidated financial statements and
the related notes.
Our
Company
GTX
Corp
was incorporated in the State of Nevada on April 7, 2006 under its former name
“Deeas Resources Inc.” Prior to March 14, 2008, we were engaged in
the exploration of mineral properties. Our sole property interest
involved the Treg-Rouchon property, which interest is limited to the exploration
and exploitation of gold placer deposits. The Treg-Rouchon property
is located in central British Columbia, approximately 102 km north-east of
the
city of Quesnel, and 712 km north-east of Vancouver, situated in the Caribou
Gold District. The Treg-Rouchon property extends along the Tregillus Creek
extending 1.5 kilometres below Tregillus Lake to 200 meters (600 feet) above
the
mouth of the Willow River. As our management conducted due diligence
on the property interest, management realized that the property did not present
the best opportunity for our company to realize value for our
shareholders. In an effort to substantiate shareholder value, GTX
Corp then sought to identify, evaluate and investigate various companies and
compatible or alternative business opportunities with the intent that, should
the opportunity arise, a reverse take-over transaction be negotiated and
completed pursuant to which GTX Corp would acquire the target with an operating
business with the intent to continue the acquired company’s business as a
publicly held entity.
Global
Trek Xploration, a California corporation (“GTX California”) develops, patents
and integrates miniaturized assisted GPS tracking and cellular
location-transmitting technology for consumer products and applications.
Providing the underlying technology, GTX California works with license branded
partners to deliver these innovative solutions to consumers in a wide variety
of
wearable location devices.
On
March
4, 2008, GTX Corp entered into a Share Exchange Agreement (the “Exchange
Agreement”) with GTX California, the shareholders of GTX
California (the “Selling Shareholders”) and Jupili Investment S.A., a
company incorporated under the laws of the Republic of Panama (“Jupili”),
pursuant to which the Company agreed to acquire all of the outstanding capital
stock of GTX California in exchange for the issuance of approximately 18,000,001
shares of the Company’s common stock to the Selling Shareholders for all of the
issued and outstanding shares of GTX California on the basis of 0.8525343 shares
of GTX Corp for every one share of GTX California (the “Merger” or “Exchange
Transaction”). The Exchange Transaction closed on March 14, 2008 (the
“Closing” or the “Closing Date”).
Effective
March 14, 2008, we completed a merger with our wholly owned subsidiary, GTX
Corp, a Nevada corporation, which we formed in February 2008 in connection
with
the Exchange Transaction. As a result of the merger, we changed our
company’s name from “Deeas Resources Inc.” to “GTX Corp.” Also on March 4, 2008,
we effected a 20.71 for 1 forward stock split of our authorized and our issued
and outstanding common stock.
Before
the Closing of the Exchange Agreement, we had approximately 2,176,000 common
shares issued and outstanding. Upon completion of the Exchange
Agreement on the Closing Date, we had approximately 36,040,963 common shares
issued and outstanding based upon: (i) the cancellation of 1,500,000 pre-split
common shares held by Jeffrey Sharpe; (ii) the 20.71 for 1 forward tock split;
(iii) the issuance of 18,000,001 common shares to the Selling Shareholders
at
the Closing; (iv) the issuance of 2,666,668 common shares pursuant to the
Financing; and (v) the issuance of 1,374,334 common shares pursuant to the
conversion of the $1,000,000 bridge loan plus accrued interest of $30,750.
The
issuance of 18,000,001 common shares to the Selling Shareholders represents
approximately 50% of our share capital as of the Closing of the Exchange
Agreement.
The
closing of the transactions contemplated by the Exchange Agreement occurred
on
March 14, 2008. Following the Closing, GTX California became our wholly owned
subsidiary.
The
Offering
We
are
registering 4,425,000 shares of the common stock of GTX Corp that may be offered
and resold from time to time by certain Selling Shareholders identified in
this
prospectus for their own account issuable pursuant to our 2008 Equity
Compensation Plan, includes 3,945,000 shares of common stock issuable upon
the
exercise of options.
|
Outstanding
common stock
|
38,472,963
common shares issued and outstanding as of May 21, 2008
|
|
|
|
|
Common
stock offered
|
4,425,000
shares of common stock, including 3,945,000 shares issuable upon
the
exercise of options.
|
|
|
|
|
Common
stock to be outstanding after the offering, assuming the exercise
of the
options to purchase 3,945,000 of the shares included in this
prospectus
|
42,907,963
shares
|
|
|
|
|
Proceeds
|
We
may receive proceeds upon the exercise of the 3,945,000 options of
up to
$2,958,750. The Selling Shareholders are under no obligation to exercise
the options. Proceeds received from the exercise of options will
be used
for general corporate purposes.
|
|
|
|
|
Risk
Factors
|
The
securities offered hereby involve a high degree of risk. See “Risk
Factors.”
|
|
|
|
|
OTC
Bulletin Board Symbol
|
GTXO
|
RISK
FACTORS
Our
business, financial condition and operating results, or the value of any
investment you make in the stock of our Company, or both, could be adversely
affected by any of the factors listed and described below. These risks and
uncertainties, however, are not the only ones that we face. Additional risks
and
uncertainties not currently known to us, or that we currently think are
immaterial, may also impair our business operations or the value of your
investment.
Risks
Related to Our Corporate Structure
Our
operations have been devoted to research and development and we have not
launched our product to a large number of customers, making it difficult to
evaluate our future prospects and results of operations.
GTX
California, formed in 2002, dedicated its resources to research and development
until recently and has not yet launched a product to a large number of
customers. Accordingly, you should consider our future prospects in light of
the
risks and uncertainties experienced by early stage companies in evolving
industries. Some of these risks and uncertainties relate to our ability
to:
|
|
·
|
offer
new and innovative products to attract and retain a larger customer
base;
|
|
|
·
|
attract
additional customers and increase spending per
customer;
|
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·
|
increase
awareness of our brand and continue to develop user and customer
loyalty;
|
|
|
·
|
respond
to competitive market conditions;
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|
·
|
manage
risks associated with intellectual property
rights;
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|
·
|
maintain
effective control of our costs and
expenses;
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|
|
·
|
raise
sufficient capital to sustain and expand our
business;
|
|
|
·
|
attract,
retain and motivate qualified personnel;
and
|
|
|
·
|
upgrade
our technology to support additional research and development of
new
products.
|
If
we are
unsuccessful in addressing any of these risks and uncertainties, our business
may be materially and adversely affected.
If
we fail to develop and maintain an effective system of internal controls, we
may
not be able to accurately report our financial results or prevent fraud; as
a
result, current and potential shareholders could lose confidence in our
financial reports, which could harm our business and the trading price of our
common stock.
Effective
internal controls are necessary for us to provide reliable financial reports
and
effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002
requires us to evaluate and report on our internal controls over financial
reporting and have our independent registered public accounting firm annually
attest to our evaluation, as well as issue their own opinion on our internal
controls over financial reporting. We plan to prepare for compliance with
Section 404 by strengthening, assessing and testing our system of internal
controls to provide the basis for our report. The process of strengthening
our
internal controls and complying with Section 404 is expensive and time
consuming, and requires significant management attention, especially given
that
we have not yet undertaken any efforts to comply with the requirements of
Section 404. We cannot be certain that the measures we will undertake will
ensure that we will maintain adequate controls over our financial processes
and
reporting in the future. Furthermore, if we are able to rapidly grow our
business, the internal controls that we will need will become more complex,
and
significantly more resources will be required to ensure our internal controls
remain effective. Failure to implement required controls, or difficulties
encountered in their implementation, could harm our operating results or cause
us to fail to meet our reporting obligations. If we or our auditors discover
a
material weakness in our internal controls, the disclosure of that fact, even
if
the weakness is quickly remedied, could diminish investors’ confidence in our
financial statements and harm our stock price. In addition, non-compliance
with
Section 404 could subject us to a variety of administrative sanctions, including
the suspension of trading, ineligibility for listing on one of the Nasdaq Stock
Markets or national securities exchanges, and the inability of registered
broker-dealers to make a market in our common stock, which would further reduce
our stock price.
We
will incur increased costs as a public company which may affect our
profitability and an active trading market.
As
a
public company, we incur significant legal, accounting and other expenses.
We
are subject to the SEC’s rules and regulations relating to public disclosure.
SEC disclosures generally involve a substantial expenditure of financial
resources. In addition, the Sarbanes-Oxley Act of 2002 and new rules
subsequently implemented by the SEC have required changes in corporate
governance practices of public companies. We expect that full compliance with
these new rules and regulations will significantly increase our legal and
financial compliance costs and make some activities more time-consuming and
costly. For example, we will be required to create additional board committees
and adopt policies regarding internal controls and disclosure controls and
procedures. Such additional reporting and compliance costs may negatively impact
our financial results. To the extent our earnings suffer as a result of the
financial impact of our SEC reporting or compliance costs, our ability to
develop an active trading market for our securities could be
harmed.
Risk
Relating to an Investment in Our Securities
Our
common stock is illiquid and shareholders may be unable to sell their
shares.
There
is
currently no market for our common stock and we can provide no assurance to
investors that a market will develop. If a market for our common stock does
not
develop, our shareholders may not be able to re-sell the shares of our common
stock that they have purchased and they may lose all of their investment. Public
announcements regarding our company, changes in government regulations,
conditions in our market segment or changes in earnings estimates by analysts
may cause the price of our common shares to fluctuate substantially. These
fluctuations may adversely affect the trading price of our common
shares.
We
do not expect to pay dividends for the foreseeable future, and we may never
pay
dividends.
Investors
seeking cash dividends should not purchase our common
stock.
We
currently intend to retain any future earnings to support the development of
our
business and do not anticipate paying cash dividends in the foreseeable future.
Our payment of any future dividends will be at the discretion of our board
of
directors after taking into account various factors, including but not limited
to our financial condition, operating results, cash needs, growth plans and
the
terms of any credit agreements that we may be a party to at the time. In
addition, our ability to pay dividends on our common stock may be limited by
Nevada corporate law. Accordingly, investors must rely on sales of their common
stock after price appreciation, which may never occur, as the only way to
realize a return on their investment. Investors seeking cash dividends should
not purchase our common stock.
The
application of the “penny stock” rules could adversely affect the market price
of our common stock and increase your transaction costs to sell those
shares.
As
long
as the trading price of our common shares is below $5 per share, the open-market
trading of our common shares will be subject to the “penny stock” rules. The
“penny stock” rules impose additional sales practice requirements on
broker-dealers who sell securities to persons other than established customers
and accredited investors (generally those with assets in excess of US$1,000,000
or annual income exceeding US$200,000 or US$300,000 together with their spouse).
For transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of securities and have received
the
purchaser’s written consent to the transaction before the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
broker-dealer must deliver, before the transaction, a disclosure schedule
prescribed by the Securities and Exchange Commission relating to the penny
stock
market. The broker-dealer also must disclose the commissions payable to both
the
broker-dealer and the registered representative and current quotations for
the
securities. Finally, monthly statements must be sent disclosing recent price
information on the limited market in penny stocks. These additional burdens
imposed on broker-dealers may restrict the ability or decrease the willingness
of broker-dealers to sell our common stock, and may result in decreased
liquidity for our common stock and increased transaction costs for sales and
purchases of our common stock as compared to other securities.
There
is a limited market for our common stock. Our common stock is thinly traded
and,
you may be unable to sell at or near “ask” prices or at all if you need to sell
your shares to raise money or otherwise desire to liquidate your
shares.
Our
common stock is currently listed on the OTC Bulletin Board under the symbol
“GTXO”; our stock has been trading since mid-March 2008. We cannot predict the
extent to which an active public market for our common stock will be sustained.
However, we do not rule out the possibility of applying for listing on the
Nasdaq Global Select Market, Nasdaq Global Market, Nasdaq Capital Market (the
“Nasdaq Markets”), or other exchanges. If a trading market is sustained, we
expect our common stock to continue to be “thinly-traded” on the OTC Bulletin
Board, meaning that the number of persons interested in purchasing our common
stock at or near bid prices at any give time may be relatively small or
nonexistent. This is attributable to a number of factors, including the fact
that we are a small company which is relatively unknown to stock analysts,
stock
brokers, institutional investors and others in the investment community that
generate or influence sales volume, and that even if we came to the attention
of
such persons, they tend to be risk-adverse and would be reluctant to follow
an
unproven company such as ours or purchase or recommend the purchase of our
shares until such time as we become more seasoned and viable. As a consequence,
if a market for our common stock is sustained, there may be periods of several
days or more when trading activity in our shares is minimal or non-existent,
as
compared to a seasoned issuer that has a large and steady volume of trading
activity that will generally support continuous sales without an adverse effect
on share price. We cannot give you any assurance that a broader or more active
public trading market for our common stock will develop or be sustained, or
that
current trading levels will be sustained.
The
market price of our common stock will be particularly volatile given our status
as a relatively small company with a small and thinly traded “float” that could
lead to wide fluctuations in our share price. The price at which you purchase
our common stock may not be indicative of the price that will prevail in the
trading market. You may be unable to sell your common stock at or above your
purchase price if at all, which may result in substantial losses to
you.
