UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the
Securities
Exhange Act of 1934
Filed
by
the Registrant
x
Filed
by
a Party other than the Registrant
o
Check
the
appropriate box:
o
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Preliminary
proxy statement
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o
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
proxy statement
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o
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Definitive
Additional Materials
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o
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Soliciting
Material under Rule 14a-12
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Xethanol
Corporation
(Name
of
Registrant as Specified In Its Charter)
______________________________________________
(Name
of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
o
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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_________________________________________________________________________________________
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(2)
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Aggregate
number of securities to which transaction
applies:
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_________________________________________________________________________________________
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act
Rule
0-11 (set forth the amount on which the filing fee is calculated
and state
how it was determined):
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_________________________________________________________________________________________
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(4)
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Proposed
maximum aggregate value of
transaction:
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_________________________________________________________________________________________
_________________________________________________________________________________________
o
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Fee
paid previously with preliminary
materials.
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o
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule
0-11(a)(2) and identify the filing for which the offsetting fee was
paid
previously. Identify the previous filing by registration statement
number,
or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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______________________________________
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(2)
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Form,
Schedule or Registration Statement
No.:
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______________________________________
______________________________________
______________________________________
1185
Avenue of the Americas, 20th
Floor
New
York, NY 10036
December
27, 2007
Dear
Stockholder:
I
would
like to extend a personal invitation for you to join us at our annual meeting
of
stockholders on Tuesday, January 22, 2008, at 1:00 p.m., Eastern Standard Time,
at our headquarters located at 1185 Avenue of the Americas, 20th Floor, New
York, New York.
At
this
year’s meeting, we are asking our stockholders elect six directors, to approve
an amendment to our 2005 Incentive Compensation Plan to increase the number
of
shares of common stock available for issuance under the plan from 4,000,000
to
6,500,000 and to ratify the appointment of Imowitz Koenig & Co., LLP as our
independent registered public accounting firm for 2007.
I
urge
you to vote in favor of each of these proposals, as our board of directors
has
recommended.
Attached
you will find a notice of meeting and proxy statement that contains information
about these items as well as specific details of the meeting.
Your
vote is important
.
Whether
or not you expect to attend the meeting, I encourage you to vote. Please sign
and return your proxy card before the meeting. This will assure that your shares
will be represented and voted at the meeting, even if you cannot
attend.
Sincerely,
/s/
David
R. Ames
David
R.
Ames
Chief
Executive Officer and President
XETHANOL
CORPORATION
1185
Avenue of the Americas, 20th
Floor
New
York, NY 10036
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
You
are
invited to attend the 2007 annual meeting of the stockholders of Xethanol
Corporation:
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When
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1:00
p.m., Eastern Standard Time, on Tuesday, January 22, 2008.
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Where
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Our
headquarters located at 1185 Avenue of the Americas, 20th Floor, New
York,
New York.
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Items
of Business
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To
elect six directors to serve until the 2008 annual meeting of stockholders
or until their successors have been duly elected and qualified (Proposal
No. 1);
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To
approve an amendment to our 2005 Incentive Compensation Plan to increase
the number of shares of common stock available for issuance under
the plan
from 4,000,000 to 6,500,000 (Proposal No. 2);
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To
ratify the appointment of Imowitz Koenig & Co., LLP as our independent
registered public accounting firm for the fiscal year ending December
31,
2007 (Proposal No. 3); and
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To
conduct any other business that properly comes before the meeting
or any
adjournment or postponement of the meeting.
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Record
Date
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You
are entitled to vote if you are a stockholder of record at the close
of
business on December 11, 2007.
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Voting
by Proxy
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Our
board of directors is soliciting your proxy to assure that a quorum
is
present and that your shares are represented and voted at the meeting.
Please see the attached proxy statement and enclosed proxy card (no
extra
postage is needed for the enclosed envelope if mailed in the U.S.).
If you
later decide to vote at the meeting, information on revoking your
proxy
before the meeting is also provided. You may receive more than one
set of
proxy materials and proxy cards. Please promptly complete, sign and
return
each proxy card you receive to ensure that all of your shares are
represented and voted.
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Attendance
at Meeting
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If
you plan to attend the annual meeting, please be sure to mark the
box
provided on the proxy card.
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Recommendations
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Our
board of directors recommends that you vote “FOR” each nominee for
director and “FOR” each of Proposal No. 2 and Proposal No.
3.
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Your
vote is important
.
Whether
or not you expect to attend the meeting, please submit your proxy promptly
to
assure that a quorum is present.
Thank
you
for your attention to this important matter.
By
Order of the Board of Directors,
/s/
Gary Flicker
Gary
Flicker
Chief
Financial Officer
New
York,
New York
December
27, 2007
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1185
Avenue of the Americas, 20th
Floor
New
York, NY 10036
PROXY
STATEMENT FOR THE
2007
ANNUAL MEETING OF STOCKHOLDERS
The
enclosed proxy is solicited by the board of directors of Xethanol Corporation
for use at the 2007 annual meeting of our stockholders and any adjournment
or
postponement of it.
Your
vote is very important
.
For
this reason, our board of directors is requesting that you allow your shares
to
be represented at the annual meeting by the proxies named on the enclosed proxy
card. We are first mailing this proxy statement to all stockholders entitled
to
vote at the annual meeting on or about December 27, 2007.
In
this
proxy statement, terms such as “we,” “us” and “our” refer to Xethanol
Corporation.
When
is the annual meeting?
The
annual meeting will be held at 1:00 p.m., Eastern Standard Time, on Tuesday,
January 22, 2008.
Where
will the annual meeting be held?
The
annual meeting will be held at our headquarters located at 1185 Avenue of the
Americas, 20th Floor, New York, New York 10036.
What
items will be voted on at the annual meeting?
There
are
three matters scheduled for a vote:
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to
elect six directors to serve until the 2008 annual meeting of stockholders
or until their successors have been duly elected and
qualified;
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to
approve an amendment to our 2005 Incentive Compensation Plan, as
amended
on August 10, 2006 (the “Plan”) to increase the number of shares of common
stock available for issuance under the Plan from 4,000,000 to 6,500,000;
and
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to
ratify the appointment of Imowitz Koenig & Co., LLP as our independent
registered public accounting firm for the fiscal year ending December
31,
2007.
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As
of the
date of this proxy statement, we are not aware of any other matters that will
be
presented for consideration at the annual meeting.
What
are the recommendations of our board of directors?
Our
board
of directors recommends that you vote:
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“FOR”
the election of each of the six nominees to serve on the board of
directors;
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“FOR”
the approval of an amendment to the Plan to increase the number of
shares
of common stock available for issuance under the Plan from 4,000,000
to
6,500,000; and
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“FOR”
the ratification of the appointment of Imowitz Koenig as our independent
registered public accounting firm for the fiscal year ending December
31,
2007.
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Why
are we proposing to amend the Plan to increase the number of shares of common
stock available for issuance under the Plan from 4,000,000 to
6,500,000?
As
explained below in Proposal No. 2, the total number of awards currently
outstanding under the Plan is 1,562,070 shares greater than the 4,000,000 share
limit in the Plan. This excess resulted from grants of options that were
expressly subject to stockholder approval of an amendment to the Plan to cover
those options. If stockholders approve Proposal No. 2, we will have enough
options to cover the excess shares, plus an additional 937,930 shares for future
awards. As described in greater detail below, if our stockholders do not approve
Proposal No. 2, then:
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the
excess options will be void, and our compensation committee will
have to
consider alternative incentives for the holders of these options;
and
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we
will have few if any shares available for awards under the Plan in
the
future.
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Will
our directors attend the annual meeting?
We
encourage, but do not require, our directors to attend annual meetings of
stockholders.
Who
is entitled to vote at the annual meeting?
Only
stockholders of record at the close of business on December 11, 2007 are
entitled to receive notice of the annual meeting and to vote the shares that
they held on that date at the annual meeting, or any postponement or adjournment
of the annual meeting. As of the close of business on the record date, there
were 28,609,103 shares of common stock outstanding.
Stockholders
of Record: Shares Registered in Your Name.
If the
common stock you held on the record date was registered directly in your name
with our transfer agent (American Stock Transfer & Trust Company), then you
are a stockholder of record. As a stockholder of record, you may vote in person
at the annual meeting or vote by proxy. Whether or not you plan to attend the
annual meeting, we urge you to fill out and return the enclosed proxy card
to
ensure your vote is counted.
Beneficial
Owner: Shares Registered in the Name of a Broker or Bank.
If the
common stock you held on the record date was held in an account at a brokerage
firm, bank, dealer or other similar organization, then you are a beneficial
owner of shares held in “street name” and these proxy materials are being
forwarded to you by that organization. The organization holding your account
is
considered the stockholder of record for purposes of voting at the annual
meeting. As a beneficial owner, you have the right to direct your broker or
other agent on how to vote the shares in your account. You are also invited
to
attend the annual meeting. Because you are not the stockholder of record,
however, you may not vote your shares in person at the meeting unless you
request and obtain a valid proxy from your broker or other agent.
How
do I vote?
On
Proposal No. 1 (election of directors), you may either vote “FOR” all the
nominees to the board of directors or you may withhold your vote for all
nominees or for any nominee you specify. You may vote “FOR” or “AGAINST” or
abstain from voting on Proposal No. 2 (approval of an amendment to the Plan)
and
Proposal No. 3 (ratification of the appointment of Imowitz Koenig). The
procedures for voting are explained below:
Stockholder
of Record: Shares Registered in Your Name.
If you
are a stockholder of record, you may vote in person at the annual meeting or
vote by proxy using the enclosed proxy card. Whether or not you plan to attend
the meeting, we urge you to vote by proxy to ensure your vote is counted. You
may still attend the meeting and vote in person if you have already voted by
proxy.
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To
vote in person, come to the annual meeting. We will give you a ballot
when
you arrive.
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To
vote using the enclosed proxy card, simply complete, sign and date
the
enclosed proxy card and return it promptly in the postage paid envelope
provided. If you return your signed proxy card to us before the annual
meeting, we will vote your shares as you
direct.
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Beneficial
Owner: Shares Registered in the Name of Broker or Bank.
If you
are a beneficial owner of shares registered in the name of your broker, bank
or
other agent, you should have received a proxy card and voting instructions
with
these proxy materials from that organization rather than from us. Simply
complete and mail the proxy card to ensure that your vote is counted. To vote
in
person at the annual meeting, you must obtain a valid proxy card from your
broker, bank or other agent. Follow the instructions from your broker or bank
included with these proxy materials, or contact your broker or bank to request
a
proxy form.
How
many votes do I have?
On
each
matter to be voted, you have one vote for each share of common stock you own
as
of the record date. Stockholders do not have cumulative voting rights or
dissenters’ rights.
What
if I return a proxy card but do not make specific choices?
If
you
return a signed and dated proxy card without marking any voting selections,
your
shares will be voted “FOR” the election of all six nominees for director, “FOR”
the approval of the amendment to the Plan and “FOR” the ratification of the
appointment of Imowitz Koenig. If any other matter is properly presented at
the
meeting, your proxy (one of the individuals named on your proxy card) will
vote
your shares as recommended by our board of directors or, if no recommendation
is
given, will vote your shares using his best judgment.
Can
I change my vote after I return my proxy card?
Yes.
You
can revoke your proxy at any time before the final vote at the meeting. If
you
are the record holder of your shares, you may revoke your proxy in any one
of
three ways:
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You
may submit another properly completed proxy bearing a later
date;
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You
may send a written notice that you are revoking your proxy to Xethanol
Corporation at 1185 Avenue of the Americas, New York, New York 10036,
Attention: Gary Flicker, Chief Financial Officer;
or
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You
may attend the annual meeting and notify the election officials at
the
meeting that you wish to revoke your proxy and vote in person. Simply
attending the meeting will not, by itself, revoke your
proxy.
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If
your
shares are held by your broker or bank as a nominee or agent, you should follow
the instructions provided by your broker, bank or agent.
How
are votes counted?
Votes
will be counted by the inspector of election appointed for the meeting, who
will
separately count “FOR” and withheld votes, and, with respect to proposals other
than the election of directors, “AGAINST” votes, abstentions and broker
non-votes. Abstentions will be counted towards the vote total for each proposal
(other than for the election of directors) and will have the same effect as
“AGAINST” votes.
If
your
shares are held by your broker as your nominee (that is, in “street name”), you
will need to obtain a proxy form from the institution that holds your shares
and
follow the instructions included on that form regarding how to instruct your
broker to vote your shares. Please note that brokers that have not received
voting instructions from their clients cannot vote on their clients’ behalf on
“non-routine” proposals, but may vote their clients’ shares on other proposals.
If a broker, bank, custodian, nominee or other record holder of our common
stock
indicates on a proxy that it does not have discretionary authority to vote
certain shares on a particular matter, then those shares will be treated as
“broker non-votes.”
With
respect to Proposal No. 2 (approval of the amendment to our 2005 Incentive
Compensation Plan), your failure to give voting instructions to your broker
will
result in a broker non-vote because
your
broker is not entitled to vote your shares on this matter unless it receives
instructions from you. Any broker non-vote will have the same effect as a vote
“AGAINST” the proposal.
With
respect to each of the other proposals, your broker is entitled to vote your
shares on these matters if no instructions are received from you. Shares
represented by broker non-votes will be counted in determining whether there
is
a quorum.
How
many votes are needed to approve each proposal?
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For
the election of directors, the six nominees receiving the most “FOR” votes
from the shares of common stock present either in person or by proxy
and
entitled to vote at the annual meeting will be elected. Only votes
“FOR”
or votes withheld with respect to any or all of the nominees will
affect
the outcome.
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To
be approved, Proposal No. 2 (the approval of the amendment to the
Plan)
must receive “FOR” votes from the majority of the shares of common stock
present either in person or by proxy and entitled to vote at the
annual
meeting.
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Proposal
No. 3 (the ratification of the appointment of Imowitz Koenig as our
independent registered public accounting firm for the fiscal year
ending
December 31, 2007) must receive “FOR” votes from the majority of the
shares of common stock present either in person or by proxy and entitled
to vote at the annual meeting.
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What
is the quorum requirement?
A
quorum
of stockholders is necessary to hold a valid meeting. A quorum will be present
if at least a majority of the outstanding shares of common stock entitled to
vote are represented by stockholders present at the meeting or by proxy. On
the
record date, there were 28,609,103 shares outstanding and entitled to vote.
Therefore, at least 14,304,551 shares of common stock entitled to vote at the
annual meeting must be present either in person or by proxy for a quorum to
be
present.
Your
shares will be counted towards the quorum only if you submit a valid proxy
(or
one is submitted on your behalf by your broker, bank or other nominee) or if
you
attend the annual meeting in person. Abstentions and broker non-votes will
be
counted towards the quorum requirement. If there is no quorum, a majority of
the
votes present in person or represented by proxy at the annual meeting may
adjourn the meeting to another date.
How
can I find out the results of the voting at the annual
meeting?
Preliminary
voting results will be announced at the annual meeting. Final results will
be
published in our Annual Report on Form 10-K for the year ending December 31,
2007.
How
and when may I submit a stockholder proposal for the 2008 annual meeting of
stockholders?
We
will
consider stockholder proposals for inclusion in our proxy materials for the
2008
annual meeting of stockholders if they are received at our executive offices
within a reasonable time before we begin to print and send our proxy materials
and comply with all applicable requirements of Rule l4a-8 promulgated under
the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). We intend to
provide the deadline for stockholder proposals for inclusion in our proxy
materials for the 2008 annual meeting of stockholders in one of our quarterly
reports on Form 10-Q or current reports on Form 8-K.
Our
bylaws establish an advance notice procedure with regard to certain matters,
including stockholder proposals and nominations for individuals for election
to
our board of directors. For stockholder proposals and stockholder nominations
for director to be properly brought before an annual meeting by a stockholder
under our bylaws, the stockholder must have given timely notice in writing
to
our corporate secretary.
With
respect to stockholder proposals, to be timely in connection with an annual
meeting, a stockholder’s notice and other required information must be received
at our principal executive offices not less than 90 days nor more than 180
days
prior to the earlier of the date of the annual meeting or the corresponding
date
on which the
immediately
preceding year’s annual meeting was held. To be timely in connection with a
special meeting, a stockholder’s notice and other required information must be
received at our principal executive offices not less than 40 days nor more
than
60 days prior to the date of the special meeting; provided that in the event
that less than 50 days’ notice or prior public disclosure of the date of the
special meeting is given or made to stockholders, such notice and other items
must be received not later than the close of business on the 10th day following
the day on which such notice of the date of the special meeting was mailed
or
public disclosure was made. The stockholder’s notice referred to above must set
forth as to each matter proposed:
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a
brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting
and, if
such business includes a proposal to amend our charter or bylaws,
the
language of the proposed amendment;
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the
name and address, as they appear on our books, of the stockholder
proposing such business;
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a
representation of the stockholder as to the class and number of shares
of
our capital stock that are beneficially owned by the stockholder,
and the
stockholder’s intent to appear in person or by proxy at the meeting to
propose such business;
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a
list of the names and addresses of other beneficial owners of shares
of
our capital stock, if any, with whom such stockholder is acting in
concert, and the number of shares of each class of our capital stock
beneficially owned by each such beneficial
owner;
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any
material interest of such stockholder in such proposal or business;
and
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if
the proposal relates to a proposed change to our charter or bylaws,
an
opinion of counsel, the form and substance of which shall be reasonably
satisfactory to our board of directors, to the effect that such change
will not conflict with Delaware
law.
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With
respect to stockholder nominations for a director, to be timely in connection
with an annual meeting, a stockholder’s notice and other required information
must be received at our principal executive offices not less than 90 days nor
more than 180 days prior to the earlier of the date of the annual meeting or
the
corresponding date on which the immediately preceding year’s annual meeting was
held. To be timely in connection with a special meeting at which directors
are
to be elected, a stockholder’s notice and other required information must be
received at our principal executive offices not later than the close of business
on the tenth day following the day on which such notice of the date of the
special meeting was mailed or public disclosure was made, whichever occurs
first. At such time, the stockholder must also submit written evidence,
reasonably satisfactory to our corporate secretary, that the stockholder is
a
stockholder of Xethanol. The stockholder’s notice referred to above must set
forth:
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the
name and address of the stockholder;
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the
number of shares of each class of our capital stock of which the
stockholder is the beneficial owner;
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the
name and address of each of the persons with whom the stockholder
is
acting in concert;
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the
number of shares of capital stock of which each such person with
whom the
stockholder is acting in concert is the beneficial owner pursuant
to which
the nomination or nominations are to be made;
and
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a
description of all arrangements or understandings between the stockholder
and each proposed nominee and any other person or persons (naming
such
person or persons) pursuant to which the nomination or nominations
are to
be made by the stockholder.
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The
stockholder’s notice referred to above must also set forth, as to each person
whom the stockholder proposes to nominate for election as a
director:
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the
name, age, business address and residence address of such proposed
nominee;
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the
principal occupation or employment of such proposed
nominee;
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the
class and number of shares of our common stock beneficially owned
by such
proposed nominee;
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such
other information with respect to each such proposed nominee that
would be
required to be provided in a proxy statement prepared in accordance
with
Regulation 14A under the Exchange Act; and
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a
notarized affidavit executed by each such proposed nominee to the
effect
that, if elected as a director, he will serve and that he is eligible
for
election as a member of our board of
directors.
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The
chairman at each meeting of stockholders may determine, if the facts warrant,
that a matter has not been properly brought before the meeting and, therefore,
may not be considered at the meeting. In addition, if a stockholder submits
a
proposal outside of Rule 14a-8 for our 2007 annual meeting, and the proposal
fails to comply with the advance notice procedures described by our bylaws,
then
our proxy may confer discretionary authority on the persons being appointed
as
proxies on behalf of our board of directors to vote on the
proposal.
All
notice of proposals and nominations by stockholders, whether or not to be
included in our proxy materials, should be sent to us at
Xethanol
Corporation, 1185 Avenue of the Americas, New York, New York 10036; Attention:
Gary Flicker, Chief Financial Officer
.
How
can I obtain copies of the exhibits to our Annual Report on Form 10-KSB, as
amended?
Included
with these proxy materials is a copy of our 2006 Annual Report on Form 10-KSB,
as amended, without exhibits, as filed with the SEC. We will furnish to each
person whose proxy is solicited, on the written request of that person, a copy
of the exhibits to that annual report for a charge of ten cents per page. Please
direct your request to Gary Flicker, Chief Financial Officer, Xethanol
Corporation, 1185 Avenue of the Americas, New York, New York
10036.
Who
is paying for this proxy solicitation?
We
will
pay for the entire cost of soliciting proxies. In addition to these mailed
proxy
materials, our directors and employees may also solicit proxies in person,
by
telephone or by other means of communication. We will not pay directors and
employees any additional compensation for soliciting proxies. We may also engage
the services of others to solicit proxies in person, by telephone or by other
means of communication. We may also reimburse brokerage firms, banks and other
agents for the cost of forwarding proxy materials to beneficial
owners.
How
many copies should I receive if I share an address with another
stockholder?
The
SEC
has adopted rules that permit companies and intermediaries, such as brokers,
to
satisfy the delivery requirements for proxy statements and annual reports with
respect to two or more stockholders sharing the same address by delivering
a
single proxy statement addressed to those stockholders. This process, which
is
commonly referred to as “householding,” potentially provides extra convenience
for stockholders and cost savings for companies.
We
and
some brokers may be householding our proxy materials by delivering a single
proxy statement and annual report to multiple stockholders sharing an address
unless contrary instructions have been received from the affected stockholders.
Once you have received notice from your broker or us that they or we will be
householding materials to your address, householding will continue until you
are
notified otherwise or until you revoke your consent. If at any time you no
longer wish to participate in householding and would prefer to receive a
separate proxy statement and annual report, or if you are receiving multiple
copies of the proxy statement and annual report and wish to receive only one,
please notify your broker if your shares are held in a brokerage account or
us
if you are a stockholder of record. You can notify us by sending a written
request to Xethanol Corporation, c/o Gary Flicker, Chief Financial Officer,
1185
Avenue of the Americas, New York, New York 10036, or by calling (646) 723-4000.
In addition, we will promptly deliver, upon written or oral request to the
address or telephone number above, a separate copy of the annual report and
proxy statement to a stockholder at a shared address to which a single copy
of
the documents was delivered.
Who
should I contact if I have any questions?
If
you
have any questions about the annual meeting, these proxy materials or your
ownership of our common stock, please contact us by mail at Xethanol
Corporation, c/o Gary Flicker, Chief Financial Officer, 1185 Avenue of the
Americas, New York, New York 10036, by calling (646) 723-4000 or by facsimile
at
(646) 723-4001.
ELECTION
OF DIRECTORS
The
number of directors constituting our board of directors is fixed from time
to
time by resolution of the board of directors. The number of directors comprising
our full board of directors is currently fixed at eight but will be fixed at
six
effective at the annual meeting. Eight directors currently serve on our board
of
directors. The terms of all eight of our incumbent directors expire at the
annual meeting. Six of our incumbent directors are standing for reelection
at
the annual meeting. Two of our current directors, Lawrence S. Bellone and
Christopher d’Arnaud-Taylor, are not standing for reelection. Each of the six
incumbent directors standing for reelection (a) was unanimously recommended
for
election to the board of directors by the members of our governance committee,
who are “independent” within the meaning of Section 121A of the Company Guide of
the American Stock Exchange and (b) is recommended for reelection by our board
of directors. If elected at the annual meeting, these nominees will serve as
our
directors until the 2008 annual meeting of stockholders and until their
successors are elected and qualified, or until their earlier death, resignation
or removal.
Directors
are elected by a plurality of the votes present in person or represented by
proxy and entitled to vote at the annual meeting. If there exists any vacancy
on
our board of directors, the vacancy may be filled by the affirmative vote of
a
majority of the directors then in office, although less than a quorum, or by
a
sole remaining director, or by the requisite vote of the stockholders at an
annual meeting of the stockholders or at a special meeting of the stockholders
called for that purpose, and the directors so elected shall serve until the
next
annual meeting of stockholders and until the director’s successor is elected and
qualified. This includes vacancies created by an increase in the number of
directors.
Shares
represented by executed proxies will be voted, if authority to do so is not
withheld, for the election of each of the director nominees listed below. If
any
nominee should be unavailable for election as a result of an unexpected
occurrence, those shares will be voted for the election of a substitute nominee
as the independent directors may propose. We are not aware of any circumstances
likely to cause any nominee to become unavailable for election. Each of the
nominees named below has agreed to serve if elected. Proxies cannot be voted
for
more than six nominees.
Director
Nominees
Information
about each director nominee, including age, tenure as a director and committee
memberships is provided in the table below. Additional information about each
director nominee’s principal occupation and business experience during at least
the past five years follows.
Name
of Director/Nominee
|
|
Age
|
|
Director
Since
|
|
Board
Committees
|
|
|
|
|
|
|
|
David
R. Ames
|
|
58
|
|
October
2006
|
|
—
|
|
|
|
|
|
|
|
William
P. Behrens
|
|
69
|
|
October
2006
|
|
Compensation
Committee
Governance
Committee
Executive
Committee
|
|
|
|
|
|
|
|
Gil
Boosidan
|
|
35
|
|
January
2007
|
|
Audit
Committee, Chairman
|
|
|
|
|
|
|
|
Richard
D. Ditoro
|
|
70
|
|
September
2006
|
|
Compensation
Committee, Chairman
Governance
Committee
Science
and Technology Committee
|
|
|
|
|
|
|
|
Robert
L. Franklin
|
|
70
|
|
January
2007
|
|
Science
and Technology Committee,
Chairman
Audit
Committee
Executive
Committee
|
|
|
|
|
|
|
|
Edwin
L. Klett
|
|
72
|
|
December
2006
|
|
Governance
Committee, Chairman
Audit
Committee
Compensation
Committee
Executive
Committee
|
David
R. Ames
became
our Chief Executive Officer and President on November 9, 2006 and has served
as
a member of our board of directors since October 1, 2006. Mr. Ames has been
an
active venture capital investor in alternative energy companies, technologies,
processes and services. He is currently a member of the National Ethanol Vehicle
Coalition (NEVC), an association dedicated to bringing together political,
business, industry and scientific leaders to focus on the alternative energy
marketplace. In 2004, Mr. Ames co-founded Alterna Energy to make investments
in
alternative energy companies. From 1994 through 1999, Mr. Ames served as
Chairman, President and Chief Executive Officer of Convergence.com, a provider
of high-speed cable modem broadband internet access and other data services
over
cable systems that was founded by Mr. Ames in 1994 and acquired by C-COR
Incorporated in 1999.
William
P. Behrens
became
our non-executive Chairman of the Board on November 9, 2006 and has served
as a
member of our board of directors since October 1, 2006. Mr. Behrens serves
as
the Vice Chairman at Northeast Securities, Inc., where he has built a
significant presence in private-client advisory services and institutional
brokerage. He joined Northeast Securities with over 30 years of experience
from
Ernst & Company, most recently as Chairman and CEO of Investec Ernst &
Company (a wholly owned subsidiary of Investec Group, Ltd.). Mr. Behrens
currently serves as an Official for the American Stock Exchange and also served
as a member of the Self-Regulatory Organizations Task Force on Options Reform
and on committees for the FISC, American Stock Exchange, NSCC and NASD. He
is
also a director of Volumetric Fund, Inc.
Gil
Boosidan
became
a
member of our board of directors on January 29, 2007. Until February 2007,
Mr.
Boosidan served as Senior Vice President of IDT Corporation, a New York Stock
Exchange listed company, as well as Treasurer of IDT Investments, Inc., a
subsidiary of IDT that managed a substantial portion of IDT’s cash and
investments. In that role, Mr. Boosidan managed its multi-million fixed income
portfolio, and he coordinated IDT’s commercial banking relationships, borrowing,
trading and risk management.
