VOTING SECURITIES
Pursuant to ValueRichs Bylaws and the Delaware General Corporation Law, a vote by the holders of at least a majority of the Companys outstanding capital stock is required to effect the action described herein. The Companys articles of incorporation does not authorize cumulative voting. As of the record date, the Company had 8,151,539 voting shares of common stock issued and outstanding of which 4,075,770 shares are required to pass any stockholder resolutions. The consenting stockholders are the record and beneficial owners of 4,175,425 shares of the Companys common stock as of December 31, 2007, which represents 52.12% of the issued and outstanding shares of the Companys Common Stock. Pursuant to Section 228 of the Delaware General Corporation Laws, the consenting stockholders voted in favor of the actions described herein in a unanimous written consent,
dated November 30, 2007. No consideration was paid for the consent.
DISSENTERS RIGHT OF APPRAISAL
Under Delaware law and our articles of incorporation and bylaws, no stockholder has any right to dissent to the proposed amendment to the Plan, and no stockholder is entitled to appraisal of or payment for their shares of our stock.
AMENDMENT OF THE COMPANYS
INCENTIVE STOCK PLAN
In April 2006, the Board adopted, and our shareholders subsequently approved, the ValueRich, Inc. Incentive Stock Option Plan (the Plan). As of December 31, 2007, there were 500,000 shares of common stock reserved for issuance under the Plan.
As of December 31, 2007, no awards had been granted under the Plan in an effort to preserve cash and to attract, retain and motivate persons who make important contributions to our business, we would like to issue securities to our consultants as well as to our employees and directors. To reduce our overhead costs, our management has been hiring consultants on an as needed basis, who do not require office space or benefits. However, the original Plan did not authorize the issuance of securities to consultants. Furthermore, the original Plan only had a limited number of shares of common stock reserved for issuance and was limited to the issuance of only options, which are not always an attractive incentive. Management believes that the number of shares of common stock currently available for issuance under the Plan is insufficient to meet its needs to provide for awards to the Plan
participants for the next 12 months. In addition, the type of awards under the Plan needs to be broadened in order to allow the Corporation the ability to compete successfully for talented employees and consultants as does the individuals who are eligible to receive awards under the Plan.
On November 29, 2007 our Board of Directors approved and adopted an amendment to our Plan, subject to shareholder approval. On November 30, 2007, shareholders owning approximately 51.21% of the outstanding shares of our common stock approved the amendment to the Plan by action taken by written consent without a meeting in accordance with the Delaware General Corporation Law. No further vote of our shareholders is required to approve the amendment to the Plan. Such approval by our shareholders will be effective 20 calendar days after the date this Information Statement is first mailed to our shareholders.
The amendment to our Plan will increase the number of shares of common stock with respect to which awards may be granted under the Plan from (1) 500,000 to 3,000,000, (2) provide that consultants also be eligible to receive grants under the Plan and (3) provide that awards may issued be in the form of stock options and, restricted stock . The complete text of the amendment is set forth at the end of this Information Statement.
The principal provisions of the Plan, as amended, are summarized below.
Purpose of the Plan.
The purpose of the Plan is to promote long-term growth and profitability by providing our key directors, officers, employees and consultants with incentives to improve stockholder value and contribute to our growth and financial success and enable us to attract, retain and reward the best available persons for positions of substantial responsibility.
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Eligibility
. The Plan provides for the granting to employees of incentive stock options within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and for the granting to employees and consultants of nonstatutory stock options. In addition, the Plan permits the granting of shares of restricted stock. Approximately, seven employees (including our executive officers), ten consultants and two directors are eligible to receive awards under the Plan.
Administration.
The Plan is administered by a committee appointed by our Board of Directors or by the full Board. Subject to the discretion of the Board, all members of such committee must be a non-employee director and an outside director, as defined in the Plan. Currently, the Plan is administered by our board of directors. Subject to the limitations set forth in the Plan, the administrator has the authority to select the persons to whom grants are to be made, to designate the number of shares to be covered by each stock award, to determine whether an award will be restricted stock or an option and whether an option is to be an incentive stock option or a non-statutory stock option, to establish vesting schedules, to specify the option exercise price and the type of consideration to be paid upon exercise, and, subject to some restrictions, to specify other terms
of stock awards.
Options
Option Grants.
Options granted under the Plan will have an exercise price equal to the fair market value of a share of our common stock on the option grant date. Incentive stock options may only be granted to employees. Currently, two of our directors are non-employee directors.