The
market for our common stock will be characterized by significant price
volatility when compared to seasoned issuers, and we expect that our share
price
will continue to be more volatile than a seasoned issuer for the indefinite
future. The volatility in our share price will be attributable to a number
of
factors. As noted above, our common stock is sporadically and/or thinly traded.
As a consequence of this lack of liquidity, the trading of relatively small
quantities of shares by our shareholders may disproportionately influence the
price of those shares in either direction. The price for our shares could,
for
example, decline precipitously in the event a large number of our common shares
are sold on the market without commensurate demand, as compared to a seasoned
issuer which could better absorb those sales without adverse impact on its
share
price. The following factors also may add to the volatility in the price of
our
common stock: actual or anticipated variations in our quarterly or annual
operating results; adverse outcomes; additions to or departures of our key
personnel, as well as other items discussed under this “Risk Factors” section,
as well as elsewhere in this prospectus. Many of these factors are beyond our
control and may decrease the market price of our common stock, regardless of
our
operating performance. We cannot make any predictions or projections as to
what
the prevailing market price for our common stock will be at any time, including
as to whether our common stock will sustain its current market prices, or as
to
what effect the sale of shares or the availability of common shares for sale
at
any time will have on the prevailing market price. However, we do not rule
out
the possibility of applying for listing on the Nasdaq Markets or another
exchange.
Shareholders
should be aware that, according to SEC Release No. 34-29093, the market for
penny stocks has suffered in recent years from patterns of fraud and abuse.
Such
patterns include (1) control of the market for the security by one or a few
broker-dealers that are often related to the promoter or issuer; (2)
manipulation of prices through pre-arranged matching of purchases and sales
and
false and misleading press releases; (3) boiler room practices involving
high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups
by
selling broker-dealers; and (5) the wholesale dumping of the same securities
by
promoters and broker-dealers after prices have been manipulated to a desired
level, along with the resulting inevitable collapse of those prices and with
consequent investor losses. Our management is aware of the abuses that have
occurred historically in the penny stock market. Although we do not expect
to be
in a position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities. The occurrence of these patterns or practices
could increase the volatility of our share price.
Volatility
in our common stock price may subject us to securities
litigation.
The
market for our common stock may be characterized by significant price volatility
when compared to seasoned issuers, and we expect our share price will be more
volatile than a seasoned issuer for the indefinite future. In the past,
plaintiffs have often initiated securities class action litigation against
a
company following periods of volatility in the market price of its securities.
We may, in the future, be the target of similar litigation. Securities
litigation could result in substantial costs and liabilities and could divert
management’s attention and resources.
Legislative
actions, higher insurance costs and potential new accounting pronouncements
may
impact our future financial position and results of
operations.
There
have been regulatory changes, including the Sarbanes-Oxley Act of 2002, and
there may potentially be new accounting pronouncements or additional regulatory
rulings that will have an impact on our future financial position and results
of
operations. The Sarbanes-Oxley Act of 2002 and other rule changes, as well
as
proposed legislative initiatives following the Enron bankruptcy, are likely
to
increase general and administrative costs and expenses. In addition, insurers
are likely to increase premiums as a result of high claims rates over the past
several years, which we expect will increase our premiums for insurance
policies. Further, there could be changes in certain accounting rules. These
and
other potential changes could materially increase the expenses we report under
generally accepted accounting principles, and adversely affect our operating
results.
Past
activities of our company and its affiliates may lead to future liability for
our company.
Prior
to
our acquisition of GTX California in 2008, we engaged in businesses unrelated
to
our current operations. Although certain previously controlling shareholders
of
our company are providing certain indemnifications against any loss, liability,
claim, damage or expense arising out of or based on any breach of or inaccuracy
in any of their representations and warranties made regarding such acquisition,
any liabilities relating to such prior business against which we are not
completely indemnified may have a material adverse effect on our
Company.
Future
sales of shares of our common stock may decrease the price for such
shares.
Actual
sales, or the prospect of sales by our shareholders, may have a negative effect
on the market price of the shares of our common stock. We may also register
certain shares of our common stock that are subject to outstanding convertible
securities, if any, or reserved for issuance under our stock option plans,
if
any. Once such shares are registered, they can be freely sold in the public
market upon exercise of the options. If any of our shareholders either
individually or in the aggregate causes a large number of securities to be
sold
in the public market, or if the market perceives that these holders intend
to
sell a large number of securities, such sales or anticipated sales could result
in a substantial reduction in the trading price of shares of our common stock
and could also impede our ability to raise future capital.
Mergers
of the type we just completed with GTX California are often heavily scrutinized
by the SEC and we may encounter difficulties or delays in obtaining future
regulatory approvals which would negatively impact our financial condition
and
the value and liquidity of your shares of common stock.
Historically,
the SEC and Nasdaq have not generally favored transactions in which a
privately-held company merges into a largely inactive company with publicly
listed stock, and there is a significant risk that we may encounter difficulties
in obtaining the regulatory approvals necessary to conduct future financing
or
acquisition transactions, or to eventually achieve a listing of shares on one
of
the Nasdaq stock markets or on a national securities exchange. On June 29,
2005,
the SEC adopted rules dealing with private company mergers into dormant or
inactive public companies. As a result, it is likely that we will be scrutinized
carefully by the SEC and possibly by the Financial Industry Regulatory Authority
(“FINRA”) or Nasdaq, which could result in difficulties or delays in achieving
SEC clearance of any future registration statements or other SEC filings that
we
may pursue, in attracting FINRA-member broker-dealers to serve as market-makers
in our common stock, or in achieving admission to one of the Nasdaq stock
markets or any other national securities market. As a consequence, our financial
condition and the value and liquidity of your shares of our common stock may
be
negatively impacted.
Our
corporate actions are substantially controlled by our officers and directors
who
beneficially own approximately 17.2% of our issued and outstanding capital
stock.
Our
officers and directors own 6,621,617 of our outstanding common stock,
representing approximately 17.2% of our voting power. These shareholders, acting
as a group, could exert substantial influence over matters such as electing
directors and approving mergers or other business combination transactions.
In
addition, because of the percentage of ownership and voting concentration in
these officers and directors, elections of our Board of Directors may generally
be within the control of these shareholders. While all of our shareholders
are
entitled to vote on matters submitted to our shareholders for approval, the
concentration of shares and voting control presently lies with principal
shareholders and their affiliated entities. As such, it would be difficult
for
shareholders to propose and have approved proposals not supported by management.
There can be no assurances that matters voted upon by our officers and directors
in their capacity as shareholders will be viewed favorably by all shareholders
of our company.
The
elimination of monetary liability against our directors, officers and employees
under Nevada law and the existence of indemnification rights to our directors,
officers and employees may result in substantial expenditures by us and may
discourage lawsuits against our directors, officers and
employees.
Our
Amended and Restated Bylaws contain specific provisions that eliminate the
liability of our directors for monetary damages to our company and shareholders,
and we are prepared to give such indemnification to our directors and officers
to the extent provided by Nevada law. We may also have contractual
indemnification obligations under our employment agreements with our officers.
The foregoing indemnification obligations could result in our company incurring
substantial expenditures to cover the cost of settlement or damage awards
against directors and officers, which we may be unable to recoup. These
provisions and resultant costs may also discourage our company from bringing
a
lawsuit against directors and officers for breaches of their fiduciary duties,
and may similarly discourage the filing of derivative litigation by our
shareholders against our directors and officers even though such actions, if
successful, might otherwise benefit our company and shareholders.
We
currently lack liquidity and have limited revenues. We will need to raise
additional capital, which will result in substantial dilution to existing
stockholders.
As
of May
12, 2008 we had cash and cash equivalents of approximately $4 million.
Substantially all of our cash has been raised through capital raising
transactions rather than operations. In order to license, manufacture, and
sell
our products and to execute on our business plan, we need substantial additional
capital. We are currently considering possible sources of this additional
capital, including raising capital through the issuance of equity securities.
Although the exact amount we intend to raise has not yet been determined, we
are
contemplating an amount in excess of $10 million. There can be no assurance
that we will be able to raise sufficient additional capital at all or on terms
favorable to our stockholders or us. If we issue equity securities in order
to
raise additional capital in the amounts currently contemplated, the stockholders
will experience immediate and substantial dilution in their ownership percentage
of the combined company. In addition, to raise the capital we need, we may
need
to issue additional shares at a discount to the current market price. If the
terms of such financing are unfavorable to us or our stockholders, the
stockholders may experience substantial dilution in the net tangible book value
of their stock. In addition, any new equity securities may have rights,
preferences or privileges senior to those of existing holders of common stock.
If we cannot raise funds on acceptable terms, we may not be able to develop
or
enhance our products, take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements, all of which could have
a
material adverse effect on us.
Risks
Related to our Business
We
have only recently begun production of our GpVector
TM
product and may encounter manufacturing problems during the production process,
which would adversely affect our results of operations and financial
condition.
Our
GpVector
TM
product
is a new product and we have discontinued manufacturing all of our other
products. The manufacture of our GpVector
TM
product
involves complex and precise processes, which we have subcontracted to another
company. To date, we have only initiated a limited production of this product
and so we do not yet know whether we will encounter any serious problems during
the production process in the long-term. Any significant problems in
manufacturing, assembling or testing of this product could delay the roll-out
of
the GpVector™ product and have an adverse impact on our business and prospects.
The willingness of manufacturers to make the product or lack of availability
of
manufacturing capacity may have an adverse impact on our ability to go to
market, and as a result we may not be able to grow our business as we expect,
and our ability to compete could be harmed, adversely affecting our results
of
operations and financial condition.
Our
software products are complex and may contain unknown defects that could result
in numerous adverse consequences
,
resulting
in costly litigation or diverting management's attention and
resources
.
Complex
software products such as those associate with our GpVector
TM
product
often contain latent errors or defects, particularly when first introduced,
or
when new versions or enhancements are released. We have experienced errors
and
defects in our most recent release of the software associated with our
GpVector
TM
product,
but do not believe these errors will have a material negative effect on the
functionality of the GpVector
TM
product.
However, there can be no assurance that, despite testing, additional defects
and
errors will not be found in the current version, or in any new versions or
enhancements of this software, any of which could result in damage to our
reputation, the loss of sales, a diversion of our product development resources,
and/or a delay in market acceptance, and thereby materially adversely affecting
our business, operating results and financial condition. Furthermore, there
can
be no assurance that our products will meet all of the expectations and demands
of our customers. The failure of our products to perform to customer
expectations could give rise to warranty claims. Any of these claims, even
if
not meritorious, could result in costly litigation or divert management's
attention and resources. Any product liability insurance that we may carry
could
be insufficient to protect us from all liability that may be imposed under
any
asserted claims.
We
depend on our key personnel to manage our business effectively in a rapidly
changing market. If we are unable to retain our key employees, our business,
financial condition and results of operations could be
harmed.
Our
future success depends to a significant degree on the skills, efforts and
continued services of our executive officers and other key engineering,
manufacturing, operations, sales, marketing and support personnel who have
critical industry experience and relationships. If we were to lose the services
of one or more of our key executive officers and senior management members,
we
may not be able to grow our business as we expect, and our ability to compete
could be harmed, adversely affecting our business and prospects.
Our
markets are highly competitive, and our failure to compete successfully would
limit our ability to sell our products, attract and retain customers and grow
our business.
Competition
in the wireless location services market and the facial composite software
market is intense. In addition, the adoption of new technology in the
communications industry likely will intensify the competition for improved
wireless location technologies. The wireless location services market has
historically been dominated by large companies, such as Siemens AG and LoJack
Corporation. In addition, a number of other companies such as Trimble
Navigation, Verizon, FireFly, Disney, Mattel, Digital Angel Corporation,
Location-Based Technologies, Inc. (OTCBB: LBAS) and WebTech Wireless Inc. either
have announced plans for new products or have commenced selling products that
are similar to our wireless location products, and new competitors are emerging
to compete with our wireless location services products. Due to the rapidly
evolving markets in which we compete, additional competitors with significant
market presence and financial resources may enter those markets, thereby further
intensifying competition. All competitors in the wireless location services
market rely on retail distributors to sell their products to consumers.
Additional competitors in this market may limit the availability or interest
of
retail distributors to carry our wireless location services product and launch
it into the market. These issues may have an adverse impact on our ability
to go
to market, and as a result we may not be able to grow our business as we expect,
and our ability to compete could be harmed, adversely affecting our business
and
prospects.
Our
wireless location products and technology are new and may not be accepted in
the
market, which would dramatically alter our financial
results.
We
have
had only a limited release of one of our planned wireless locator products
in
the market. There can be no assurances that consumer demand will meet, or even
approach, our expectations. In addition, our pricing and marketing strategies
may not be successful. Lack of customer demand, a change in marketing strategy
and changes to our pricing models could dramatically alter our financial
results.
Standards
in wireless communications industry are in flux, and if we are unable to comply
with these industry standards, our business will be
harmed.
Standards
in the wireless communications industry are evolving. The emergence and broad
adoption of new industry standards could require us to redesign our products.
If
we are unable to design our products to comply with these new standards, our
products would become obsolete and consumers would instead purchase other
standard-compliant products. As a result, our business could be harmed, and
our
financial condition and results of operations could be adversely
affected.
