SCHEDULE 14C - INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE
SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
[X] Definitive Information Statement
ACE MARKETING & PROMOTIONS, INC.
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(Name of Registrant As Specified In Charter
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
________________________________________________________________________
2) Aggregate number of securities to which transaction applies:
________________________________________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11: (Set forth the amount on which the
filing fee is calculated and state how it was determined):
________________________________________________________________________
4) Proposed maximum aggregate value of transaction:
________________________________________________________________________
5) Total fee paid:
________________________________________________________________________
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form of Schedule and the date of its filing.
1) Amount Previously Paid: ________________________________________________
2) Form, Schedule or Registration Statement No.: __________________________
3) Filing Party: __________________________________________________________
4) Date Filed: ____________________________________________________________
ACE MARKETING & PROMOTIONS, INC.
457 ROCKAWAY AVENUE
VALLEY STREAM, NY 11581
(516) 256-7766
INFORMATION STATEMENT
SHAREHOLDER MAJORITY ACTION IN LIEU OF A SPECIAL MEETING
ON OR ABOUT AUGUST 12, 2005
NOTICE IS HEREBY GIVEN TO ALL SHAREHOLDERS THAT A MAJORITY ACTION OF
SHAREHOLDERS IN LIEU OF A SPECIAL MEETING (THE "ACTION") OF ACE MARKETING &
PROMOTIONS, INC., A NEW YORK CORPORATION (THE "COMPANY") WILL BE TAKEN ON OR
ABOUT AUGUST 12, 2005 TO ADOPT THE FOLLOWING:
o To ratify, adopt and approve an amendment to the Company's
2005 Stock Option Plan to increase the number of shares
covered by the Plan from 2,000,000 shares to 4,000,000 shares
of Common Stock, $.0001 par value.
Only shareholders of record at the close of business on July 11, 2005
are entitled to receipt of this Information Statement.
By Order of the Board of Directors
Dean L. Julia, Chief Executive Officer
July 18, 2005
INFORMATION STATEMENT
The Board of Directors of Ace Marketing & Promotions, Inc. ("Ace" or
"the Company") is furnishing this Information Statement to shareholders on or
about July 18, 2005.
This Information Statement is being furnished to the stockholders of
the Company in connection with a proposal to amend the Company's 2005 Stock
Option Plan to increase the number of shares covered by the Plan from 2,000,000
shares to 4,000,000 shares of Common Stock, $.0001 par value.
The Company has authorized 25,000,000 shares of Common Stock, $.0001
par value. Of the 25,000,000 shares, there are currently 5,888,076 shares of
Common Stock currently outstanding. The Company has 5,000,000 shares of
authorized Preferred Stock, none of which is outstanding. The proposal contained
in the preceding paragraph is expected to be adopted by the written consent of
the holders of a majority in interest in the Company's outstanding Common Stock
and submitted to the Secretary of the Company on or about August 12, 2005 (the
"Written Consent Effective Date"). If the proposal was not adopted by written
consent, it would have been required to be considered by the Company's
stockholders at an annual or special stockholders' meeting convened for the
specific purpose of approving the proposal.
The elimination of the need for an annual or special meeting of
stockholders to approve the proposal is made possible by Section 615 of the New
York Corporation Law (the "New York Law") and Article Seventh of the Company's
Certificate of Incorporation, as amended, which provides in essence that the
written consent of the holders of outstanding shares of common stock, having not
less than the minimum number of votes which would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted, may be substituted for such an annual or special meeting. In
order to eliminate the costs and management time involved in holding an annual
or special meeting and in order to effect the proposal as early as possible in
order to accomplish the purpose of the Company, as hereinafter described, the
Board of Directors of the Company voted to utilize the written consent of the
holders of a majority in interest of the Company's outstanding voting capital
stock in lieu of a special meeting of stockholders to approve the proposal
described herein.
The date on which this Information Statement will first be sent to the
stockholders is on or about July 18, 2005. The record date established by the
Company for purposes of determining the number of outstanding shares of Common
Stock of the Company entitled to consent to the proposal is July 11, 2005 (the
"Record Date").
Inasmuch as the Company will have provided to its stockholders of
record this Information Statement, the Company will notify its stockholders in
its next Quarterly Report on Form 10-QSB and/or Form 8-K of the Written Consent
Effective Date of the proposal. No additional action will be undertaken pursuant
to such written consents, and no dissenters' rights under New York Law are
afforded to the Company's stockholders as a result of the adoption of the
proposal.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of July 11, 2005, the Company had outstanding 5,888,076 shares of
Common Stock. The only persons of record who presently hold or are known to own
(or believed by the Company to own) beneficially more than 5% of the outstanding
shares of such class of stock is listed below. The following table also sets
forth certain information as to holdings of the Company's Common Stock of all
officers and directors individually, and all officers and directors as a group.