Exercise Price.
The administrator establishes the option exercise price, which in the case of incentive stock options, must be at least the fair market value of the common stock on the date of the grant or, with respect to optionees who own at least 10% of our outstanding common stock, 110% of fair market value. The fair market value of our common stock for purposes of the Plan is determined by such methods or procedures as shall be established from time to time by the administrator.
Vesting.
Options granted under the Plan vest as follows: for initial grants at the rate specified in the option agreement. However, in no event may an option be exercised later than the earlier of the expiration of the term of the option or ten years from the date of the grant of the option, or when an optionee owns stock representing more than 10% of the voting power, five years from the date of the grant of the option in the case of incentive stock options.
Limitation on Statutory Stock Options
. Any incentive stock options granted to an optionee which, when combined with all other incentive stock options becoming exercisable for the first time in any calendar year that are held by that person, would have an aggregate fair market value in excess of $100,000, shall automatically be treated as nonstatutory stock options.
Awards of shares of restricted stock will be made on such terms as determined by the administrator and shall include provisions regarding the forfeiture of such shares in the event employment by the participant, or service as a director, terminates prior to the termination of the restrictions applicable to such shares. The terms of such awards will be contained in a restricted stock agreement entered into between the Corporation and the participant and may include, among other provisions, the ability of the Corporation to purchase such Shares under certain circumstances and that such shares will be held in escrow by the Corporation until the termination of the applicable restrictions. The holder of shares of restricted stock will generally be entitled to voting and other rights of ownership prior to the termination of restrictions.
Transfer
. Options granted under the Plan are generally not transferable by the optionee except by will or the laws of descent and distribution, and to certain related individuals with the consent of the administrator. Restricted stock may not be transferred until all of the restrictions terminate or expire.
Change in Control
. In the event of a change in control, any outstanding option that is not assumed or continued, or an equivalent option or right is not substituted therefor pursuant to the change in control transactions governing document, shall become fully vested and exercisable immediately prior to the effective date of such change in control and shall expire upon the effective date of such change in control and all restrictions applicable to restricted stock shall terminate. The term change in control shall be deemed to have occurred if (i) any sale,
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exchange or other disposition of substantially all of the Corporation's assets; or (ii) any merger, share exchange, consolidation or other reorganization or business combination in which the Corporation is not the surviving or continuing corporation, or in which the Corporation's stockholders become entitled to receive cash, securities of the Corporation other than voting common stock, or securities of another issuer.
Amendment and Termination
. The Plan may be amended, altered, suspended or terminated by our board of directors at any time, but no such amendment, alteration, suspension or termination may adversely affect the terms of any award previously granted without the consent of the affected grantee, and any amendment will be subject to shareholder approval to the extent required by applicable law, rules or regulations. Unless terminated sooner, the Plan will terminate automatically in October 2017, ten years from the effective date.
Stock Subject to the Plan.
The maximum number of shares of common stock with respect to which plan awards may be granted under the Plan, as amended, is 3,000,000 assuming effectiveness of the above-described amendment to the Plan, as of January 2, 2008, there would be 3,000,000 shares available for award. To date, no shares of restricted stock or options have been issued under the Plan.
Federal Income Tax Consequences
A recipient of an incentive stock option will not recognize any taxable income upon the grant of the option or at the time of exercise (although the optionee will have income for alternative minimum income tax purposes at that time as if the option were a nonqualified stock option). If the shares acquired upon exercise of the incentive stock option are sold or exchanged after the later of (a) one year from the date of exercise of the options and (b) two years from the date of grant of the option, the difference between the amount realized by the optionee on that sale or exchange and the option price will be taxed to the optionee as a long-term capital gain or loss. If the shares are disposed of before such holding period requirements are satisfied, then the optionee will have ordinary income in the year of disposition equal to the difference between the exercise price and the
lower of the fair market value of the stock at the date of the option exercise or the sale of the stock and the optionee will have capital gain or loss, long-term or short-term, as the case may be, in an amount equal to the difference between (i) the amount realized by the optionee upon that disposition of the shares and (ii) the option price paid by the optionee increased by the amount of ordinary income, if any, so recognized by the optionee.
Any options granted under the Plan to non-employee directors will be nonqualified stock options, which do not qualify as incentive stock options and will not qualify for any special tax benefits to the option holder. An option holder generally will not recognize any taxable income at the time of the grant of a nonqualified stock option. However, upon the options exercise, the option holder will recognize ordinary income for federal income tax purposes measured by the excess of the fair market value of the shares on the exercise date over the exercise price. The income realized by an option holder who is also an employee will be subject to income and other employee withholding taxes.