Richard
D. Ditoro
became
a
member of our board of directors on September 7, 2006. Mr. Ditoro previously
served as a member of our board of directors from July 28, 2005 through August
10, 2006, the date of our 2006 annual meeting of stockholders, at which Mr.
Ditoro did not stand for reelection. Mr. Ditoro is currently a principal in
the
consulting firm Merestone Development. In this capacity, Mr. Ditoro provides
due
diligence, financial modeling, market research, acquisition candidate profiling
and strategic partnering advice and assistance to clients in the life sciences
and specialty chemical sectors. Before forming Merestone Development in 1998,
Mr. Ditoro held numerous senior management positions, including Vice President
of Corporate Development, with Lonza Group, an international chemical
conglomerate based in Basle, Switzerland.
Robert
L. Franklin
became
a
member of our board of directors on January 29, 2007. Mr. Franklin is a career
investment banker who is currently the chairman of the Angel Investor Network
in
Hilton Head, South Carolina and in Savannah, Georgia. Since 1991, Mr. Franklin
has been president of Prospect Ventures, Inc., advising private investors,
entrepreneurs and private and public emerging growth companies regarding their
capital requirements, business strategy, and the development of their boards
of
directors. He has served on numerous corporate and not-for-profit boards of
directors. In July 2003, Mr. Franklin was appointed by Massachusetts Governor
Romney as a member of the Massachusetts Public Education Nominating Council,
on
which he served until February 2005. In 2003 he was vice chairman, and in 2004
he was chairman of the Council. In November 2004, he joined the Advisory Board
of the Institute for Effective Governance, a Washington, DC service organization
for responsible trustees. From 1998 to 2001, he was a member of the Advisory
Board of Directors of the Association of the United States Army.
Edwin
L. Klett
became a
member of our board of directors on December 7, 2006. Mr. Klett is currently
senior counsel with the law firm of Buchanan Ingersoll & Rooney, in
Pittsburgh, Pennsylvania, where he focuses his practice on corporate litigation.
He was a partner in the law firm of Klett Rooney Lieber & Schorling from its
formation in April 1989 until its merger with Buchanan Ingersoll in July 2006.
He has over 40 years of experience in practicing law. A trial attorney with
a
background in corporate law, banking, securities and business matters, Mr.
Klett
was selected by the Pennsylvania Supreme Court to a four-year term on the
Judicial Conduct Board of Pennsylvania in 2006. Mr. Klett is a fellow of the
International Academy of Trial Lawyers, the American College of Trial Lawyers,
the American Board of Trial Advocates, the American Bar Foundation and the
American Law Institute. He is a member of the American Bar Association and
previously served as a member of the ABA House
of
Delegates. Mr. Klett is also a member of the House of Delegates of the
Pennsylvania Bar Association and previously served as chairman of the Securities
and Class Action Committee of the Civil Litigation Section of the state
association. Mr. Klett is also a director of Northeast Securities,
Inc.
There
are
no family relationships among our directors or executive officers. No director
has been a general partner or executive officer of any business which has filed
a bankruptcy petition or had a bankruptcy petition filed against it. No director
has been convicted of a criminal offense or is the subject of a pending criminal
proceeding. No director has been the subject of any order, judgment or decree
of
any court permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities. No director has been found by a court to have violated a federal
or
state securities or commodities law.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” EACH OF THE ABOVE
NOMINEES FOR ELECTION AS A DIRECTOR.
Executive
Officers
Officers
of our company are elected annually by the board of directors and serve at
the
discretion of the board. There are no family relationships among our directors
and executive officers.
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
David
R. Ames
|
|
58
|
|
Chief
Executive Officer, President and Director
|
|
|
|
|
|
Gary
Flicker
|
|
49
|
|
Chief
Financial Officer, Executive Vice President and
Secretary
|
|
|
|
|
|
Thomas
J. Endres
|
|
50
|
|
Chief
Operating Officer and Executive Vice President,
Operations
|
Please
see “Proposal No. 1: Election of Directors” above for biographical information
relating to Mr. Ames. The principal occupations for the past five years (and,
in
some instances, for prior years) of Mr. Flicker and Mr. Endres are as
follows:
Gary
Flicker
became
our Chief Financial Officer, Executive Vice President and Secretary on January
29, 2007. From May 2002 through January 2007, Mr. Flicker was President and
Chief Executive Officer of Flick Financial, a professional CPA/financial
services firm founded by Mr. Flicker to assist businesses with their financial
and related accounting needs. From March 2004 to November 2006, Flick Financial
had been engaged by HealthSouth Corp. to assist in restating its financial
statements. From 1997 through 2002, Mr. Flicker was the Executive Vice President
and Chief Financial Officer of DVL, Inc., which owns and services commercial
mortgage loans and manages real estate properties and partnerships. Mr. Flicker
has been an independent member of the board of directors of DVL since 2004
and
chairs its audit committee. He is a licensed CPA in New York and Georgia and
is
a Member of the American Institute of Certified Public Accountants.
Thomas
J. Endres
became
our Senior Vice President, Operations on September 7, 2006, our Executive Vice
President, Operations on March 15, 2007 and our Chief Operating Officer on
June
19, 2007. Before joining us, Mr. Endres served in the United States Army for
26
years, retiring with the rank of Lieutenant Colonel. From August 1997 until
August 2006, he served as Director of Operations/Director of Cadet Activities
at
the United States Military Academy at West Point, from which he graduated in
1980. In this position, he was responsible for managing $2 billion in
facilities, a $50 million budget and 356 employees. From November 1999 through
April 2002, Mr. Endres also served as a member of the board of directors of
the
West Point Federal Credit Union, which managed over $55 million in funds.
Advisory
Board
We
have
established an advisory board currently comprised of two members with experience
in the ethanol production business or general corporate matters. Our advisory
board consults with our board of directors and management to discuss matters
relating to our business activities. Our policy is to reimburse members of
our
advisory board for out-of-pocket expenses incurred in serving on our advisory
board.
Members
of our advisory board may serve as consultants to us under consulting agreements
for which they will receive compensation. In December 2005, we entered into
an
arrangement with Mr. Mark Austin, a member of our advisory board, under which
he
agreed to serve as our chief technology strategist on a month-to-month basis
in
consideration of a monthly consulting fee of $8,000. For the year ended December
31, 2006, we paid Mr. Austin $96,000 under this agreement. During March 2006,
we
also granted to Mr. Austin warrants to acquire 25,000 shares of common stock
at
an exercise price of $4.50 per share. In March 2006, we entered into an
arrangement with Dr. Foster Aryi Agblevor, a member of our advisory board,
under
which he agreed to provide research and consulting services for a two-year
term.
For the year ended December 31, 2006, we paid Dr. Agblevor $6,390 under this
agreement. During March 2006, we also granted to Dr. Agblevor warrants to
acquire 20,000 shares of common stock at an exercise price of $5.50 per share.
To our knowledge, neither of our advisory board members has any conflict of
interest between their obligations to us and their obligations to others.
Companies with which advisory board members are involved may in the future
have
commercial relationships with us.
The
members of our advisory board and their primary professional affiliations are
as
follows:
Foster
Aryi Agblevor
,
Ph.D.
is known
internationally as an expert in thermochemical biomass conversion and rapid
characterization of biomass feedstocks. His expertise in the area was recognized
with the winning of the Best Paper Awards at the Gordon Conference on Analytical
Pyrolysis in 1991 and 1993. He was also awarded the U.S. Department of Energy’s
Special Achievement Award for his contribution towards the development of
biomass standards. Since 1996, Dr. Agblevor has been an Associate Professor
in
the Biological Systems Engineering Department at Virginia Tech. From 1990 to
1996, most recently as a Senior Chemical Engineer, Dr. Agblevor was on the
staff
of the Center for Renewable Chemicals and Materials at the National Renewable
Energy Laboratory. Dr. Agblevor is the current Vice Chairman of the E48
Committee on Biotechnology of the American Society of Testing and Materials
(ASTM). He has developed eight ASTM standards on biomass analysis. Dr. Agblevor
has authored more than 100 publications in peer-reviewed journals and conference
proceedings and holds two U.S. patents and three other patents pending
concerning biomass for ethanol production. He has been guest lecturer at the
Department of Chemical and Petroleum Engineering, Colorado School of Mines,
and
was an invited speaker at the Department of Chemical and Petroleum Engineering,
University of Kansas, and at several International Energy Agency (IEA) meetings
throughout the country. Dr. Agblevor has organized and chaired several sessions
of the Cellulose Paper and Textile Division of the American Chemical Society
and
is active in the American Institute of Chemical Engineers. Dr. Agblevor received
M.A.Sc. and Ph.D. degrees in Chemical Engineering and Applied Chemistry from
the
University of Toronto, Canada.
Mark
Austin
is the
Managing Director of Chandler Reed LLC, a strategic growth and venture
development consulting firm, where he advises clients in the areas of business
strategy and planning, technology development, marketing, finance and strategic
alliances. He has lectured on strategic planning in China, business development
in Africa, and technology in Latin America. Mr. Austin holds patents issued
in
the United States, Latin America, Europe and Asia, and has won product design
awards in the United States and Asia. He is an advisor to the New York Energy
& Environmental Funders’ Forum, a program of the Center for Economic and
Environmental Partnership, Inc. In December 2005, Mr. Austin entered into a
consulting arrangement with us to assist us in the development of our technology
portfolio and overall technology strategy.
CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information regarding the number of shares of our
common stock beneficially owned as of December 11, 2007, the record date:
|
·
|
each
person who is known by us to beneficially own 5% or more of our common
stock;
|
|
·
|
each
of our directors and executive officers;
and
|
|
·
|
all
of our directors and executive officers, as a
group.
|
Beneficial
ownership is determined in accordance with the rules of the SEC and generally
includes voting or investment power with respect to securities. Shares of our
common stock that may be acquired on exercise of stock options or warrants
that
are currently exercisable or that become exercisable within 60 days after the
date indicated in the table are deemed beneficially owned by the option holders.
Subject to any applicable community property laws, the persons or entities
named
in the table above have sole voting and investment power with respect to all
shares indicated as beneficially owned by them.
Except
as
otherwise provided below, the address of each of the persons listed below is
c/o
Xethanol Corporation, 1185 Avenue of the Americas, 20th Floor, New York, New
York 10036.
Name
and Address of Beneficial Owner
|
|
Number
of
Shares
Beneficially
Owned
(1)
|
|
Percentage
of
Shares
Beneficially
Owned
(2)
|
|
|
|
|
|
David
R. Ames
|
|
1,625,010
(3)
|
|
5.4%
|
Gary
Flicker
|
|
212,500
(4)
|
|
*
|
Lawrence
S. Bellone
|
|
791,855
(5)
|
|
2.7%
|
Thomas
J. Endres
|
|
133,300
(6)
|
|
*
|
William
P. Behrens
|
|
328,591
(7)
|
|
1.1%
|
Gil
Boosidan
|
|
228,891
(8)
|
|
*
|
Christopher
d’Arnaud-Taylor
|
|
1,420,139
(9)
|
|
4.9%
|
Richard
D. Ditoro
|
|
288,828
(10)
|
|
1.0%
|
Robert
L. Franklin
|
|
200,000
(11)
|
|
*
|
Edwin
L. Klett
|
|
240,000
(12)
|
|
*
|
Directors
and executive officers as a group
|
|
5,469,414
(13)
|
|
16.8%
|
|
|
|
|
|
*
|
Less
than 1% of outstanding shares.
|
(1)
|
Unless
otherwise indicated, includes shares owned by a spouse, minor children
and
relatives sharing the same home, as well as entities owned or controlled
by the named person. Also includes shares if the named person has
the
right to acquire those shares within 60 days after December 11, 2007
by
the exercise of any warrant, stock option or other right. Unless
otherwise
noted, shares are owned of record and beneficially by the named
person.
|
(2)
|
Based
upon 28,609,103 shares of common stock outstanding on December 11,
2007.
|
(3)
|
Includes
1,525,000 shares of common stock issuable to Mr. Ames on the exercise
of
stock options.
|
(4)
|
These
shares of common stock are issuable to Mr. Flicker on the exercise
of
stock options.
|
(5)
|
Includes
300,000 shares of common stock issuable to Mr. Bellone on the exercise
of
stock options.
|
(6)
|
These
shares of common stock are issuable to Mr. Endres on the exercise
of stock
options.
|
(7)
|
Includes
215,000 shares of common stock issuable to Mr. Behrens on the exercise
of
stock options, 41,668 shares of common stock issuable on exercise
of
warrants held by Mr. Behrens and 50,000 shares of common stock issuable
on
exercise of warrants held by Northeast Securities, Inc. Mr. Behrens
is
Vice Chairman of Northeast Securities and disclaims beneficial ownership
of the portion of the shares held by Northeast Securities in which
he has
no pecuniary interest.
|
(8)
|
Includes
200,000 shares of common stock issuable upon the exercise of stock
options, 22,223 shares of common stock and 6,668 shares of common
stock
issuable on exercise of warrants held by GBAF Capital, LLC, an entity
controlled by Mr. Boosidan. Mr. Boosidan disclaims beneficial ownership
of
the portion of the shares held by GBAF Capital, LLC in which he has
no
pecuniary interest.
|
(9)
|
Includes
450,000 shares of common stock issuable to Mr. d’Arnaud-Taylor on the
exercise of stock options; 632,450 shares of common stock held by
Mr.
d’Arnaud-Taylor’s spouse; 318,088 shares of common stock held by London
Manhattan Securities, Inc., an entity controlled by Mr. d’Arnaud-Taylor;
and 12,539 shares of common stock held by London Manhattan Limited,
Inc.,
an entity controlled by Mr.
d’Arnaud-Taylor.
|
(10)
|
Includes
280,000 shares of common stock issuable to Mr. Ditoro on the exercise
of
stock options.
|
(11)
|
These
shares of common stock are issuable to Mr. Franklin on the exercise
of
stock options.
|
(12)
|
These
shares of common stock are issuable to Mr. Klett on the exercise
of stock
options.
|
(13)
|
Includes
3,850,836
shares
of common stock issuable on the exercise of warrants and stock
options.
|
Introduction
Our
board
of directors added two new directors, David R. Ames and William P. Behrens,
in
October 2006; another new director, Edwin P. Klett, in December 2006; and two
more new directors, Gil Boosidan and Robert L. Franklin, in January 2007. During
2007, we revised and updated our committee charters and elected new board
committees composed entirely of independent directors (with one exception on
our
science and technology committee). Except where we specifically refer to 2006,
the discussion in this section describes our current committee structure and
meetings in 2007. The directors meet to review our operations and discuss our
business plans and strategies for the future. Our board of directors met six
times in 2007. During 2007, each director attended at least 75% of the aggregate
of the number of board meetings and the number of meetings held by the
committees of the board on which he served. We encourage, but do not require,
our directors to attend annual meetings of stockholders. Two of the six
directors then in office attended the 2006 annual meeting.
All
directors hold office until the next annual meeting of stockholders and the
election and qualification of their successors. Our board of directors has
determined that each of Mr. Behrens, Mr. Boosidan, Mr. Ditoro, Mr. Franklin
and
Mr. Klett is an “independent” director within the meaning of Rule
10A-3(b)(1)(ii) under the Exchange Act and Section 121A of the Amex Company
Guide. In evaluating Mr. Behrens’ independence, our board considered that Mr.
Behrens is the Vice Chairman of Northeast Securities, Inc., the placement agent
for our April 2006 private placement. During 2006, the following persons served
on our board of directors and were “independent” within the meaning of Rule
10A-3(b)(1)(ii) under the Exchange Act and Section 121A of the Amex Company
Guide: Mr. Behrens, Mr. Ditoro, Mr. Klett, Mr. Ames (for part of 2006 before
he
became an officer), Mr. Louis B. Bernstein (for part of 2006 before he became
an
officer), Mr. Marc S. Goodman and Mr. Richard L. Ritchie.
Board
Committees
Our
board
of directors has established the audit committee, compensation committee,
governance committee, science and technology committee, and executive committee.
Each committee other than the executive committee operates under a written
charter adopted by our board of directors, a copy of which is available on
our
website at www.xethanol.com. The executive committee is governed by our
bylaws.
Audit
Committee
Our
audit
committee consists of Mr. Boosidan, its chairman, Mr. Franklin and Mr. Klett.
Our board of directors has determined that each of Mr. Boosidan, Mr. Franklin
and Mr. Klett is “independent” within the meaning of Rule 10A-3(b)(1) under the
Exchange Act and Section 121A of the Amex Company Guide. In addition, our board
of directors has determined that Mr. Boosidan qualifies as an “audit committee
financial expert” within the meaning of the applicable SEC rules. During 2007,
the audit committee met seven times (including telephonic
meetings).
The
functions of the audit committee include:
|
·
|
review
and discuss with management and our independent registered public
accounting firm our annual audited financial statements and quarterly
financial statements, earnings press releases and earnings guidance
provided to analysts and rating
agencies;
|
|
·
|
appoint,
retain, compensate, evaluate and oversee the work of the independent
registered public accounting firm engaged by us for the purpose of
preparing or issuing an audit report or performing other audit, review
or
attest services for us;
|
|
·
|
approve,
in advance, the provision by the independent registered public accounting
firm of all audit and permissible non-audit
services;
|
|
·
|
review
and evaluate, at least annually, the qualifications, performance
and
independence of our independent registered public accounting
firm;
|
|
·
|
in
consultation with our independent registered public accounting firm,
management and the internal auditor, review the integrity of our
financial
reporting processes, both internal and
external;
|
|
·
|
establish
procedures for the receipt, retention, and treatment of complaints
we
receive regarding accounting, internal accounting controls, or auditing
matters and the confidential, anonymous submissions by our employees
of
concerns regarding questionable accounting or auditing
matters;
|
|
·
|
engage
and obtain assistance from outside legal and other advisors as the
audit
committee deems necessary to carry out its duties;
and
|
|
·
|
review
and approve all related person
transactions.
|
Compensation
Committee
Our
compensation committee consists of Mr. Ditoro, its chairman, Mr. Behrens and
Mr.
Klett. Our board of directors has determined that each of Mr. Ditoro, Mr.
Behrens and Mr. Klett is “independent” within the meaning of Section 121A of the
Amex Company Guide. During 2007, the compensation committee met three times
(including telephonic meetings).
As
specified in its charter, the functions and authority of the compensation
committee include:
|
·
|
establish
and review our overall compensation
philosophy;
|
|
·
|
review
and approve our corporate goals and objectives relevant to the
compensation for our Chief Executive Officer and other officers,
including
annual performance objectives;
|
|
·
|
evaluate
the performance of our Chief Executive Officer and other officers
in light
of these goals and objectives and, based on such evaluation, approve,
or
recommend to the full board of directors the approval of, the annual
salary, bonus, stock options and other benefits, direct and indirect,
of
the Chief Executive Officer and other executive
officers;
|
|
·
|
review
and make recommendations to our board of directors with respect to,
or
approve, our incentive compensation plans and equity-based plans,
and
review the activities of the individuals responsible for administering
those plans;
|
|
·
|
review
and make recommendations to the full board of directors, or approve
all
awards of shares or share options pursuant to our equity-based
plans;
|
|
·
|
review
and monitor employee pension, profit-sharing and benefit
plans;
|
|
·
|
review
and discuss with management the Compensation Discussion and Analysis
section of the proxy statement (the “CD&A,” which under SEC rules is
not required for our proxy statement for this year) and determine
whether
to recommend to the Board that the CD&A be included in our proxy
statement; and
|
|
·
|
provide
the compensation committee report for inclusion in our annual proxy
statement in accordance with applicable rules and regulations of
the SEC.
|
The
compensation committee may delegate any or all of its responsibilities to a
subcommittee of the committee, except as otherwise provided in the charter.
In
determining the compensation of executive officers, the compensation committee
takes into account the opinion of the Chief Executive Officer. The compensation
committee then determines the compensation of our executive officers in a
private meeting in which no executive officer participates.
We
have
not in the past and do not presently intend to retain a compensation consultant,
although the compensation committee has the authority the authority to select,
retain and/or replace, as needed, any compensation or other outside consultant
to assist in the evaluation of director, Chief Executive Officer or senior
executive compensation. If the committee retains such a compensation consultant,
the committee has the authority to approve the consultant’s fees and other
retention terms.
Governance
Committee
Our
governance
committee
consists
of Mr. Klett, its chairman, Mr. Behrens and Mr. Ditoro. Our board of directors
has determined that each of Mr. Klett, Mr. Behrens and Mr. Ditoro is
“independent” within the meaning of Section 121A of the Amex Company Guide.
During 2007, the governance committee met three times (including telephonic
meetings).
The
functions of the governance committee include:
|
·
|
establish
criteria for the selection of new directors to serve on our board
of
directors;
|
|
·
|
identify
individuals believed to be qualified as candidates to serve on our
board
of directors and select, or recommend that the board of directors
select,
the candidates for all directorships to be filled by our board of
directors or by the stockholders at an annual or special meeting;
|
|
·
|
review
and make recommendations to the full board of directors, or determine,
whether members of the board should stand for reelection;
|
|
·
|
conduct
all necessary and appropriate inquiries into the backgrounds and
qualifications of possible candidates;
|
|
·
|
consider
questions of independence and possible conflicts of interest of members
of
our board of directors and executive officers;
|
|
·
|
oversee
the evaluation, at least annually, and as circumstances otherwise
dictate,
of our board of directors and management;
|
|
·
|
recommend
members of the board of directors to serve on the committees of the
board,
giving consideration to the criteria for service on each committee
as set
forth in the charter for such committee, as well as to any other
factors
it deems relevant, and when appropriate, make recommendations regarding
the removal of any member of any committee;
|
|
·
|
establish,
monitor, and recommend the purpose, structure, and operations of
the
various committees of our board of directors, the qualifications
and
criteria for membership on each committee of the board, and as
circumstances dictate, make any recommendations regarding periodic
rotation of directors among the committees and impose any term limitations
of service on any board committee;
|
|
·
|
periodically
review the charter and composition of each committee of the board
and make
recommendations to the board for the creation of additional committees
or
the elimination of board committees;
|
|
·
|
oversee
and approve the management continuity planning process;
|
|
·
|
review
and evaluate the succession plans relating to the Chief Executive
Officer
and other executive officer positions and make recommendations to
the
board of directors with respect to the selection of individuals to
occupy
these positions;
|
|
·
|
consider
the adequacy of our certificate of incorporation and bylaws and recommend
to our board of directors, as conditions dictate, that it propose
amendments to the certificate of incorporation and bylaws for
consideration by the stockholders; and
|
|
·
|
develop
and recommend to our board of directors a set of corporate governance
principles applicable to us and keep abreast of developments with
regard
to corporate governance to enable the committee to make recommendations
to
the board of directors in light of such developments as may be
appropriate.
|
Director
Nominations
The
responsibilities of the governance committee include evaluating and recommending
to the full board of directors the director nominees to stand for election
at
our annual meetings of stockholders. The committee is authorized to retain
search firms and to compensate them for their services.
The
governance committee examines each director nominee on a case-by-case basis
regardless of who recommends the nominee. In considering whether to recommend
any particular candidate for inclusion in the board’s slate of recommended
director nominees, the governance committee considers the following criteria,
among others: the candidate’s availability, insight, practical wisdom,
professional and personal ethics and values consistent with company values
and
standards; experience at the policy-making level in business or other areas
of
endeavor specified by the board; management, finance and/or scientific
expertise; commitment to enhancing stockholder value; previous relationships
with us, if any; service on other boards of directors and their committees;
and
ability and desire to represent the interests of all stockholders. The
governance committee does not assign specific weights to particular criteria,
and no particular criterion is a prerequisite for each prospective nominee.
We
believe that the backgrounds and qualifications of our directors, considered
as
a group, should provide a composite mix of experience, knowledge and abilities
that will allow the board of directors to fulfill its
responsibilities.
In
addition to the qualification criteria above, the governance committee also
takes into account whether a potential director nominee qualifies as an “audit
committee financial expert” as that term is defined by the SEC, and whether the
potential director nominee would qualify as an “independent” director under the
listing standards of the American Stock Exchange.
The
governance committee evaluated our board’s six nominees and recommended to the
board that they be nominated for reelection as directors at the 2007 annual
meeting. Our board approved that recommendation.
Stockholder
Nomination Policy
Our
governance committee will review and consider all candidates for nomination
and
election as directors who are suggested by any of our directors or executive
officers. The governance committee will also consider persons recommended by
stockholders to become nominees for election as directors, provided that those
recommendations are submitted in writing to our Corporate Secretary specifying
the nominee’s name and qualifications for board membership. For a stockholder to
nominate a director candidate, the stockholder must comply with the advance
notice provisions and other requirements of our bylaws, including Section 3.10.
We urge any stockholder who intends to recommend a director candidate to the
governance committee for consideration to review thoroughly our Governance
Committee Charter and Section 3.10 of our bylaws. To be considered, a
recommendation for director nomination should be submitted in writing to
Xethanol Corporation, 1185 Avenue of the Americas, New York, New York 10036,
Attention: Gary Flicker, Chief Financial Officer.
Code
of Business Conduct and Ethics and Guidelines on Governance
Issues
Our
board
has adopted a code of ethics applicable to all officers, directors and
employees, a copy of which is available on our website at www.xethanol.com.
We
will provide a copy of this code to any person, without charge, upon written
request to us at Xethanol Corporation, 1185 Avenue of the Americas, New York,
New York 10036, Attention: Gary Flicker, Chief Financial Officer. We intend
to
satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an
amendment to, or waiver from, a provision of the code of ethics by posting
such
information on our website at the address specified above.
Communications
with the Board
Stockholders
may communicate in writing with our board of directors, any of our committees,
or with any of our non-management directors by sending written communications
addressed to Xethanol Corporation, 1185 Avenue of the Americas, New York, New
York 10036, Attention: Gary Flicker, Chief Financial Officer. Our Chief
Financial Officer will review each communication and will forward it to our
board or to any individual director to whom the communication is addressed
unless the communication is unduly hostile, threatening or similarly
inappropriate, in which case, the Chief Financial Officer will discard the
communication.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our directors and
executive officers and persons who own beneficially more than 10% of our
outstanding common stock to file with the SEC initial reports of ownership
and
reports of changes in their ownership of our common stock. Directors, executive
officers and greater than 10% stockholders are required by SEC regulations
to
furnish us with copies of the forms they file.
To
our
knowledge, based solely on a review of the copies of such reports furnished
to
us, during the fiscal year ended December 31, 2006, none of our directors,
officers, or beneficial owners of more than 10% of our common stock failed
to
file on a timely basis reports required by Section 16(a) of the Exchange Act
during the year ended December 31, 2006, except that David R. Ames, our Chief
Executive Officer, President and a director,
failed
to
file a Form 4 to report the grant of options upon his election to the board
(although he reported the grant of the options in his Form 3)
;
William
P. Behrens, the Chairman of our Board of Directors, filed a late Form 3 to
report his joining our board of directors,
failed
to
file a Form 4 to report the grant of options upon his election to the board
(although he reported the grant of the options in his Form 3)
and
filed
a late Form 4 reporting one transaction; Lawrence S. Bellone, our Executive
Vice
President, Corporate Development and a director and formerly our Chief Financial
Officer, filed a late Form 4 reporting the grant of options; Christopher
d’Arnaud-Taylor, our former Chairman
,
President
and Chief Executive Officer, filed one late Form 4 reporting the grant of
options and failed to file another Form 4 reporting the grant of options;
Richard D. Ditoro, a director,
filed
a
late Form 3 to report his becoming a director
,
failed
to file a Form 3 when he rejoined our board on September 7, 2006 after leaving
the board at the annual meeting in August 2006 and filed one late Form 4; Thomas
Endres, our Executive Vice President, Operations and formerly our Senior Vice
President, Operations, filed a late Form 3 and failed to file a Form 4 to report
the grant of options upon his becoming an officer (although he reported the
grant of the options in his Form 3); Marc S. Goodman, formerly a director,
filed
a late Form 4 reporting the grant of options; Edwin L. Klett, a director, filed
a late Form 3 to report his joining our board of directors and failed to file
a
Form 4 to report the grant of options upon his election to the board (although
he reported the grant of the options in his Form 3); Mark J. Oppenheimer,
formerly a director, failed to file a Form 4 to report the grant of options
upon
his election to the board (although he reported the grant of the options in
his
Form 3)
;
and
Jeffrey S. Langberg, formerly a director, filed a late Form 3 to report his
becoming a director.