-------------------------------------------------------------------------------------------------------------
NAME AND AMOUNT OF PERCENT
-------- --------- -------
ADDRESS OF BENEFICIAL OWNER (1) BENEFICIAL OWNERSHIP (1) OF CLASS (1)
------------------------------- ------------------------ ------------
DIRECTORS AND OFFICERS:
-----------------------
Scott Novack
457 Rockaway Avenue
Valley Stream, NY 11583 1,167,000 19.9
Michael D. Trepeta
457 Rockaway Avenue
Valley Stream, NY 11583(2) 1,382,000 22.5
Dean L. Julia
457 Rockaway Avenue
Valley Stream, NY 11583 (2) 1,352,500 22.0
Sean McDonnell
457 Rockaway Avenue
Valley Stream, NY 11583 (3) 50,000 .8
All Directors and Officers as a
Group (four persons) (4) 3,951,500 61.4
5% STOCKHOLDERS
---------------
James Simanton
4816 S. Pender Lane
Spokane, WA 99224 487,000 8.3
David McCooey
50 Urso Drive
Westerly, RI 02891 297,143 5.0
-----------------------------------------------------------------------------------------------------------
---------------
(1) Beneficial ownership is determined in accordance with Rule 13d-3 under
the Securities Exchange Act of 1934, as amended, and is generally
determined by voting powers and/or investment powers with respect to
securities. Unless otherwise noted, all of such shares of common stock
listed above are owned of record by each individual named as beneficial
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owner and such individual has sole voting and dispositive power with
respect to the shares of common stock owned by each of them. Such
person or entity's percentage of ownership is determined by assuming
that any options or convertible securities held by such person or
entity, which are exercisable within sixty (60) days from the date
hereof, have been exercised or converted as the case may be, but not
for the purposes of determining the number of outstanding shares held
by any other named beneficial owner.
(2) Includes options to purchase 250,000 shares.
(3) Includes options to purchase 50,000 shares.
(4) Includes options to purchase 550,000 shares.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The names and ages of the executive officers and directors of the
Company are set forth below:
Name Age Position
---- --- --------
Dean Julia 37 Chief Executive Officer/Secretary/
Treasurer/Director/Co-Founder
Michael Trepeta 33 President/Director/Co-Founder
Scott Novack 37 Director/Co-Founder
Sean McDonnell 44 Chief Financial Officer
MANAGEMENT TEAM
Our officers, directors and founders biographical information is as
follows:
MICHAEL D. TREPETA. Mr. Trepeta received a Bachelor of Science Degree
in Applied Economics and Business Management with a minor in Communications from
Cornell University in 1993. Since that time, Mr. Trepeta has been associated
with various broker/dealers as a stockbroker where he was involved in the
funding of numerous development stage and growth companies. Mr. Trepeta was a
Vice President of Investments at Joseph Roberts & Co. in 1994 and a Vice
President of Investments at Rickel & Associates from 1995-1996. From September
of 1996 through February 1998, he has served as President of MDT Consulting
Group, Inc., a corporation contracted by publicly traded companies to serve as a
financial intermediary to investment bankers and to assist in developing
products, services, and business strategies. In 1998, Mr. Trepeta co-founded us
and he became an officer, director and principal owner of our company.
DEAN L. JULIA. Mr. Julia holds a Bachelor of Business Administration
from Hofstra University received in 1990. Since that time, Mr. Julia has been
associated with various broker/dealers as a stockbroker where he was involved in
the funding of numerous development stage and growth companies. From 1991 to
1996, Mr. Julia served as a Vice President for Reich & Co. From 1993 to 1994, he
was Vice President for D. Blech & Co. From 1994 to 1995, he served as a Vice
President for GKN Securities; and from 1995 to 1996 he served as Vice President
for Rickel & Associates. From September 1996 through February 1998, Mr. Julia
served as President and Chief Executive Officer of DLJ Consulting, a financial
intermediary consultant for public and private companies. In 1998, Mr. Julia
co-founded us and became an officer, director and principal stockholder of our
company.