Changes
in the government regulation of our wireless location product or wireless
carriers could harm our business.
Our
products, wireless carriers and other members of the communications industry
are
subject to domestic government regulation by the Federal Communications
Commission (the “FCC”) and international regulatory bodies. These regulatory
bodies could enact regulations which affect our products or the service
providers which distribute our products, such as limiting the scope of the
service providers' market, capping fees for services provided by them or
imposing communication technology standards which impact our
products.
If
our wireless locator products fail to achieve broad market acceptance, our
business results will be harmed.
We
have
not begun selling our wireless location products for use by direct purchase
consumers or for resale by distributors. If our products are not widely accepted
by the market, our business results could be harmed. Factors that may affect
the
market acceptance of our location products include price, reliability,
performance, technological innovation/enhancements, network coverage, ease
of
use, and availability.
If
we
fail to perform adequately on the basis of each of these factors versus
competing products and technologies, our business results could be
harmed.
Our
ability to compete could be jeopardized and our business seriously compromised
if we are unable to protect ourselves from third-party challenges, the
development and maintenance of the proprietary aspects of wireless location
products and technology we develop.
Our
products utilize a variety of proprietary rights that are critical to our
competitive position. Because the technology and intellectual property
associated with our wireless location products are evolving and rapidly
changing, our current intellectual property rights may not adequately protect
us
in the future. We rely on a combination of patent, copyright, trademark and
trade secret laws and contractual restrictions to protect the intellectual
property utilized in our products. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy or otherwise obtain
and use our products or technology. In addition, monitoring unauthorized use
of
our products is difficult and we cannot be certain the steps we have taken
will
prevent unauthorized use of our technology. Also, it is possible that no patents
or trademarks will be issued from our currently pending or future patent or
trademark applications. Because legal standards relating to the validity,
enforceability and scope of protection of patent and intellectual property
rights in new technologies are uncertain and still evolving, the future
viability or value of our intellectual property rights is uncertain. Moreover,
effective patent, trademark, copyright and trade secret protection may not
be
available in some countries in which we distribute or may anticipate
distributing our products. Furthermore, our competitors may independently
develop similar technologies that limit the value of our intellectual property
or design or patents.. If competitors are able to use our technology, our
competitive edge would be reduced or eliminated.
In
addition, third parties may at some point claim certain aspects of our business
infringe their intellectual property rights. While we are not currently subject
to nor aware of any such claim, any future claim (with or without merit) could
result in one or more of the following:
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Significant
litigation costs;
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Diversion
of resources, including the attention of
management;
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Our
agreement to pay certain royalty and/or licensing fees;
and
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Cessation
of our rights to use, market, or distribute such
technology.
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Any
of
these developments could materially and adversely affect our business, results
of operations and financial condition. In the future, we may also need to file
lawsuits to enforce our intellectual property rights, to protect our trade
secrets, or to determine the validity and scope of the proprietary rights of
others. Whether successful or unsuccessful, such litigation could result in
substantial costs and diversion of resources. Such costs and diversion could
materially and adversely affect our business, results of operations and
financial condition.
We
could become subject to litigation regarding intellectual property rights,
which
could seriously harm our business and require us to incur significant
costs.
In
recent
years, there has been significant litigation in the United States involving
patents and other intellectual property rights. Any parties asserting that
our
products infringe upon their proprietary rights would force us to defend
ourselves and possibly our customers or manufacturers against the alleged
infringement. These claims and any resulting lawsuit, if successful, could
subject us to significant liability for damages and invalidation of proprietary
rights. These lawsuits, regardless of their merits, would likely be
time-consuming and expensive to resolve and would divert management time and
attention. Any potential intellectual property litigation also could force
us to
do one or more of the following:
·
Stop
selling, incorporating or using our products that use the challenged
intellectual property;
·
Obtain
from the owner of the infringed intellectual property right a license to sell
or
use the relevant technology, which license may not be available on reasonable
terms, or at all; or
·
Redesign
those products that use such technology.
If
we are
forced to take any of the foregoing actions, our business and prospects may
be
seriously harmed.
We
currently depend upon one manufacturer for our principal product and if we
encounter problems with this manufacturer there is no assurance that we could
obtain products from other manufacturers without significant disruptions to
our
business.
We
expect
that our principal product will be manufactured to our specifications by one
manufacturer. Although we could arrange for another manufacturer to supply
the
product, there is no assurance that we could do so without undue cost, expense
and delay.
We
expect to rely heavily on a few licensees.
The
loss
of, or a significant reduction in, orders from these major customers could
have
a material adverse effect on our financial condition and results of
operations.
Our
revenues in the next several years could be heavily dependent on contracts
with
a limited number of major market makers in each business segment. The loss
of,
or a significant reduction in, orders from these major customers could have
a
material adverse effect on our financial condition and results of
operations.
Fluctuations
in operating results could adversely affect the market price of our common
stock.
Our
revenues and operating results are likely to fluctuate significantly in the
future. The timing of order placement, size of orders and satisfaction of
contractual customer acceptance criteria, as well as order delays or deferrals
and shipment delays and deferrals, may cause material fluctuations in
revenue.
Delays
or
deferrals in purchasing decisions may increase as we develop new or enhanced
products. The current and anticipated dependence on a small number of customers
increases the revenue impact of each customer's actions relative to these
factors. Our expense levels in the future will be based, in large part, on
our
expectations regarding future revenue, and as a result net income for any
quarterly period in which material orders are delayed could vary
significantly.
Because
of these and other factors, investors should not rely on quarter-to-quarter
comparisons of our results of operations, our results of operations or the
pro
forma financial information as an indication of future performance. It is
possible that, in future periods, results of operations will differ from the
estimates of public market analysts and investors. Such a discrepancy could
cause the market price of our common stock to decline
significantly.
Delays,
disruptions or quality control problems in manufacturing could result in delays
in shipments of products to customers and could adversely affect our
business.
We
might
experience delays, disruptions or quality control problems in the manufacturing
operations of our subcontractors. As a result, we could incur additional costs
that would adversely affect gross margins, and product shipments to our
customers could be delayed beyond the shipment schedules requested by our
customers, which would negatively affect our revenues, competitive position
and
reputation. Furthermore, even if we are able to timely deliver products to
our
customers, we may be unable to recognize revenue based on our revenue
recognition policies. Any disruptions in the future could adversely affect
the
combined company's revenues, gross margins and results of operations. We may
experience manufacturing delays and reduced manufacturing yields upon
introducing new products to our manufacturing lines or when integrating acquired
products.
Rapid
technological change in our market could cause our products to become obsolete
or require us to redesign our products,
which would have a material adverse affect on our business, operating results
and financial condition
.
We
expect
that our markets will be characterized by rapid technological change, frequent
new product introductions and enhancements, uncertain product life cycles,
changing customer demands and evolving industry standards, any of which can
render existing products obsolete. We believe that our future success will
depend in large part on our ability to develop new and effective products in
a
timely manner and on a cost effective basis. As a result of the complexities
inherent in our product, major new products and product enhancements can require
long development and testing periods, which may result in significant delays
in
the general availability of new releases or significant problems in the
implementation of new releases. In addition, if we or our competitors announce
or introduce new products our current or prospective customers may defer or
cancel purchases of our products, which could materially adversely affect our
business, operating results and financial condition. Our failure to develop
successfully, on a timely and cost effective basis, new products or new product
enhancements that respond to technological change, evolving industry standards
or customer requirements would have a material adverse affect on our business,
operating results and financial condition.
Failure
to manage growth effectively could adversely affect our business, results of
operations and financial condition.
The
success of our future operating activities will depend upon our ability to
expand our support system to meet the demands of our growing business. Any
failure by our management to effectively anticipate, implement, and manage
changes required to sustain our growth would have a material adverse effect
on
our business, financial condition, and results of operations. We cannot assure
you that we will be able to successfully operate acquired businesses, become
profitable in the future, or effectively manage any other change.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. All statements other than
statements of historical facts contained in this prospectus, including
statements regarding our future results of operations and financial position,
business strategy and plans and objectives of management for future operations,
are forward-looking statements. These statements involve known and unknown
risks, uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking
statements.
In
some
cases, you can identify forward-looking statements by terms such as "may,"
"should," "expects," "plans," "anticipates," "could," "intends," "target,"
"projects," "contemplates," "believes," "estimates," "predicts," "potential"
or
"continue" or the negative of these terms or other similar words. These
statements are only predictions. We have based these forward-looking statements
largely on our current expectations and projections about future events and
financial trends that we believe may affect our business, financial condition
and results of operations. We discuss many of the risks in greater detail under
the heading "Risk Factors." Also, these forward-looking statements represent
our
estimates and assumptions only as of the date of this prospectus. Except as
required by law, we assume no obligation to update any forward-looking
statements after the date of this prospectus.
This
prospectus also contains estimates and other statistical data made by
independent parties and by us relating to market size and growth and other
industry data. This data involves a number of assumptions and limitations,
and
you are cautioned not to give undue weight to such estimates. We have not
independently verified the statistical and other industry data generated by
independent parties and contained in this prospectus and, accordingly, we cannot
guarantee their accuracy or completeness. In addition, projections, assumptions
and estimates of our future performance and the future performance of the
industries in which we operate are necessarily subject to a high degree of
uncertainty and risk due to a variety of factors, including those described
in
"Risk Factors" and elsewhere in this prospectus. These and other factors could
cause results to differ materially from those expressed in the estimates made
by
the independent parties and by us.
USE
OF PROCEEDS
We
will
not receive any proceeds from the sale of common shares by the Selling
Shareholders pursuant to this prospectus. All of the common shares which may
be
offered pursuant to this reoffer prospectus include stock or stock options
that
may be granted under our 2008 Equity Compensation Plan. All proceeds, if any,
from the exercise of options will be used for general working
capital.
SELLING
SHAREHOLDERS
This
reoffer prospectus relates to the sale of up to 4,425,000 shares of the common
stock of which includes 3,945,000 shares of common stock issuable upon the
exercise of options, that may be offered and resold from time to time by selling
shareholders (“Selling Shareholders”) identified in this prospectus for their
own account issuable pursuant to our 2008 Equity Compensation Plan. A total
of
7,000,000 shares of common stock have been reserved for issuance under all
awards that may be granted under our 2008 Equity Compensation Plan, of which
2,575,000 shares remain available for issuance.
If,
subsequent to the date of this reoffer prospectus, we grant any further awards
under the 2008 Equity Compensation Plan, to any eligible participants who are
affiliates of our company (as defined in Rule 405 under the Securities Act),
Instruction C of Form S-8 requires that we supplement this reoffer prospectus
with the names of such affiliates and the amounts of securities to be reoffered
by them as Selling Shareholders.
The
following table provides, as of May 21, 2008 information regarding the
beneficial ownership of our common shares held by each of the Selling
Shareholders, including:
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1.
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the
number of common shares owned by each Selling Shareholder prior to
this
offering;
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2.
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the
total number of common shares that are to be offered by each Selling
Shareholder;
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|
|
3.
|
the
total number of common shares that will be owned by each Selling
Shareholder upon completion of the offering; and
|
|
|
4.
|
the
percentage owned by each Selling Shareholder upon completion of the
offering.
|
Information
with respect to beneficial ownership is based upon information obtained from
the
selling shareholders. Information with respect to "Shares Beneficially Owned
Prior to the Offering" includes the shares issuable upon exercise of the stock
options held by the selling shareholders to the extent these options are
exercisable within 60 days of May 21, 2008. The "Number of Shares Being Offered"
includes the common shares that may be acquired by the Selling Shareholders
pursuant to the exercise of stock options granted to the Selling Shareholders
pursuant to our 2008 Equity Compensation Plan. Information with respect to
"Shares Beneficially Owned After the Offering" assumes the sale of all of the
common shares offered by this prospectus and no other purchases or sales of
our
common shares by the Selling Shareholders. Except as described below and to
our
knowledge, the named Selling Shareholder beneficially owns and has sole voting
and investment power over all common shares or rights to these common shares.