Copies
of
the Section 16(a) reports filed by our officers, directors and persons who
beneficially own more than 10% of our common stock can be found at our website
at www.xethanol.com under “SEC Filings.”
Transactions
with Related Persons
For
information about transactions with related persons during the fiscal year
ended
December 31, 2006, please see “Certain Relationships and Related Transactions”
below.
No
director or nominee for director, no executive officer, and no associate of
the
company has any substantial interest, direct or indirect, by security holdings
or otherwise, in any matter to be acted upon at the annual meeting, other than
the elections of the director nominees to office and any benefits that directors
and officers may receive under the Plan.
Earlier
this year, our board adopted a written policy regarding any transaction,
arrangement or relationship or series of similar transactions, arrangements
or
relationships with related persons, which is defined as an interested
transaction. The policy generally requires that the governance committee review
and approve all interested transactions in advance, or ratify them later if
advance approval is not feasible. Under the policy, the chairman of the
governance committee has the authority to pre-approve or ratify, as applicable,
any interested transaction in which the aggregate amount involved is expected
to
be less than $120,000. The policy applies to any interested transaction
involving an aggregate amount in excess of $100,000 in any calendar year between
us or our affiliates, on the one hand, and our directors, officers (or officers
of affiliates) or stockholders holding in excess of 5% of our common stock,
or
members of their immediate family, on the other hand.
The
governance committee has reviewed and determined that certain types of
interested transactions should be deemed to be pre-approved by the committee.
For example, the policy provides standing pre-approvals for the following
transactions:
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·
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compensatory
arrangements for service as an officer or director of the company,
to the
extent such compensation is required to be reported under Item 402
of
Regulation S-K; and
|
|
·
|
any
transaction where the related person’s interest arises solely from the
ownership of our common stock and all holders of our common stock
received
the same benefit on a pro rata basis (for example,
dividends).
|
The
following Summary Compensation Table sets forth for the year ended December
31,
2006 all plan compensation paid, distributed or accrued for services, including
salary and bonus amounts, rendered in all capacities by all individuals who
served as our principal executive officer during 2006 and our two most highly
compensated executive officers other than the principal executive officer who
were serving as executive officers at the end of 2006. These individuals are
our
“named executive officers.”
Summary
Compensation Table for 2006
Name
and Principal Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Option
Awards
($)(1)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
(f)
|
|
(g)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
Ames
President
and Chief Executive Officer (2)
|
|
|
2006
|
|
|
1
|
|
|
—
|
|
|
743,472
|
(3)
|
|
5,000
|
(4)
|
|
748,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
d’Arnaud-Taylor
Former
President and Chief
Executive
Officer
(5)
|
|
|
2006
|
|
|
156,000
|
|
|
|
|
|
1,514,692
|
(6)
|
|
250,000
|
(7)
|
|
1,920,692
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Louis
B. Bernstein
Former
President and Interim Chief Executive Officer
(8)
|
|
|
2006
|
|
|
69,531
|
|
|
|
|
|
93,103
|
(9)
|
|
|
|
|
162,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lawrence
Bellone
Former
Executive Vice President - Corporate Development, Former Chief Financial
Officer
(10)
|
|
|
2006
|
|
|
180,000
|
|
|
50,000
|
|
|
312,259
|
(11)
|
|
|
|
|
542,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
Endres
Chief
Operating Officer and Executive Vice President, Operations
(12)
|
|
|
2006
|
|
|
47,083
|
|
|
|
|
|
67,598
|
(13)
|
|
|
|
|
114,681
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
amounts in column (e) reflect the dollar amount of awards under the
Plan
that we recognized for financial statement reporting purposes for
the
fiscal year ended December 31, 2006 in accordance with FAS 123(R).
For Mr. Bernstein, the amount includes compensation derived from
awards
granted before 2006 but that vested in 2006 and from awards granted
in
2006 and vested in 2006. Assumptions used in the calculations of
these
amounts are included in Note 12 to our consolidated financial statements
in our Annual Report on Form 10-KSB for the year ended December 31,
2006.
|
The
Plan
provides that the total number of shares of common stock that may be subject
to
awards granted under the Plan is 4,000,000 shares (plus the number of shares
with respect to which awards previously granted there under are forfeited,
expire, terminate without being exercised or are settled with property other
than shares, and the number of shares that are surrendered in payment of any
awards or any tax withholding requirements). On December 7, 2006, before any
additional options were granted on that date as described in various footnotes
to this table (the “December 2006 Options”), there were 1,677,930 shares of
common stock remaining available for awards under the Plan. The number of shares
issuable upon exercise of the December 2006 Options exceeded the number then
available under the Plan by 737,070 shares, which represents approximately
30.5%
of the shares issuable upon exercise of the December 2006 Options. Accordingly,
the compensation committee of our board of directors determined that each of
the
December 2006 Options shall be subject, on a pro rata basis, to approval by
our
stockholders of an amendment to the Plan to increase the number of shares
available for award under the Plan. As a result of this determination, shares
issuable upon exercise of the December 2006 Options are subject to stockholder
approval, as noted below.
|
(2)
|
Mr.
Ames has served as our President and Chief Executive Officer since
November 9, 2006.
|
|
(3)
|
On
October 5, 2006, we granted an option to purchase 205,000 shares
of our
common stock to Mr. Ames at an exercise price of $3.00 per share
(the
closing price per share of our common stock on the day before the
date of
grant as reported by the American Stock Exchange) in consideration
of his
service as a director, and 175,000 shares were vested on the date
of grant
and the remainder of the option vests in two installments of 15,000
shares
each on the six-month and one-year anniversaries of the date of grant.
The
option expires on the tenth anniversary of the date of grant. On
November
9, 2006, upon Mr. Ames becoming our President and Chief Executive
Officer,
30,000 shares that were granted as part of the October 5, 2006 grant
were
forfeited as a result of his resigning as a member of the governance
and
compensation committees. On December 7, 2006, we granted an option
to
purchase 1,350,000 shares of our common stock to Mr. Ames at an exercise
price of $2.44 per share (the closing price per share of our common
stock
on the date of grant as reported by the American Stock Exchange)
in
consideration of his service as our President and Chief Executive
Officer,
and 200,000 shares vested on the grant date. The remaining 1,150,000
were
initially scheduled to vest on the first anniversary of the date
of grant.
On February 1, 2007, Xethanol’s compensation committee agreed to revise
the vesting of the option for those 1,150,000 shares so that they
vest in
equal monthly installments on the seventh day of each month, with
the
final installment vesting on December 7, 2007. 411,750 shares issuable
on
exercise of the option granted to Mr. Ames are subject to stockholder
approval. The option expires on the fifth anniversary of the date
of
grant. The amount in the table includes (x) $367,369 in compensation
expense we incurred in 2006 for Mr. Ames in connection with the October
5,
2006 grant; and (y) $376,104 in compensation expense we incurred
in 2006
for Mr. Ames in connection with the December 7, 2006 grant.
|
|
(4)
|
This
amount represents a payment made to Mr. Ames for his service as an
independent director from October 1, 2006 until his election by the
board
as President and Chief Executive Officer on November 9,
2006.
|
|
(5)
|
Mr.
d’Arnaud-Taylor served as our Chairman, President and Chief Executive
Officer from February 2, 2005 until his termination effective August 22,
2006 under a termination agreement. The agreement provides that Mr.
d’Arnaud-Taylor will continue to serve as a director of the company
for
the remainder of his current term. For a description of our termination
and consulting agreements with Mr. d’Arnaud-Taylor, see the immediately
following subsection entitled “Termination and Consulting Agreements with
Christopher d’Arnaud-Taylor.”
|
|
(6)
|
On
February 28, 2006, we granted an option to purchase 250,000 shares
of our
common stock to Mr. d’Arnaud-Taylor at an exercise price of $5.56 per
share (the average closing price per share of our common stock on
the five
trading days before the date of grant as reported by the OTC Bulletin
Board) in consideration of his service as our President and Chief
Executive Officer, and all shares (as adjusted as described below)
vested
on the first anniversary of the grant date. On June 12, 2006, we
granted
an option to purchase 450,000 shares of our common stock to Mr.
d’Arnaud-Taylor at an exercise price of $8.32 per share (the last sale
price per share of our common stock on the date of grant as reported
by
the OTC Bulletin Board) in consideration of his service as our President
and Chief Executive Officer, with all shares to vest upon Mr.
d’Arnaud-Taylor entering a new employment agreement. On August 25,
2006,
we entered into a termination agreement with Mr. d’Arnaud-Taylor under
which we agreed with Mr. d’Arnaud-Taylor that his employment by, and his
position as an officer of, the company was terminated effective as
of
August 22, 2006. The agreement provides that Mr. d’Arnaud-Taylor will
continue to serve as a director of the company for the remainder
of his
current term. The agreement further provides, with respect to the
foregoing options, and subject to Mr. d’Arnaud-Taylor’s compliance with
the terms of the agreement, that (a) the exercise period is extended
until
August 22, 2009 with respect to one half of each option, which vested
on
August 25, 2006; and (b) the remaining one-half of each option was
terminated. On December 7, 2006, we granted an option to purchase
100,000
shares of our common stock to Mr. d’Arnaud-Taylor at an exercise price of
$2.44 per share (the closing price per share of our common stock
on the
date of grant as reported by the American Stock Exchange) in consideration
of his service as a director, and all shares vested on the date of
grant.
The option expires
|
on
the
tenth anniversary of the date of grant. 30,500 shares issuable on exercise
of
the option granted to Mr. d’Arnaud-Taylor are subject to stockholder approval.
The amount in the table includes (x) $454,313 in compensation expense we
incurred in 2006 for Mr. d’Arnaud-Taylor in connection with the February 28,
2006 grant (as adjusted); (y) $890,145 in compensation expense we incurred
in
2006 for Mr. d’Arnaud-Taylor in connection with the June 12, 2006 grant (as
adjusted); and (z) $170,234 in compensation expense we incurred in 2006 for
Mr.
d’Arnaud-Taylor in connection with the December 7, 2006 grant.
|
(7)
|
This
amount represents compensation expense in 2006 to Mr. d’Arnaud-Taylor
under the August 24, 2006 termination agreement and the August 25,
2006
consulting agreement (as terminated on December 1, 2006 and replaced),
in
each case between Mr. d’Arnaud-Taylor and
us.
|
|
(8)
|
Mr.
Bernstein served: (a) as our Interim Chief Executive Officer from
August
21, 2006 until his resignation on November 9, 2006; (b) as our President
from September 7, 2006 until his resignation on November 9, 2006;
and (c)
as a director from June 2, 2005 until his resignation on November
9, 2006.
|
|
(9)
|
On
July 28, 2005, we granted an option to purchase 75,000 shares of
our
common stock to Mr. Bernstein at an exercise price of $4.00 per share
(as
reported by the OTC Bulletin Board, the high and closing prices per
share
of our common stock on the date of grant were $4.20 and the low price
was
$3.51) in consideration of his service as a director, and 50% of
the
shares vested on the grant date and the remaining 50% vested on the
first
anniversary of the grant date. The option expires on the fifth anniversary
of the date of grant. On September 7, 2006, we granted an option
to
purchase 45,000 shares of our common stock to Mr. Bernstein at an
exercise
price of $3.62 per share (the closing price per share of our common
stock
on the date of grant as reported by the American Stock Exchange)
in
consideration of his service as our President and Interim Chief Executive
Officer, with 30,000 shares vesting on the date of grant and the
remaining
15,000 shares vesting on termination of his service as our Interim
Chief
Executive Officer and resumption as an independent member of the
Board of
Directors. The option expires on the fifth anniversary of the date
of
grant. On November 9, 2006 upon termination of Mr. Bernstein’s service as
our President and Interim Chief Executive Officer and his resignation
from
the our board of directors, 15,000 shares awarded on September 7,
2006
were forfeited. The amount in the table includes (x) $36,100 in
compensation expense we incurred in 2006 for Mr. Bernstein in connection
with the July 28, 2005 grant; and (y) $57,003 in compensation expense
we
incurred in 2006 for Mr. Bernstein in connection with the September
7,
2006 grant.
|
|
(10)
|
Mr.
Bellone served as our Executive Vice President, Corporate Development
from
January 29, 2007 to December 2007. He became a member of our board
of
directors on October 5, 2006. Mr. Bellone served as our Chief Financial
Officer from April 5, 2005 until his election as Executive Vice President
and provided financial consulting services to us from March 2005
until his
election as Chief Financial
Officer.
|
|
(11)
|
On
February 28, 2006, we granted an option to purchase 100,000 shares
of our
common stock to Mr. Bellone at an exercise price of $5.56 per share
(the
average closing price per share of our common stock on the five trading
days before the date of grant as reported by the OTC Bulletin Board)
in
consideration of his service as our Chief Financial Officer, and
all
shares vested on the one-year anniversary of the date of grant. The
option
expires on the fifth anniversary of the date of grant. On December
7,
2006, we granted an option to purchase 100,000 shares of our common
stock
to Mr. Bellone at an exercise price of $2.44 per share (the closing
price
per share of our common stock on the date of grant as reported by
the
American Stock Exchange) in consideration of his service as our Chief
Financial Officer, and all shares will vest on the first anniversary
of
the date of grant. 30,500 shares issuable on exercise of the option
granted to Mr. Bellone are subject to stockholder approval. The option
expires on the fifth anniversary of the date of grant. The amount
in the
table includes (x) $301,665 in compensation expense we incurred in
2006
for Mr. Bellone in connection with the February 28, 2006 grant; and
(y)
$10,594 in compensation expense we incurred in 2006 for Mr. Bellone
in
connection with the December 7, 2006 grant.
|
|
(12)
|
Mr.
Endres became our Senior Vice President, Operations on September
7, 2006,
our Executive Vice President, Operations on March 15, 2007 and our
Chief
Operating Officer on June 19, 2007.
|
|
(13)
|
On
September 7, 2006, we granted an option to purchase 30,000 shares
of our
common stock to Mr. Endres at an exercise price of $3.62 per share
(the
closing price per share of our common stock on the date of grant
as
reported by the American Stock Exchange) in consideration of his
service
as our Senior Vice President, Operations, and all shares vested on
December 31, 2006. On December 7, 2006, we granted an option to purchase
100,000 shares of our common stock to Mr. Endres at an exercise price
of
$2.44 per share (the closing price per share of our common stock
on the
date of grant as reported by the American Stock Exchange) in consideration
of his continued service as our Senior Vice President, Operations,
and all
shares will vest on the first anniversary of the date of grant. 30,500
shares issuable on exercise of this option granted to Mr. Endres
are
subject to stockholder approval. Both options expire on the fifth
anniversary of the dates of grant. The amount in the table includes
(x)
$57,003 in compensation expense we incurred in 2006 for Mr. Endres
in
connection with the September 7, 2006 grant; and (y) $10,594 in
compensation expense we incurred in 2006 for Mr. Endres in connection
with
the December 7, 2006 grant.
|
Employment
Agreement with Thomas Endres
In
connection with Mr. Endres’ appointment as Chief Operating Officer, we entered
into an amended and restated employment agreement with him on June 19, 2007.
The
agreement provides for an annual base salary of $200,000 and has a term of
eighteen months commencing on September 7, 2006 and ending on March 6, 2008.
The
employment agreement further provides for our previous grants to Mr. Endres
of
(a) an option to purchase 30,000 shares of our common stock at an exercise
price
of $3.62 per share (the closing price per share of our common stock on September
7, 2006, the date of grant as reported by the American Stock Exchange), of
which
all shares vested on December 31, 2006, and (b) an option to purchase 100,000
shares of our common stock at an exercise price of $2.44 per share (the closing
price per share of our common stock on December 7, 2006, the date of grant
as
reported by the American Stock Exchange), of which 30,500 shares issuable on
exercise of this option are subject to stockholder approval as described below.
The option to purchase 100,000 shares of our common stock that was granted
on
December 7, 2006 vests on the first anniversary of the date of grant and expires
on the fifth anniversary of the date of grant. Under the agreement, we also
granted Mr. Endres on June 19, 2007 an additional option to purchase 50,000
shares of our common stock at an exercise price of $1.19 per share (the closing
sales price of the common stock on the date of grant as reported on the American
Stock Exchange). This option vests on the first anniversary of the date of
grant
and expires on the fifth anniversary of the date of grant. The option for 50,000
shares and a 30,500 share portion of the option for 100,000 shares were each
granted subject to approval by our stockholders of an amendment to the Plan
to
increase the number of shares available for award under the Plan. As described
in this proxy statement, we are submitting to our stockholders a proposal to
amend the Plan to increase the number of shares available for award under the
Plan to cover these options granted to Mr. Endres. If the stockholders do not
approve that amendment, these options will be void and our compensation
committee will consider alternative incentives for Mr. Endres.
The
employment agreement provides for various payments to Mr. Endres upon cessation
of employment, depending on the circumstances. If Mr. Endres is terminated
for
“cause” or Mr. Endres resigns other than for “good reason,” he will receive any
earned but unpaid salary through the date of termination. “Cause” means: (a)
willful engagement in conduct which is materially injurious to us; (b) willful
fraud or material dishonesty in performing duties; (c) deliberate or intentional
failure to substantially perform duties that results in material harm to us;
(d)
the conviction for, or plea of nolo contendere to a charge of, commission of
a
felony; or (e) the continuous and habitual failure to substantially perform
duties under the employment agreement. “Good reason” means: (a) a breach by us
relating to compensation and benefits; (b) a material breach by us of any of
the
terms of the employment agreement; or (c) the relocation of Mr. Endres’
principal place of business at our request beyond 50 miles from its current
location. In situations involving the continuous and habitual failure to
substantially perform duties and termination based on “good reason,” the
employment agreement requires prior written notice of termination and provides
an opportunity to cure within twenty days of such notice. If Mr. Endres dies
or
becomes disabled during his term of employment, is terminated without “cause,”
or resigns for “good reason,” he will receive then current base salary for the
remainder of his term under the agreement, immediate vesting of all stock
options or stock-based compensation,
and
continuation of his company benefits (e.g., health, life, disability insurance)
for the remainder of his term under the agreement.
Termination
and Consulting Agreements with Christopher d’Arnaud-Taylor
Termination
Agreement
.
On
August 25, 2006, we entered into a termination agreement with Christopher
d’Arnaud-Taylor, our former Chairman, President and Chief Executive Officer,
under which his employment by us and his position as an officer of our company
was terminated effective as of August 22, 2006 (the “Termination Date”). The
agreement provides that Mr. d’Arnaud-Taylor will continue to serve as a member
of our board of directors for the remainder of his current term. Under the
termination agreement, we continued to pay Mr. d’Arnaud-Taylor his salary and
maintain his employment benefits in effect immediately before the Termination
Date through September 30, 2006, and we paid Mr. d’Arnaud-Taylor $100,000 in
severance on the three-month anniversary of the Termination Date. The agreement
provides that, subject to Mr. d’Arnaud-Taylor’s compliance with the terms of the
agreement, the exercise periods of the options to purchase 250,000 shares of
common stock at an exercise price of $5.56 per share and 450,000 shares of
common stock at an exercise price of $8.32 per share that were granted to Mr.
d’Arnaud-Taylor on February 28, 2006 and June 12, 2006, respectively, are
extended until the third anniversary of the Termination Date with respect to
one
half of each option. The options are otherwise terminated. The agreement also
provides that we will reimburse Mr. d’Arnaud-Taylor for any reasonable and
appropriately documented business expenses he may have incurred before the
Termination Date in the performance of his duties as an employee and that Mr.
d’Arnaud-Taylor will be entitled to continue his coverage under our group
medical and dental plans to the extent provided in and subject to the terms
and
conditions of our standard policy.
Under
the
termination agreement, Mr. d’Arnaud-Taylor agreed to provide the advisory and
consulting services as we may reasonably request during the three months after
the Termination Date to permit the order transfer of his duties to other
personnel and not to solicit our employees during the period ending on the
first
anniversary of the Termination Date. The agreement also provides for mutual
releases from all claims arising before the date of the agreement, other than
claims based on the released party’s willful acts, gross negligence or
dishonesty and, with respect to Mr. d’Arnaud-Taylor’s release of us, claims
vested before the date of the agreement for benefits under our employee benefit
plans and claims for indemnification for acts as an officer of our
company.
Initial
Consulting Agreement
.
On
August 25, 2006, we also entered into a consulting agreement with Mr.
d’Arnaud-Taylor under which Mr. d’Arnaud-Taylor agreed to provide the
consulting and advisory services as we may reasonably request from time to
time.
During the term of the agreement, we agreed to pay Mr. d’Arnaud-Taylor $15,000
per month (payable monthly in arrears) and reimburse him for any reasonable
and
appropriately documented business expenses he may incur in the performance
of
his duties under the agreement. The agreement provided that
Mr. d’Arnaud-Taylor was not required to dedicate more than eight days in
any calendar month to the performance of services under the agreement and that
if he did provide services for more than eight days in any calendar month,
we
would pay him an additional $2,000 for each additional day or part of a
day.
The
consulting agreement had a term of one year, subject to earlier termination
by
us if Mr. d’Arnaud-Taylor failed to perform his duties under the agreement. Upon
the termination of the agreement, we would have had no obligation to Mr.
d’Arnaud-Taylor other than payment obligations accrued before the termination
date, which would have been paid within 15 days of the termination date. The
agreement included covenants by Mr. d’Arnaud-Taylor regarding
confidentiality, competition and solicitation of our customers, suppliers and
employees. This agreement was terminated effective December 1,
2006.
New
Consulting Agreement
.
On
December 1, 2006, we entered into a consulting agreement with Mr.
d’Arnaud-Taylor under which Mr. d’Arnaud-Taylor agreed to provide strategic
advice to our Chief Executive Officer. During the term of the agreement, we
paid
Mr. d’Arnaud-Taylor $15,000 per month (payable monthly in advance) and
reimbursed him for any reasonable and appropriately documented business expenses
he incurred in the performance of his duties under the agreement. The term
of
the agreement expired on November 25, 2007.
Outstanding
Equity Awards for Named Executive Officers at Fiscal Year-End
The
following table sets forth certain information with respect to outstanding
options at December 31, 2006 for each of our executive officers listed in the
Summary Compensation Table above. Unless otherwise noted in the footnotes,
options are fully vested. The Plan provides that the total number of shares
of
common stock that may be subject to awards granted under the Plan is 4,000,000
shares (plus the number of shares with respect to which awards previously
granted there under are forfeited, expire, terminate without being exercised
or
are settled with property other than shares, and the number of shares that
are
surrendered in payment of any awards or any tax withholding requirements).
On
December 7, 2006, before any additional options were granted on that date (the
“December 2006 Options”), there were 1,677,930 shares of common stock remaining
available for awards under the Plan. The number of shares issuable upon exercise
of the December 2006 Options exceeded the number then available under the Plan
by 737,070 shares, which represents approximately 30.5% of the shares issuable
upon exercise of the December 2006 Options. Accordingly, the compensation
committee of our board of directors determined that each of the December 2006
Options will be subject, on a pro rata basis, to approval by our stockholders
of
an amendment to the Plan to increase the number of shares available for award
under the Plan. As a result of this determination, shares issuable upon exercise
of the December 2006 Options are subject to stockholder approval, as noted
below.
The
December 2006 Options included in this table have either an option expiration
date of December 7, 2011 or December 7, 2016
.
Outstanding
Equity Awards at Fiscal Year-End (December 31, 2006)
Name
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
|
|
|
|
|
|
|
|
|
|
David
R. Ames
|
|
|
175,000
|
(1)
|
|
|
|
|
3.00
|
(3)
|
|
October
5, 2016
|
|
|
|
|
200,000
|
(2)
|
|
1,150,000
|
(2)
|
|
2.44
|
(3)
|
|
December
7, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
d’Arnaud-Taylor
|
|
|
125,000
|
(4)
|
|
|
|
|
5.56
|
(5)
|
|
August
22, 2009
|
|
|
|
|
225,000
|
(4)
|
|
|
|
|
8.32
|
(6)
|
|
August
22, 2009
|
|
|
|
|
100,000
|
(7)
|
|
|
|
|
2.44
|
(3)
|
|
December
7, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Louis
B. Bernstein
|
|
|
75,000
|
(8)
|
|
|
|
|
4.00
|
(9)
|
|
July
28, 2010
|
|
|
|
|
30,000
|
(10)
|
|
|
|
|
3.62
|
(3)
|
|
September
7, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lawrence
Bellone
|
|
|
100,000
|
|
|
|
|
|
3.75
|
|
|
April
5, 2008
|
|
|
|
|
—
|
|
|
100,000
|
(11)
|
|
5.56
|
(5)
|
|
February
28, 2011
|
|
|
|
|
|
|
|
100,000
|
(11)
|
|
2.44
|
(3)
|
|
December
7, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
Endres
|
|
|
30,000
|
(12)
|
|
|
|
|
3.62
|
|
|
September
7, 2011
|
|
|
|
|
|
|
|
100,000
|
(12)
|
|
2.44
|
|
|
December
7, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
On
October 5, 2006, we granted an option to purchase 205,000 shares
of our
common stock to Mr. Ames in consideration of his service as a director,
and 175,000 shares were vested on the date of grant and the remainder
of
the option vests in two installments of 15,000 shares each on the
six-month and one-year anniversaries of the date of grant. On November
9,
2006, upon Mr. Ames becoming our President and Chief Executive Officer,
30,000 shares that were granted as part of the October 5, 2006 grant
were
forfeited as a result of his resigning as a member of the governance
and
compensation committees.
|
|
(2)
|
On
December 7, 2006, we granted an option to purchase 1,350,000 shares
of our
common stock to Mr. Ames in consideration of his service as our President
and Chief Executive Officer, and 200,000 shares vested on the grant
date.