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SCOTT J. NOVACK. Mr. Novack holds a Bachelor of Business Administration
from Hofstra University received in 1990. From 1993-1994, Mr. Novack was a Vice
President at D. Blech & Co., a New York investment bank specializing in raising
venture capital money for early stage companies. From 1994-1995, Mr. Novack was
a Vice President at GKN Securities, a New York based investment bank. From
1995-1996, Mr. Novack was a Vice President at Rickel Associates, a New York
based investment bank. Mr. Novack was the President of SJN Consulting Group,
Inc., a privately held company, from 1996 to 2003. SJN was a corporation
contracted by publicly traded companies to serve as a financial intermediary to
investment bankers and to assist in developing products, services, and business
strategies. Since 2003, Mr. Novack is a private investor who invests for his own
account. In 1998, Mr. Novack co-founded us and became a director of our company.
SEAN MCDONNELL. Sean J. McDonnell, Certified Public Accountant, has
been self employed and in private accounting practice since January 1990
handling many different types of business entities and associations. Mr.
McDonnell has spent much of his time helping his customers grow their companies
and acquire financing for the purchase of buildings and equipment. Prior to
starting his own practice, he was employed from 1985 - 1990 as a senior staff
member in the accounting firm of Breiner & Bodian CPA's. After graduating from
Dowling College in 1984, he was employed by Kenneth Silver C.P.A. from 1984 -
1985. He is currently serving on the boards of the Police Athletic League, North
East Youth Sports Association and Sound Beach Soccer Club, Inc. Mr. McDonnell
has served as our Chief Financial Officer since January 3, 2005 as an
independent contractor. Mr. McDonnell devotes such time to us as is necessary
for the performance of his duties.
Executive officers are appointed by the board and serve at the
discretion of the board. The board members serve for a period of one year until
their successors are elected and shall qualify.
LACK OF COMMITTEES
Our company has no standing nominating and compensation committees of
our board of directors or committees performing similar functions. We currently
lack an audit committee of our board of directors. In the future, we will seek
to nominate and appoint to the board two independent directors and to form an
audit committee consisting of the two independent directors. It is our goal that
at least, one of the two independent directors would be deemed a "financial
expert" within the meaning of Sarbanes-Oxley Act of 2002, as amended. An
independent director is defined in Rule 4200(a)(14) of the NASD's Listing
Standards to mean a person other than an officer or employee of our Company or
any other individual having a relationship which, in the opinion of our board of
directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. The following persons should not be
considered independent:
o A director who is employed by the Company or any of its
affiliates for the current year or any of the past three
years;
o A director who accepts any compensation from the Company or
any of its affiliates in excess of $60,000 during the previous
fiscal year other than compensation for Board service,
benefits under a tax qualified retirement plan, or non
discretionary compensation;
o A director who is a member of the immediate family of an
individual who is, or has been in any of the past three years,
employed by the Company or any of its affiliates as an
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executive officer. Immediate family includes a person's
spouse, parents, children, siblings, mother-in-law,
father-in-law, sister-in-law, brother-in-law, son-in-law,
daughter-in-law, and anyone who resides in such person's home;
o A director who is a partner in, or a controlling shareholder
or an executive officer of, any for-profit business
organization to which the Company made, or from which the
Company received, payments (other than those arising solely
from investments in the Company's securities) that exceed 5%
of the Company's or business organizations consolidated gross
revenues for that year, or $200,000, whichever is more, in any
of the past three years;
o A director who is employed as an executive of another entity
where any of the Company's executives serve on that entity's
compensation committee.
The term "Financial Expert" is defined as a person who has the
following attributes: an understanding of generally accepted accounting
principles and financial statements; has the ability to assess the general
application of such principles in connection with the accounting for estimates,
accruals and reserves; experience preparing, auditing, analyzing or evaluating
financial statements that present a breadth and level of complexity of
accounting issues that are generally comparable to the breadth and complexity of
issues that can reasonably be expected to be raised by the company's financial
statements, or experience actively supervising one or more persons engaged in
such activities; an understanding of internal controls and procedures for
financial reporting; and an understanding of audit committee functions.