The
common shares currently owned and the common shares received upon exercise
of
the options offered by this reoffer prospectus may be offered from time to
time
by the Selling Shareholders named below. Because the Selling Shareholders may
offer all or part of the common shares currently owned or the common shares
received upon exercise of the options, no estimate can be given as to the amount
of options that will be held upon termination of this offering.
|
|
|
SHARES
BENEFICIALLY
OWNED
PRIOR
TO THIS
OFFERING
(1)
|
|
|
|
SHARES
BENEFICIALLY
OWNED
UPON
COMPLETION OF
THE OFFERING (1)
|
|
|
NAME
|
|
NUMBER
|
|
%
(2)
|
|
NUMBER
OF
SHARES
BEING
OFFERED
|
|
NUMBER
|
|
%
(2)
|
|
|
Patrick
E. Bertagna(3)
|
|
|
3,215,406
|
|
|
8.4
|
%
|
|
1,050,000
|
|
|
3,065,406
|
|
|
8.0
|
%
|
|
Murray
Williams (4)
|
|
|
190,000
|
|
|
*
|
|
|
900,000
|
|
|
40,000
|
|
|
*
|
%
|
|
Patrick
Aroff (5)
|
|
|
452,473
|
|
|
1.2
|
%
|
|
150,000
|
|
|
452,473
|
|
|
1.2
|
%
|
|
Louis
Rosenbaum (6)
|
|
|
2,544,402
|
|
|
6.6
|
|
|
150,000
|
|
|
2,544,402
|
|
|
6.6
|
%
|
|
Christopher
M. Walsh (7)
|
|
|
219,336
|
|
|
*
|
|
|
800,000
|
|
|
169,336
|
|
|
*
|
|
|
Jeffrey
Sharpe (8)
|
|
|
0
|
|
|
0
|
|
|
150,000
|
|
|
0
|
|
|
*
|
|
|
+
|
|
|
|
|
|
|
|
|
1,225,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
SHARES
|
|
|
|
|
|
|
|
|
4,425,000
|
|
|
|
|
|
|
|
*
less
than one percent
+
Certain
unnamed non-affiliates, each of whom own
no
more
than the lesser of 1,000 shares or 1% of the shares issuable under the 2008
Equity Compensation Plan
|
(1)
|
The
number and percentage of shares beneficially owned is determined
in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934,
as
amended, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rule, beneficial ownership
includes any shares as to which the selling shareholder has sole
or shared
voting power or investment power and also any shares, which the selling
shareholder has the right to acquire within 60 days.
|
|
(2)
|
Based
upon 38,472,963 shares of common stock issued and outstanding as
of May
21, 2008.
|
|
(3)
|
Mr.
Bertagna serves as Chief Executive Officer and Chairman of the Board
of
the Company. Shares beneficially owned by Mr. Bertagna include 150,000
shares issued under the 2008 Equity Compensation Plan. On March 16,
2008,
Mr. Bertagna was granted 900,000 options, none of which may be acquired
by
Mr. Bertagna by exercise within 60 days of May 21,
2008.
|
|
(4)
|
Mr.
Williams serves as a Chief Financial Officer, Treasurer and Secretary
of
the Company. Shares beneficially owned by Mr. Williams include 150,000
shares issued under the 2008 Equity Compensation Plan. On March 16,
2008,
Mr. Williams was granted 750,000 options, none of which may be acquired
by
Mr. Williams by exercise within 60 days of May 21,
2008.
|
|
(5)
|
Mr.
Aroff serves as a director of the Company. On March 16, 2008, Mr.
Aroff
was granted 150,000 options, none of which may be acquired by Mr.
Aroff by
exercise within 60 days of May 21,
2008.
|
|
(6)
|
Mr.
Rosenbaum serves as a director of the Company. On March 16, 2008,
Mr.
Rosenbaum was granted 150,000 options, none of which may be acquired
by
Mr. Rosenbaum by exercise within 60 days of May 21,
2008.
|
|
(7)
|
Mr.
Walsh serves as Chief Operating Officer. Shares beneficially owned
by Mr.
Walsh include 50,000 shares issued under the 2008 Equity Compensation
Plan. On March 16, 2008, Mr. Walsh was granted 750,000 options, none
of
which may be acquired by Mr. Walsh by exercise within 60 days of
May 21,
2008.
|
|
(8)
|
Mr.
Sharpe serves as director of the Company. On March 16, 2008, Mr.
Walsh was
granted 150,000 options, none of which may be acquired by Mr. Walsh
by
exercise within 60 days of May 21,
2008.
|
Since
our Company does not currently meet the registrant requirements for use of
Form
S-3, the amount of common shares which may be resold by means of this reoffer
prospectus by each of the Selling Shareholders, and any other person with whom
he or she is acting in concert for the purpose of selling securities of our
company, must not exceed, in any three month period, the amount specified in
Rule 144(e) promulgated under the Securities Act.
PLAN
OF DISTRIBUTION
Under
our
2008 Equity Compensation Plan (the “Plan”), we are authorized to issue up to
7,000,000 shares of our common stock.
Subject
to the foregoing, the Selling Shareholders may offer and sell the shares covered
by this prospectus at various times. The Selling Shareholders will act
independently of our Company in making decisions with respect to the timing,
manner and size of each sale.
No
Known Agreements to Resell the Shares
To
our
knowledge, no Selling Shareholder has any agreement or understanding, directly
or indirectly, with any person to resell the common shares covered by this
prospectus.
Offering
Price
The
sales
price offered by the Selling Shareholders to the public may be:
|
1.
|
the
market price prevailing at the time of sale;
|
|
2.
|
a
price related to such prevailing market price; or
|
|
3.
|
such
other price as the selling shareholders determine from time to time.
|
Manner
of Sale
The
common shares may be sold by means of one or more of the following methods:
|
·
|
a
block trade in which the broker-dealer so engaged will attempt to
sell the
common shares as agent, but may position and resell a portion of
the block
as principal to facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by that broker-dealer
for its
account pursuant to this prospectus;
|
|
·
|
ordinary
brokerage transactions in which the broker solicits purchasers;
|
|
·
|
through
options, swaps or derivatives;
|
|
·
|
in
transactions to cover short sales;
|
|
·
|
in
privately negotiated transactions; or
|
|
·
|
in
a combination of any of the above methods.
|
The
Selling Shareholders may sell their common shares directly to purchasers or
may
use brokers, dealers, underwriters or agents to sell their common shares.
Brokers or dealers engaged by the Selling Shareholders may arrange for other
brokers or dealers to participate. Brokers or dealers may receive commissions,
discounts or concessions from the Selling Shareholders, or, if any such
broker-dealer acts as agent for the purchaser of common shares, from the
purchaser in amounts to be negotiated immediately prior to the sale. The
compensation received by brokers or dealers may, but is not expected to, exceed
that which is customary for the types of transactions involved.
Broker-dealers
may agree with a Selling Shareholder to sell a specified number of common shares
at a stipulated price per common share, and, to the extent the broker-dealer
is
unable to do so acting as agent for a selling shareholder, to purchase as
principal any unsold common shares at the price required to fulfill the
broker-dealer commitment to the Selling Shareholder.
Broker-dealers
who acquire common shares as principal may thereafter resell the common shares
from time to time in transactions, which may involve block transactions and
sales to and through other broker-dealers, including transactions of the nature
described above, in the over-the-counter market or otherwise at prices and
on
terms then prevailing at the time of sale, at prices then related to the
then-current market price or in negotiated transactions. In connection with
resales of the common shares, broker-dealers may pay to or receive from the
purchasers of shares commissions as described above.
If
our
Selling Shareholders enter into arrangements with brokers or dealers, as
described above, we are obligated to file a post-effective amendment to this
registration statement disclosing such arrangements, including the names of
any
broker-dealers acting as underwriters.
The
Selling Shareholders and any broker-dealers or agents that participate with
the
Selling Shareholders in the sale of the common shares may be deemed to be
"underwriters" within the meaning of the Securities Act. In that event, any
commissions received by broker-dealers or agents and any profit on the resale
of
the common shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act.
Sales
Pursuant to Rule 144
Any
common shares covered by this prospectus which qualify for sale pursuant to
Rule
144 under the Securities Act may be sold under Rule 144 rather than pursuant
to
this prospectus.
Accordingly,
during such times as a Selling Shareholder may be deemed to be engaged in a
distribution of the common stock, and therefore be considered to be an
underwriter, the selling shareholder must comply with applicable law and, among
other things:
|
·
|
may
not engage in any stabilization activities in connection with our
common
stock;
|
|
·
|
may
not cover short sales by purchasing shares while the distribution
is
taking place; and
|
|
·
|
may
not bid for or purchase any of our securities or attempt to induce
any
person to purchase any of our securities other than as permitted
under the
Exchange Act.
|
In
addition, we will make copies of this prospectus available to the selling
shareholders for the purpose of satisfying the prospectus delivery requirements
of the Securities Act.
Penny
Stock Rules
The
SEC
has adopted regulations which generally define "penny stock" to be any equity
security that has a market price (as defined) of less than $5.00 per share
or an
exercise price of less than $5.00 per share, subject to certain exceptions.
Our
securities are covered by the penny stock rules, which impose additional sales
practice requirements on broker-dealers who sell to persons other than
established customers and "institutional accredited investors." The term
"institutional accredited investor" refers generally to those accredited
investors who are not natural persons and fall into one of the categories of
accredited investor specified in subparagraphs (1), (2), (3), (7) or (8) of
Rule 501 of Regulation D promulgated under the Securities Act,
including institutions with assets in excess of $5,000,000.
The
penny
stock rules require a broker-dealer, prior to a transaction in a penny stock
not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form required by the Securities and Exchange Commission, obtain
from the customer a signed and dated acknowledgement of receipt of the
disclosure document and to wait two business days before effecting the
transaction. The risk disclosure document provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account.
The
bid
and offer quotations, and the broker-dealer and salesperson compensation
information, must be given to the customer orally or in writing prior to
effecting the transaction and must be given to the customer in writing before
or
with the customer's confirmation. In addition, the penny stock rules require
that prior to a transaction in a penny stock not otherwise exempt from these
rules, the broker-dealer must make a special written determination that the
penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction.
These
disclosure requirements may have the effect of reducing the level of trading
activity in the secondary market for the stock that is subject to these penny
stock rules. Consequently, these penny stock rules may affect the ability of
broker-dealers to trade our securities. We believe that the penny stock rules
discourage investor interest in and limit the marketability of our common stock.
State
Securities Laws
Under
the
securities laws of some states, the common shares may be sold in such states
only through registered or licensed brokers or dealers. In addition, in some
states the common shares may not be sold unless the shares have been registered
or qualified for sale in the state or an exemption from registration or
qualification is available and is complied with.
Expenses
of Registration
We
are
bearing all costs relating to the registration of the common stock. These
expenses are estimated to be $5,000, including, but not limited to, legal,
accounting, printing and mailing fees. The Selling Shareholders, however, will
pay any commissions or other fees payable to brokers or dealers in connection
with any sale of the common stock.
LEGAL
MATTERS
Richardson
& Patel LLP has issued an opinion as to the validity of the securities being
registered hereunder.
EXPERTS
The
financial statements incorporated by reference herein have been audited by
LBB
&
Associates Ltd., LLP
,
our
independent registered public accounting firm, to the extent and for the periods
set forth in its reports. Such financial statements are included in reliance
upon the authority of said firm as experts in auditing and
accounting.
INDEMNIFICATION
FOR
SECURITIES ACT LIABILITIES
The
Nevada Revised Statutes authorizes indemnification of a director, officer,
employee or agent of the Company against expenses incurred in connection with
any action, suit, or proceeding to which he or she is named a party by reason
of
his or her having acted or served in such capacity, except for liabilities
arising from his or her own misconduct or negligence in performance of his
or
her duty. In addition, even a director, officer, employee, or agent
of the Company who was found liable for misconduct or negligence in the
performance of his or her duty may obtain such indemnification if, in view
of
all the circumstances in the case, a court of competent jurisdiction determines
such person is fairly and reasonably entitled to
indemnification.
Section
78.7502 of the Nevada Revised Statutes provides that we may indemnify any person
who was or is a party, or is threatened to be made a party, to any action,
suit
or proceeding brought by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or other entity. The expenses that are subject to this indemnity
include attorneys’ fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by the indemnified party in connection with
the
action, suit or proceeding. In order for us to provide this statutory indemnity,
the indemnified party must not be liable under Nevada Revised Statutes section
78.138 or must have acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation. With respect
to a criminal action or proceeding, the indemnified party must have had no
reasonable cause to believe his conduct was unlawful.
Section
78.7502 also provides that we may indemnify any person who was or is a party,
or
is threatened to be made a party, to any action or suit brought by or on behalf
of the corporation by reason of the fact that he is or was serving at the
request of the corporation as a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other entity
against expenses actually or reasonably incurred by him in connection with
the
defense or settlement of such action or suit if he is not liable under Nevada
Revised Statutes section 78.138 of if he acted in good faith and in a manner
he
reasonably believed to be in or not opposed to the best interests of the
corporation. We may not indemnify a person if the person is adjudged by a court
of competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the corporation, or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which such action or suit was
brought or another court of competent jurisdiction shall determine upon
application that, despite the adjudication of liability but in view of all
the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity.
Section
78.7502 requires us to indemnify our directors or officers against expenses,
including attorneys’ fees, actually and reasonably incurred by him in connection
with his defense, if he has been successful on the merits or otherwise in
defense of any action, suit or proceeding, or in defense of any claim, issue
or
matter.
Further,
pursuant to the Nevada Revised Statutes, the Company has adopted the following
indemnification provisions in its Amended and Restated Bylaws for its directors
and officers:
“The
Corporation shall indemnify any person who was or is a party or is threatened
to
be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, including
all appeals (other than an action, suit, or proceeding by or in the right of
the
Corporation) by reason of the fact that he or she is or was a director or
officer of the Corporation (and the Corporation, in the discretion of the Board
of Directors, may so indemnify a person by reason of the fact that he or she
is
or was an employee or agent of the Corporation or is or was serving at the
request of the Corporation in any other capacity for or on behalf of the
Corporation), against expenses (including attorneys’ fees), judgments, decrees,
fines, penalties, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit, or proceeding
if he
or she acted in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the Corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful;
provided
,
however
,
the
Corporation shall be required to indemnify an officer or director in connection
with an action, suit, or proceeding initiated by such person only if such
action, suit, or proceeding was authorized by the Board of Directors. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of
itself, create a presumption that the person did not act in good faith or in
a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.”