The 1,150,000 unvested options were initially scheduled to vest on
the
first anniversary of the date of grant. On February 1, 2007, Xethanol’s
compensation committee agreed to
|
revise
the vesting of the option for those 1,150,000 shares so that they vest in equal
monthly installments on the seventh day of each month, with the final
installment vesting on December 7, 2007. 411,750 shares issuable on exercise
of
the option granted to Mr. Ames are subject to stockholder approval.
|
(3)
|
Based
on the closing price per share of our common stock on the day before
the
date of grant as reported by the American Stock
Exchange.
|
|
(4)
|
On
February 28, 2006, we granted an option to purchase 250,000 shares
of our
common stock to Mr. d’Arnaud-Taylor in consideration of his service as our
President and Chief Executive Officer, and all shares vested on the
first
anniversary of the grant date. On June 12, 2006, we granted an option
to
purchase 450,000 shares of our common stock to Mr. d’Arnaud-Taylor in
consideration of his service as our President and Chief Executive
Officer,
with all shares to vest upon Mr. d’Arnaud-Taylor entering a new employment
agreement. On August 25, 2006, we entered into a termination agreement
with Mr. d’Arnaud-Taylor under which we agreed with Mr. d’Arnaud-Taylor
that his employment by, and his position as an officer of, the company
was
terminated effective as of August 22, 2006. The agreement provided,
with
respect to the foregoing options, and subject to Mr. d’Arnaud-Taylor’s
compliance with the terms of the agreement, that (a) the exercise
period
was extended until August 22, 2009 with respect to one half of each
option, which vested on August 26, 2006; and (b) the remaining one-half
of
each option was terminated.
|
|
(5)
|
The
average closing price per share of our common stock on the five trading
days before the date of grant as reported by the OTC Bulletin
Board.
|
|
(6)
|
The
last sale price per share of our common stock on the date of grant
as
reported by the OTC Bulletin Board.
|
|
(7)
|
On
December 7, 2006, we granted an option to purchase 100,000 shares
of our
common stock to Mr. d’Arnaud-Taylor in consideration of his service as a
director, and all shares vested on the date of grant. 30,500 shares
issuable on exercise of the option granted to Mr. d’Arnaud-Taylor are
subject to stockholder approval.
|
|
(8)
|
On
July 28, 2005, we granted an option to purchase 75,000 shares of
our
common stock to Mr. Bernstein in consideration of his service as
a
director, and 50% of the shares vested on the grant date and the
remaining
50% vested on the first anniversary of the grant date.
|
|
(9)
|
As
reported by the OTC Bulletin Board, the high and closing prices per
share
of our common stock on the date of grant were $4.20 and the low price
was
$3.51.
|
|
(10)
|
On
September 7, 2006, we granted an option to purchase 45,000 shares
of our
common stock to Mr. Bernstein in consideration of his service as
our
President and Interim Chief Executive Officer, with 30,000 shares
vesting
on the date of grant and the remaining 15,000 shares vesting on
termination of his service as our Interim Chief Executive Officer
and
resumption as an independent member of the Board of Directors. On
November
9, 2006, upon termination of Mr. Bernstein’s service as our Interim Chief
Executive Officer and his resignation from the our board of directors,
15,000 shares awarded on September 7, 2006 were forfeited.
|
|
(11)
|
In
consideration of his service as our Chief Financial Officer, on February
28, 2006, we granted an option to purchase 100,000 shares of our
common
stock to Mr. Bellone, and on December 7, 2006, we granted an option
to
purchase 100,000 shares of our common stock. 30,500 shares issuable
on
exercise of the option granted to Mr. Bellone on December 7, 2006
are
subject to stockholder approval. These options vested on February
28, 2007
and December 7, 2007 respectively.
|
|
(12)
|
In
consideration of his service as our Senior Vice President, Operations,
on
September 7, 2006, we granted to Mr. Endres an option to purchase
30,000
shares of our common stock that vested on December 31, 2006. On December
7, 2006, we granted Mr. Endres an option to purchase 100,000 shares
|
of
our
common stock that vested on December 7, 2007. 30,500 shares issuable on exercise
of the option granted to Mr. Endres on December 7, 2006 are subject to
stockholder approval.
Compensation
of Directors
The
following table sets forth a summary of the compensation we paid in 2006 to
our
directors. The table includes any person who served during 2006 as a director
(other than named executive officers), even if he is no longer serving as a
director. For information about the compensation we paid to Mr. Ames, Mr.
d’Arnaud-Taylor and Mr. Bernstein for serving as directors, see the notes to
the
Summary Compensation Table above. Mr. Bellone did not receive any compensation
related to serving as a director.
Director
Compensation for 2006
Name
|
|
Fees
Earned
or
Paid
in
Cash
($)
|
|
Option
Awards
(1)
($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
(a)
|
|
(b)
|
|
(c)
|
|
(d)
|
|
(e)
|
|
|
|
|
|
|
|
|
|
|
|
William
P. Behrens (2)
|
|
|
5,000
|
|
|
388,361
|
(3)
|
|
|
|
|
393,361
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
D. Ditoro (4)
|
|
|
5,000
|
|
|
366,301
|
(3)
|
|
|
|
|
371,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edwin
L. Klett (5)
|
|
|
—
|
|
|
303,584
|
(3)
|
|
|
|
|
303,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc
Goodman (6)
|
|
|
|
|
|
131,106
|
(3)
|
|
|
|
|
131,106
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
Oppenheimer (7)
|
|
|
|
|
|
367,369
|
(3)
|
|
|
|
|
367,369
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jeffrey
Langberg (8)
|
|
|
|
|
|
|
|
|
672,288
|
(9)
|
|
672,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Ritchie (10)
|
|
|
|
|
|
200,142
|
(3)
|
|
|
|
|
200,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franz
A. Skryanz (11)
|
|
|
|
|
|
2,649
|
(3)
|
|
60,000
|
(12)
|
|
62,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
amounts in column (c) reflect the dollar amount of awards under the
Plan
that we recognized for financial statement reporting purposes for
the
fiscal year ended December 31, 2006 in accordance with FAS 123(R).
For Mr. Ditoro, Mr. Goodman and Mr. Ritchie, amounts include compensation
derived from awards granted before 2006 but that vested in 2006.
Assumptions used in the calculation of this amount are included in
Note 12
to our audited consolidated financial statements in our Annual Report
on
Form 10-KSB for the year ended December 31, 2006.
|
The
Plan
provides that the total number of shares of common stock that may be subject
to
awards granted under the Plan is 4,000,000 shares (plus the number of shares
with respect to which awards previously granted there under are forfeited,
expire, terminate without being exercised or are settled with property other
than shares, and the number of shares that are surrendered in payment of any
awards or any tax withholding requirements). On December 7, 2006, before any
additional options were granted on that date (the “December 2006 Options”),
there were 1,677,930 shares of common stock remaining available for awards
under
the Plan. The number of shares issuable upon exercise of the December 2006
Options exceeded the number then available under the Plan by 737,070 shares,
which represents approximately 30.5% of the shares issuable upon exercise of
the
December 2006 Options. Accordingly, the compensation committee of our board
of
directors determined that each of the December 2006 Options shall be subject,
on
a pro rata basis, to approval by our stockholders of an amendment to the Plan
to
increase the number of shares available for award under the Plan. As a result
of
this determination, shares issuable upon exercise of the December 2006 Options
are subject to stockholder approval, as noted below.
|
(2)
|
Mr.
Behrens, who is currently serving as a director, was elected to
the board
on October 1, 2006.
|
|
(3)
|
The
following table below summarizes the outstanding stock options
held on
December 31, 2006 by any person who served during 2006 as a director
(other than named executive officers), even if he is no longer
serving as
a director.
|
Name
|
|
Grant
Date
|
|
Number
of
Options
Granted
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Option
Exercise
Price
($)
(a)
|
|
Option
Expiration
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William
P. Behrens (b)
|
|
|
Oct.
5, 2006
|
|
|
215,000
|
|
|
175,000
|
|
|
40,000
|
|
|
3.00
|
|
|
Oct.
5, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
D. Ditoro (c)
|
|
|
July
28, 2005
|
|
|
80,000
|
|
|
80,000
|
|
|
|
|
|
4.00
|
(d)
|
|
July
28, 2010
|
|
|
|
|
Sept.
7, 2006
|
|
|
55,000
|
|
|
55,000
|
|
|
|
|
|
3.62
|
|
|
Sept.
7, 2011
|
|
|
|
|
Oct.
5, 2006
|
|
|
5,000
|
|
|
5,000
|
|
|
|
|
|
3.00
|
|
|
Oct.
5, 2011
|
|
|
|
|
Dec.
7, 2006
|
|
|
125,000
|
|
|
125,000
|
|
|
|
|
|
2.44
|
|
|
Dec.
7, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edwin
L. Klett
|
|
|
Dec.
7, 2006 (e)
|
|
|
40,000
|
|
|
—
|
|
|
40,000
|
|
|
2.44
|
|
|
Dec.
7, 2016
|
|
|
|
|
Dec.
7, 2006 (f)
|
|
|
175,000
|
|
|
175,000
|
|
|
|
|
|
2.44
|
|
|
Dec.
7, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marc
Goodman (g)
|
|
|
July
28, 2005
|
|
|
75,000
|
|
|
75,000
|
|
|
|
|
|
4.00
|
(d)
|
|
July
28, 2010
|
|
|
|
|
Sept.
7, 2006
|
|
|
50,000
|
|
|
50,000
|
|
|
|
|
|
3.62
|
|
|
Sept.
7, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark
Oppenheimer (h)
|
|
|
Oct.
5, 2006
|
|
|
230,000
|
|
|
175,000
|
|
|
|
|
|
3.00
|
|
|
Oct.
5, 2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Ritchie (i)
|
|
|
July
28, 2005
|
|
|
100,000
|
|
|
100,000
|
|
|
|
|
|
4.00
|
(d)
|
|
July
28, 2010
|
|
|
|
|
Sept.
7, 2006
|
|
|
80,000
|
|
|
80,000
|
|
|
|
|
|
3.62
|
|
|
Sept.
7, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franz
A. Skryanz (j)
|
|
|
Dec.
7, 2006
|
|
|
25,000
|
|
|
|
|
|
25,000
|
|
|
2.44
|
|
|
Dec.
7, 2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Except
as noted otherwise, the exercise price of each option in this column
is
equal to the closing price per share of our common stock on the date
of
grant as reported by the American Stock
Exchange.
|
|
(b)
|
We
granted an option to purchase 215,000 shares of our common stock
to Mr.
Behrens in consideration of his service as a director, and 175,000
of the
shares vested on the date of grant and the remainder of the option
vested
in two installments of 20,000 shares each on the six-month and one-year
anniversaries of the date of grant. The amount in the table includes
$388,361 in compensation expense we incurred in 2006 for Mr. Behrens
in
connection with this grant.
|
|
(c)
|
We
granted options to purchase shares of our common stock to Mr. Ditoro
in
consideration of his service as a director. The amount in the table
includes (a) $38,506 in compensation expense we incurred in 2006
for Mr.
Ditoro in connection with the July 28, 2005 grant; (b) $104,506 in
compensation expense we incurred in 2006 for Mr. Ditoro in connection
with
the September 7, 2006 grant; (c) $10,496 in compensation expense
we
incurred in 2006 for Mr. Ditoro in connection with the October 5,
2006
grant; and (d) $212,793 in compensation expense we incurred in 2006
for
Mr. Ditoro in connection with the December 7, 2006 grant. 38,125
shares
issuable on exercise of the December 7, 2006 option granted to Mr.
Ditoro
are subject to stockholder approval.
|
|
(d)
|
As
reported by the OTC Bulletin Board, the high and closing prices per
share
of our common stock on the date of grant were $4.20 and the low price
was
$3.51.
|
|
(e)
|
We
granted an option to Mr. Klett in consideration of his service as
a
director, and the option vested in two installments of 20,000 shares
each
on the six-month and one-year anniversaries of the date of grant.
12,200
shares issuable on exercise of the option granted to Mr. Klett are
subject
to stockholder approval. The amount in the table includes $5,674
in
compensation expense we incurred in 2006 for Mr. Klett in connection
with
this grant.
|
|
(f)
|
We
granted an option to shares of our common stock to Mr. Klett in
consideration of his service as a director, and all shares vested
on the
date of grant. 53,375 shares issuable on exercise of the option granted
to
Mr. Klett are subject to stockholder approval. The amount in the
table
includes $297,910 in compensation expense we incurred in 2006 for
Mr.
Klett in connection with this grant.
|
|
(g)
|
We
granted options to purchase shares of our common stock to Mr. Goodman
in
consideration of his service as a director. The amount in the table
includes (a) $36,100 in compensation expense we incurred in 2006
for Mr.
Goodman in connection with the July 28, 2005 grant; and (b) $95,006
in
compensation expense we incurred in 2006 for Mr. Goodman in connection
with the September 7, 2006 grant.
|
|
(h)
|
We
granted an option to purchase 230,000 shares of our common stock
to Mr.
Oppenheimer in consideration of his service as a director, and 175,000
of
the shares vested on the date of grant and the remaining portions
of the
option were originally scheduled to vest in two installments of 27,500
shares each on the six-month and one-year anniversaries of the date
of
grant. Upon Mr. Oppenheimer’s resignation from the Board on November 9,
2006, 55,000 shares awarded on October 5, 2006 were forfeited. The
amount
in the table includes $367,369 in compensation expense we incurred
in 2006
for Mr. Oppenheimer in connection with this grant.
|
|
(i)
|
We
granted options to purchase shares of our common stock to Mr. Ritchie
in
consideration of his service as a director. The amount in the table
includes (a) $48,133 in compensation expense we incurred in 2006
for Mr.
Ritchie in connection with the July 28, 2005 grant; and (b) $152,009
in
compensation expense we incurred in 2006 for Mr. Ritchie in connection
with the September 7, 2006 grant.
|
|
(j)
|
No
options were granted to Mr. Skryanz for his service as a director.
The
amount in this table includes $2,649 in compensation expense we incurred
in 2006 for Mr. Skryanz in connection with the December 7, 2006
grant.
|
|
(4)
|
Mr.
Ditoro, who is currently serving as a director, served as a director
from
July 28, 2005 through August 10, 2006 and again became a director
on
September 7, 2006.
|
|
(5)
|
Mr.
Klett, who is currently serving as a director, was elected a director
on
December 7, 2006.
|
|
(6)
|
Mr.
Goodman was elected to the Board of Directors on July 28, 2005 and
served
as a director from August 10, 2005 through September 28,
2006.
|
|
(7)
|
Mr.
Oppenheimer served as a director from October 1, 2006 through November
9,
2006.
|
|
(8)
|
Mr.
Langberg served as a director from February 28, 2005 through June
12,
2006. We granted no options to Mr. Langberg in 2006, and no options
were
outstanding at December 31, 2006.
|
|
(9)
|
During
2006, we paid Mr. Langberg a $400,000 performance bonus, 2005 consulting
fees of $4,353, 2006 consulting fees of $135,000 and termination
fees of
$45,000. We also paid $27,496 in health insurance and benefits on
his
behalf. On December 20, 2006, we agreed to issue to him a fully vested
five-year warrant to purchase 125,000 shares of our common stock
at an
exercise price of $8.32, and, in connection with that warrant, we
recognized a $60,439 compensation expense in 2006.
(On
an accrual basis, our
audited
financial statements reflect an additional $190,000 in termination
fees
payable as of December 31, 2006, less $4,353 of 2005 consulting fees.)
Mr.
Langberg received no compensation as
a
|
member
of
the board of directors. For more information about our payments to Mr. Langberg,
please see “Certain Relationships and Related Transactions.”
|
(10)
|
Mr.
Ritchie served as a director from July 28, 2005 through September
28,
2006.
|
|
(11)
|
Mr.
Skryanz served as a director from February 2, 2005 through October
5,
2006.
|
|
(12)
|
The
amount represents wages paid to Mr. Skryanz as our Treasurer during
2006.
|
We
compensate non-employee members of the board through a mixture of cash and
equity-based compensation. Commencing October 1, 2006, we adopted a policy
of
paying each independent, non-employee director a quarterly retainer of $5,000
for his services as a director.
On
the
date each independent, non-employee director is elected to the board of
directors for his or her first time, our current policy is to grant to the
director an option to purchase shares of our common stock at a price equal
to
the fair market value of our common stock on the date of grant. Directors also
receive stock option grants for serving on the audit, governance, compensation
and science committees. The number of shares underlying each annual option
grant
is: 25,000 shares for chairing the compensation, governance or science
committees; 50,000 shares for chairing the audit committee; 15,000 shares for
being a member of the governance, compensation or science committees; and 25,000
shares for being a member of the audit committee. Annual grants to reelected
directors are at the discretion of the board. Directors who are also our
employees do not receive cash or equity compensation for service on the board
in
addition to compensation payable for their service as our
employees.
Directors
who are also our employees do not receive cash or equity compensation for
service on the board in addition to compensation payable for their service
as
our employees.
Change-in-Control
Arrangements
The
Plan
provides that if and only to the extent provided in the award agreement, or
to
the extent otherwise determined by the compensation committee, subject to
certain limitations, on the occurrence of a “Change-in-Control”, (a) any option
or stock appreciation right that was not previously vested and exercisable
as of
the time of the Change-in-Control, shall become immediately vested and
exercisable, (b) any restrictions, deferral of settlement, and forfeiture
conditions applicable to a restricted stock award, deferred stock award or
an
other stock-based award subject only to future service requirements granted
under the Plan shall lapse and such awards shall be deemed fully vested as
of
the time of the Change-in-Control, and (c) with respect to any outstanding
award
subject to achievement of performance goals and conditions under the Plan,
the
compensation committee may, in its discretion, deem such performance goals
and
conditions as having been met as of the date of the
Change-in-Control.
For
this
purpose, a “Change-in-Control” includes:
|
·
|
consummation
of a reorganization, merger, statutory share exchange or consolidation
or
similar corporate transaction involving Xethanol or any of its
subsidiaries, a sale or other disposition of all or substantially
all of
the assets of Xethanol, or the acquisition of assets or stock of
another
entity by Xethanol or any of its subsidiaries (each a “Business
Combination”), in each case, unless, following such Business Combination,
(A) all or substantially all of the individuals and entities who
were the
beneficial owners, respectively, of the outstanding voting securities
of
Xethanol immediately prior to such Business Combination beneficially
own,
directly or indirectly, more than 50% of the then outstanding shares
of
common stock and the combined voting power of the then outstanding
voting
securities entitled to vote generally in the election of directors,
as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of
such
transaction owns Xethanol or all or substantially all of our assets
either
directly or through one or more subsidiaries) in substantially the
same
proportions as their ownership, immediately prior to such Business
Combination, of the voting securities of Xethanol, (B) no person
(excluding any employee benefit plan (or related trust) of Xethanol
or
such corporation resulting from such Business Combination or any
person
that as of the effective date of the Plan owns beneficial ownership
of a
controlling interest) beneficially owns, directly or indirectly,
fifty
percent (50%) or
|
more
of
the then outstanding shares of common stock of the corporation resulting from
such Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (C) at least a majority of the
members of the Board of Directors of the corporation resulting from such
Business Combination were members of our incumbent board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for
such Business Combination;
|
·
|
the
acquisition, directly or indirectly, by any person or related group
of
persons (other than Xethanol or a person that directly or indirectly
controls, is controlled by, or is under common control with, Xethanol),
of
beneficial ownership (within the meaning of Rule 13d-3 of the Exchange
Act) of securities possessing more than 50% of the total combined
voting
power of our outstanding securities, with certain
exceptions;
|
|
·
|
during
any consecutive two-year period, individuals who at the beginning
of that
two-year period constituted the Board of Directors (together with
any new
directors whose election to the Board of Directors, or whose nomination
for election by the stockholders of Xethanol, was approved by a vote
of a
majority of the directors then still in office who were either directors
at the beginning of such period or whose elections or nominations
for
election were previously so approved) cease for any reason to constitute
a
majority of the Board of Directors then in office;
or
|
|
·
|
approval
by our stockholders of a complete liquidation or dissolution of
Xethanol.
|
Acquisition
of Permeate Refining
In
September 2001, Old Xethanol issued 1,000,000 shares of common stock to Robert
and Carol Lehman, of Permeate Refining, Inc. as a “good faith” payment, under a
non-binding letter of intent, in contemplation of the acquisition of Permeate.
In July 2003, Old Xethanol completed the transaction and acquired Permeate.
Old
Xethanol, through its wholly owned subsidiary, Xethanol One, LLC, also acquired
the real estate and some of the production facilities associated with Permeate’s
operations from the Lehmans for a total price of $1,250,000, payable as follows:
(a) a down payment of $125,000, which we made on July 9, 2003, and (b) a
promissory note for the balance of $1,125,000, which bore interest at the simple
interest rate of 9% per year with monthly payments due on the first day of
each
month commencing August 1, 2003 until June 1, 2006, the maturity date. Our
obligations under the promissory note were secured by a mortgage on the Permeate
real estate granted to Master’s Trust (an entity formed by the
Lehmans).
Under
an
October 18, 2005 memorandum of agreement among the Lehmans, Master’s Trust and
us, we entered into a mutual general release on January 23, 2006. Under release,
we issued to the Lehmans a new $243,395 promissory note in exchange for the
$1,125,000 promissory note and we issued 135,000 shares of our common stock
to
Master’s Trust in exchange for the full release and satisfaction of the mortgage
on the Permeate real estate.
We
repaid
the new note in full on August 1, 2006, its maturity date. Interest was due
monthly on the outstanding principal amount of the new note at a rate equal
to
0.5% above the prime rate. We made monthly payments equal to $3,128 allocated
between interest and principal based on the then-current prime
rate.
Consulting
Agreements with Jeffrey S. Langberg
In
February 2005, we entered into a consulting services agreement with Jeffrey
S.
Langberg, then one of our directors, under which Mr. Langberg agreed to provide
general business advisory services. Under this agreement, we agreed to pay
Mr.
Langberg a monthly consulting fee of $15,000 per month and a sign-on bonus
of
$225,000. Under the consulting agreement, Mr. Langberg was also eligible to
receive performances bonuses at the discretion of the board of directors as
well
as equity-based awards under the Plan. Mr. Langberg agreed to waive any
compensation otherwise payable to him while he was a director of our company.
During 2005, Mr. Langberg earned $180,000 in consulting fees and $275,000 in
bonuses. Including $194,147 he earned in 2004 that we paid him in 2005, we
paid
Mr. Langberg a total of $649,147 in 2005, and we provided him with health
insurance coverage at a cost of $14,014 to us. (We also paid rent paid to an
entity controlled by Mr. Langberg as described below under “Office Space.”) Mr.
Langberg did not receive any compensation otherwise payable to him as a director
in 2005.
On
June
12, 2006, Mr. Langberg resigned from our board of directors. On that date,
we
issued to Mr. Langberg warrants to purchases 250,000 shares of common stock
at
an exercise price of $8.32 per share that were originally scheduled to vest
upon
the date on which NewEnglandXethanol, LLC has approved and commenced its initial
project. For these purposes, the project was to be deemed to have been approved
and commenced when (a) the project has been approved, (b) financing for
construction of the project has been obtained and closed and (c) our chief
executive officer has notified our board of directors or our compensation
committee that conditions (a) and (b) have been met. Due to the contingent
nature of these warrants, we did not reflect an expense for them in our
financial statements. In September 2006, we entered into an agreement with
Mr.
Langberg that terminated our consulting agreement with him. Mr. Langberg
continued to provide consulting services directly to our board of directors
under the terms of the terminated agreement until December 20, 2006, when we
entered into another agreement with Mr. Langberg that terminated the September
2006 agreement. In the December 20, 2006 agreement with Mr. Langberg, we agreed
as follows:
|
·
|
to
pay Mr. Langberg $15,000 on December 20, 2006 and $100,000 on January
2,
2007;
|
|
·
|
to
pay him six monthly payments of $15,000 each, beginning on December
25,
2006 and continuing on the 25
th
day of each month thereafter through May 25, 2007 (in addition to
payments
in that amount previously made on September 25, 2006 and October
25,
2006), although we are longer using Mr. Langberg’s services as a
consultant;
|
|
·
|
to
cancel the warrants we granted to him on June 12, 2006, and to issue
to
him a fully vested five-year warrant to purchase 125,000 shares of
our
common stock at an exercise price of $8.32;
|
|
·
|
to
continue paying or reimbursing him for health insurance through May
25,
2007; and
|
|
·
|
to
amend the sublease arrangement with a company controlled by Mr. Langberg
to reflect the terms described in “Office Space”
below.
|
During
2006, we paid Mr. Langberg a $400,000 performance bonus, consulting fees of
$139,353 (including $4,353 in consulting fees he earned in 2005) and termination
fees of $45,000. We also paid $27,496 in health insurance and benefits on his
behalf. In connection with the warrant we agreed to issue to Mr. Langberg on
December 20, 2006, we recognized a $60,439 compensation expense for financial
statement reporting purposes for the fiscal year ended December 31, 2006 in
accordance with FAS 123(R). (On an accrual basis, our audited financial
statements reflect a $400,000 performance bonus, $135,000 in consulting fees,
$235,000 in termination fees, a $60,439 compensation expense for the warrant,
and $27,496 in health insurance and benefits.) Mr. Langberg received no
compensation as a member of the board of directors in 2006. (We also paid rent
paid to an entity controlled by Mr. Langberg as described below under “Office
Space.”)
Office
Space
In
October 2004, Old Xethanol began sharing office space in New York City with
other affiliated companies under a sublease with Xethanol Management Services,
LLC, a single member limited liability company controlled by Jeffrey S.
Langberg. Under this arrangement as amended pursuant to the December 20, 2006
agreement with Mr. Langberg described above, we are currently paying
approximately $17,000 per month, plus reimbursements of other costs, in sublease
payments on a month-to-month basis. Total payments under the sublease were
$132,043 for the year ended December 31, 2006 and $99,806 for the year ended
December 31, 2005.
Agreements
with Northeast Securities, Inc.
William
P. Behrens, a director, is the Vice Chairman of Northeast Securities, Inc.,
a
multi-line financial services firm serving both institutional and individual
clients. Under a placement agent agreement dated as of February 22, 2006 between
Northeast and us, Northeast acted as our placement agent in connection with
the
private offering of our common stock and warrants to purchase common stock
consummated on April 13, 2006. In consideration of Northeast’s services, on
April 13, 2006 we paid Northeast $1,928,397 in cash and issued to Northeast
and
its designees warrants to purchase 606,938 shares of our common stock at an
exercise price $4.50 per share, exercisable at any time until April 12, 2009.
We
issued warrants to purchase 35,000 shares of common stock to Mr. Behrens as
a
designee of Northeast. The warrants may be exercised on a “cashless” basis at
any time and are otherwise exercisable on the same terms and conditions as,
and
are entitled to registration rights on the same terms as, the warrants issued
to
the investors in the April 2006 private placement. (Mr. Behrens also acquired
in
the private offering 22,223 shares of common stock, 4,445 Series A warrants
and
2,223 Series B warrants on the same terms as the other investors in the private
offering.)
On
October 1, 2006, we entered into an advisory agreement with Northeast under
which Northeast agreed, on a non-exclusive basis, to assist us in various
corporate matters including advice relating to general capital raising, mergers
and acquisition matters, recommendations relating to business operations and
strategic planning. In consideration of these services, we agreed to pay
Northeast an advisory fee of $10,000 per month during the term of the agreement
and to reimburse Northeast for all necessary and reasonable out-of-pocket costs
and expenses it incurred in the performance of its obligations under the
agreement. The scheduled term of the agreement was one year, subject to earlier
termination by us in the event of a material breach by Northeast of any of
its
obligations under the agreement. The agreement provided that if, within twelve
months after the termination of the agreement, we either (a) consummate a
financing transaction with any investor that Northeast introduced to us before
the termination or (b) enter into a definitive agreement to consummate a
financing transaction with any such investor and the financing transaction
is
consummated within six months thereafter, then we are obligated to pay Northeast
a cash fee in line with industry standard rates (the “tail provision”). In the
agreement, we also agreed to indemnify Northeast against any losses, claims,
damages and liabilities it may incur as a result of its engagement as an advisor
under the agreement, other than losses, claims, damages and liabilities
resulting solely from Northeast’s gross negligence or willful misconduct. In May
2007, we informally amended our agreement with Northeast to
eliminate
the
advisory fee of $10,000 per month, although Northeast continued to perform
advisory services for us. On July 25, 2007, we formally agreed with Northeast
to
terminate the agreement, including the tail provision.
Reverse
Merger
Xethanol
Corporation is the successor to a corporation of the same name that was
organized under the laws of Delaware on January 24, 2000. We refer to that
predecessor corporation as “Old Xethanol.” In 2005, Old Xethanol structured a
series of transactions to gain access to the capital markets. In connection
with
these transactions, which we collectively refer to as the reverse merger, Zen
Pottery Equipment, Inc., a Colorado publicly traded corporation (“Zen”),
organized Zen Acquisition Corp. as a wholly owned Delaware subsidiary (“Zen
Acquisition”). Thereafter, under an agreement of merger and plan of
reorganization dated as of February 2, 2005 among Zen, Zen Acquisition and
Old
Xethanol, Zen Acquisition merged with and into Old Xethanol, which then became
a
wholly owned subsidiary of Zen. Following an exchange of shares between the
stockholders of Old Xethanol and Zen, Old Xethanol changed its name to Xethanol
BioEnergy, Inc. Zen then discontinued its previous business activities,
reincorporated as a Delaware corporation, changed its name to Xethanol
Corporation, and succeeded to the business of Old Xethanol as its sole line
of
business.