The option holders basis for determination of gain or loss upon the subsequent disposition of shares acquired upon the exercise of a nonqualified stock option will be the amount paid for such shares plus any ordinary income recognized as a result of the exercise of such option. Upon disposition of any shares acquired pursuant to the exercise of a nonqualified stock option, the difference between the sale price and the option holders 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 at their disposition.
In general, there will be no federal income tax deduction allowed to the Company upon the grant or termination of a nonqualified stock option or a sale or disposition of the shares acquired upon the exercise of a nonqualified stock option. However, upon the exercise of a nonqualified stock option, the Company will be entitled to a deduction for federal income tax purposes equal to the amount of ordinary income that an option holder is required to recognize as a result of the exercise, provided that the deduction is not otherwise disallowed under the Internal Revenue Code (the Code).
In general, a recipient of Restricted Stock will not incur any federal income tax liability upon grant because the shares will be subject to a substantial risk of forfeiture. Instead, he or she will recognize ordinary income at the time of vesting (at the time all restrictions lapse) equal to the excess, if any, of the fair market value of the shares on the vesting date of the shares over any amount paid for the shares. Alternatively, a recipient may elect to recognize income at the time of grant by making a Section 83(b) election and filing such election with the IRS within 30 days
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of the date of grant, in which case the recipient will recognize ordinary income at the time of grant equal to the excess, if any, of the fair market value of the stock at the time of grant over any amount paid for the shares; in that case, there is no further income recognition when the restrictions lapse. The Corporation is entitled to a tax deduction in an amount equal to the ordinary income recognized by the participant.
The following table sets forth the awards that the individuals and groups referred to below have received as of December 31, 2007, under the Plan.
ValueRich, Inc.s Incentive Stock Plan
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Dollar
Value
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Number
of
Shares
Underlying
Options
Granted
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Restricted Stock
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|
|
|
|
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Joseph Visconti
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|
0
|
|
0
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0
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David Willson
|
|
0
|
|
0
|
0
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Gregg Lowenstein
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|
0
|
|
0
|
0
|
|
|
|
|
|
|
Executive Group
|
|
0
|
|
0
|
0
|
Non-Executive Director Group
|
|
0
|
|
0
|
0
|
Non-Executive Officer Employee Group
|
|
0
|
|
0
|
0
|
|
|
|
|
|
|
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To date, no awards have been granted under the Plan. Because the administrator of the Plan has complete discretion to determine awards under the Plan, it is not possible to determine the benefits or amounts, if any, that will be received or allocated to any person under the Plan.
SECURITY OWNERSHIP
The following table sets forth, as of December 31, 2007, information concerning the beneficial ownership of common stock by each director of the Company, the Chief Executive Officer and the other compensated executive officers provided that their annual compensation exceeds $100,000, and all directors and executive officers as a group. Unless otherwise indicated below, the business address for each named individual is the principal executive office address, which is 1804 N. Dixie Highway, Suite A, West Palm Beach, Florida, 33407. According to rules adopted by the Securities and Exchange Commission, a person is the beneficial owner of securities if he or she has, or shares, the power to vote such securities or to direct their investment. Unless otherwise indicated, each of the shareholders has sole voting and investment power with respect to shares beneficially owned.
The table also sets forth, as of December 31, 2007, the name, address, stock ownership and voting power of each person or group of persons known by the Company to own beneficially more than 5% of the outstanding shares of Common Stock. Unless otherwise indicated, each of the shareholders has sole voting and investment power with respect to shares beneficially owned.
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Name and Address(1)
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Amount and
Nature
Of
Beneficial
Ownership
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Percentage
of Class
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Joseph Visconti
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3,694,425(2)
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45.32
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%
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David Willson
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160,000
|
|
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1.96
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%
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Gregg Lowenstein
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50,000
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.61
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%
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All officers and directors as a group (3 people)
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3,904,425
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47.89
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%
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Vision Opportunity Master Fund, Ltd.
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851,341(3)
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10.44
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%
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(1)
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Unless otherwise indicated, the address for each is c/o ValueRich, Inc., 1804 N. Dixie Highway, Suite A, West Palm Beach, Florida 33407.
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(2)
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Includes 82 shares owned indirectly by son, Joseph Visconti.
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(3)
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Does not include 928,572 shares issuable under warrants exercisable more than 60 days after the date hereof.
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