“The
Corporation shall indemnify any person who was or is a party or is threatened
to
be made a party to any threatened, pending, or completed action or suit,
including all appeals, by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director
or officer of the Corporation (and the Corporation, in the discretion of the
Board of Directors, may so indemnify a person by reason of the fact that he
or
she is or was an employee or agent of the Corporation or is or was serving
at
the request of the Corporation in any other capacity for or on behalf of the
Corporation), against expenses (including attorneys’ fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a manner he
or
she reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been finally adjudged
to be liable for gross negligence or willful misconduct in the performance
of
his or her duty to the Corporation unless and only to the extent that the court
in which such action or suit was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication
of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as such court
shall deem proper. Notwithstanding the foregoing, the Corporation shall be
required to indemnify an officer or director in connection with an action,
suit,
or proceeding initiated by such person only if such action, suit, or proceeding
was authorized by the Board of Directors.”
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to our directors, officers and controlling persons pursuant to
the
Nevada Revised Statutes, our Amended and Restated Bylaws or otherwise, we have
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. No pending material litigation or proceeding involving our
directors, executive officers, employees or other agents as to which
indemnification is being sought exists, and we are not aware of any pending
or
threatened material litigation that may result in claims for indemnification
by
any of our directors or executive officers.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The
following documents previously filed by GTX Corp pursuant to the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), are incorporated herein
by reference:
|
|
(a)
|
The
Company’s Annual Report on Form 10-KSB for the fiscal year ended
August 31, 2007, as filed November 15,
2007;
|
|
|
(b)
|
The
Company’s Quarterly Reports on Form 10QSB filed January 11, 2008 and April
15, 2008 and the Company’s Quarterly Report on Form 10Q filed May 15,
2008;
|
|
|
(c)
|
The
Company’s Current Reports on Form 8-K filed with the SEC on February 19,
2008, February 22, 2008, March 10, 2008, March 20, 2008 and May 13,
2008;
|
|
|
(b)
|
All
other reports filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
since
the end of the fiscal year covered by the annual report referred
to in
paragraph (a) above; and
|
|
|
(d)
|
The
description of the Company’s common stock that is contained in the
Company’s Registration Statement on Form S-1 (File No.
333-150861
)
,
filed May 12, 2008.
|
All
documents subsequently filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), prior to the termination of the offering shall be deemed to be
incorporated by reference into this prospectus and to be a part hereof from
the
date of filing of such documents; provided, however, that documents or
information deemed to have been furnished and not filed in accordance with
SEC
rules shall not be deemed incorporated by reference into this prospectus. Any
statement contained herein or in a document, all or a portion of which is
incorporated or deemed to be incorporated by reference herein, shall be deemed
to be modified or superseded for purposes of this prospectus to the extent
that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or amended, to constitute a part of this
prospectus.
Statements
contained in this prospectus as to the contents of any contract or other
document referred to herein do not purport to be complete, and where reference
is made to the particular provisions of such contract or other document, such
provisions are qualified in all respects by reference to all of the provisions
of such contract or other document. The Company undertakes to provide without
charge to each person to whom a copy of this prospectus has been delivered,
upon
the written request of any such person to the Company, a copy of any or all
of
the documents referred to above that have been or may be incorporated into
this
prospectus by reference, including exhibits to such documents (unless such
exhibits are specifically incorporated by reference to such documents). Requests
for such copies should be directed to
Patrick
E. Bertagna,
117
W.
9th Street, Suite 1214, Los Angeles, California 90015.
WHERE
YOU CAN FIND MORE INFORMATION
We
file
annual, quarterly and current reports, proxy statements and other information
with the SEC. You may read and copy any reports, statements or other information
the Company files at the SEC’s public reference room at 100 F Street, NE, N.W.,
Washington, D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference room. Our SEC filings
are
also available to the public from commercial document retrieval services and
through the web site maintained by the SEC at www.sec.gov.
As
allowed by SEC rules, this prospectus does not contain all the information
you
can find in the registration statement or the exhibits filed with or
incorporated by reference into the registration statement. Whenever a reference
is made in this prospectus to an agreement or other document of the Company,
be
aware that such reference is not necessarily complete and that you should refer
to the exhibits that are filed with or incorporated by reference into the
registration statement for a copy of the agreement or other document. You may
review a copy of the registration statement at the SEC’s public reference room
in Washington, D.C., as well as through the web site maintained by the SEC
at
www.sec.gov.
You
should read this prospectus and any prospectus supplement together with the
registration statement and the exhibits filed with or incorporated by reference
into the registration statement. The information contained in this prospectus
speaks only as of its date unless the information specifically indicates that
another date applies.
We
have
not authorized any person to give any information or to make any representations
that differ from, or add to, the information discussed in this prospectus.
Therefore, if anyone gives you different or additional information, you should
not rely on it.
We
maintain a website on the Internet at www.gtxcorp.com. Our website and the
information included on our website is not part of this prospectus.
PART
II
INFORMATION
REQUIRED IN THE REGISTRATION STATEMENT
Item
3. Incorporation of Documents by Reference
The
following documents previously filed by GTX Corp, a Nevada Corporation (“GTX
Corp” or the “Registrant”) pursuant to the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), are incorporated herein by reference:
|
|
(a)
|
The
Registrant’s Annual Report on Form 10-KSB for the fiscal year ended
August 31, 2007, as filed November 15,
2007;
|
|
|
(b)
|
The
Registrant’s Quarterly Reports on Form 10QSB filed January 11, 2008 and
April 15, 2008 and the Registrant Quarterly Report on Form 10Q filed
May
15, 2008;
|
|
|
(c)
|
The
Registrant’s Current Reports on Form 8-K filed with the SEC on February
19, 2008, February 22, 2008, March 10, 2008, March 20, 2008 and May
13,
2008;
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(b)
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All
other reports filed pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"),
since
the end of the fiscal year covered by the annual report referred
to in
paragraph (a) above; and
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(d)
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The
description of the Registrant’s common stock that is contained in the
Registrant’s Registration Statement on Form S-1 (File No.
333-150861
)
,
filed May 12, 2008.
|
In
addition, all documents subsequently filed by the Registrant pursuant to
Sections 13(a), 13(c), 14, and 15(d) of the Exchange Act, prior to the filing
of
a post-effective amendment which indicates that all securities offered have
been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference into this Registration Statement and to be
a
part hereof from the date of filing of such documents.
Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is
or is
deemed to be incorporated by reference herein modifies or supersedes such
earlier statement. Any statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
Item
4. Description of Securities
Not
applicable. The class of securities to be offered is registered under Section
12
of the Exchange Act.
Item
5. Interests of Named Experts and Counsel
Not
applicable.
Item
6. Indemnification of Directors and Officers
The
Nevada Revised Statutes authorizes indemnification of a director, officer,
employee or agent of the Company against expenses incurred in connection with
any action, suit, or proceeding to which he or she is named a party by reason
of
his or her having acted or served in such capacity, except for liabilities
arising from his or her own misconduct or negligence in performance of his
or
her duty. In addition, even a director, officer, employee, or agent
of the Company who was found liable for misconduct or negligence in the
performance of his or her duty may obtain such indemnification if, in view
of
all the circumstances in the case, a court of competent jurisdiction determines
such person is fairly and reasonably entitled to
indemnification.
Section
78.7502 of the Nevada Revised Statutes provides that we may indemnify any person
who was or is a party, or is threatened to be made a party, to any action,
suit
or proceeding brought by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or other entity. The expenses that are subject to this indemnity
include attorneys’ fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by the indemnified party in connection with
the
action, suit or proceeding. In order for us to provide this statutory indemnity,
the indemnified party must not be liable under Nevada Revised Statutes section
78.138 or must have acted in good faith and in a manner he reasonably believed
to be in, or not opposed to, the best interests of the corporation. With respect
to a criminal action or proceeding, the indemnified party must have had no
reasonable cause to believe his conduct was unlawful.
Section
78.7502 also provides that we may indemnify any person who was or is a party,
or
is threatened to be made a party, to any action or suit brought by or on behalf
of the corporation by reason of the fact that he is or was serving at the
request of the corporation as a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or other entity
against expenses actually or reasonably incurred by him in connection with
the
defense or settlement of such action or suit if he is not liable under Nevada
Revised Statutes section 78.138 of if he acted in good faith and in a manner
he
reasonably believed to be in or not opposed to the best interests of the
corporation. We may not indemnify a person if the person is adjudged by a court
of competent jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the corporation, or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which such action or suit was
brought or another court of competent jurisdiction shall determine upon
application that, despite the adjudication of liability but in view of all
the
circumstances of the case, the person is fairly and reasonably entitled to
indemnity.
Section
78.7502 requires us to indemnify our directors or officers against expenses,
including attorneys’ fees, actually and reasonably incurred by him in connection
with his defense, if he has been successful on the merits or otherwise in
defense of any action, suit or proceeding, or in defense of any claim, issue
or
matter.
Further,
pursuant to the Nevada Revised Statutes, the Company has adopted the following
indemnification provisions in its Amended and Restated Bylaws for its directors
and officers:
“The
Corporation shall indemnify any person who was or is a party or is threatened
to
be made a party to any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, or investigative, including
all appeals (other than an action, suit, or proceeding by or in the right of
the
Corporation) by reason of the fact that he or she is or was a director or
officer of the Corporation (and the Corporation, in the discretion of the Board
of Directors, may so indemnify a person by reason of the fact that he or she
is
or was an employee or agent of the Corporation or is or was serving at the
request of the Corporation in any other capacity for or on behalf of the
Corporation), against expenses (including attorneys’ fees), judgments, decrees,
fines, penalties, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit, or proceeding
if he
or she acted in good faith and in a manner which he or she reasonably believed
to be in or not opposed to the best interests of the Corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his or her conduct was unlawful;
provided
,
however
,
the
Corporation shall be required to indemnify an officer or director in connection
with an action, suit, or proceeding initiated by such person only if such
action, suit, or proceeding was authorized by the Board of Directors. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not,
of
itself, create a presumption that the person did not act in good faith or in
a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.”
“The
Corporation shall indemnify any person who was or is a party or is threatened
to
be made a party to any threatened, pending, or completed action or suit,
including all appeals, by or in the right of the Corporation to procure a
judgment in its favor by reason of the fact that he or she is or was a director
or officer of the Corporation (and the Corporation, in the discretion of the
Board of Directors, may so indemnify a person by reason of the fact that he
or
she is or was an employee or agent of the Corporation or is or was serving
at
the request of the Corporation in any other capacity for or on behalf of the
Corporation), against expenses (including attorneys’ fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a manner he
or
she reasonably believed to be in or not opposed to the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue, or matter as to which such person shall have been finally adjudged
to be liable for gross negligence or willful misconduct in the performance
of
his or her duty to the Corporation unless and only to the extent that the court
in which such action or suit was brought, or any other court of competent
jurisdiction, shall determine upon application that, despite the adjudication
of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses as such court
shall deem proper. Notwithstanding the foregoing, the Corporation shall be
required to indemnify an officer or director in connection with an action,
suit,
or proceeding initiated by such person only if such action, suit, or proceeding
was authorized by the Board of Directors.”
Insofar
as indemnification for liabilities arising under the Securities Act of 1933
may
be permitted to our directors, officers and controlling persons pursuant to
the
Nevada Revised Statutes, our Amended and Restated Bylaws or otherwise, we have
been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act of 1933 and is, therefore,
unenforceable. No pending material litigation or proceeding involving our
directors, executive officers, employees or other agents as to which
indemnification is being sought exists, and we are not aware of any pending
or
threatened material litigation that may result in claims for indemnification
by
any of our directors or executive officers.
Item
7. Exemption from Registration Claimed
Not
applicable.
Item
8. Exhibits.
See
the
attached Exhibit Index that follows the signature pages, which is incorporated
by reference.
Item
9. Undertakings.
The
undersigned registrant hereby undertakes:
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(2)
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To
file, during any period in which offers or sales are being made,
a
post-effective amendment to this registration
statement:
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(i)
|
To
include any prospectus required by section 10(a)(3) of the Securities
Act
of 1933;
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(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent
a
fundamental change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or decrease
in
volume of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any deviation
from
the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant
to
Rule 424(b) (§ 230.424(b) of this chapter) if, in the aggregate, the
changes in volume and price represent no more than 20% change in
the
maximum aggregate offering price set forth in the “Calculation of
Registration Fee” table in the effective registration
statement.
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(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the registration statement or any material
change to such information in the registration
statement;
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provided,
however
,
that
the undertakings set forth in paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in reports filed with or furnished to the
Commission by the Registrant pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)) that are incorporated
by reference in the registration statement.
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(3)
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That,
for the purpose of determining any liability under the Securities
Act of
1933, each such post-effective amendment shall be deemed to be a
new
registration statement relating to the securities offered therein,
and the
offering of such securities at that time shall be deemed to be the
initial
bona fide offering thereof.