Under
the
merger agreement, stockholders of Old Xethanol received in the merger
approximately .88 of a share of our common stock for each share of Old Xethanol
common stock they held. As a result, at closing we issued 9,706,781 shares
of
our common stock to the former stockholders of Old Xethanol, representing 74.0%
of our outstanding common stock following the merger, in exchange for 100%
of
the outstanding capital stock of Old Xethanol. The consideration issued in
the
merger was determined as a result of arm’s-length negotiations between the
parties. There were 1,874,303 shares of our common stock outstanding before
giving effect to the stock issuances in the merger and the concurrent private
offering of 1,190,116 shares of our common stock at a purchase price of $3.25
per share.
In
November 2004, before the merger, Zen Zachariah Pool III, Zen’s Chief Executive
Officer and President and a member of its board of directors, and Walter C.
Nathan, Zen’s Chief Financial Officer and a member of its board of directors,
sold options to purchase a total of 700,000 shares of Zen’s common stock owned
by them at an exercise price of $0.20 per share as follows: (a) 250,000 options
to a company controlled by the brother of Christopher d’Arnaud-Taylor, a
director, officer and significant stockholder of Old Xethanol and currently
one
of our
directors
and our former Chairman, President and Chief Executive Officer
;
(b)
250,000 options to the mother-in-law of
Jeffrey
S. Langberg,
a
significant stockholder of Old Xethanol and
our
former director
;
and (c)
200,000 options to another significant stockholder of Old Xethanol. Each
purchaser paid $10.00 for that purchaser’s options. Exercise of the options was
conditional upon the closing of the private offering and reverse merger, and
the
options were exercisable at any time within 200 days after the closing of the
reverse merger. On February 2, 2005, each of the company controlled by the
brother of Mr. d’Arnaud-Taylor and the mother-in-law of
Mr.
Langberg
entered
into and consummated an agreement with a stockholder of Zen to purchase 100,000
shares of Zen’s common stock at a purchase price of $0.40 per share. Also in
connection with the merger, each of Mr. d’Arnaud-Taylor and Mr. Langberg agreed
to contribute or cause to be contributed 250,000 shares of our common stock
to
us for cancellation. We reflected those contributions to capital in connection
with the reverse merger in the consolidated statements of changes in
stockholder’s equity in the audited consolidated financial statements in our
Annual Report on Form 10-KSB for the year ended December 31, 2006. Under our
agreement with Mr. d’Arnaud-Taylor and Mr. Langberg, they each caused to be
delivered share certificates for 250,000 shares to our transfer agent for
cancellation. The shares were tendered by London Manhattan Securities Inc.,
a
company controlled by Mr. d’Arnaud-Taylor, and by Mr. Jeffrey S. Langberg.
Our
audit
committee of the board of directors operates under a written charter adopted
by
our board of directors, which is available on our website at www.xethanol.com.
The audit committee is responsible for providing oversight of the independent
audit process and the independent auditors, reviewing our financial statements
and financial statements of our subsidiaries and discussing them with management
and the independent auditors, reviewing and discussing with management and
the
independent auditors the adequacy and effectiveness of our internal accounting
and disclosure controls and procedures, and providing legal and regulatory
compliance and ethics programs oversight. The audit committee communicates
regularly with our management, including our Chief Financial Officer, and with
our auditors. The audit committee is also responsible for conducting an
appropriate review of and pre-approving all related person transactions in
accordance with the American Stock Exchange listing standards, and evaluating
the effectiveness of the audit committee charter at least annually.
To
comply
with the Sarbanes-Oxley Act of 2002, our audit committee adopted a policy that
pre-approves specified audit and tax-related services to be provided by our
independent auditors. The policy forbids our independent auditors from providing
the services enumerated in Section 201(a) of Sarbanes-Oxley.
In
performing all of these functions, the audit committee acts only in an oversight
capacity. The audit committee reviews our quarterly reporting on Form 10-QSB
or
Form 10-Q and annual reporting on Form 10-KSB or Form 10-K prior to filing
with
the SEC. In its oversight role, the audit committee relies on the work and
assurances of our management, which has the primary responsibility for financial
statements and reports, and of the independent auditors, who, in their report,
express an opinion on the conformity of our annual financial statements to
generally accepted accounting principles.
The
audit
committee has discussed with Imowitz Koenig & Co., LLP, our independent
registered public accounting firm, the matters required by statement on Auditing
Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section
380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
The audit committee has received the written disclosures and the letter from
the
independent accountants required by Independence Standards Board Standard No.
1
(Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees), as adopted by the Public Company Accounting Oversight Board
in Rule 3600T, and it has discussed with the independent auditors the
independent auditors’ independence from the company and our management. The
audit committee reported its findings to our board of directors.
Based
on
the reviews and discussions referred to above, the audit committee recommended
to our board of directors that the audited financial statements be included
in
our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006
for
filing with the Securities and Exchange Commission. A copy of our Annual Report
on Form 10-KSB, as amended, is part of the annual report to stockholders
enclosed with these proxy materials.
The
audit
committee’s report shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, except to
the
extent that we specifically incorporate the information contained in the report
by reference, and it shall not be deemed filed under such acts.
THE
AUDIT
COMMITTEE
Gil
Boosidan, Chairman
Robert
L.
Franklin
Edwin
Klett
APPROVAL
OF AMENDMENT TO 2005 INCENTIVE COMPENSATION PLAN
Background
and Purpose
The
2005
Incentive Compensation Plan, as amended and restated on August 10, 2006 (the
“Plan”), currently provides that the total number of shares of common stock that
may be subject to awards granted under the Plan is 4,000,000 shares, plus the
number of shares with respect to which awards previously granted under the
Plan
are forfeited, expire, terminate without being exercised or are settled with
property other than shares, and the number of shares that are surrendered in
payment of any awards or any tax withholding requirements. On December 21,
2007,
the Plan was amended to increase the number of shares of common stock available
for awards under the Plan from 4,000,000 to 6,500,000, subject to stockholder
approval.
The
purpose of the Plan is to attract, motivate, retain and reward high-quality
executives and other employees, officers, directors, consultants and other
persons who provide services to us or entities related to us by enabling those
persons to acquire a proprietary interest in our company to align their
interests with those of our stockholders. The Plan also provides those persons
with performance incentives to expend their maximum efforts in creating
stockholder value. By providing the opportunity to participate in our success
and growth, we believe we encourage award recipients to continue their
association with us or service to us.
As
of
December 11, 2007, the record date, the following awards were outstanding under
the Plan: 317,070 shares of common stock; and stock options to purchase
5,245,000 shares of common stock. As explained below
,
the
total number of awards currently outstanding under the Plan
is
1,562,070 shares greater than the 4,000,000 share limit in the Plan. (This
amount reflects stock options forfeited in the third quarter of 2007.) As
described in greater detail below, if our stockholders do not approve this
Proposal No. 2, then:
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these
excess options will be void, and our compensation committee will
have to
consider alternative incentives for the holders of these options;
and
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we
will have no or a limited number of shares available for awards under
the
Plan in the future.
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The
total
number of shares of common stock issuable on exercise of options granted on
December 7, 2006, February 1, 2007 and June 19, 2007 exceeded the number of
shares then available under the Plan by 1,652,070 shares (the “excess options”).
The excess options were granted expressly subject to subsequent stockholder
approval of an increase in the 4,000,000 limit in the Plan to cover those
options. Specifically, on December 7, 2006, options to purchase 2,415,000 shares
of our common stock were granted under the Plan to some of our officers,
directors, employees and consultants. On that date, before the options were
granted, there were 1,677,930 shares of common stock remaining available for
awards under the Plan. Therefore, the number of shares issuable upon exercise
of
those options exceeded the number then available under the Plan by 737,070
shares, which represents approximately 30.5% of the shares issuable upon
exercise of those options. Accordingly, the compensation committee of our board
of directors has determined that each of those excess options is subject, on
a
pro rata basis, to approval by our stockholders of an amendment to the Plan
to
increase the number of shares available for awards under the Plan to cover
those
excess options. Subsequently, on February 1, 2007, options under the Plan to
purchase 865,000 shares were granted to our new chief financial officer and
to
two new directors. On June 19, 2007, an option under the Plan to purchase 50,000
shares was granted to our new chief operating officer. The compensation
committee determined that each of those options is subject to approval by our
stockholders of an amendment to the Plan to increase the number of shares
available for awards under the Plan to cover those excess options.
As
described below in “Interest of Officers and Directors in the Amendment to the
Plan; New Plan Benefits,” our executive officers and directors have an interest
in the approval of the amendment to the Plan to cover the excess options, which
will be void if our stockholders do not approve the amendment. Based on a price
per share of $0.50, the closing price per share of our common stock on the
American Stock Exchange on December 19, 2007, the exercise price of each excess
option is currently higher than that closing price. Accordingly, the excess
options are currently out-of-the-money, and the trading price of our common
stock must increase substantially before the holders can realize any value
from
the options.
Proposal
No. 2 will increase the number of shares of common stock available for awards
under the Plan from 4,000,000 to 6,500,000. This increase will:
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cover
the 737,070 shares issuable upon exercise of the December 2006
options;
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cover
the 865,000 shares issuable upon exercise of the February 2007 options;
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·
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cover
the 50,000 shares issuable upon exercise of the June 2007 options;
and
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provide
an additional 937,930 shares for future
awards.
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Each
of
the option agreements with respect to the options granted in December 2006,
February 2007 and June 2007 provides that the number of shares issuable upon
exercise of the options, to the extent that such amount exceeded the number
then
available under the Plan, is subject to approval by our stockholders as noted
above. If the stockholders do not approve the proposed amendment to the
Plan:
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the
December 2006 options will be void to the extent (and only to the
extent)
that the number of shares issuable upon the exercise of those options
exceeds the holder’s pro rata allocation of the 737,070 excess shares, and
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all
of the February 2007 options and June 2007 options will be void.
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In
that
event, our compensation committee will consider alternative incentives for
those
option holders.
Stockholder
approval of the amendment to the Plan is required:
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to
comply with certain exclusions from the limitations of Section 162(m)
of
the Internal Revenue Code of 1986 (the “Code”);
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for
the Plan to be eligible under the “plan lender” exemption from the margin
requirements of Regulation G promulgated under the Securities Exchange
Act
of 1934, as amended, which we refer to as the Exchange Act;
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to
comply with the incentive stock options rules under Section 422 of
the
Code; and
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to
comply with the stockholder approval requirements of the American
Stock
Exchange.
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The
Plan
was originally approved by our board of directors on February 2, 2005 and by
our
stockholders at a special meeting of stockholders held on March 29, 2005. The
Plan was subsequently amended after receiving stockholder approval at our 2006
annual meeting on August 10, 2006 for amendments proposed to stockholders at
that meeting. The copy of the Plan attached to this proxy statement as
Appendix
A
reflects
those amendments (and an amendment to reflect that Xethanol Corporation is
a
Delaware corporation).
If
our
stockholders approve an amendment to the Plan to increase the number of shares
of common stock available for awards under the Plan from 4,000,000 to 6,500,000,
we intend to file with the SEC, within a reasonable time after our annual
meeting, a registration statement on Form S-8 to register under the Securities
Act the total number of shares of common stock that may be subject to awards
granted under the Plan.
The
following is a summary of certain principal features of the Plan as currently
in
effect. This summary is qualified in its entirety by reference to the complete
text of the Plan attached to this proxy statement as
Appendix
A
.
Shares
Available for Awards; Annual Per-Person Limitations
Under
the
current Plan, the total number of shares of common stock that may be subject
to
the granting of awards
under
the
Plan
is
4,000,000 shares, plus the number of shares with respect to which awards
previously granted under the Plan are forfeited, expire, terminate without
being
exercised or are settled with property other than shares, and the number of
shares that are surrendered in payment of any awards or any tax withholding
requirements.
Awards
with respect to shares that are granted to replace outstanding awards or other
similar rights that are assumed or replaced by awards under the Plan pursuant
to
the acquisition of a business are not subject to, and do not count against,
the
foregoing limit.
In
addition, the Plan imposes individual limitations on the amount of certain
awards in part to comply with Section 162(m) of the Code. Under these
limitations, the maximum amount that may be earned by any one participant as
a
performance award in respect of a performance period of one year is $1,000,000,
and in respect of a performance period greater than one year is $1,000,000
multiplied by the number of full years in the performance period. A “performance
award” is any grant of a unit valued by reference to a designated amount of
property (including cash) other than shares of common stock. The foregoing
limits do not apply to stock options.
The
compensation committee of our board of directors administers the Plan. The
committee is authorized to adjust the limitations described above and is
authorized to adjust outstanding awards (including adjustments to exercise
prices of options and other affected terms of awards) if a dividend or other
distribution (whether in cash, shares of common stock or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange or other
similar corporate transaction or event affects the common stock so that an
adjustment is appropriate in order to prevent dilution or enlargement of the
rights of participants. The committee is also authorized to adjust performance
conditions and other terms of awards in response to these kinds of events or
in
response to changes in applicable laws, regulations or accounting
principles.
Eligibility
The
persons eligible to receive awards under the Plan are the officers, directors,
employees and independent contractors of us and of our related entities. An
employee on leave of absence may be considered as still in our employ or in
the
employ of a related entity for purposes of eligibility for participation in
the
Plan.
Administration
Our
board
of directors selects the committee that will administer the Plan, and it has
designated the compensation committee to act as the “Committee” under the Plan.
(Accordingly, in the remainder of this section of the proxy statement, the
term
“committee” refers to the compensation committee of our board of directors.) All
committee members must be “non-employee directors” as defined by Rule 16b-3 of
the Exchange Act, “outside directors” for purposes of Section 162(m) of the
Code, and “independent” within the meaning of Section 121A of the Amex Company
Guide or the rules of any other national securities exchange on which any of
our
securities may be listed for trading in the future. Except as otherwise required
to comply with Rule 16b-3 of the Exchange Act or Section 162(m) of the Code,
however, our board of directors may exercise any power or authority granted
to
the committee. Subject to the terms of the Plan, the committee is authorized
to
select eligible persons to receive awards, determine the type and number of
awards to be granted and the number of shares of common stock to which awards
will relate, specify times at which awards will be exercisable or settleable
(including performance conditions that may be required as a condition of
settlement), set other terms and conditions of awards, prescribe forms of award
agreements, interpret and specify rules and regulations relating to the Plan
and
make all other determinations that may be necessary or advisable for the
administration of the Plan.
Stock
Options and SARS
The
committee is authorized to grant stock options, including both incentive stock
options (or ISOs), which can result in potentially favorable tax treatment
to
the participant, and non-qualified stock options. The committee is also
authorized to grant SARs entitling the participant to receive the amount by
which the fair market value of a share of common stock on the date of exercise
(or the “change in control price,” as defined in the Plan, following a change in
control) exceeds the grant price of the SAR. The exercise price per share
subject to an option and the grant price of an SAR are determined by the
committee, but in the case of an ISO must not be less than the fair market
value
of a share of common stock on the date of grant. For purposes of the Plan,
the
term “fair market value” means the fair market value of the common stock, awards
or other property as determined by the committee or under procedures established
by the committee. Unless otherwise determined by the committee or our board
of
directors, the fair market value of the common stock as of any given date must
be the closing sales price per share of common stock as reported on the
principal stock exchange or market on which the common stock is traded on the
date as of which such value is being determined or, if there is no sale on
that
date, the last previous day on which a sale was reported. The maximum term
of
each option or SAR, the times at which each option or SAR will be
exercisable,
and provisions requiring forfeiture of unexercised options or SARs at or
following termination of employment or service generally are fixed by the
committee except that no option or SAR may have a term exceeding ten years.
Options may be exercised by payment of the exercise price in cash, shares that
have been held for at least six months (or that the committee otherwise
determines will not result in a financial accounting charge to us), outstanding
awards or other property having a fair market value equal to the exercise price,
as the committee may determine from time to time. Methods of exercise and
settlement and other terms of the SARs are determined by the committee. SARs
granted under the Plan may include “limited SARs” exercisable for a stated
period of time following a change in control of the company or upon the
occurrence of some other event specified by the committee, as discussed
below.
Restricted
and Deferred Stock
The
committee is authorized to grant restricted stock and deferred stock. Restricted
stock is a grant of shares of common stock that may not be sold or disposed
of,
and which may be forfeited in the event of certain terminations of employment
or
service, before the end of a restricted period specified by the committee.
A
participant granted restricted stock generally has all of the rights of a
stockholder, unless otherwise determined by the committee. An award of deferred
stock confers upon a participant the right to receive shares of common stock
at
the end of a specified deferral period, and may be subject to possible
forfeiture of the award in the event of certain terminations of employment
prior
to the end of a specified restricted period. Before settlement, an award of
deferred stock carries no voting or dividend rights or other rights associated
with share ownership, although dividend equivalents may be granted, as discussed
below.
Dividend
Equivalents
The
committee is authorized to grant dividend equivalents, which confer on
participants the right to receive, currently or on a deferred basis, cash,
shares of common stock, other awards or other property equal in value to
dividends paid on a specific number of shares of common stock or other periodic
payments. Dividend equivalents may be granted alone or in connection with
another award, may be paid currently or on a deferred basis and, if deferred,
may be deemed to have been reinvested in additional shares of common stock,
awards or otherwise as specified by the committee.
Bonus
Stock and Awards in Lieu of Cash Obligations
The
committee is authorized to grant shares of common stock as a bonus free of
restrictions, or to grant shares of common stock or other awards in lieu of
our
obligations to pay cash under the Plan or other plans or compensatory
arrangements, subject to such terms as the committee may specify.
Other
Stock-Based Awards
The
committee is authorized to grant awards under the Plan that are denominated
or
payable in, valued by reference to, or otherwise based on or related to shares
of common stock. Those awards might include convertible or exchangeable debt
securities, other rights convertible or exchangeable into shares of common
stock, purchase rights for shares of common stock, awards with value and payment
contingent upon our performance or any other factors designated by the
committee, and awards valued by reference to the book value of shares of common
stock or the value of securities of or the performance of specified subsidiaries
or business units. The committee determines the terms and conditions of these
awards.
Performance
Awards
The
right
of a participant to exercise or receive a grant or settlement of an award,
and
the timing of any such event, may be subject to such performance conditions
(including subjective individual goals) as the committee may specify. In
addition, the Plan authorizes specific performance awards, which represent
a
conditional right to receive cash, shares of common stock or other awards upon
achievement of certain pre-established performance goals and subjective
individual goals during a specified fiscal year. Performance awards granted
to
persons whom the committee expects will, for the year in which a deduction
arises, be “covered employees” (as defined below) will, if and to the extent
intended by the committee, be subject to provisions that should qualify such
awards as
“performance-based
compensation” not subject to the limitation on tax deductibility by us under
Section 162(m) of the Code. For purposes of Section 162(m) of the Code, the
term
“covered employee” means our chief executive officer and each other person whose
compensation is required to be disclosed in our filings with the SEC by reason
of that person being among our three highest compensated as of the end of a
taxable year (other than the principal executive officer or the principal
financial officer). If and to the extent required under Section 162(m) of the
Code, any power or authority relating to a performance award intended to qualify
under Section 162(m) of the Code is to be exercised by the committee, not our
board of directors.
Subject
to the requirements of the Plan, the committee will determine performance award
terms, including the required levels of performance with respect to specified
business criteria, the corresponding amounts payable upon achievement of such
levels of performance, termination and forfeiture provisions and the form of
settlement. In establishing performance goals for performance awards to “covered
employees” that are intended to qualify under Section 162(m) of the Code, the
committee must use one or more of the following business criteria for the
company, on a consolidated basis, and/or for related entities, or for our
business or geographical units or the business or geographical units of a
related entity (except with respect to the total stockholder return and earnings
per share criteria):
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net
income; pretax earnings;
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earnings
before interest, taxes, depreciation and amortization;
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earnings
after interest expense and before extraordinary or special items;
operating income;
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income
before interest income or expense, unusual items and income taxes,
local,
state or Federal and excluding budgeted and actual bonuses which
might be
paid under any of our ongoing bonus plans;
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management
of fixed costs or variable costs;
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identification
or consummation of investment opportunities or completion of specified
projects in accordance with corporate business plans, including strategic
mergers, acquisitions or
divestitures;
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total
stockholder return;
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any
of the above goals determined on an absolute or relative basis or
as
compared to the performance of a published or special index deemed
applicable by the committee including, but not limited to, the Standard
& Poor’s 500 Stock Index or a group of comparable companies.
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The
committee may exclude the effect of an event or occurrence that the committee
determines should appropriately be excluded, including without
limitation:
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restructurings,
discontinued operations, extraordinary items, and other unusual or
non-recurring charges;
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an
event either not directly related to our operations or not within
the
reasonable control of our management;
or
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a
change in accounting standards required by generally accepted accounting
principles.
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In
granting performance awards, the committee may establish unfunded award “pools,”
the amounts of which will be based upon the achievement of a performance goal
or
goals based on one or more of certain business criteria described in the Plan,
including, for example, total stockholder return, net income, pretax earnings,
EBITDA,
earnings
per share, and return on investment. During the first 90 days of a performance
period, the committee will determine who will potentially receive performance
awards for that performance period, either out of the pool or
otherwise.
After
the
end of each performance period, the committee will determine (a) the amount
of
any pools and the maximum amount of potential performance awards payable to
each
participant in the pools, and (b) the amount of any other potential performance
awards payable to participants in the Plan. The committee may, in its
discretion, determine that the amount payable as a performance award will be
reduced from the amount of any potential award.
Other
Terms of Awards
Awards
may be settled in the form of cash, shares of common stock, other awards or
other property, in the discretion of the committee. The committee may require
or
permit participants to defer the settlement of all or part of an award in
accordance with such terms and conditions as the committee may establish,
including payment or crediting of interest or dividend equivalents on deferred
amounts, and the crediting of earnings, gains and losses based on deemed
investment of deferred amounts in specified investment vehicles. The committee
is authorized to place cash, shares of common stock or other property in trusts
or make other arrangements to provide for payment of our obligations under
the
Plan. The committee may condition any payment relating to an award on the
withholding of taxes and may provide that a portion of any shares of common
stock or other property to be distributed will be withheld (or previously
acquired shares of common stock or other property be surrendered by the
participant) to satisfy withholding and other tax obligations. Awards granted
under the Plan generally may not be pledged or otherwise encumbered and are
not
transferable except by will or by the laws of descent and distribution, or
to a
designated beneficiary upon the participant’s death, except that the committee
may, in its discretion, permit transfers for estate planning or other purposes
subject to any applicable restrictions under Rule 16b-3 of the Exchange
Act.
Awards
under the Plan are generally granted without a requirement that the participant
pay consideration in the form of cash or property for the grant (as
distinguished from the exercise), except to the extent required by law. The
committee may, however, grant awards in exchange for other awards under the
Plan
or under other company plans, or other rights to payment from us, and may grant
awards in addition to and in tandem with such other awards or
rights.
Acceleration
of Vesting; Change in Control
The
committee may, in its discretion, accelerate the exercisability, the lapsing
of
restrictions or the expiration of deferral or vesting periods of any award,
and
such accelerated exercisability, lapse, expiration and, if so provided in the
award agreement, vesting shall occur automatically in the case of a “change in
control” of the company, as defined in the Plan (including the cash settlement
of SARs and “limited SARs” which may be exercisable in the event of a change in
control). In addition, the committee may provide in an award agreement that
the
performance goals relating to any performance-based award will be deemed to
have
been met upon the occurrence of any “change in control.” Upon the occurrence of
a change in control, if so provided in the award agreement, stock options and
limited SARs (and other SARs which so provide) may be cashed out based on a
defined “change in control price,” which will be the higher of (x) the cash and
fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any reorganization, merger,
consolidation, liquidation, dissolution or sale of substantially all of our
assets, or (y) the highest fair market value per share (generally based on
market prices) at any time during the 60 days before and 60 days after a change
in control.
Amendment
and Termination
Our
board
of directors may amend, alter, suspend, discontinue or terminate the Plan or
the
committee’s authority to grant awards without further stockholder approval,
except stockholder approval must be obtained for any amendment or alteration
if
such approval is required by law or regulation or under the rules of any stock
exchange or quotation system on which shares of our common stock are then listed
or quoted. Thus, stockholder approval may not necessarily be required for every
amendment to the Plan that might increase the cost of the Plan or alter the
eligibility of persons to receive awards. Stockholder approval will not be
deemed to be required under laws or regulations, such as those relating to
ISOs,
that condition favorable treatment of participants on such approval, although
our board of directors may, in its discretion, seek stockholder approval in
any
circumstance in which it
deems
such approval advisable. The Plan will terminate at the earliest of (a) the
time
when no shares remain available for issuance under the Plan, (b) termination
of
the Plan by our board of directors, or (c) February 2, 2015. Awards outstanding
upon expiration of the Plan remain in effect until they have been exercised
or
terminated, or have expired
.
Federal
Income Tax Consequences of Awards
The
Plan
is not qualified under the provisions of Section 401(a) of the Code and is
not
subject to any of the provisions of the Employee Retirement Income Security
Act
of 1974.
Nonqualified
Stock Options
On
exercise of a nonqualified stock option granted under the Plan, an optionee
will
recognize ordinary income equal to the excess, if any, of the fair market value
on the date of exercise of the shares of stock acquired on exercise of the
option over the exercise price. If the optionee is our employee or an employee
of a related entity, that income will be subject to the withholding of Federal
income tax. The optionee’s tax basis in those shares will be equal to their fair
market value on the date of exercise of the option, and his holding period
for
those shares will begin on that date.
If
an
optionee pays for shares of stock on the exercise of an option by delivering
shares of our common stock, the optionee will not recognize gain or loss on
the
shares delivered, even if their fair market value at the time of exercise
differs from the optionee’s tax basis in them. The optionee, however, otherwise
will be taxed on the exercise of the option in the manner described above as
if
he had paid the exercise price in cash. If the optionee receives certificated
or
uncertificated shares in number equal to the number of shares delivered on
exercise of the option, the optionee’s tax basis in the certificated or
uncertificated shares received in exchange will be equal to his tax basis in
the
shares delivered, and his holding period for those shares will include his
holding period for the shares delivered. The optionee’s tax basis and holding
period for the additional shares received on exercise of the option will be
the
same as if the optionee had exercised the option solely in exchange for cash.
We
will
be entitled to a deduction for Federal income tax purposes equal to the amount
of ordinary income taxable to the optionee, provided that the amount constitutes
an ordinary and necessary business expense for us and is reasonable in amount,
and either the employee includes that amount in income or we timely satisfy
our
reporting requirements with respect to that amount.
Incentive
Stock Options
The
Plan
provides for the grant of stock options that qualify as “incentive stock
options” as defined in Section 422 of the Code, which we refer to as ISOs. Under
the Code, an optionee generally is not subject to tax upon the grant or exercise
of an ISO. In addition, if the optionee holds a share received on exercise
of an
ISO for more than two years from the date the option was granted and more than
one year from the date the option was exercised (and the optionee was our
employee at all times during the period beginning on the date the option was
granted and ending on the day three months before exercise) (the “Required
Holding Period”), then the difference, if any, between the amount realized on a
sale or other taxable disposition of that share and the holder’s tax basis in
that share will be long-term capital gain or loss.