We can provide no assurances that our board's efforts to select two
persons to serve as independent directors and on the proposed audit committee
will be successful. In the event an audit committee is established, its first
responsibility would be to adopt a written charter. Such charter would be
expected to include, among other things:
o annually reviewing and reassessing the adequacy of the
committee's formal charter;
o reviewing the annual audited financial statements with our
management and the independent auditors and the adequacy of
our internal accounting controls;
o reviewing analyses prepared by our management and independent
auditors concerning significant financial reporting issues and
judgments made in connection with the preparation of our
financial statements;
o being directly responsible for the appointment, compensation
and oversight of our independent auditor, which shall report
directly to the audit committee, including resolution of
disagreements between management and the auditors regarding
financial reporting for the purpose of preparing or issuing an
audit report or related work;
o reviewing the independence of the independent auditors;
o reviewing our auditing and accounting principles and practices
with the independent auditors and reviewing major changes to
our auditing and accounting principles and practices as
suggested by the independent auditor or its management;
o reviewing all related party transactions on an ongoing basis
for potential conflict of interest situations; and
o all responsibilities given to the audit committee by virtue of
the Sarbanes-Oxley Act of 2002, which was signed into law by
President George W. Bush on July 30, 2002.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
LONG-TERM
NAME AND COMPENSATION
PRINCIPAL CALENDAR OTHER ANNUAL AWARDS AND ALL OTHER
POSITION YEAR SALARY($) BONUS COMPENSATION (1) PAYOUTS (2) COMPENSATION
-------- ---- --------- ----- ---------------- ----------- ------------
Dean Julia, 2004 121,500 0 0 0 0
Chief Executive 2003 108,000 0 0 0 0
Officer 2002 108,000 0 0 0 0
Michael Trepeta, 2004 121,500 0 0 0 0
President 2003 108,000 0 0 0 0
2002 108,000 0 0 0 0
(1) Does not include the value of a leased automobile provided to the
executive officer for business purposes, as each officer owns his own
separate automobile that he uses for personal reasons.
(2) In January 2005, we adopted the 2005 Employee Benefit and Consulting
Services Compensation Plan pursuant to which we reserved shares of
common stock for the issuance of options to employees, consultants and
non-employee directors. No options or restricted stock were issued in
connection with services rendered to Messrs. Julia and Trepeta during
the past three years ended December 31, 2004. However, Messrs. Julia
and Trepeta were each granted ten-year options to purchase 250,000
shares at $1.00 per share on January 3, 2005.
EMPLOYMENT AGREEMENTS
Michael Trepeta, our President and Dean Julia, our Chief Executive
Officer, received salaries at the rate of $9,000 per month between 2002 through
March 2004, which was raised to $10,500 per month in April, 2004 and $12,000
per month in March 2005. Historically, all compensation of our executive
officers and directors including, without limitation, the payment of salaries,
bonuses and the grant of options and employment contracts have been determined
solely by our Board of Directors, which is controlled by the founders of the
Company. Effective March 1, 2005, we entered into employment contracts with
each of Messrs. Julia and Trepeta. These contracts contain the following
material provisions:
o A term of three years, with the Executive having the option to
renew the agreement for a period of an additional two years.
o A monthly base salary of $12,000, which salary will increase
each subsequent March 1 by at least $2,000 per month during
the term of the agreements and any extension thereof.
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o The annual grant on March 1 of each year commencing March 1,
2006 of ten-year stock options to purchase 50,000 shares at an
exercise price equal to the then fair market value of our
common stock as determined by the Board.
o Annual bonuses of at least 5% of pre-tax earnings.
o Use of company automobile with all related costs paid for by
us.
o Health insurance.
o Indemnification to the extent permitted by New York law.
o Right to participate in any pensions of our company.
DIRECTORS' COMPENSATION
Our directors are not expected to receive cash compensation for their
services as such. However, our non-employee directors will receive a fee of $500
to be paid to them for attending each meeting of the Board of Directors. All
directors will also be reimbursed for actual travel expenses incurred in
attending board meetings. Members of the board of directors are eligible to
participate under our company's stock incentive plan. Over a period of three
years, which currently may be extended to up to five years, Messrs. Julia and
Trepeta will receive compensation and options as executive officers pursuant to
their employment contracts and not in their capacity as directors of our
company. Equity incentive awards issued to other board members will not be a
fixed amount or granted on a pre-determined timetable. Equity incentive awards
will be determined and granted in the sole discretion of the board and/or a
compensation committee of the board at such times and in such amounts as the
board or a committee thereof determines to make such awards.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The New York Business Corporation Law contains provisions permitting
and, in some situations, requiring New York corporations to provide
indemnification to their officers and directors for losses and litigation
expense incurred in connection with their service to the corporation. Our
articles and bylaws contain provisions requiring our indemnification of our
directors and officers and other persons acting in their corporate capacities.
In addition, we may enter into agreements with our directors providing
contractually for indemnification consistent with the articles and bylaws.
Currently, we have no such agreements. The New York Business Corporation Law
also authorizes us to purchase insurance for our directors and officers insuring
them against risks as to which we may be unable lawfully to indemnify them. We
intend to obtain limited insurance coverage for our officers and directors as
well as insurance coverage to reimburse us for potential costs of our corporate
indemnification of officers and directors.