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(4)
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To
remove from registration by means of a post-effective amendment any
of the
securities being registered which remain unsold at the termination
of the
offering.
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(b)
|
The
Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d)
of
the Securities Exchange Act of 1934 (and, where applicable, each
filing of
an employee benefit plan's annual report pursuant to section 15(d)
of the
Securities Exchange Act of 1934) that is incorporated by reference
in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
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(c)
|
Insofar
as indemnification for liabilities arising under the Securities Act
of
1933 may be permitted to directors, officers and controlling persons
of
the Registrant pursuant to the foregoing provisions, or otherwise,
the
Registrant has been advised that in the opinion of the Securities
and
Exchange Commission such indemnification is against public policy
as
expressed in the Act and is, therefore, unenforceable. In the event
that a
claim for indemnification against such liabilities (other than the
payment
by the registrant of expenses incurred or paid by a director, officer
or
controlling person of the registrant in the successful defense of
any
action, suit or proceeding) is asserted by such director, officer
or
controlling person in connection with the securities being registered,
the
Registrant will, unless in the opinion of its counsel the matter
has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the
final
adjudication of such issue.
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SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements of filing this Registration Statement on Form S-8 and authorized
this Registration Statement to be signed on its behalf by the undersigned,
in
Los Angeles, California on May 22, 2008.
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GTX
Corp
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/s/
Patrick E. Bertagna
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By:
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Patrick
E. Bertagna
Chief
Executive Officer
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KNOW
ALL MEN BY THESE PRESENTS
,
that
each of the undersigned officers and directors of GTX Corp hereby constitutes
and appoints Patrick E. Bertagna, his attorney-in-fact and agent, with full
power of substitution and resubstitution for her in any and all capacities,
to
sign any or all amendments or post-effective amendments to this registration
statement, and to file the same, with exhibits thereto and other documents
in
connection therewith or in connection with the registration of the shares of
common stock under the Securities Act of 1933, with the Securities and Exchange
Commission, granting unto such attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
in connection with such matters as fully to all intents and purposes as he
might
or could do in person, hereby ratifying and confirming all that such
attorney-in-fact and agent or her substitute may do or cause to be done by
virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the date
indicated.
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Signature
|
|
Title
|
|
Date
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|
|
|
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|
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/s/
Patrick E. Bertagna
|
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Chief
Executive Officer,
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May
22, 2008
|
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Patrick
E. Bertagna
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President
and Director
(Principal
Executive Officer)
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/s/
Murray Williams
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Chief
Financial Officer,
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Murray
Williams
|
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Secretary
and Treasurer
(Principal
Financial and Accounting Officer)
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/s/
Louis Rosenbaum
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Director
|
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Louis
Rosenbaum
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/s/
Patrick Aroff
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Director
|
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Patrick
Aroff
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/s/
Jeffrey Sharpe
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Director
|
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Jeffrey
Sharpe
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EXHIBIT
INDEX
|
Exhibit
No.
|
|
Exhibit
Description
|
|
4.1
|
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2008
Equity Compensation Plan
|
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5.1
|
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Opinion
of Richardson & Patel, LLP
|
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23.1
|
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Consent
of LBB & Associates Ltd., LLP, independent auditors
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23.2
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Consent
of Richardson & Patel , LLP (contained in
Exhibit 5.1).
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EXHIBIT 4.1
GTX
CORP
2008
EQUITY COMPENSATION PLAN
I.
ESTABLISHMENT OF PLAN; DEFINITIONS
1.
Purpose
.
The
purpose of the GTX Corp’s 2008 Equity Compensation Plan is to encourage certain,
officers, employees, directors and consultants of GTX Corp, a Nevada corporation
(the "Corporation")
to
acquire and hold stock in the Corporation as an added incentive to remain with
the Corporation and to increase their efforts in promoting the interests of
the
Corporation and to enable the Corporation to attract and retain capable
individuals
.
2.
Definitions
.
Unless
the context clearly indicates otherwise, the following terms shall have the
meanings set forth below:
(a)
“Award”
shall mean the grant of any Stock Option, Stock Appreciation Right or Stock
Award pursuant to the Plan.
(a)
"Board"
shall mean the Board of Directors of the Corporation.
(b)
"Code"
shall mean the Internal Revenue Code of 1986, as it may be amended from time
to
time.
(c)
"Committee"
shall mean a committee made up of at least two members of the Board whose
members shall, from time to time, be appointed by the Board. If a Committee
has
not been appointed by the Board, “Committee” shall mean the Board..
(d)
"Corporation"
shall mean GTX Corp, a Nevada corporation.
(e)
"Consultants"
shall mean individuals or entities that provide services to the Corporation
who
are not Employees or Directors.
(f)
"Directors"
shall mean those members of the Board of Directors of the Corporation who are
not Employees.
(g)
"Disability"
shall mean a medically determinable physical or mental condition which causes
an
Employee, Director or Consultant to be unable to engage in any substantial
gainful activity and which can be expected to result in death or to be of
long-continued and indefinite duration.
(h)
"Employee"
shall mean any common law employee, including officers, of the Corporation
as
determined under the Code and the Treasury Regulations thereunder.
(i)
"Fair
Market Value" with regards to the grant of Stock Options
shall
mean (i) if the Stock is listed on a national securities exchange, the mean
between the highest and lowest sales prices for the Stock on such date, or,
if
no such prices are reported for such day, then on the next preceding day on
which there were reported prices; (ii) if the Stock is not listed on a national
securities exchange, the closing price for the shares on such date, or if no
such prices are reported for such day, then on the next preceding day on which
there were reported prices; or (iii) as determined in good faith by the Board.
“Fair Market Value” with regards to Stock Awards shall be determined by the
Board, in good faith and in its sole discretion.
(j)
"Grantee"
shall mean an officer, Employee, Director or Consultant granted a Stock Option
or Stock Award under this Plan.
(k)
"Incentive
Stock Option" shall mean an option granted pursuant to the Incentive Stock
Option provisions as set forth in Part II of this Plan.
(l)
"Non-Qualified
Stock Option" shall mean an option granted pursuant to the Non-Qualified Stock
Option provisions as set forth in Part III of this Plan.
(m)
"Plan"
shall mean the GTX Corp 2008 Equity Compensation Plan as set forth herein and
as
amended from time to time.
(n)
"Restricted
Stock" shall mean Stock which is issued pursuant to the Restricted Stock as
set
forth in Part IV of this Plan.
(o)
"Stock"
shall mean authorized but unissued shares of the Common Stock of the Corporation
or reacquired shares of the Corporation's Common Stock.
(p)
"Stock
Appreciation Right" shall mean a stock appreciation right granted pursuant
to
the Stock Appreciation Right provisions as set forth in Part II and III of
this
Plan.
(q)
"Stock
Award" shall mean an award of Restricted or Unrestricted Stock granted pursuant
to this Plan.
(r)
"Stock
Option" shall mean an option granted pursuant to the Plan to purchase shares
of
Stock.
(s)
“Subsidiary”
shall
mean any corporation (other than the Corporation) in an unbroken chain of
corporations beginning with and including the Corporation, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50 percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(t)
"Ten
Percent Shareholder" shall mean an Employee who at the time a Stock Option
is
granted owns stock possessing more than ten percent (10%) of the total combined
voting power of all stock of the Corporation or of its parent or subsidiary
corporation.
(u)
"Unrestricted
Stock" shall mean Stock which is issued pursuant to the Unrestricted Stock
provisions as set forth in Part V of this Plan.
3.
Shares
of Stock Subject to the Plan
.
Subject
to the provisions of Paragraph 2 of Part VI of the Plan, the Stock which may
be
issued or transferred pursuant to Stock Options and Stock Awards granted under
the Plan and the Stock which is subject to outstanding but unexercised Stock
Options under the Plan shall not exceed 7,000,000 shares in the aggregate.
If a
Stock Option shall expire and terminate for any reason, in whole or in part,
without being exercised or, if Stock Awards are forfeited because the
restrictions with respect to such Stock Awards shall not have been met or have
lapsed, the number of shares of Stock which are no longer outstanding as Stock
Awards or subject to Stock Options may again become available for the grant
of
Stock Awards or Stock Options. There shall be no terms and conditions in a
Stock
Award or Stock Option which provide that the exercise of an Incentive Stock
Option reduces the number of shares of Stock for which an outstanding
Non-Qualified Stock Option may be exercised; and there shall be no terms and
conditions in a Stock Award or Stock Option which provide that the exercise
of a
Non-Qualified Stock Option reduces the number of shares of Stock for which
an
outstanding Incentive Stock Option may be exercised.
4.
Administration
of the Plan
.
The
Plan shall be administered by the Committee. Subject to the express provisions
of the Plan, the Committee shall have authority to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to it, to determine
the terms and provisions of Stock Option agreements, and to make all other
determinations necessary or advisable for the administration of the Plan. Any
controversy or claim arising out of or related to this Plan shall be determined
unilaterally by and at the sole discretion of the Committee.
5.
Amendment
or Termination
.
The
Board may, at any time, alter, amend, suspend, discontinue, or terminate this
Plan; provided, however, that such action shall not adversely affect the right
of Grantees to Stock Awards or Stock Options previously granted and no
amendment, without the approval of the stockholders of the Corporation, shall
increase the maximum number of shares which may be awarded under the Plan in
the
aggregate, materially increase the benefits accruing to Grantees under the
Plan,
change the class of Employees eligible to receive options under the Plan, or
materially modify the eligibility requirements for participation in the Plan.
6.
Effective
Date and Duration of the Plan
.
This
Plan shall become effective on March 14, 2008. This Plan shall terminate at
such
time as may be determined by the Board, and no Stock Award or Stock Option
may
be issued or granted under the Plan thereafter, but such termination shall
not
affect any Stock Award or Stock Option theretofore issued or
granted.
7.
General.
(a)
Each
Stock Option, Stock Award and Stock Appreciation Right shall be evidenced by
a
written instrument (which may be in the form of a unanimous written consent
of
the Board) containing such terms and conditions, not inconsistent with this
Plan, as the Committee shall approve.
(b)
The
granting of a Stock Option, Stock Award or Stock Appreciation Right in any
year
shall not give the Grantee any right to similar grants in future years or any
right to be retained in the employ of the Corporation, and all Employees shall
remain subject to discharge to the same extent as if the Plan were not in
effect.
(c)
No
officer, Employee, Director or Consultant and no beneficiary or other person
claiming under or through him, shall have any right, title or interest by reason
of any Stock Option or any Stock Award to any particular assets of the
Corporation, or any shares of Stock allocated or reserved for the purposes
of
the Plan or subject to any Stock Option or any Stock Award except as set forth
herein. The Corporation shall not be required to establish any fund or make
any
other segregation of assets to assure the payment of any Stock Option or Stock
Award.
(d)
No
right
under the Plan shall be subject to anticipation, sale, assignment, pledge,
encumbrance, or charge except by will or the laws of descent and distribution,
and a Stock Option shall be exercisable during the Grantee's lifetime only
by
the Grantee or his conservator.
(e)
Notwithstanding
any other provision of this Plan or agreements made pursuant thereto, the
Corporation's obligation to issue or deliver any certificate or certificates
for
shares of Stock under a Stock Option or Stock Award, and the transferability
of
Stock acquired by exercise of a Stock Option or grant of a Stock Award, shall
be
subject to all of the following conditions:
(i)
Any
registration or other qualification of such shares under any state or federal
law or regulation, or the maintaining in effect of any such registration or
other qualification which the Board shall, in its absolute discretion upon
the
advice of counsel, deem necessary or advisable; and
(ii)
The
obtaining of any other consent, approval, or permit from any state or federal
governmental agency which the Board shall, in its absolute discretion upon
the
advice of counsel, determine to be necessary or advisable.
(f)
All
payments to Grantees or to their legal representatives shall be subject to
any
applicable tax, community property, or other statutes or regulations of the
United States or of any state or country having jurisdiction thereof. The
Grantee may be required to pay to the Corporation the amount of any withholding
taxes which the Corporation is required to withhold with respect to a Stock
Option or its exercise or a Stock Award. In the event that such payment is
not
made when due, the Corporation shall have the right to deduct, to the extent
permitted by law, from any payment of any kind otherwise due to such person
all
or part of the amount required to be withheld.
(g)
In
the
case of a grant of a Stock Option or Stock Award to any Employee of a subsidiary
of the Corporation, the Corporation may, if the Committee so directs, issue
or
transfer the shares, if any, covered by the Stock Option or Stock Award to
the
subsidiary, for such lawful consideration as the Committee may specify, upon
the
condition or understanding that the subsidiary will transfer the shares to
the
Employee in accordance with the terms of the Stock Option or Stock Award
specified by the Committee pursuant to the provisions of the Plan. For purposes
of this Section, a subsidiary shall mean any subsidiary corporation of the
Corporation as defined in Section 424 of the Code.
(h)
A
Grantee
entitled to Stock as a result of the exercise of a Stock Option or grant of
a
Stock Award shall not be deemed for any purpose to be, or have rights as, a
shareholder of the Corporation by virtue of such exercise, except to the extent
a stock certificate is issued therefor and then only from the date such
certificate is issued. No adjustments shall be made for dividends or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued. The Corporation shall issue any stock
certificates required to be issued in connection with the exercise of a Stock
Option with reasonable promptness after such exercise.