If,
however, an optionee disposes of a share acquired on the exercise of an ISO
before the end of the Required Holding Period, which we refer to as a
Disqualifying Disposition, the optionee generally will recognize ordinary income
in the year of the Disqualifying Disposition equal to the excess, if any, of
the
fair market value of the share on the date the ISO was exercised over the
exercise price. If, however, the Disqualifying Disposition is a sale or an
exchange on which a loss, if realized, would be recognized for Federal income
tax purposes, and if the sales proceeds are less than the fair market value
of
the share on the date of exercise of the option, the amount of ordinary income
recognized by the optionee will not exceed the excess, if any, of the amount
realized on the sale over the exercise price. If the amount realized on a
Disqualifying Disposition exceeds the fair market value of the share on the
date
of exercise of the option, that excess will be short-term or long-term capital
gain, depending on whether the holding period for the share exceeds one
year.
An
optionee who exercises an ISO by delivering shares of stock acquired previously
pursuant to the exercise of an ISO before the expiration of the Required Holding
Period for those shares is treated as making a Disqualifying Disposition of
those shares. This rule prevents “pyramiding” on the exercise of an ISO (that
is, exercising an ISO for one share and using that share, and others so
acquired, to exercise successive ISOs) without the imposition of current income
tax.
For
purposes of the alternative minimum tax, the amount by which the fair market
value of a share of stock acquired on exercise of an ISO exceeds the exercise
price of that option generally will be an adjustment included in the optionee’s
alternative minimum taxable income for the year in which the option is
exercised. If, however, there is a Disqualifying Disposition of the share in
the
year in which the option is exercised, there will be no adjustment with respect
to that share. If there is a Disqualifying Disposition in a later year, no
income with respect to the Disqualifying Disposition is included in the
optionee’s alternative minimum taxable income for that year. In computing
alternative minimum taxable income, the tax basis of a share acquired on
exercise of an ISO is increased by the amount of the adjustment taken into
account with respect to that share for alternative minimum tax purposes in
the
year the option is exercised.
We
are
not allowed an income tax deduction with respect to the grant or exercise of
an
ISO or the disposition of a share acquired on exercise of an ISO after the
Required Holding Period. If there is a Disqualifying Disposition of a share,
however, we are allowed a deduction in an amount equal to the ordinary income
includible in income by the optionee, provided that amount constitutes an
ordinary and necessary business expense for us and is reasonable in amount,
and
either the employee includes that amount in income or we timely satisfy our
reporting requirements with respect to that amount.
Stock
Awards
Generally,
the recipient of a stock award will recognize ordinary compensation income
at
the time the stock is received equal to the excess, if any, of the fair market
value of the stock received over any amount paid by the recipient in exchange
for the stock. If, however, the stock is non-vested when it is received under
the Plan (for example, if the employee is required to work for a period of
time
in order to have the right to sell the stock), the recipient generally will
not
recognize income until the stock becomes vested, at which time the recipient
will recognize ordinary compensation income equal to the excess, if any, of
the
fair market value of the stock on the date it becomes vested over any amount
paid by the recipient in exchange for the stock. A recipient may, however,
file
an election with the Internal Revenue Service, within 30 days of his or her
receipt of the stock award, to recognize ordinary compensation income, as of
the
date the recipient receives the award, equal to the excess, if any, of the
fair
market value of the stock on the date the award is granted over any amount
paid
by the recipient in exchange for the stock.
The
recipient’s basis for the determination of gain or loss upon the subsequent
disposition of shares acquired as stock awards will be the amount paid for
such
shares plus any ordinary income recognized either when the stock is received
or
when the stock becomes vested. Upon the disposition of any stock received as
a
stock award under the Plan the difference between the sale price and the
recipient’s basis in the shares will be treated as a capital gain or loss and
generally will be characterized as long-term capital gain or loss if the shares
have been held for more than one year from the date as of which he or she would
be required to recognize any compensation income.
Stock
Appreciation Rights
We
may
grant SARs separate from any other award, which we refer to as Stand-Alone
SARs,
or in tandem with options, which we refer to as Tandem SARs, under the Plan.
Generally, the recipient of a Stand-Alone SAR will not recognize any taxable
income at the time the Stand-Alone SAR is granted.
With
respect to Stand-Alone SARs, if the recipient receives the appreciation inherent
in the SARs in cash, the cash will be taxable as ordinary compensation income
to
the recipient at the time that the cash is received. If the recipient receives
the appreciation inherent in the SARs in shares of stock, the recipient will
recognize ordinary compensation income equal to the excess of the fair market
value of the stock on the day it is received over any amounts paid by the
recipient for the stock.
With
respect to Tandem SARs, if the recipient elects to surrender the underlying
option in exchange for cash or shares of stock equal to the appreciation
inherent in the underlying option, the tax consequences to the recipient will
be
the same as discussed above relating to the Stand-Alone SARs. If the recipient
elects to exercise the underlying option, the holder will be taxed at the time
of exercise as if he or she had exercised a nonqualified stock option (discussed
above), i.e., the recipient will recognize ordinary income for Federal tax
purposes measured by the excess of the then fair market value of the shares
of
stock over the exercise price.
In
general, we are not allowed any Federal income tax deduction upon the grant
or
termination of Stand-Alone SARs or Tandem SARs. Upon the exercise of either
a
Stand-Alone SAR or a Tandem SAR, however, we will be entitled to a deduction
for
Federal income tax purposes equal to the amount of ordinary income that the
employee is required to recognize as a result of the exercise, provided that
the
deduction is not otherwise disallowed under the Code.
Dividend
Equivalents
Generally,
the recipient of a dividend equivalent award will recognize ordinary
compensation income at the time the dividend equivalent award is received equal
to the dividend equivalent award received. We generally will be entitled to
a
deduction for Federal income tax purposes equal to the amount of ordinary income
that the employee is required to recognize as a result of the dividend
equivalent award, provided that the deduction is not otherwise disallowed under
the Code.
Section
409A
Section
409A of the Code, enacted as part of the American Jobs Creation Act of 2004,
imposes certain new requirements applicable to “nonqualified deferred
compensation plans,” including new rules relating to the timing of deferral
elections and elections with regard to the form and timing of benefit
distributions, prohibitions against the acceleration of the timing of
distributions, and the times when distributions may be made, as well as rules
that generally prohibit the funding of nonqualified deferred compensation plans
in offshore trusts or upon the occurrence of a change in the employer’s
financial health. These new rules generally apply with respect to deferred
compensation that becomes earned and vested on or after January 1, 2005. If
a
nonqualified deferred compensation plan subject to Section 409A of the Code
fails to meet, or is not operated in accordance with, these new requirements,
then all compensation deferred under the plan is or becomes immediately taxable
to the extent that it is not subject to a substantial risk of forfeiture and
was
not previously taxable. The tax imposed as a result of these new rules would
be
increased by interest at a rate equal to the rate imposed upon tax underpayments
plus one percentage point, and an additional tax equal to 20% of the
compensation required to be included in income. Some of the types of awards
that
may be granted under the Plan may constitute deferred compensation subject
to
the requirements of Section 409A of the Code, including discounted stock
options, deferred stock and SARs. We intend that any award agreement that will
govern awards subject to Section 409A of the Code will comply with these new
rules.
Section
162(m) Limitations
The
Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the Code,
which generally disallows a public company’s tax deduction for compensation to
covered employees in excess of $1,000,000. Compensation that qualifies as
“performance-based compensation” is excluded from the $1,000,000 deductibility
cap, and therefore remains fully deductible by the company that pays it. We
intend that options granted to employees whom the committee expects to be
covered employees at the time a deduction arises in connection with such
options, will qualify as such “performance-based compensation,” so that such
options will not be subject to the deductibility cap of $1,000,000 million
provided under Section 162(m) of the Code. Future changes in Section 162(m)
of
the Code or the regulations under the Code may adversely affect our ability
to
ensure that options under the Plan will qualify as “performance-based
compensation” that is fully deductible by us under Section 162(m) of the
Code.
Importance
of Consulting Tax Adviser
The
information set forth above is a summary only and does not purport to be
complete. In addition, the information is based upon current Federal income
tax
rules and therefore is subject to change when those rules
change.
Moreover, because the tax consequences to any recipient may depend on his
particular situation, each recipient should consult his tax adviser as to the
Federal, state, local and other tax consequences of the grant or exercise of
an
award or the disposition of stock acquired as a result of an award.
Interest
of Officers and Directors in the Amendment to the Plan; Plan
Benefits
Our
executive officers and directors have an interest in the approval of an
amendment to the Plan to cover the options listed in the following tables,
which
options will be void if the stockholders do not approve the amendment. The
tables provide additional information about the options granted under the Plan
on December 7, 2006, February 1, 2007
and
June
19, 2007
,
subject
to stockholder approval of an amendment to the Plan to increase the number
of
shares available for award under the Plan to cover those options. Under
applicable SEC rules, the tables provide information required to be disclosed
about our “named executive officers,” which include former executive officers,
and about certain other groups of executive officers, directors and employees.
The information included in the tables relates solely to the options granted
under the Plan on December 7, 2006, February 1, 2007 and June 19, 2007, subject
to stockholder approval. In addition, although we cannot currently determine
the
number of shares of common stock that may be subject to awards granted in the
future to our executive officers or directors under the Plan, each of our
executive officers and directors has an interest in the approval of the
amendment to the Plan insofar as he is eligible to receive future awards under
the Plan. The first table describes, in a format mandated by the SEC, the “new
plan benefits” resulting from the amendment to the Plan.
NEW
PLAN BENEFITS
Name
and Position
|
|
Dollar
Value ($)
|
|
Number
of Options
|
|
|
|
|
|
|
|
David
Ames
President
and Chief Executive Officer
|
|
|
(1
|
)
|
|
411,750
|
|
|
|
|
|
|
|
|
|
Christopher
d’Arnaud-Taylor
Former
President and Chief Executive Officer
|
|
|
(1
|
)
|
|
30,500
|
|
|
|
|
|
|
|
|
|
Louis
B. Bernstein
Former
President and Interim Chief Executive Officer
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
Lawrence
Bellone
Former
Executive Vice President, Corporate Development, Former Chief Financial
Officer
|
|
|
(1
|
)
|
|
30,500
|
|
|
|
|
|
|
|
|
|
Thomas
Endres
Chief
Operating Officer and Executive Vice President,
Operations
|
|
|
(1
|
)
|
|
80,500
|
|
|
|
|
|
|
|
|
|
Executive
Officer Group
(composed
of only current executive officers)
|
|
|
(1
|
)
|
|
917,250
|
(2)
|
|
|
|
|
|
|
|
|
Non-Executive
Director Group
(composed
of current directors who
are
not executive officers)
|
|
|
(1
|
)
|
|
604,700
|
(3)
|
|
|
|
|
|
|
|
|
Non-Executive
Officer Employee Group
(composed
of all employees, including all current officers who are not executive
officers)
|
|
|
(1
|
)
|
|
99,125
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
exercise price of options granted under the Plan on December 7, 2006
was
$2.44 per share, on February 1, 2007 was $2.79 per share, and on
June 19,
2007 was $1.19 per share, in each case equal to the closing price
of our
common stock on the American Stock Exchange on that date. The value
of the
options will equal the difference between the exercise price of such
options and the market price of our common stock on the date of exercise
of an option. Accordingly, the value to the recipient is not
|
determinable
until the option is exercised. These options are contingent on stockholder
approval of Proposal No. 2. For more information about these options, please
see
the table below.
|
(2)
|
Includes
411,750 shares of common stock issuable to Mr. Ames, our chief executive
officer, on the exercise of the excess options granted on December
7,
2006; 425,000 shares of common stock issuable to Mr. Flicker, our
chief
financial officer, on the exercise of the excess options granted
on
February 1, 2007; and 30,500 and 50,000 shares of common stock issuable
to
Mr. Endres, our chief operating officer, on the exercise of the excess
options granted on December 7, 2006 and June 19, 2007,
respectively.
|
|
(3)
|
Includes
30,500 shares of common stock issuable to Mr. Bellone on the exercise
of
the excess options granted on December 7, 2006; 200,000 shares of
common
stock issuable to Mr. Boosidan on the exercise of the excess options
granted on February 1, 2007; 38,125 and 15,000 shares of common stock
issuable to Mr. Ditoro on the exercise of the excess options granted
on
December 7, 2006 and February 1, 2007, respectively; 200,000 shares
of
common stock issuable to Mr. Franklin on the exercise of the excess
options granted on February 1, 2007; 65,575 and 25,000 shares of
common
stock issuable to Mr. Klett on the exercise of the excess options
granted
on December 7, 2006 and February 1, 2007, respectively; and 30,500
shares
of common stock issuable to Mr. d’Arnaud-Taylor on the exercise of the
excess options granted on December 7, 2006.
|
The
following table describes for each named option grantee:
|
·
|
the
number of shares of our common stock underlying the options granted
under
the Plan on December 7, 2006, February 1, 2007 and June 19, 2007,
subject
to stockholder approval; and
|
|
·
|
the
exercise prices, expiration dates and the market value of the securities
underlying the options as of the latest practicable
date.
|
The
only
consideration we will receive for the granting of the options is continued
employment or service as a director and, on exercise, the exercise price of
the
option. The options vest up to three years from the date of grant based on
an
exercise schedule, as provided in each of option agreements covering the
options. The Federal income tax consequences of the issuance and exercise of
the
options to the recipient and to us are described above in “Federal Income Tax
Consequences of Awards.”
Based
on a price per share of $0.50, the closing price per share of our common stock
on the American Stock Exchange on December 19, 2007, the exercise price of
each
option in the table is currently higher than that closing price. Accordingly,
the options are currently out-of-the-money, and the trading price of our common
stock must increase substantially before the holders can realize any value
from
the options. The amount shown in the last column in the table is the current
value of the shares underlying the options of each holder and does not reflect
that the holder would have to pay substantially more than that amount to
exercise the options and obtain the shares.
The
following table provides more detailed information about the excess
options:
Name
and Position
|
|
Date
of
Grant
|
|
Number
of Common Shares Underlying
Excess
Options (1)
|
|
Exercise
Price
($)(2)
|
|
Expiration
Date
|
|
Recent
Market Value of Common Shares
Underlying
Excess
Options
($)(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
David
R. Ames
President
and CEO,
Current
Director and Nominee
|
|
|
Dec.
7, 2006
|
|
|
411,750
|
|
|
2.44
|
|
|
Dec.
7, 2011
|
|
|
205,875
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher
d’Arnaud-Taylor
Former
President and CEO
|
|
|
Dec.
7, 2006
|
|
|
30,500
|
|
|
2.44
|
|
|
Dec.
7, 2016
|
|
|
15,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Louis
B. Bernstein
Former
President and Interim CEO
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lawrence
S. Bellone
Former
Executive Vice President - Corporate Development,
Former
CFO
|
|
|
Dec.
7, 2006
|
|
|
30,500
|
|
|
2.44
|
|
|
Dec.
7, 2011
|
|
|
15,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
Endres
|
|
|
Dec.
7, 2006
|
|
|
30,500
|
|
|
2.44
|
|
|
Dec.
7, 2011
|
|
|
15,250
|
|
Chief
Operating Officer and Executive Vice President,
Operations
|
|
|
June
19, 2007
|
|
|
50,000
|
|
|
1.19
|
|
|
June
19, 2012
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gil
Boosidan
Current
Director and Nominee
|
|
|
Feb.
1, 2007
|
|
|
200,000
|
|
|
2.79
|
|
|
Feb.
1, 2017
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
D. Ditoro
|
|
|
Dec.
7, 2006
|
|
|
38,125
|
|
|
2.44
|
|
|
Dec.
7, 2016
|
|
|
19,063
|
|
Current
Director and Nominee
|
|
|
Feb.
1, 2007
|
|
|
15,000
|
|
|
2.79
|
|
|
Feb.
1, 2017
|
|
|
7,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert
L. Franklin
Current
Director and Nominee
|
|
|
Feb.
1, 2007
|
|
|
200,000
|
|
|
2.79
|
|
|
Feb.
1, 2017
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Edwin
L. Klett
|
|
|
Dec.
7, 2006
|
|
|
65,575
|
|
|
2.44
|
|
|
Dec.
7, 2016
|
|
|
32,788
|
|
Current
Director and Nominee
|
|
|
Feb.
1, 2007
|
|
|
25,000
|
|
|
2.79
|
|
|
Feb.
1, 2017
|
|
|
12,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
Officer Group
|
|
|
Dec.
7, 2006
|
|
|
442,250
|
|
|
2.44
|
|
|
|
|
|
221,125
|
|
(composed
of only current executive officers) (4)
|
|
|
Feb.
1, 2007
|
|
|
425,000
|
|
|
2.79
|
|
|
|
|
|
212,500
|
|
|
|
|
June
19, 2007
|
|
|
50,000
|
|
|
1.19
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Executive
Director Group
|
|
|
Dec.
7, 2006
|
|
|
164,700
|
|
|
2.44
|
|
|
|
|
|
82,350
|
|
(composed
of current directors who are not executive officers) (5)
|
|
|
Feb.
1, 2007
|
|
|
440,000
|
|
|
2.79
|
|
|
|
|
|
220,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Executive
Officer Employee Group
(composed
of all employees, including all current officers who are not executive
officers)
|
|
|
Dec.
7, 2006
|
|
|
99,125
|
|
|
2.44
|
|
|
|
|
|
49,563
|
|
|
(1)
|
This
column reflects the number of shares issuable upon exercise of those
options, which exceeded the number then available under the Plan,
subject
to approval by our stockholders as noted above (pro rata allocation
of the
737,070 excess shares for the December 2006 options and all of the
February 2007 options and June 2007
options).
|
|
(2)
|
The
exercise price of each option in this column is equal to the closing
price
per share of our common stock on the date of grant as reported by
the
American Stock Exchange.
|
|
(3)
|
Based
on a price per share of $0.50, the closing price per share of our
common
stock on the American Stock Exchange on December 19, 2007. In each
case,
the exercise price of the options is currently higher than that closing
price, which means that as of that date, the options are out-of-the-money.
Accordingly, this column does not reflect that the holder would have
to
pay substantially more than the amount in this column to exercise
the
options and obtain the shares.
|
|
(4)
|
Reflects
411,750 shares of common stock issuable to Mr. Ames, our chief executive
officer, on the exercise of the excess options granted on December
7,
2006; 425,000 shares of common stock issuable to Mr. Flicker, our
chief
financial officer, on the exercise of the excess options granted
on
February 1, 2007; and 30,500 and 50,000 shares of common stock issuable
to
Mr. Endres, our chief operating officer, on the exercise of the excess
options granted on December 7, 2006 and June 19, 2007,
respectively.
|
|
(5)
|
Reflects
30,500 shares of common stock issuable to Mr. Bellone on the exercise
of
the excess options granted on December 7, 2006; 200,000 shares of
common
stock issuable to Mr. Boosidan on the exercise of the excess options
granted on February 1, 2007; 38,125 and 15,000 shares of common stock
issuable to Mr. Ditoro on the exercise of the excess options granted
on
December 7, 2006 and February 1, 2007, respectively; 200,000 shares
of
common stock issuable to Mr. Franklin on the exercise of the excess
options granted on February 1, 2007; 65,575 and 25,000 shares of
common
stock issuable to Mr. Klett on the exercise of the excess options
granted
on December 7, 2006 and February 1, 2007, respectively; and 30,500
shares
of common stock issuable to Mr. d’Arnaud-Taylor on the exercise of the
excess options granted on December 7, 2006.
|
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” APPROVAL OF THE AMENDMENT
TO THE PLAN.
RATIFICATION
OF APPOINTMENT OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
Our
audit
committee has selected Imowitz Koenig
&
Co., LLP
as
our
independent registered public accounting firm for the fiscal year ending
December 31, 2007, and our board of directors has further directed that
management should submit the appointment of the independent registered public
accounting firm for ratification by the stockholders at the annual meeting.
Imowitz Koenig has audited our financial statements since February 2, 2005.
Imowitz Koenig audited the financial statements of our predecessor Xethanol
Corporation from January 24, 2000 (inception) through February 2, 2005. A
representative of Imowitz Koenig is expected to be present at the annual meeting
to make a statement, if he or she so desires, and to answer any appropriate
questions.
We
retained Imowitz Koenig as our new independent public accounting firm,
dismissing Cordovano and Honeck, P.C., on February 2, 2005. The dismissal of
Cordovano and Honeck, P.C. and the engagement of Imowitz Koenig as our
independent public accounting firm for the fiscal year ending December 31,
2005
were approved by our board of directors at a meeting held on February 2,
2005.
The
reports of Cordovano and Honeck, P.C. on our financial statements for each
of
the two fiscal years ended June 30, 2004 and 2003 did not contain an adverse
opinion or a disclaimer of opinion and were not qualified or modified as to
uncertainty, audit scope, or accounting principles, except that the audit report
for the fiscal year ended June 30, 2004 contained an explanatory paragraph
to
the effect that a majority of our sales were to a related party and, therefore,
not arms’ length transactions. In connection with the audits of our financial
statements for each of the two fiscal years ended June 30, 2004 and 2003, and
through February 2, 2005, there were no disagreements with Cordovano and Honeck,
P.C. on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Cordovano and Honeck, P.C., would have caused Cordovano
and Honeck, P.C. to make reference to the matter in its reports.
During
our most recent two fiscal years, there were no disagreements with Imowitz
Koenig on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of with Imowitz Koenig, would have caused Imowitz Koenig
to
make reference to the subject matter of the disagreements in connection with
its
respective reports. Imowitz Koenig’s report on the financial statements for the
two fiscal years ended December 31, 2005 and 2006 did not contain an adverse
opinion or a disclaimer of opinion, nor was it qualified or modified as to
uncertainty, audit scope or accounting principles. During our most recent two
fiscal years, there were no “reportable events” as such term is described in
Item 304 (a)(1)(v) of Regulation of S-K.
Stockholder
ratification of the appointment of Imowitz Koenig as our independent registered
public accounting firm is not required by our bylaws or other governing
documents. Even if the stockholders do ratify the appointment, our audit
committee in its discretion may direct the appointment of a different
independent registered public accounting firm at any time during the year if
it
believes that such a change would be in the best interest of us and our
stockholders.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE
APPOINTMENT OF IMOWITZ KOENIG & CO., LLP AS OUR INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM.
Independent
Registered Public Accounting Firm’s Fees
The
following table shows the aggregate fees billed by Imowitz Koenig, our
independent registered public accounting firm, for audit and other services
provided for the years ended December 31, 2006 and December 31, 2005.
Year
|
|
Audit
Fees
(1)
|
|
Audit-Related
Fees
(2)
|
|
Tax
Fees
(3
)
|
|
All
Other
Fees
|
|
Total
Fees
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
$
|
338,246
|
|
$
|
81,690
|
|
$
|
64,175
|
|
|
—
|
|
$
|
484,111
|
|
2005
|
|
|
77,000
|
|
|
47,505
|
|
|
38,796
|
|
|
—
|
|
|
163,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
“Audit
Fees” consist of fees for professional services provided in connection
with the audit of our annual financial statements included in
our annual
reports on Form 10-K or 10-KSB, review of financial statements
included in
our quarterly reports on Form 10-Q or 10-QSB, and audit services
provided
in connection with other statutory or regulatory
filings.
|
|
(2)
|
“Audit
Related Fees” consist of fees billed for assurance and related services
that are reasonably related to the performance of the audit
or review of
our financial statements and are not reported under “Audit Fees.” During
2006, these services included consulting services and accounting
research
services related to our registration statements and our current
reports on
Form 8-K.
|
|
(3)
|
“Tax
Fees” consist of fees associated with tax compliance,
including tax return
preparation.
|
Pre-Approval
Policies and
Procedures
Applicable
SEC rules require our audit committee to pre-approve audit and non-audit
services provided by our independent registered public accounting firm. On
November 28, 2005, our audit committee began pre-approving all services by
Imowitz Koenig and has pre-approved all new services since that
time.
Our
audit
committee pre-approves all audit and non-audit services to be performed for
us
by our independent registered public accounting firm. Our audit committee does
not delegate its responsibilities under the Exchange Act to our management.
Our
audit committee has determined that the rendering of the services other than
audit services by Imowitz Koenig is compatible with maintaining Imowitz Koenig’s
independence.
Our
board
of directors, at the time of the preparation of this proxy statement, knows
of
no business to come before the annual meeting other than that referred to in
this proxy statement. If any other business properly comes before the annual
meeting, the person named in the enclosed proxy will have discretionary
authority to vote all proxies in accordance with his best judgment.
By
Order of the Board of Directors,
/s/
Gary Flicker
Gary
Flicker
Chief
Financial Officer
New
York,
New York
December
27, 2007
XETHANOL
CORPORATION
2005
INCENTIVE COMPENSATION PLAN
As
Amended Effective August 10, 2006
1.
Purpose
.
The
purpose of this XETHANOL CORPORATION 2005 INCENTIVE COMPENSATION PLAN (the
“Plan”) is to assist Xethanol Corporation, a Delaware corporation (the
“Company”) and its Related Entities (as hereinafter defined) in attracting,
motivating, retaining and rewarding high-quality executives and other employees,
officers, directors, consultants and other persons who provide services to
the
Company or its Related Entities by enabling such persons to acquire or increase
a proprietary interest in the Company in order to strengthen the mutuality
of
interests between such persons and the Company’s shareholders, and providing
such persons with performance incentives to expend their maximum efforts in
the
creation of shareholder value.
2.
Definitions
.
For
purposes of the Plan, the following terms shall be defined as set forth below,
in addition to such terms defined in Section 1 hereof.
(a)
“Award” means any Option, Stock Appreciation Right, Restricted Stock Award,
Deferred Stock Award, Share granted as a bonus or in lieu of another award,
Dividend Equivalent, Other Stock-Based Award or Performance Award, together
with
any other right or interest, granted to a Participant under the
Plan.
(b)
“Award Agreement” means any written agreement, contract or other instrument or
document evidencing any Award granted by the Committee hereunder.
(c)
“Beneficiary” means the person, persons, trust or trusts that have been
designated by a Participant in his or her most recent written beneficiary
designation filed with the Committee to receive the benefits specified under
the
Plan upon such Participant’s death or to which Awards or other rights are
transferred if and to the extent permitted under Section 10(b) hereof. If,
upon
a Participant’s death, there is no designated Beneficiary or surviving
designated Beneficiary, then the term Beneficiary means the person, persons,
trust or trusts entitled by will or the laws of descent and distribution to
receive such benefits.
(d)
“Beneficial Owner” shall have the meaning ascribed to such term in Rule 13d-3
under the Exchange Act and any successor to such Rule.
(e)
“Board” means the Company’s Board of Directors.
(f)
“Cause” shall, with respect to any Participant have the meaning specified in the
Award Agreement. In the absence of any definition in the Award Agreement,
“Cause” shall have the equivalent meaning or the same meaning as “cause” or “for
cause” set forth in any employment, consulting, or other agreement for the
performance of services between the Participant and the Company or a Related
Entity or, in the absence of any such agreement or any such definition in such
agreement, such term shall mean (i) the failure by the Participant to perform,
in a reasonable manner, his or her duties as assigned by the Company or a
Related Entity, (ii) any violation or breach by the Participant of his or her
employment, consulting or other similar agreement with the Company or a Related
Entity, if any, (iii) any violation or breach by the Participant of any
non-competition, non-solicitation, non-disclosure and/or other similar agreement
with the Company or a Related Entity, (iv) any act by the Participant of
dishonesty or bad faith with respect to the Company or a Related Entity, (v)
use
of alcohol, drugs or other similar substances in a manner that adversely affects
the Participant’s work performance, or (vi) the commission by the Participant of
any act, misdemeanor, or crime reflecting unfavorably upon the Participant
or
the Company or any Related Entity. The good faith determination by the Committee
of whether the Participant’s Continuous Service was terminated by the Company
for “Cause” shall be final and binding for all purposes hereunder.
(g)
“Change in Control” means a Change in Control as defined with related terms in
Section 9(b) of the Plan.
(h)
“Code” means the Internal Revenue Code of 1986, as amended from time to time,
including regulations thereunder and successor provisions and regulations
thereto.
(i)
“Committee” means a committee designated by the Board to administer the Plan;
provided, however, that if the Board fails to designate a committee or if there
are no longer any members on the committee so designated by the Board, then
the
Board shall serve as the Committee. The Committee shall consist of at least
two
directors, and each member of the Committee shall be (i) a “non-employee
director” within the meaning of Rule 16b-3 (or any successor rule) under the
Exchange Act, unless administration of the Plan by “non-employee directors” is
not then required in order for exemptions under Rule 16b-3 to apply to
transactions under the Plan, (ii) an “outside director” within the meaning of
Section 162(m) of the Code, and (iii) “Independent.”
(j)
“Consultant” means any person (other than an Employee or a Director, solely with
respect to rendering services in such person’s capacity as a director) who is
engaged by the Company or any Related Entity to render consulting or advisory
services to the Company or such Related Entity.
(k)
“Continuous Service” means the uninterrupted provision of services to the
Company or any Related Entity in any capacity of Employee, Director, Consultant
or other service provider. Continuous Service shall not be considered to be
interrupted in the case of (i) any approved leave of absence, (ii) transfers
among the Company, any Related Entities, or any successor entities, in any
capacity of Employee, Director, Consultant or other service provider, or (iii)
any change in status as long as the individual remains in the service of the
Company or a Related Entity in any capacity of Employee, Director, Consultant
or
other service provider (except as otherwise provided in the Award Agreement).
An
approved leave of absence shall include sick leave, military leave, or any
other
authorized personal leave.
(l)
“Covered Employee” means an Eligible Person who is a “covered employee” within
the meaning of Section 162(m)(3) of the Code, or any successor provision
thereto.
(m)
“Deferred Stock” means a right to receive Shares, including Restricted Stock,
cash or a combination thereof, at the end of a specified deferral
period.
(n)
“Deferred Stock Award” means an Award of Deferred Stock granted to a Participant
under Section 6(e) hereof.
(o)
“Director” means a member of the Board or the board of directors of any Related
Entity.
(p)
“Disability” means a permanent and total disability (within the meaning of
Section 22(e) of the Code), as determined by a medical doctor satisfactory
to
the Committee.
(q)
“Discounted Option” means any Option awarded under Section 6(b) hereof with an
exercise price that is less than the Fair Market Value of a Share on the date
of
grant.
(r)
“Discounted Stock Appreciation Right” means any Stock Appreciation Right awarded
under Section 6(c) hereof with an exercise price that is less than the Fair
Market Value of a Share on the date of grant.
(s)
“Dividend Equivalent” means a right, granted to a Participant under Section 6(g)
hereof, to receive cash, Shares, other Awards or other property equal in value
to dividends paid with respect to a specified number of Shares, or other
periodic payments.
(t)
“Effective Date” means the effective date of the Plan, which shall be February
2, 2005.
(u)
“Eligible Person” means each officer, Director, Employee, Consultant and other
person who provides services to the Company or any Related Entity. The foregoing
notwithstanding, only employees of the Company, or any parent corporation or
subsidiary corporation of the Company (as those terms are defined in Sections
424(e) and (f) of the Code, respectively), shall be Eligible Persons for
purposes of receiving any Incentive Stock Options. An Employee on leave of
absence may be considered as still in the employ of the Company or a Related
Entity for purposes of eligibility for participation in the Plan.
(v)
“Employee” means any person, including an officer or Director, who is an
employee of the Company or any Related Entity. The payment of a director’s fee
by the Company or a Related Entity shall not be sufficient to constitute
“employment” by the Company.
(w)
“Exchange Act” means the Securities Exchange Act of 1934, as amended from time
to time, including rules thereunder and successor provisions and rules
thereto.
(x)
“Fair
Market Value” means the fair market value of Shares, Awards or other property as
determined by the Committee, or under procedures established by the Committee.
Unless otherwise determined by the Committee, the Fair Market Value of a Share
as of any given date shall be the closing sale price per Share reported on
a
consolidated basis for stock listed on the principal stock exchange or market
on
which Shares are traded on the date as of which such value is being determined
or, if there is no sale on that date, then on the last previous day on which
a
sale was reported.
(y)
“Good
Reason” shall, with respect to any Participant, have the meaning specified in
the Award Agreement. In the absence of any definition in the Award Agreement,
“Good Reason” shall have the equivalent meaning or the same meaning as “good
reason” or “for good reason” set forth in any employment, consulting or other
agreement for the performance of services between the Participant and the
Company or a Related Entity or, in the absence of any such agreement or any
such
definition in such agreement, such term shall mean (i) the assignment to the
Participant of any duties inconsistent in any material respect with the
Participant’s position, authority, duties or responsibilities as assigned by the
Company or a Related Entity, or any other action by the Company or a Related
Entity which results in a material diminution in such position, authority,
duties or responsibilities, excluding for this purpose any action not taken
in
bad faith and which is remedied by the Company or a Related Entity promptly
after receipt of notice thereof given by the Participant, or any action taken
with the consent of the Participant; or (ii) any material failure by the Company
or a Related Entity to comply with its obligations to the Participant as agreed
upon, other than any failure not occurring in bad faith and which is remedied
by
the Company or a Related Entity promptly after receipt of notice thereof given
by the Participant.
(z)
“Incentive Stock Option” means any Option intended to be designated as an
incentive stock option within the meaning of Section 422 of the Code or any
successor provision thereto.
(aa)
“Independent,” when referring to either the Board or members of the Committee,
shall have the same meaning as used in the rules of the Nasdaq Stock Market
or
any national securities exchange on which any securities of the Company are
listed for trading, and if not listed for trading, by the rules of the Nasdaq
Stock Market.
(bb)
“Incumbent Board” means the Incumbent Board as defined in Section 9(b)(ii) of
the Plan.
(cc)
“Option” means a right granted to a Participant under Section 6(b) hereof, to
purchase Shares or other Awards at a specified price during specified time
periods.
(dd)
“Optionee” means a person to whom an Option is granted under this Plan or any
person who succeeds to the rights of such person under this Plan.
(ee)
“Option Proceeds” means the cash actually received by the Company for the
exercise price in connection with the exercise of Options that are exercised
after the Effective Date of the Plan, plus the maximum tax benefit that could
be
realized by the Company as a result of the exercise of such Options, which
tax
benefit shall be determined by multiplying (i) the amount that is deductible
for
Federal income tax purposes as a result of any such option exercise (currently,
equal to the amount upon which the Participant’s withholding tax obligation is
calculated), times (ii) the maximum Federal corporate income tax rate for the
year of exercise. With respect to Options, to the extent that a Participant
pays
the exercise price and/or withholding taxes with Shares, Option Proceeds shall
not be calculated with respect to the amounts so paid in Shares.
(ff)
“Other Stock-Based Awards” means Awards granted to a Participant under Section
6(i) hereof.
(gg)
“Outside Director” means a member of the Board who is not an
Employee.
(hh)
“Participant” means a person who has been granted an Award under the Plan which
remains outstanding, including a person who is no longer an Eligible
Person.
(ii)
“Performance Award” shall mean any Award of Performance Shares or Performance
Units granted pursuant to Section 6(h).
(jj)
“Performance Period” means that period established by the Committee at the time
any Performance Award is granted or at any time thereafter during which any
performance goals specified by the Committee with respect to such Award are
to
be measured.
(kk)
“Performance Share” means any grant pursuant to Section 6(h) of a unit valued by
reference to a designated number of Shares, which value may be paid to the
Participant by delivery of such property as the Committee shall determine,
including cash, Shares, other property, or any combination thereof, upon
achievement of such performance goals during the Performance Period as the
Committee shall establish at the time of such grant or thereafter.
(ll)
“Performance Unit” means any grant pursuant to Section 6(h) of a unit valued by
reference to a designated amount of property (including cash) other than Shares,
which value may be paid to the Participant by delivery of such property as
the
Committee shall determine, including cash, Shares, other property, or any
combination thereof, upon achievement of such performance goals during the
Performance Period as the Committee shall establish at the time of such grant
or
thereafter.
(mm)
“Person” shall have the meaning ascribed to such term in Section 3(a)(9) of the
Exchange Act and used in Sections 13(d) and 14(d) thereof, and shall include
a
“group” as defined in Section 13(d) thereof.
(nn)
“Related Entity” means any Subsidiary, and any business, corporation,
partnership, limited liability company or other entity designated by Board
in
which the Company or a Subsidiary holds a substantial ownership interest,
directly or indirectly.
(oo)
“Restricted Stock” means any Share issued with the restriction that the holder
may not sell, transfer, pledge or assign such Share and with such risks of
forfeiture and other restrictions as the Committee, in its sole discretion,
may
impose (including any restriction on the right to vote such Share and the right
to receive any dividends), which restrictions may lapse separately or in
combination at such time or times, in installments or otherwise, as the
Committee may deem appropriate.
(pp)
“Restricted Stock Award” means an Award granted to a Participant under Section
6(d) hereof.
(qq)
“Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to
the Plan and Participants, promulgated by the Securities and Exchange Commission
under Section 16 of the Exchange Act.
(rr)
“Shareholder Approval Date” means the date on which this Plan is approved
shareholders of the Company eligible to vote in the election of directors,
by a
vote sufficient to meet the requirements of Code Sections 162(m) (if applicable)
and 422, Rule 16b-3 under the Exchange Act (if applicable), applicable
requirements under the rules of any stock exchange or automated quotation system
on which the Shares may be listed on quoted, and other laws, regulations and
obligations of the Company applicable to the Plan.
(ss)
“Shares” means the shares of common stock of the Company, par value $.001 per
share, and such other securities as may be substituted (or resubstituted) for
Shares pursuant to Section 10(c) hereof.
(tt)
“Stock Appreciation Right” means a right granted to a Participant under Section
6(c) hereof.
(uu)
“Subsidiary” means any corporation or other entity in which the Company has a
direct or indirect ownership interest of 50% or more of the total combined
voting power of the then outstanding securities or interests of such corporation
or other entity entitled to vote generally in the election of directors or
in
which the Company has the right to receive 50% or more of the distribution
of
profits or 50% or more of the assets on liquidation or dissolution.
(vv)
“Substitute Awards” shall mean Awards granted or Shares issued by the Company in
assumption of, or in substitution or exchange for, awards previously granted,
or
the right or obligation to make future awards, by a company acquired by the
Company or any Related Entity or with which the Company or any Related Entity
combines.
3.
Administration
.
(a)
Authority
of the Committee
.
The
Plan shall be administered by the Committee, except to the extent the Board
elects to administer the Plan, in which case the Plan shall be administered
by
only those directors who are Independent Directors, in which case references
herein to the “Committee” shall be deemed to include references to the
Independent members of the Board. The Committee shall have full and final
authority, subject to and consistent with the provisions of the Plan, to select
Eligible Persons to become Participants, grant Awards, determine the type,
number and other terms and conditions of, and all other matters relating to,
Awards, prescribe Award Agreements (which need not be identical for each
Participant) and rules and regulations for the administration of the Plan,
construe and interpret the Plan and Award Agreements and correct defects, supply
omissions or reconcile inconsistencies therein, and to make all other decisions
and determinations as the Committee may deem necessary or advisable for the
administration of the Plan. In exercising any discretion granted to the
Committee under the Plan or pursuant to any Award, the Committee shall not
be
required to follow past practices, act in a manner consistent with past
practices, or treat any Eligible Person or Participant in a manner consistent
with the treatment of other Eligible Persons or Participants.
(b)
Manner
of Exercise of Committee Authority
.
The
Committee, and not the Board, shall exercise sole and exclusive discretion
on
any matter relating to a Participant then subject to Section 16 of the Exchange
Act with respect to the Company to the extent necessary in order that
transactions by such Participant shall be exempt under Rule 16b-3 under the
Exchange Act. Any action of the Committee shall be final, conclusive and binding
on all persons, including the Company, its Related Entities, Participants,
Beneficiaries, transferees under Section 10(b) hereof or other persons claiming
rights from or through a Participant, and shareholders. The express grant of
any
specific power to the Committee, and the taking of any action by the Committee,
shall not be construed as limiting any power or authority of the Committee.
The
Committee may delegate to officers or managers of the Company or any Related
Entity, or committees thereof, the authority, subject to such terms as the
Committee shall determine, to perform such functions, including administrative
functions as the Committee may determine to the extent that such delegation
will
not result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted
to Participants subject to Section 16 of the Exchange Act in respect of the
Company and will not cause Awards intended to qualify as “performance-based
compensation” under Code Section 162(m) to fail to so qualify. The Committee may
appoint agents to assist it in administering the Plan.
(c)
Limitation
of Liability
.
The
Committee and the Board, and each member thereof, shall be entitled to, in
good
faith, rely or act upon any report or other information furnished to him or
her
by any officer or Employee, the Company’s independent auditors, Consultants or
any other agents assisting in the administration of the Plan. Members of the
Committee and the Board, and any officer or Employee acting at the direction
or
on behalf of the Committee or the Board, shall not be personally liable for
any
action or determination taken or made in good faith with respect to the Plan,
and shall, to the extent permitted by law, be fully indemnified and protected
by
the Company with respect to any such action or determination.
4.
Shares Subject to Plan
.
(a)
Limitation
on Overall Number of Shares Available for Delivery Under Plan
.
Subject
to adjustment as provided in Section 10(c) hereof, the total number of Shares
reserved and available for delivery under the Plan shall be 4,000,000. Any
Shares delivered under the Plan may consist, in whole or in part, of authorized
and unissued shares or treasury shares.
(b)
Application
of Limitation to Grants of Award
.
No
Award may be granted if the number of Shares to be delivered in connection
with
such an Award or, in the case of an Award relating to Shares but settled only
in
cash (such as cash-only Stock Appreciation Rights), the number of Shares to
which such Award relates, exceeds the number of Shares remaining available
for
delivery under the Plan, minus the number of Shares deliverable in
settlement
of or relating to then outstanding Awards. The Committee may adopt reasonable
counting procedures to ensure appropriate counting, avoid double counting (as,
for example, in the case of tandem or substitute awards) and make adjustments
if
the number of Shares actually delivered differs from the number of Shares
previously counted in connection with an Award.
(c)
Availability
of Shares Not Delivered under Awards and Adjustments to Limits
.
(i)
If
any Shares subject to an Award are forfeited, expire or otherwise terminate
without issuance of such Shares, or any Award is settled for cash or otherwise
does not result in the issuance of all or a portion of the Shares subject to
such Award or award, the Shares shall, to the extent of such forfeiture,
expiration, termination, cash settlement or non-issuance, again be available
for
Awards under the Plan, subject to Section 4(c)(v) below.
(ii)
In
the event that any Option or other Award granted hereunder is exercised through
the tendering of Shares (either actually or by attestation) or by the
withholding of Shares by the Company, or withholding tax liabilities arising
from such option or other award are satisfied by the tendering of Shares (either
actually or by attestation) or by the withholding of Shares by the Company,
then
only the number of Shares issued net of the Shares tendered or withheld shall
be
counted for purposes of determining the maximum number of Shares available
for
grant under the Plan.
(iii)
Shares reacquired by the Company on the open market using Option Proceeds shall
be available for Awards under the Plan. The increase in Shares available
pursuant to the repurchase of Shares with Option Proceeds shall not be greater
than the amount of such proceeds divided by the Fair Market Value of a Share
on
the date of exercise of the Option giving rise to such Option
Proceeds.
(iv)
Substitute Awards shall not reduce the Shares authorized for grant under the
Plan or authorized for grant to a Participant in any period. Additionally,
in
the event that a company acquired by the Company or any Related Entity or with
which the Company or any Related Entity combines has shares available under
a
pre-existing plan approved by shareholders and not adopted in contemplation
of
such acquisition or combination, the shares available for delivery pursuant
to
the terms of such pre-existing plan (as adjusted, to the extent appropriate,
using the exchange ratio or other adjustment or valuation ratio or formula
used
in such acquisition or combination to determine the consideration payable to
the
holders of common stock of the entities party to such acquisition or
combination) may be used for Awards under the Plan and shall not reduce the
Shares authorized for delivery under the Plan; provided that Awards using such
available shares shall not be made after the date awards or grants could have
been made under the terms of the pre-existing plan, absent the acquisition
or
combination, and shall only be made to individuals who were not Employees or
Directors prior to such acquisition or combination.
(v)
Any
Shares that again become available for delivery pursuant to this Section 4(c)
shall be added back as one (1) Share.
(vi)
Notwithstanding anything in this Section 4(c) to the contrary and solely for
purposes of determining whether Shares are available for the delivery of
Incentive Stock Options, the maximum aggregate number of shares that may be
granted under this Plan shall be determined without regard to any Shares
restored pursuant to this Section 4(c) that, if taken into account, would cause
the Plan to fail the requirement under Code Section 422 that the Plan designate
a maximum aggregate number of shares that may be issued.
5.
Eligibility; Per-Person Award Limitations
.
Awards
may be granted under the Plan only to Eligible Persons. The maximum dollar
value
payable to any one Participant with respect to Performance Units is (x)
$1,000,000 with respect to any 12 month Performance Period, and (y) with respect
to any Performance Period that is more than 12 months, $1,000,000 multiplied
by
the number of full years in the Performance Period.
6.
Specific Terms of Awards
.
(a)
General
.
Awards
may be granted on the terms and conditions set forth in this Section 6. In
addition, the Committee may impose on any Award or the exercise thereof, at
the
date of grant or thereafter (subject to Section 10(e)), such additional terms
and conditions, not inconsistent with the provisions of the Plan, as the
Committee shall determine, including terms requiring forfeiture of Awards in
the
event of termination of the Participant’s Continuous
Service
and terms permitting a Participant to make elections relating to his or her
Award. The Committee shall retain full power and discretion to accelerate,
waive
or modify, at any time, any term or condition of an Award that is not mandatory
under the Plan. Except in cases in which the Committee is authorized to require
other forms of consideration under the Plan, or to the extent other forms of
consideration must be paid to satisfy the requirements of applicable law, no
consideration other than services may be required for the grant (but not the
exercise) of any Award.
(b)
Options
.
The
Committee is authorized to grant Options to any Eligible Person on the following
terms and conditions:
(i)
Exercise
Price
.
Other
than in connection with Substitute Awards, the exercise price per Share
purchasable under an Option shall be determined by the Committee, provided
that
such exercise price shall not, in the case of Incentive Stock Options, be less
than 100% of the Fair Market Value of a Share on the date of grant of the Option
and shall not, in any event, be less than the par value of a Share on the date
of grant of the Option. If an Employee owns or is deemed to own (by reason
of
the attribution rules applicable under Section 424(d) of the Code) more than
10%
of the combined voting power of all classes of stock of the Company (or any
parent corporation or subsidiary corporation of the Company, as those terms
are
defined in Sections 424(e) and (f) of the Code, respectively) and an Incentive
Stock Option is granted to such employee, the exercise price of such Incentive
Stock Option (to the extent required by the Code at the time of grant) shall
be
no less than 110% of the Fair Market Value a Share on the date such Incentive
Stock Option is granted.
(ii)
Time
and Method of Exercise
.
The
Committee shall determine the time or times at which or the circumstances under
which an Option may be exercised in whole or in part (including based on
achievement of performance goals and/or future service requirements), the time
or times at which Options shall cease to be or become exercisable following
termination of Continuous Service or upon other conditions, the methods by
which
the exercise price may be paid or deemed to be paid (including in the discretion
of the Committee a cashless exercise procedure), the form of such payment,
including, without limitation, cash, Shares, other Awards or awards granted
under other plans of the Company or a Related Entity, or other property
(including notes or other contractual obligations of Participants to make
payment on a deferred basis provided that such deferred payments are not in
violation of the Sarbanes-Oxley Act of 2002, or any rule or regulation adopted
thereunder or any other applicable law), and the methods by or forms in which
Shares will be delivered or deemed to be delivered to Participants.
(iii)
Incentive
Stock Options
.
The
terms of any Incentive Stock Option granted under the Plan shall comply in
all
respects with the provisions of Section 422 of the Code. Anything in the Plan
to
the contrary notwithstanding, no term of the Plan relating to Incentive Stock
Options (including any Stock Appreciation Right issued in tandem therewith)
shall be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify either the Plan or
any
Incentive Stock Option under Section 422 of the Code, unless the Participant
has
first requested, or consents to, the change that will result in such
disqualification. Thus, if and to the extent required to comply with Section
422
of the Code, Options granted as Incentive Stock Options shall be subject to
the
following special terms and conditions:
(A)
the
Option shall not be exercisable more than ten years after the date such
Incentive Stock Option is granted; provided, however, that if a Participant
owns
or is deemed to own (by reason of the attribution rules of Section 424(d) of
the
Code) more than 10% of the combined voting power of all classes of stock of
the
Company (or any parent corporation or subsidiary corporation of the Company,
as
those terms are defined in Sections 424(e) and (f) of the Code, respectively)
and the Incentive Stock Option is granted to such Participant, the term of
the
Incentive Stock Option shall be (to the extent required by the Code at the
time
of the grant) for no more than five years from the date of grant;
and
(B)
The
aggregate Fair Market Value (determined as of the date the Incentive Stock
Option is granted) of the Shares with respect to which Incentive Stock Options
granted under the Plan and all other option plans of the Company (and any parent
corporation or subsidiary corporation of the Company, as those terms are defined
in Sections 424(e) and (f) of the Code, respectively) during any calendar year
exercisable for the first time by the Participant during any calendar year
shall
not (to the extent required by the Code at the time of the grant) exceed
$100,000.
(c)
Stock
Appreciation Rights
.
The
Committee may grant Stock Appreciation Rights to any Eligible Person in
conjunction with all or part of any Option granted under the Plan or at any
subsequent time during the term of such Option (a “Tandem Stock Appreciation
Right”), or without regard to any Option (a “Freestanding Stock Appreciation
Right”), in each case upon such terms and conditions as the Committee may
establish in its sole discretion, not inconsistent with the provisions of the
Plan, including the following:
(i)
Right
to Payment
.
A Stock
Appreciation Right shall confer on the Participant to whom it is granted a
right
to receive, upon exercise thereof, the excess of (A) the Fair Market Value
of
one Share on the date of exercise over (B) the grant price of the Stock
Appreciation Right as determined by the Committee. The grant price of a Stock
Appreciation Right shall not be less than 100% of the Fair Market Value of
a
Share on the date of grant, in the case of a Freestanding Stock Appreciation
Right, or less than the associated Option exercise price, in the case of a
Tandem Stock Appreciation Right.
(ii)
Other
Terms
.
The
Committee shall determine at the date of grant or thereafter, the time or times
at which and the circumstances under which a Stock Appreciation Right may be
exercised in whole or in part (including based on achievement of performance
goals and/or future service requirements), the time or times at which Stock
Appreciation Rights shall cease to be or become exercisable following
termination of Continuous Service or upon other conditions, the method of
exercise, method of settlement, form of consideration payable in settlement,
method by or forms in which Shares will be delivered or deemed to be delivered
to Participants, whether or not a Stock Appreciation Right shall be in tandem
or
in combination with any other Award, and any other terms and conditions of
any
Stock Appreciation Right
.
(iii)
Tandem
Stock Appreciation Rights
.
Any
Tandem Stock Appreciation Right may be granted at the same time as the related
Option is granted or, for Options that are not Incentive Stock Options, at
any
time thereafter before exercise or expiration of such Option. Any Tandem Stock
Appreciation Right related to an Option may be exercised only when the related
Option would be exercisable and the Fair Market Value of the Shares subject
to
the related Option exceeds the exercise price at which Shares can be acquired
pursuant to the Option. In addition, if a Tandem Stock Appreciation Right exists
with respect to less than the full number of Shares covered by a related Option,
then an exercise or termination of such Option shall not reduce the number
of
Shares to which the Tandem Stock Appreciation Right applies until the number
of
Shares then exercisable under such Option equals the number of Shares to which
the Tandem Stock Appreciation Right applies. Any Option related to a Tandem
Stock Appreciation Right shall no longer be exercisable to the extent the Tandem
Stock Appreciation Right has been exercised, and any Tandem Stock Appreciation
Right shall no longer be exercisable to the extent the related Option has been
exercised.
(d)
Restricted
Stock Awards
.
The
Committee is authorized to grant Restricted Stock Awards to any Eligible Person
on the following terms and conditions:
(i)
Grant
and Restrictions
.
Restricted Stock Awards shall be subject to such restrictions on
transferability, risk of forfeiture and other restrictions, if any, as the
Committee may impose, or as otherwise provided in this Plan, covering a period
of time specified by the Committee (the “Restriction Period”). The terms of any
Restricted Stock Award granted under the Plan shall be set forth in a written
Award Agreement which shall contain provisions determined by the Committee
and
not inconsistent with the Plan. The restrictions may lapse separately or in
combination at such times, under such circumstances (including based on
achievement of performance goals and/or future service requirements), in such
installments or otherwise, as the Committee may determine at the date of grant
or thereafter. Except to the extent restricted under the terms of the Plan
and
any Award Agreement relating to a Restricted Stock Award, a Participant granted
Restricted Stock shall have all of the rights of a shareholder, including the
right to vote the Restricted Stock and the right to receive dividends thereon
(subject to any mandatory reinvestment or other requirement imposed by the
Committee). During the Restriction Period, subject to Section 10(b) below,
the
Restricted Stock may not be sold, transferred, pledged, hypothecated, margined
or otherwise encumbered by the Participant.
(ii)
Forfeiture
.
Except
as otherwise determined by the Committee, upon termination of a Participant’s
Continuous Service during the applicable Restriction Period, the Participant’s
Restricted Stock that is at that time subject to a risk of forfeiture that
has
not lapsed or otherwise been satisfied shall be forfeited and reacquired by
the
Company; provided that the Committee may provide, by rule or regulation or
in
any Award Agreement, or may
determine
in any individual case, that forfeiture conditions relating to Restricted Stock
Awards shall be waived in whole or in part in the event of terminations
resulting from specified causes.
(iii)
Certificates
for Stock
.
Restricted Stock granted under the Plan may be evidenced in such manner as
the
Committee shall determine. If certificates representing Restricted Stock are
registered in the name of the Participant, the Committee may require that such
certificates bear an appropriate legend referring to the terms, conditions
and
restrictions applicable to such Restricted Stock, that the Company retain
physical possession of the certificates, and that the Participant deliver a
stock power to the Company, endorsed in blank, relating to the Restricted
Stock.
(iv)
Dividends
and Splits
.
As a
condition to the grant of a Restricted Stock Award, the Committee may require
or
permit a Participant to elect that any cash dividends paid on a Share of
Restricted Stock be automatically reinvested in additional Shares of Restricted
Stock or applied to the purchase of additional Awards under the Plan. Unless
otherwise determined by the Committee, Shares distributed in connection with
a
stock split or stock dividend, and other property distributed as a dividend,
shall be subject to restrictions and a risk of forfeiture to the same extent
as
the Restricted Stock with respect to which such Shares or other property have
been distributed.
(e)
Deferred
Stock Award
.
The
Committee is authorized to grant Deferred Stock Awards to any Eligible Person
on
the following terms and conditions:
(i)
Award
and Restrictions
.
Satisfaction of a Deferred Stock Award shall occur upon expiration of the
deferral period specified for such Deferred Stock Award by the Committee (or,
if
permitted by the Committee, as elected by the Participant). In addition, a
Deferred Stock Award shall be subject to such restrictions (which may include
a
risk of forfeiture) as the Committee may impose, if any, which restrictions
may
lapse at the expiration of the deferral period or at earlier specified times
(including based on achievement of performance goals and/or future service
requirements), separately or in combination, in installments or otherwise,
as
the Committee may determine. A Deferred Stock Award may be satisfied by delivery
of Shares, cash equal to the Fair Market Value of the specified number of Shares
covered by the Deferred Stock, or a combination thereof, as determined by the
Committee at the date of grant or thereafter. Prior to satisfaction of a
Deferred Stock Award, a Deferred Stock Award carries no voting or dividend
or
other rights associated with Share ownership.