(i)
The
grant
or exercise of Stock Options granted under the Plan or the grant of a Stock
Award under the Plan shall be subject to, and shall in all respects comply
with,
applicable law relating to such grant or exercise, or to the number of shares
of
Stock which may be beneficially owned or held by any Grantee.
(j)
The
Corporation intends that the Plan shall comply with the requirements of Rule
16b-3 (the “Rule”) under the Securities Exchange Act of 1934, as amended, during
the term of this Plan. Should any additional provisions be necessary for the
Plan to comply with the requirements of the Rule, the Board may amend this
Plan
to add to or modify the provisions of this Plan accordingly.
(k)
The
Corporation intends that the Plan shall comply with the requirements of Section
409A of the Code, to the extent applicable. Should any changes to the Plan
be
necessary for the Plan to comply with the requirements of Code Section 409A
the
Board
may amend this Plan to add to or modify the provisions of this Plan
accordingly.
(l)
The
Corporation will seek stockholder approval in the manner and to the degree
required under Applicable Laws. If the Corporation fails to obtain stockholder
approval of the Plan within twelve (12) months after the date this Plan is
adopted by the Board, pursuant to Section 422 of the Code, any Option granted
as
an Incentive Option at any time under the Plan will not qualify as an Incentive
Option within the meaning of the Code and will be deemed to be a Non-Statutory
Option.
II.
INCENTIVE STOCK OPTION PROVISIONS
1.
Granting
of Incentive Stock Options
.
(j)
Only
Employees of the Corporation shall be eligible to receive Incentive Stock
Options under the Plan. Officers, Directors and Consultants of the Corporation
who are not also Employees shall not be eligible to receive Incentive Stock
Options.
(k)
The
purchase price of each share of Stock subject to an Incentive Stock Option
shall
not be less than 100% of the Fair Market Value of a share of the Stock on the
date the Incentive Stock Option is granted; provided, however, that the purchase
price of each share of Stock subject to an Incentive Stock Option granted to
a
Ten Percent Shareholder shall not be less than 110% of the Fair Market Value
of
a share of the Stock on the date the Incentive Stock Option is
granted.
(l)
No
Incentive Stock Option shall be exercisable more than ten years from the date
the Incentive Stock Option was granted; provided, however, that an Incentive
Stock Option granted to a Ten Percent Shareholder shall not be exercisable
more
than five years from the date the Incentive Stock Option was
granted.
(m)
The
Committee shall determine and designate from time to time those Employees who
are to be granted Incentive Stock Options and specify the number of shares
subject to each Incentive Stock Option.
(n)
The
Committee, in its sole discretion, shall determine whether any particular
Incentive Stock Option shall become exercisable in one or more installments,
specify the installment dates, and, within the limitations herein provided,
determine the total period during which the Incentive Stock Option is
exercisable. Further, the Committee may make such other provisions as may appear
generally acceptable or desirable to the Committee or necessary to qualify
its
grants under the provisions of Section 422 of the Code.
(o)
The
Committee may grant at any time new Incentive Stock Options to an Employee
who
has previously received Incentive Stock Options or other options whether such
prior Incentive Stock Options or other options are still outstanding, have
previously been exercised in whole or in part, or are canceled in connection
with the issuance of new Incentive Stock Options. The purchase price of the
new
Incentive Stock Options may be established by the Committee without regard
to
the existing Incentive Stock Options or other options.
(p)
Notwithstanding
any other provisions hereof, the aggregate Fair Market Value (determined at
the
time the option is granted) of the Stock with respect to which Incentive Stock
Options are exercisable for the first time by the Employee during any calendar
year (under all such plans of the Grantee's employer corporation and its parent
and subsidiary corporation) shall not exceed $100,000.
2.
Exercise
of Incentive Stock Options
.
The
option price of an Incentive Stock Option shall be payable on exercise of the
option (i) in cash or by check, bank draft or postal or express money
order, (ii) by the surrender of Stock then owned by the Grantee,
(iii)
the
proceeds of a loan from an independent broker-dealer whereby the loan is secured
by the option or the stock to be received upon exercise,
or
(iv) any combination of the foregoing;
provided,
that
each such method and time for payment and each such borrowing and terms and
conditions of repayment shall then be permitted by and be in compliance with
applicable law.
Shares
of Stock so surrendered in accordance with clause (ii) or (iv) shall be valued
at the Fair Market Value thereof on the date of exercise, surrender of such
Stock to be evidenced by delivery of the certificate(s) representing such shares
in such manner, and endorsed in such form, or accompanied by stock powers
endorsed in such form, as the Committee may determine.
3.
Termination
of Employment
.
(a)
If
a
Grantee's employment with the Corporation is terminated other than by Disability
or death, the terms of any then outstanding Incentive Stock Option held by
the
Grantee shall extend for a period ending on the earlier of the date on which
such Stock Option would otherwise expire or three months after such termination
of employment, and such Stock Option shall be exercisable to the extent it
was
exercisable as of such last date of employment.
(b)
If
a
Grantee's employment with the Corporation is terminated by reason of Disability,
the term of any then outstanding Incentive Stock Option held by the Grantee
shall extend for a period ending on the earlier of the date on which such Stock
Option would otherwise expire or twelve months after such termination of
employment, and such Stock Option shall be exercisable to the extent it was
exercisable as of such last date of employment.
(c)
If
a
Grantee's employment with the Corporation is terminated by reason of death,
the
representative of his estate or beneficiaries thereof to whom the Stock Option
has been transferred shall have the right during the period ending on the
earlier of the date on which such Stock Option would otherwise expire or twelve
months after such date of death, to exercise any then outstanding Incentive
Stock Options in whole or in part. If a Grantee dies without having fully
exercised any then outstanding Incentive Stock Options, the representative
of
his estate or beneficiaries thereof to whom the Stock Option has been
transferred shall have the right to exercise such Stock Options in whole or
in
part.
4.
Stock
Appreciation Rights
(a)
Grant
.
Stock
Appreciation Rights related to all or any portion of an Incentive Stock Option
may be granted by the Committee to any Grantee in connection with the grant
of
an Incentive Stock Option or unexercised portion thereof held by the Grantee
at
any time and from time to time during the term thereof. Each Stock Appreciation
Right shall be granted at least at Fair Market Value on the date of grant and
be
subject to such terms and conditions not inconsistent with the provisions of
this Part II as shall be determined by the Committee and included in the
agreement relating to such Stock Appreciation Right, subject in any event,
however, to the following terms and conditions of this Section 4. Each Stock
Appreciation Right may include limitations as to the time when such Stock
Appreciation Right becomes exercisable and when it ceases to be exercisable
that
are more restrictive than the limitations on the exercise of the Incentive
Stock
Option to which it relates.
(b)
Exercise
.
No
Stock Appreciation Right shall be exercisable with respect to such related
Incentive Stock Option or portion thereof unless such Incentive Stock Option
or
portion shall itself be exercisable at that time. A Stock Appreciation Right
shall be exercised only upon surrender of the related Incentive Stock Option
or
portion thereof in respect of which the Stock Appreciation Right is then being
exercised.
(c)
Amount
of Payment
.
On
exercise of a Stock Appreciation Right, a Grantee shall be entitled to receive
an amount equal to the product of (i) the amount by which the Fair Market Value
of a share of Stock on the date of exercise of the Stock Appreciation Right
exceeds the option price per share specified in the related Incentive Stock
Option and (ii) the number of shares of Stock in respect of which the Stock
Appreciation Right shall have been exercised.
(d)
Form
of Payment
.
Stock
Appreciation Rights may be settled in Stock, cash or a combination thereof.
The
number of shares of Stock to be distributed shall be the largest whole number
obtained by dividing the amount otherwise distributable in respect of such
settlement by the Fair Market Value of a share of Stock on the date of exercise
of the Stock Appreciation Right. The value of fractional shares of Stock shall
be paid in cash.
(e)
Effect
of Exercise of Right or Related Option
.
If the
related Incentive Stock Option is exercised in whole or in part, then the Stock
Appreciation Right with respect to the Stock purchased pursuant to such exercise
(but not with respect to any unpurchased Stock) shall be terminated as of the
date of exercise if such Stock Appreciation Right is not exercised on such
date.
(f)
Non-transferability
.
A Stock
Appreciation Right shall not be transferable or assignable by the Grantee other
than by will or the laws of descent and distribution, and shall be exercisable
during the Grantee's lifetime only by the Grantee.
(g)
Termination
of Employment
.
If the
Grantee ceases to be an Employee of the Corporation for any reason, each
outstanding Stock Appreciation Right shall be exercisable for such period and
to
such extent as the related Incentive Stock Option or portion
thereof.
III.
NON-QUALIFIED STOCK OPTION PROVISIONS
1.
Granting
of Stock Options
.
(a)
Officers,
Employees, Directors and Consultants shall be eligible to receive Non-Qualified
Stock Options under the Plan.
(b)
The
Committee shall determine and designate from time to time those officers,
Employees, Directors and Consultants who are to be granted Non-Qualified Stock
Options and the amount subject to each Non-Qualified Stock Option.
(c)
The
Committee may grant at any time new Non-Qualified Stock Options to an Employee,
Director or Consultant who has previously received Non-Qualified Stock Options
or other Stock Options, whether such prior Non-Qualified Stock Options or other
Stock Options are still outstanding, have previously been exercised in whole
or
in part, or are canceled in connection with the issuance of new Non-Qualified
Stock Options.
(d)
The
Committee shall determine the purchase price of each share of Stock subject
to a
Non-Qualified Stock Option. Such price shall not be less than 100% of the Fair
Market Value of such Stock on the date the Non-Qualified Stock Option is
granted.
(e)
The
Committee, in its sole discretion, shall determine whether any particular
Non-Qualified Stock Option shall become exercisable in one or more installments,
specify the installment dates, and, within the limitations herein provided,
determine the total period during which the Non-Qualified Stock Option is
exercisable. Further, the Committee may make such other provisions as may appear
generally acceptable or desirable to the Committee, including the extension
of a
Non-Qualified Stock Option, provided that such extension does not extend the
option beyond the period specified in paragraph (f) below.
(f)
No
Non-Qualified Stock Option shall be exercisable more than ten years from the
date such option is granted.
2.
Exercise
of Stock Options
.
The
option price of a Non-Qualified Stock Option shall be payable on exercise of
the
Stock Option (i) in cash or by check, bank draft or postal or express money
order, (ii) by the surrender of Stock then owned by the
Grantee,
(iii)
the proceeds of a loan from an independent broker-dealer whereby the loan is
secured by the option or the stock to be received upon exercise,
or
(iv) any combination of the foregoing;
provided,
that
each such method and time for payment and each such borrowing and terms and
conditions of repayment shall then be permitted by and be in compliance with
applicable law.
Shares
of Stock so surrendered in accordance with clause (ii) or (iv) shall be valued
at the Fair Market Value thereof on the date of exercise, surrender of such
Stock to be evidenced by delivery of the certificate(s) representing such shares
in such manner, and endorsed in such form, or accompanied by stock powers
endorsed in such form, as the Committee may determine.
3.
Termination
of Relationship
.
(a)
If
a
Grantee's employment with the Corporation is terminated, a Director Grantee
ceases to be a Director, or a Consultant Grantee ceases to be a Consultant,
other than by reason of Disability or death, the terms of any then outstanding
Non-Qualified Stock Option held by the Grantee shall extend for a period ending
on the earlier of the date established by the Committee at the time of grant
or
three months after the Grantee's last date of employment or cessation of being
a
Director or Consultant, and such Stock Option shall be exercisable to the extent
it was exercisable as of the date of termination of employment or cessation
of
being a Director or Consultant.
(b)
If
a
Grantee's employment is terminated by reason of Disability, a Director Grantee
ceases to be a Director by reason of Disability or a Consultant Grantee ceases
to be a Consultant by reason of Disability, the term of any then outstanding
Non-Qualified Stock Option held by the Grantee shall extend for a period ending
on the earlier of the date on which such Stock Option would otherwise expire
or
twelve months after the Grantee's last date of employment or cessation of being
a Director or Consultant, and such Stock Option shall be exercisable to the
extent it was exercisable as of such last date of employment or cessation of
being a Director or Consultant.
(c)
If
a
Grantee's employment is terminated by reason of death, a Director Grantee ceases
to be a Director by reason of death or a Consultant Grantee ceases to be a
Consultant by reason of death, the representative of his estate or beneficiaries
thereof to whom the Stock Option has been transferred shall have the right
during the period ending on the earlier of the date on which such Stock Option
would otherwise expire or twelve months following his death to exercise any
then
outstanding Non-Qualified Stock Options in whole or in part. If a Grantee dies
without having fully exercised any then outstanding Non-Qualified Stock Options,
the representative of his estate or beneficiaries thereof to whom the Stock
Option has been transferred shall have the right to exercise such Stock Options
in whole or in part.
4.
Stock
Appreciation Rights
(a)
Grant
.