(ii)
Forfeiture
.
Except
as otherwise determined by the Committee, upon termination of a Participant’s
Continuous Service during the applicable deferral period or portion thereof
to
which forfeiture conditions apply (as provided in the Award Agreement evidencing
the Deferred Stock Award), the Participant’s Deferred Stock Award that is at
that time subject to a risk of forfeiture that has not lapsed or otherwise
been
satisfied shall be forfeited; provided that the Committee may provide, by rule
or regulation or in any Award Agreement, or may determine in any individual
case, that forfeiture conditions relating to a Deferred Stock Award shall be
waived in whole or in part in the event of terminations resulting from specified
causes, and the Committee may in other cases waive in whole or in part the
forfeiture of any Deferred Stock Award.
(iii)
Dividend
Equivalents
.
Unless
otherwise determined by the Committee at date of grant, any Dividend Equivalents
that are granted with respect to any Deferred Stock Award shall be either (A)
paid with respect to such Deferred Stock Award at the dividend payment date
in
cash or in Shares of unrestricted stock having a Fair Market Value equal to
the
amount of such dividends, or (B) deferred with respect to such Deferred Stock
Award and the amount or value thereof automatically deemed reinvested in
additional Deferred Stock, other Awards or other investment vehicles, as the
Committee shall determine or permit the Participant to elect.
(f)
Bonus
Stock and Awards in Lieu of Obligations
.
The
Committee is authorized to grant Shares to any Eligible Persons as a bonus,
or
to grant Shares or other Awards in lieu of obligations to pay cash or deliver
other property under the Plan or under other plans or compensatory arrangements,
provided that, in the case of Eligible Persons subject to Section 16 of the
Exchange Act, the amount of such grants remains within the discretion of the
Committee to the extent necessary to ensure that acquisitions of Shares or
other
Awards are exempt from liability under Section 16(b) of the Exchange Act. Shares
or Awards granted hereunder shall be subject to such other terms as shall be
determined by the Committee.
(g)
Dividend
Equivalents
.
The
Committee is authorized to grant Dividend Equivalents to any Eligible Person
entitling the Eligible Person to receive cash, Shares, other Awards, or other
property equal in value to the dividends paid with respect to a specified number
of Shares, or other periodic payments. Dividend Equivalents may be awarded
on a
free-standing basis or in connection with another Award. The Committee may
provide that Dividend Equivalents shall be paid or distributed when accrued
or
shall be deemed to have been reinvested in additional Shares, Awards, or other
investment vehicles, and subject to such restrictions on transferability and
risks of forfeiture, as the Committee may specify.
(h)
Performance
Awards
.
The
Committee is authorized to grant Performance Awards to any Eligible Person
payable in cash, Shares, or other Awards, on terms and conditions established
by
the Committee, subject to the provisions of Section 8 if and to the extent
that
the Committee shall, in its sole discretion, determine that an Award shall
be
subject to those provisions. The performance criteria to be achieved during
any
Performance Period and the length of the Performance Period shall be determined
by the Committee upon the grant of each Performance Award; provided, however,
that a Performance Period shall not be shorter than 12 months nor longer than
five years. Except as provided in Section 9 or as may be provided in an Award
Agreement, Performance Awards will be distributed only after the end of the
relevant Performance Period. The performance goals to be achieved for each
Performance Period shall be conclusively determined by the Committee and may
be
based upon the criteria set forth in Section 8(b), or in the case of an Award
that the Committee determines shall not be subject to Section 8 hereof, any
other criteria that the Committee, in its sole discretion, shall determine
should be used for that purpose. The amount of the Award to be distributed
shall
be conclusively determined by the Committee. Performance Awards may be paid
in a
lump sum or in installments following the close of the Performance Period or,
in
accordance with procedures established by the Committee, on a deferred
basis.
(i)
Other
Stock-Based Awards
.
The
Committee is authorized, subject to limitations under applicable law, to grant
to any Eligible Person such other Awards that may be denominated or payable
in,
valued in whole or in part by reference to, or otherwise based on, or related
to, Shares, as deemed by the Committee to be consistent with the purposes of
the
Plan. Other Stock-Based Awards may be granted to Participants either alone
or in
addition to other Awards granted under the Plan, and such Other Stock-Based
Awards shall also be available as a form of payment in the settlement of other
Awards granted under the Plan. The Committee shall determine the terms and
conditions of such Awards. Shares delivered pursuant to an Award in the nature
of a purchase right granted under this Section 6(i) shall be purchased for
such
consideration (including, without limitation, loans from the Company or a
Related Entity provided that such loans are not in violation of the Sarbanes
Oxley Act of 2002, or any rule or regulation adopted thereunder or any other
applicable law) paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Shares, other Awards or other property,
as
the Committee shall determine.
7.
Certain Provisions Applicable to Awards
.
(a)
Stand-Alone,
Additional, Tandem and Substitute Awards
.
Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award or any award granted under another plan of the Company,
any
Related Entity, or any business entity to be acquired by the Company or a
Related Entity, or any other right of a Participant to receive payment from
the
Company or any Related Entity. Such additional, tandem, and substitute or
exchange Awards may be granted at any time. If an Award is granted in
substitution or exchange for another Award or award, the Committee shall require
the surrender of such other Award or award in consideration for the grant of
the
new Award. In addition, Awards may be granted in lieu of cash compensation,
including in lieu of cash amounts payable under other plans of the Company
or
any Related Entity, in which the value of Stock subject to the Award is
equivalent in value to the cash compensation (for example, Deferred Stock or
Restricted Stock), or in which the exercise price, grant price or purchase
price
of the Award in the nature of a right that may be exercised is equal to the
Fair
Market Value of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options or Stock Appreciation Right granted with
an
exercise price or grant price “discounted” by the amount of the cash
compensation surrendered).
(b)
Term
of Awards
.
The
term of each Award shall be for such period as may be determined by the
Committee; provided that in no event shall the term of any Option or Stock
Appreciation Right exceed a period of ten years (or in the case of an Incentive
Stock Option such shorter term as may be required under Section 422 of the
Code).
(c)
Form
and Timing of Payment Under Awards; Deferrals
.
Subject
to the terms of the Plan and any applicable Award Agreement, payments to be
made
by the Company or a Related Entity upon the exercise of an Option or other
Award
or settlement of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Shares, other Awards or other
property, and may be made in a single payment or transfer, in installments,
or
on a deferred basis. Any installment or deferral provided for in the preceding
sentence shall, however, be subject to the Company’s compliance with the
provisions of the Sarbanes-Oxley Act of 2002, the rules and regulations adopted
by the U.S. Securities and Exchange Commission thereunder, and all applicable
rules of the Nasdaq Stock Market or any national securities exchange on which
the Company’s securities are listed for trading and, if not listed for trading
on either the Nasdaq Stock Market or a national securities exchange, then the
rules of the Nasdaq Stock Market. The settlement of any Award may be
accelerated, and cash paid in lieu of Shares in connection with such settlement,
in the discretion of the Committee or upon occurrence of one or more specified
events (in addition to a Change in Control). Installment or deferred payments
may be required by the Committee (subject to Section 10(e) of the Plan,
including the consent provisions thereof in the case of any deferral of an
outstanding Award not provided for in the original Award Agreement) or permitted
at the election of the Participant on terms and conditions established by the
Committee. Payments may include, without limitation, provisions for the payment
or crediting of a reasonable interest rate on installment or deferred payments
or the grant or crediting of Dividend Equivalents or other amounts in respect
of
installment or deferred payments denominated in Shares.
(d)
Exemptions
from Section 16(b) Liability
.
It is
the intent of the Company that the grant of any Awards to or other transaction
by a Participant who is subject to Section 16 of the Exchange Act shall be
exempt from Section 16 pursuant to an applicable exemption (except for
transactions acknowledged in writing to be non-exempt by such Participant).
Accordingly, if any provision of this Plan or any Award Agreement does not
comply with the requirements of Rule 16b-3 then applicable to any such
transaction, such provision shall be construed or deemed amended to the extent
necessary to conform to the applicable requirements of Rule 16b-3 so that such
Participant shall avoid liability under Section 16(b).
8.
Code Section 162(m) Provisions
.
(a)
Covered
Employees
.
The
Committee, in its discretion, may determine at the time an Award is granted
to
an Eligible Person who is, or is likely to be, as of the end of the tax year
in
which the Company would claim a tax deduction in connection with such Award,
a
Covered Employee, that the provisions of this Section 8 shall be applicable
to
such Award.
(b)
Performance
Criteria
.
If an
Award is subject to this Section 8, then the lapsing of restrictions thereon
and
the distribution of cash, Shares or other property pursuant thereto, as
applicable, shall be contingent upon achievement of one or more objective
performance goals
.
Performance goals shall be objective and shall otherwise meet the requirements
of Section 162(m) of the Code and regulations thereunder including the
requirement that the level or levels of performance targeted by the Committee
result in the achievement of performance goals being “substantially uncertain.”
One or more of the following business criteria for the Company, on a
consolidated basis, and/or for Related Entities, or for business or geographical
units of the Company and/or a Related Entity (except with respect to the total
shareholder return and earnings per share criteria), shall be used by the
Committee in establishing performance goals for such Awards: (1) earnings per
share; (2) revenues or margins; (3) cash flow; (4) operating margin; (5) return
on net assets, investment, capital, or equity; (6) economic value added; (7)
direct contribution; (8) net income; pretax earnings; earnings before interest
and taxes; earnings before interest, taxes, depreciation and amortization;
earnings after interest expense and before extraordinary or special items;
operating income; income before interest income or expense, unusual items and
income taxes, local, state or federal and excluding budgeted and actual bonuses
which might be paid under any ongoing bonus plans of the Company; (9) working
capital; (10) management of fixed costs or variable costs; (11) identification
or consummation of investment opportunities or completion of specified projects
in accordance with corporate business plans, including strategic mergers,
acquisitions or divestitures; (12) total shareholder return; and (13) debt
reduction. Any of the above goals may be determined on an absolute or relative
basis or as compared to the performance of a published or special index deemed
applicable by the Committee including, but not limited to, the Standard &
Poor’s 500 Stock Index or a group of companies that are comparable to the
Company. The Committee may exclude the impact of an event or occurrence which
the Committee determines should appropriately be excluded, including without
limitation (i) restructurings, discontinued operations, extraordinary items,
and
other unusual or non-recurring charges, (ii) an event either not directly
related to the operations of the Company or not within the reasonable control
of
the
Company’s
management, or (iii) a change in accounting standards required by generally
accepted accounting principles.
(c)
Performance
Period; Timing For Establishing Performance Goals
.
Achievement of performance goals in respect of such Performance Awards shall
be
measured over a Performance Period no shorter than 12 months and no longer
than
five years, as specified by the Committee. Performance goals shall be
established not later than 90 days after the beginning of any Performance Period
applicable to such Performance Awards, or at such other date as may be required
or permitted for “performance-based compensation” under Code Section
162(m).
(d)
Adjustments
.
The
Committee may, in its discretion, reduce the amount of a settlement otherwise
to
be made in connection with Awards subject to this Section 8, but may not
exercise discretion to increase any such amount payable to a Covered Employee
in
respect of an Award subject to this Section 8. The Committee shall specify
the
circumstances in which such Awards shall be paid or forfeited in the event
of
termination of Continuous Service by the Participant prior to the end of a
Performance Period or settlement of Awards.
(e)
Committee
Certification
.
No
Participant shall receive any payment under the Plan unless the Committee has
certified, by resolution or other appropriate action in writing, that the
performance criteria and any other material terms previously established by
the
Committee or set forth in the Plan, have been satisfied to the extent necessary
to qualify as “performance based compensation” under Code Section
162(m).
9.
Change in Control
.
(a)
Effect
of “Change in Control
.”
Subject to Section 9(a)(iv), and if and only to the extent provided in the
Award
Agreement, or to the extent otherwise determined by the Committee, upon the
occurrence of a “Change in Control,” as defined in Section 9(b):
(i)
Any
Option or Stock Appreciation Right that was not previously vested and
exercisable as of the time of the Change in Control, shall become immediately
vested and exercisable, subject to applicable restrictions set forth in Section
10(a) hereof.
(ii)
Any
restrictions, deferral of settlement, and forfeiture conditions applicable
to a
Restricted Stock Award, Deferred Stock Award or an Other Stock-Based Award
subject only to future service requirements granted under the Plan shall lapse
and such Awards shall be deemed fully vested as of the time of the Change in
Control, except to the extent of any waiver by the Participant and subject
to
applicable restrictions set forth in Section 10(a) hereof.
(iii)
With respect to any outstanding Award subject to achievement of performance
goals and conditions under the Plan, the Committee may, in its discretion,
deem
such performance goals and conditions as having been met as of the date of
the
Change in Control.
(iv)
Notwithstanding the foregoing, if in the event of a Change in Control the
successor company assumes or substitutes for an Option, Stock Appreciation
Right, Restricted Stock Award, Deferred Stock Award or Other Stock-Based Award,
then each outstanding Option, Stock Appreciation Right, Restricted Stock Award,
Deferred Stock Award or Other Stock-Based Award shall not be accelerated as
described in Sections 9(a)(i), (ii) and (iii). For the purposes of this Section
9(a)(iv), an Option, Stock Appreciation Right, Restricted Stock Award, Deferred
Stock Award or Other Stock-Based Award shall be considered assumed or
substituted for if following the Change in Control the award confers the right
to purchase or receive, for each Share subject to the Option, Stock Appreciation
Right, Restricted Stock Award, Deferred Stock Award or Other Stock-Based Award
immediately prior to the Change in Control, the consideration (whether stock,
cash or other securities or property) received in the transaction constituting
a
Change in Control by holders of Shares for each Share held on the effective
date
of such transaction (and if holders were offered a choice of consideration,
the
type of consideration chosen by the holders of a majority of the outstanding
shares); provided, however, that if such consideration received in the
transaction constituting a Change in Control is not solely common stock of
the
successor company or its parent or subsidiary, the Committee may, with the
consent of the successor company or its parent or subsidiary, provide that
the
consideration to be received upon the exercise or vesting of an Option, Stock
Appreciation Right, Restricted Stock Award, Deferred Stock Award or Other
Stock-Based Award, for each Share subject thereto, will be solely common stock
of the
successor
company or its parent or subsidiary substantially equal in fair market value
to
the per share consideration received by holders of Shares in the transaction
constituting a Change in Control. The determination of such substantial equality
of value of consideration shall be made by the Committee in its sole discretion
and its determination shall be conclusive and binding.
(b)
Definition
of “Change in Control
.”
Unless
otherwise specified in an Award Agreement, a “Change in Control” shall mean the
occurrence of any of the following:
(i)
The
acquisition by any Person of Beneficial Ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of more than fifty percent (50%)
of
either (A) the then outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in
the
election of directors (the “Outstanding Company Voting Securities) (the
foregoing Beneficial Ownership hereinafter being referred to as a “Controlling
Interest”); provided, however, that for purposes of this Section 9(b), the
following acquisitions shall not constitute or result in a Change of Control:
(v) any acquisition directly from the Company; (w) any acquisition by the
Company; (x) any acquisition by any Person that as of the Effective Date owns
Beneficial Ownership of a Controlling Interest; (y) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any Subsidiary; or (z) any acquisition by any corporation pursuant to a
transaction which complies with clauses (A), (B) and (C) of subsection (iii)
below; or
(ii)
During any period of two (2) consecutive years (not including any period prior
to the Effective Date) individuals who constitute the Board on the Effective
Date (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the Effective Date whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the
Board; or
(iii)
Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving the Company or any
of
its Subsidiaries, a sale or other disposition of all or substantially all of
the
assets of the Company, or the acquisition of assets or stock of another entity
by the Company or any of its Subsidiaries (each a “Business Combination”), in
each case, unless, following such Business Combination, (A) all or substantially
all of the individuals and entities who were the Beneficial Owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than fifty percent (50%) of the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result
of
such transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially
the
same proportions as their ownership, immediately prior to such Business
Combination, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination or any Person that as of the Effective Date
owns
Beneficial Ownership of a Controlling Interest) beneficially owns, directly
or
indirectly, fifty percent (50%) or more of the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the Board
of
Directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(iv)
Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
10.
General Provisions
.
(a)
Compliance
With Legal and Other Requirements
.
The
Company may, to the extent deemed necessary or advisable by the Committee,
postpone the issuance or delivery of Shares or payment of other benefits under
any Award until completion of such registration or qualification of such Shares
or other required action under any federal or state law, rule or regulation,
listing or other required action with respect to any stock exchange or automated
quotation system upon which the Shares or other Company securities are listed
or
quoted, or compliance with any other obligation of the Company, as the
Committee, may consider appropriate, and may require any Participant to make
such representations, furnish such information and comply with or be subject
to
such other conditions as it may consider appropriate in connection with the
issuance or delivery of Shares or payment of other benefits in compliance with
applicable laws, rules, and regulations, listing requirements, or other
obligations.
(b)
Limits
on Transferability; Beneficiaries
.
No
Award or other right or interest granted under the Plan shall be pledged,
hypothecated or otherwise encumbered or subject to any lien, obligation or
liability of such Participant to any party, or assigned or transferred by such
Participant otherwise than by will or the laws of descent and distribution
or to
a Beneficiary upon the death of a Participant, and such Awards or rights that
may be exercisable shall be exercised during the lifetime of the Participant
only by the Participant or his or her guardian or legal representative, except
that Awards and other rights (other than Incentive Stock Options and Stock
Appreciation Rights in tandem therewith) may be transferred to one or more
Beneficiaries or other transferees during the lifetime of the Participant,
and
may be exercised by such transferees in accordance with the terms of such Award,
but only if and to the extent such transfers are permitted by the Committee
pursuant to the express terms of an Award Agreement (subject to any terms and
conditions which the Committee may impose thereon). A Beneficiary, transferee,
or other person claiming any rights under the Plan from or through any
Participant shall be subject to all terms and conditions of the Plan and any
Award Agreement applicable to such Participant, except as otherwise determined
by the Committee, and to any additional terms and conditions deemed necessary
or
appropriate by the Committee.
(c)
Adjustments
.
(i)
Adjustments
to Awards
.
In the
event that any extraordinary dividend or other distribution (whether in the
form
of cash, Shares, or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or
event affects the Shares and/or such other securities of the Company or any
other issuer such that a substitution, exchange, or adjustment is determined
by
the Committee to be appropriate, then the Committee shall, in such manner as
it
may deem equitable, substitute, exchange or adjust any or all of (A) the number
and kind of Shares which may be delivered in connection with Awards granted
thereafter, (B) the number and kind of Shares by which annual per-person Award
limitations are measured under Section 5 hereof, (C) the number and kind of
Shares subject to or deliverable in respect of outstanding Awards, (D) the
exercise price, grant price or purchase price relating to any Award and/or
make
provision for payment of cash or other property in respect of any outstanding
Award, and (E) any other aspect of any Award that the Committee determines
to be
appropriate.
(ii)
Adjustments
in Case of Certain Corporate Transactions
.
In the
event of any merger, consolidation or other reorganization in which the Company
does not survive, or in the event of any Change in Control, any outstanding
Awards may be dealt with in accordance with any of the following approaches,
as
determined by the agreement effectuating the transaction or, if and to the
extent not so determined, as determined by the Committee: (a) the continuation
of the outstanding Awards by the Company, if the Company is a surviving
corporation, (b) the assumption or substitution for, as those terms are defined
in Section 9(b)(iv) hereof, the outstanding Awards by the surviving corporation
or its parent or subsidiary, (c) full exercisability or vesting and accelerated
expiration of the outstanding Awards, or (d) settlement of the value of the
outstanding Awards in cash or cash equivalents or other property followed by
cancellation of such Awards (which value, in the case of Options or Stock
Appreciation Rights, shall be measured by the amount, if any, by which the
Fair
Market Value of a Share exceeds the exercise or grant price of the Option or
Stock Appreciation Right as of the effective date of the transaction). The
Committee shall give written notice of any proposed transaction referred to
in
this Section 10(c)(ii) a reasonable period of time prior to the closing date
for
such transaction (which notice may be given either before or after the approval
of such transaction), in order that Participants may have a reasonable period
of
time prior to the closing date of such transaction within which to exercise
any
Awards that are then exercisable (including any Awards that may
become
exercisable
upon the closing date of such transaction). A Participant may condition his
exercise of any Awards upon the consummation of the transaction.
(iii)
Other
Adjustments
.
The
Committee (and the Board if and only to the extent such authority is not
required to be exercised by the Committee to comply with Section 162(m) of
the
Code) is authorized to make adjustments in the terms and conditions of, and
the
criteria included in, Awards (including Performance Awards, or performance
goals
relating thereto) in recognition of unusual or nonrecurring events (including,
without limitation, acquisitions and dispositions of businesses and assets)
affecting the Company, any Related Entity or any business unit, or the financial
statements of the Company or any Related Entity, or in response to changes
in
applicable laws, regulations, accounting principles, tax rates and regulations
or business conditions or in view of the Committee’s assessment of the business
strategy of the Company, any Related Entity or business unit thereof,
performance of comparable organizations, economic and business conditions,
personal performance of a Participant, and any other circumstances deemed
relevant; provided that no such adjustment shall be authorized or made if and
to
the extent that such authority or the making of such adjustment would cause
Options, Stock Appreciation Rights, Performance Awards granted pursuant to
Section 8(b) hereof to Participants designated by the Committee as Covered
Employees and intended to qualify as “performance-based compensation” under Code
Section 162(m) and the regulations thereunder to otherwise fail to qualify
as
“performance-based compensation” under Code Section 162(m) and regulations
thereunder.
(d)
Taxes
.
The
Company and any Related Entity are authorized to withhold from any Award
granted, any payment relating to an Award under the Plan, including from a
distribution of Shares, or any payroll or other payment to a Participant,
amounts of withholding and other taxes due or potentially payable in connection
with any transaction involving an Award, and to take such other action as the
Committee may deem advisable to enable the Company or any Related Entity and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Shares or other property and to make cash
payments in respect thereof in satisfaction of a Participant’s tax obligations,
either on a mandatory or elective basis in the discretion of the
Committee.
(e)
Changes
to the Plan and Awards
.
The
Board may amend, alter, suspend, discontinue or terminate the Plan, or the
Committee’s authority to grant Awards under the Plan, without the consent of
shareholders or Participants, except that any amendment or alteration to the
Plan shall be subject to the approval of the Company’s shareholders not later
than the annual meeting next following such Board action if such shareholder
approval is required by any federal or state law or regulation (including,
without limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any
stock
exchange or automated quotation system on which the Shares may then be listed
or
quoted), and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to shareholders for approval; provided that,
without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee may waive any conditions
or rights under, or amend, alter, suspend, discontinue or terminate any Award
theretofore granted and any Award Agreement relating thereto, except as
otherwise provided in the Plan; provided that, without the consent of an
affected Participant, no such Committee or the Board action may materially
and
adversely affect the rights of such Participant under such Award.
(f)
Limitation
on Rights Conferred Under Plan
.
Neither
the Plan nor any action taken hereunder shall be construed as (i) giving any
Eligible Person or Participant the right to continue as an Eligible Person
or
Participant or in the employ or service of the Company or a Related Entity;
(ii)
interfering in any way with the right of the Company or a Related Entity to
terminate any Eligible Person’s or Participant’s Continuous Service at any time,
(iii) giving an Eligible Person or Participant any claim to be granted any
Award
under the Plan or to be treated uniformly with other Participants and Employees,
or (iv) conferring on a Participant any of the rights of a shareholder of the
Company unless and until the Participant is duly issued or transferred Shares
in
accordance with the terms of an Award.
(g)
Unfunded
Status of Awards; Creation of Trusts
.
The
Plan is intended to constitute an “unfunded” plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Shares pursuant to an Award, nothing contained in the
Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Shares, other Awards
or other property, or make other arrangements
to
meet
the Company’s obligations under the Plan. Such trusts or other arrangements
shall be consistent with the “unfunded” status of the Plan unless the Committee
otherwise determines with the consent of each affected Participant. The trustee
of such trusts may be authorized to dispose of trust assets and reinvest the
proceeds in alternative investments, subject to such terms and conditions as
the
Committee may specify and in accordance with applicable law.
(h)
Nonexclusivity
of the Plan
.
Neither
the adoption of the Plan by the Board nor its submission to the shareholders
of
the Company for approval shall be construed as creating any limitations on
the
power of the Board or a committee thereof to adopt such other incentive
arrangements as it may deem desirable including incentive arrangements and
awards which do not qualify under Section 162(m) of the Code.
(i)
Payments
in the Event of Forfeitures; Fractional Shares
.
Unless
otherwise determined by the Committee, in the event of a forfeiture of an Award
with respect to which a Participant paid cash or other consideration, the
Participant shall be repaid the amount of such cash or other consideration.
No
fractional Shares shall be issued or delivered pursuant to the Plan or any
Award. The Committee shall determine whether cash, other Awards or other
property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise
eliminated.
(j)
Governing
Law
.
The
validity, construction and effect of the Plan, any rules and regulations under
the Plan, and any Award Agreement shall be determined in accordance with the
laws of the State of Delaware without giving effect to principles of conflict
of
laws, and applicable federal law.
(k)
Non-U.S.
Laws
.
The
Committee shall have the authority to adopt such modifications, procedures,
and
subplans as may be necessary or desirable to comply with provisions of the
laws
of foreign countries in which the Company or its Subsidiaries may operate to
assure the viability of the benefits from Awards granted to Participants
performing services in such countries and to meet the objectives of the
Plan.
(l)
Plan
Effective Date and Shareholder Approval; Termination of Plan
.
The
Plan shall become effective on the Effective Date, subject to subsequent
approval, within 12 months of its adoption by the Board, by shareholders of
the
Company eligible to vote in the election of directors, by a vote sufficient
to
meet the requirements of Code Sections 162(m) (if applicable) and 422, Rule
16b-3 under the Exchange Act (if applicable), applicable requirements under
the
rules of any stock exchange or automated quotation system on which the Shares
may be listed or quoted, and other laws, regulations, and obligations of the
Company applicable to the Plan. Awards may be granted subject to shareholder
approval, but may not be exercised or otherwise settled in the event the
shareholder approval is not obtained. The Plan shall terminate at the earliest
of (a) such time as no Shares remain available for issuance under the Plan,
(b)
termination of this Plan by the Board, or (c) the tenth anniversary of the
Effective Date. Awards outstanding upon expiration of the Plan shall remain
in
effect until they have been exercised or terminated, or have
expired.
XETHANOL
CORPORATION
1185
Avenue of the Americas, 20th Floor
New
York, New York 10036
PROXY
SOLICITED BY THE BOARD OF DIRECTORS FOR
ANNUAL
MEETING OF STOCKHOLDERS, JANUARY 22, 2008
The
stockholders(s) who sign this proxy card on the reverse side appoint David
R.
Ames and Gary Flicker, and each of them, as proxies, with full power of
substitution, for and in their name(s), to vote all shares of common stock
of
Xethanol Corporation that such person(s) hold of record at the annual meeting
of
stockholders to be held on Tuesday, January 22, 2008, at 1:00 p.m., E.S.T.,
at
the company’s headquarters located at 1185 Avenue of the Americas, 20th Floor,
New York, New York and at any adjournment of the meeting. The signing
stockholder(s) acknowledge receipt of the Notice of Annual Meeting and
Proxy
Statement and direct the proxies to vote as follows on the matters described
in
the accompanying Notice of Annual Meeting and Proxy Statement and otherwise
in
their discretion on any other business that may properly come before, and
matters incident to the conduct of, the meeting or any adjournment of it,
as
provided in the Proxy Statement.
(Continued
and to be signed on the reverse side)
Xethanol Corp. (AMEX:XNL)
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