Stock
Appreciation Rights related to all or any portion of a Non-Qualified Stock
Option may be granted by the Committee to any Grantee in connection with the
grant of a Non-Qualified Stock Option or unexercised portion thereof held by
the
Grantee at any time and from time to time during the term thereof. Each Stock
Appreciation Right shall be granted at least at Fair Market Value on the date
of
grant and be subject to such terms and conditions not inconsistent with the
provisions of this Part III as shall be determined by the Committee and included
in the agreement relating to such Stock Appreciation Right, subject in any
event, however, to the following terms and conditions of this Section 4. Each
Stock Appreciation Right may include limitations as to the time when such Stock
Appreciation Right becomes exercisable and when it ceases to be exercisable
that
are more restrictive than the limitations on the exercise of the Non-Qualified
Stock Option to which it relates.
(b)
Exercise
.
No
Stock Appreciation Right shall be exercisable with respect to such related
Non-Qualified Stock Option or portion thereof unless such Non-Qualified Stock
Option or portion shall itself be exercisable at that time. A Stock Appreciation
Right shall be exercised only upon surrender of the related Non-Qualified Stock
Option or portion thereof in respect of which the Stock Appreciation Right
is
then being exercised.
(c)
Amount
of Payment
.
On
exercise of a Stock Appreciation Right, a Grantee shall be entitled to receive
an amount equal to the product of (i) the amount by which the Fair Market Value
of a share of Stock on the date of exercise of the Stock Appreciation Right
exceeds the option price per share specified in the related Non-Qualified Stock
Option and (ii) the number of shares of Stock in respect of which the Stock
Appreciation Right shall have been exercised.
(d)
Form
of Payment
.
Stock
Appreciation Rights may only be settled in Stock, cash or any combination
thereof. The number of shares of Stock to be distributed shall be the largest
whole number obtained by dividing the amount otherwise distributable in respect
of such settlement by the Fair Market Value of a share of Stock on the date
of
exercise of the Stock Appreciation Right. The value of fractional shares of
Stock shall be paid in cash.
(e)
Effect
of Exercise of Right or Related Option
.
If the
related Non-Qualified Stock Option is exercised in whole or in part, then the
Stock Appreciation Right with respect to the Stock purchased pursuant to such
exercise (but not with respect to any unpurchased Stock) shall be terminated
as
of the date of exercise if such Stock Appreciation Right is not exercised on
such date.
(f)
Non-transferability
.
A Stock
Appreciation Right shall not be transferable or assignable by the Grantee other
than by will or the laws of descent and distribution, and shall be exercisable
during the Grantee's lifetime only by the Grantee.
(g)
Termination
of Employment
.
If the
Grantee ceases to be an officer, Employee, Director or Consultant of the
Corporation for any reason, each outstanding Stock Appreciation Right shall
be
exercisable for such period and to such extent as the related Non-Qualified
Stock Option or portion thereof.
IV.
RESTRICTED STOCK AWARDS
1.
Grant
of Restricted Stock
.
(a)
Officers, Employees, Directors and Consultants shall be eligible to receive
grants of Restricted Stock under the Plan.
(b)
The
Committee shall determine and designate from time to time those officers,
Employees, Directors and Consultants who are to be granted Restricted Stock
and
the number of shares of Stock subject to such Stock Award.
(c)
The
Committee, in its sole discretion, shall make such terms and conditions
applicable to the grant of Restricted Stock as may appear generally acceptable
or desirable to the Committee.
2.
Termination
of Relationship
.
(a)
If
a
Grantee's employment with the Corporation, a Director Grantee ceases to be
a
Director, or a Consultant Grantee ceases to be a Consultant, prior to the lapse
of any restrictions applicable to the Restricted Stock such Stock shall be
forfeited and the Grantee shall return the certificates representing such Stock
to the Corporation.
(b)
If
the
restrictions applicable to a grant of Restricted Stock shall lapse, the Grantee
shall hold such Stock free and clear of all such restrictions except as
otherwise provided in the Plan.
V.
UNRESTRICTED STOCK AWARDS
1.
Grant
of Unrestricted Stock
.
(a)
Officers,
Employees, Directors and Consultants shall be eligible to receive grants of
Unrestricted Stock under the Plan.
(b)
The
Committee shall determine and designate from time to time those officers,
Employees, Directors and Consultants who are to be granted Unrestricted Stock
and number of shares of Stock subject to such Stock Award.
2.
Issuance
of Stock
.
The
Grantee shall hold Stock issued pursuant to an Unrestricted Stock award free
and
clear of all restrictions except as otherwise provided in the Plan.
VI.
ADJUSTMENTS UPON MERGER, REORGANIZATION, DISSOLUTION OR CHANGE IN
CONTROL
1.
Substitution
of Options
.
In the
event of a corporate merger or consolidation, or the acquisition by the
Corporation of property or stock of an acquired corporation or any
reorganization or other transaction qualifying under Section 424 of the Code,
the Committee may, in accordance with the provisions of that Section, substitute
Stock Options, Stock Awards and Stock Appreciation Rights under this Plan for
Stock Options, Stock Awards and Stock Appreciation Rights under the plan of
the
acquired corporation provided (i) the excess of the aggregate Fair Market
Value of the shares of Stock subject to Stock Option immediately after the
substitution over the aggregate option price of such Stock is not more than
the
similar excess immediately before such substitution and (ii) the new Stock
Option does not give the Grantee additional benefits, including any extension
of
the exercise period. Alternatively,
the
Committee may provide, that each Stock Option, Stock Award and Stock
Appreciation Right granted under the Plan shall terminate as of a date to be
fixed by the Board;
provided,
that no
less than thirty days written notice of the date so fixed shall be given to
each
holder, and each holder shall have the right, during the period of fifteen
days
preceding such termination, to exercise the Stock Options, Stock Awards and
Stock Appreciation Rights as to all or any part of the Stock covered thereby,
including Stock as to which such would not otherwise be exercisable.
2.
Adjustment
Provisions
.
(a)
In
the
event that a dividend shall be declared upon the Stock payable in shares of
the
Corporation's common stock, the number of shares of Stock then subject to any
Stock Option or Stock Award outstanding under the Plan and the number of shares
reserved for the grant of Stock Options or Stock Awards pursuant to the Plan
shall be adjusted by adding to each such share the number of shares which would
be distributable in respect thereof if such shares had been outstanding on
the
date fixed for determining the shareholders of the Corporation entitled to
receive such share dividend.
(b)
If
the
shares of Stock outstanding are changed into or exchanged for a different number
or class or other securities of the Corporation or of another corporation,
whether through split-up, merger, consolidation, reorganization,
reclassification or recapitalization then there shall be substituted for each
share of Stock subject to any such Stock Option or Stock Award and for each
share of Stock reserved for the grant of Stock Options or Stock Awards pursuant
to the Plan the number and kind of shares or other securities into which each
outstanding share of Stock shall have been so changed or for which each share
shall have been exchanged.
(c)
In
the
event there shall be any change, other than as specified above in this Section
2, in the number or kind of outstanding shares of Stock or of any shares or
other securities into which such shares shall have been changed or for which
they shall have been exchanged, then if the Board shall, in its sole discretion,
determine that such change equitably requires an adjustment in the number or
kind of shares theretofore reserved for the grant of Stock Options or Stock
Awards pursuant to the Plan and of the shares then subject to Stock Options
or
Stock Awards, such adjustment shall be made by the Board and shall be effective
and binding for all purposes of the Plan and of each Stock Option and Stock
Award outstanding thereunder.
(d)
Each
Stock Appreciation Right outstanding at the time of any adjustment pursuant
to
this Section 2 and the number of outstanding Stock Appreciation Rights, shall
be
adjusted, changed or exchanged in the same manner as related Stock
Options.
(e)
In
the
case of any such substitution or adjustment as provided for in this Section
2,
the option price set forth in each outstanding Stock Option for each share
covered thereby prior to such substitution or adjustment will be the option
price for all shares or other securities which shall have been substituted
for
such share or to which such share shall have been adjusted pursuant to this
Section 2, and the price per share shall be adjusted accordingly.
(f)
No
adjustment or substitution provided for in this Section 2 shall require the
Corporation to sell a fractional share, and the total substitution or adjustment
with respect to each outstanding Stock Option shall be limited
accordingly.
(g)
Upon
any
adjustment made pursuant to this Section 2 the Corporation will, upon request,
deliver to the Grantee a certificate setting forth the option price thereafter
in effect and the number and kind of shares or other securities thereafter
purchasable on the exercise of such Stock Option.
3.
Dissolution
or Liquidation
.
In the
event of a proposed dissolution or liquidation of the Corporation, to the extent
an Award has not been previously exercised, it will terminate immediately prior
to the consum-mation of such proposed action.
4
.
Change
in Control
.
Notwithstanding Sections 1 and 2 above, in the event of a Change of Control
(as
defined below), except as otherwise determined by the Board, the Grantee shall
fully vest in and have the right to exercise the Awards as to all of the Stock,
including Stock as to which it would not otherwise be vested or exercisable.
If
an Award becomes fully vested and exercisable as the result of a Change of
Control, the Committee shall notify the Grantee in writing or electronically
prior to the Change of Control that the Award shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice,
and
the Award shall terminate upon the expiration of such period. For purposes
of
this Agreement, a “Change of Control” means the happening of any of the
following events:
(a)
When
any
“person,” as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (“Exchange Act”) (other than the
Corporation, a Subsidiary or a Corporation employee benefit plan, including
any
trustee of such plan acting as trustee) is or becomes the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing fifty percent (50%) or more of the
combined voting power of the Corporation’s then outstanding securities entitled
to vote generally in the election of directors; or
(b)
The
stockholders of the Corporation approve a merger or consolidation of the
Corporation with any other corporation, other than a merger or consolidation
which would result in the voting securities of the Corporation outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than fifty percent (50%) of the total voting power represented
by
the voting securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Corporation approve an agreement for the sale or disposition by the Corporation
of all or substantially all the Corporation’s assets; or
(c)
A
change
in the composition of the Board of the Corporation, as a result of which less
than a majority of the directors are Incumbent Directors. “
Incumbent
Directors
”
shall
mean directors who either (A) are directors of the Corporation as of the
date the Plan is approved by the stockholders, or (B) are elected, or
nominated for election, to the Board with the affirmative votes of at least
a
majority of the Incumbent Directors at the time of such election or nomination
(but shall not include an individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors to the Corporation).
VII.
INDEMNIFICATION
Each
person who is or shall have been a member of the Committee, or of the Board,
shall be indemnified and held harmless by the Corporation against and from
any
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by him or her in connection with or resulting from any claim, notion,
suit, or proceeding to which he or she may be a party or in which he or she
may
be involved by reason of any action taken or failure to act under the Plan
or
any Award agreement and against and from any and all amounts paid by him or
her
in settlement thereof, with the Corporation’s approval, or paid by him or her in
settlement thereof, with the Corporation’s approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against
him
or her, provided he or she shall give the Corporation an opportunity, at its
own
expense, to handle and defend the same before he or she undertakes to handle
and
defend it on his or her own behalf. The foregoing right of indemnification
shall
not be exclusive of any other rights of indemnification to which such persons
may be entitled under the Corporation’s Articles of Incorporation or Bylaws, as
a matter of law, or otherwise, or any power that the Corporation may have to
indemnify them or hold them harmless.
VIII.
CONDITIONS
UPON ISSUANCE OF SHARES
1.
Legal
Compliance
.
Stock
shall not be issued pursuant to the exercise of an Award unless the exercise
of
such Award and the issuance and delivery of Stock shall comply with applicable
laws and shall be further subject to the approval of counsel for the Corporation
with respect to such compliance.
2.
Investment
Representations
.
As a
condition to the exercise of an Award, the Corporation may require the Grantee
exercising such Award to represent and warrant at the time of any such exercise
that the Stock is being purchased only for investment and without any present
intention to sell or distribute such Stock if, in the opinion of counsel for
the
Corporation, such a representation is required.
3.
No
Rights as Stockholder
.
No
Grantee will have any of the rights of a stockholder with respect to any Stock
until the Stock is issued to the said Grantee. After Stock is issued to the
Grantee, the Grantee will be a stockholder and will have all the rights of
a
stockholder with respect to such Stock, including the right to vote and receive
all dividends or other distributions made or paid with respect to such Stock.
IX.
LEGAL
CONSTRUCTION
1.
Gender
and Number
.
Except
where otherwise indicated by the context, any masculine term used herein also
shall include the feminine; the plural shall include the singular and the
singular shall include the plural.
2.
Severability
.
In the
event any provision of the Plan shall be held illegal or invalid for any reason,
such illegality or invalidity shall not affect the remaining parts of the Plan,
and the Plan shall be construed and enforced as if the illegal or invalid
provision had not been included.
3.
Requirements
of Law
.
The
granting of Awards and the issuance of Stock under the Plan shall be subject
to
all applicable laws.
4.
Governing
Law
.
The
Plan and all Award agreements shall be construed in accordance with and governed
by the laws of the State of California.
5.
Captions
.
Captions are provided herein for convenience only, and shall not serve as a
basis for interpretation or construction of the Plan.
[End
of
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