As far as exculpation or indemnification for liabilities arising under
the Securities Act of 1933 may be permitted for directors and officers and
controlling persons, we have been advised that in the opinion of the Securities
and Exchange Commission such exculpation or indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
CERTAIN TRANSACTIONS
The transaction described in paragraph (i) below was approved by the
Board of directors and was an arms-length transaction which did not involve a
director or executive officer of our company. The transactions described in
paragraph (iii) below were approved by the Board of Directors based upon
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obtaining at least three competitive quotes and Mr. Trepeta's wife being the
best price. The transactions described in paragraphs (i) and (iii) were on terms
to us that are at least as favorable as the terms we could have obtained from an
unaffiliated party.
(i) On August 5, 2002, we issued to David McCooey, who is currently the
beneficial owner of 5.0% of our outstanding shares of common stock, a debenture
in the principal amount of $25,000 originally convertible at $1.50 per share.
The debenture bore interest at the rate of 10% per annum. On January 13, 2005,
we agreed with Mr. McCooey to convert his $25,000 of principal and accrued
interest thereon of $6,076, which payments were in arrears, into 31,076 shares
of our common stock at a conversion price of $1.00 per share.
(ii) In February 2005, our three founders, Dean Julia, Michael Trepeta
and Scott Novack, each privately sold, at a resale price of $2.00 per share,
18,500 shares to close personal friends of Mr. Novack to accommodate their
desire to have an interest in our company before it went public. The shares that
were resold were originally purchased by our founders in 1998 at a nominal price
of $.0001 per share.
(iii) Mr. Trepeta's wife has a company which is a candle supplier. From
time-to-time, we have in the past and may in the future purchase candle supplies
from her company. In 2003 and 2004, we purchased a total of $28,000 from her
company.
In the future, we expect to have one or more members of our Board
be independent directors of our company. It is anticipated that future
transactions between us and our executive officers and directors and other
affiliated parties will be approved by the then disinterested members of the
Board and, if not a majority of the Board, then by our independent director(s)
through a committee appointed by the Board.
PROPOSAL TO RATIFY, ADOPT AND APPROVE AN AMENDMENT TO THE
COMPANY'S 2005 STOCK OPTION PLAN TO INCREASE THE NUMBER
OF SHARES COVERED BY THE PLAN FROM 2,000,000 SHARES TO
4,000,000 SHARES OF COMMON STOCK.
On January 3, 2005, the Company established a 2005 Employee Benefit and
Consulting Compensation Plan (the "2005 Plan") covering 2,000,000 shares. On
February 9, 2005, the stockholders of the Company ratified the 2005 Plan at a
Special Meeting called in lieu of an Annual Meeting. The material features of
the Plan are described below. On June 9, 2005, the Board approved an amendment
to the 2005 Plan to increase the number of shares covered by the 2005 Plan from
2,000,000 shares to 4,000,000 shares of Common Stock, subject to stockholder
approval. The proposed amendment is annexed as Appendix I.
Administration
--------------
Our Board of Directors administers the 2005 Plan, which was approved by
the Company's Board of Directors on January 3, 2005. The Board, subject to the
provisions of the 2005 Plan, has the authority to determine and designate
officers, employees, directors and consultants to whom awards shall be made and
the terms, conditions and restrictions applicable to each award (including, but
not limited to, the option price, any restriction or limitation, any vesting
schedule or acceleration thereof, and any forfeiture restrictions). The Board
may, in its sole discretion, accelerate the vesting of awards. The Board of
Directors must approve all grants of Options and Stock Awards issued to our
officers or directors.
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Types of Awards
---------------
The 2005 Plan is designed to enable us to offer certain officers,
employees, directors and consultants of us and our subsidiaries equity interests
in us and other incentive awards in order to attract, retain and reward such
individuals and to strengthen the mutuality of interests between such
individuals and our stockholders. In furtherance of this purpose, the 2005 Plan
contained provisions for granting incentive and non-statutory stock options and
Common Stock Awards.
STOCK OPTIONS. A "stock option" is a contractual right to purchase a
number of shares of Common Stock at a price determined on the date the option is
granted. The option price per share of Common Stock purchasable upon exercise of
a stock option and the time or times at which such options shall be exercisable
shall be determined by the Board at the time of grant. Such option price shall
not be less than 100% of the fair market value of the Common Stock on the date
of grant. The option price must be paid in cash, money order or check. The
Options may also contain at the time of grant, at the discretion of the Board,
certain cashless exercise provisions.
Options shall be exercisable at the times and subject to the conditions
determined by the Board at the date of grant, but no option may be exercisable
more than ten years after the date it is granted. If the Optionee ceases to be
an employee of our company for any reason other than death, any option
originally granted as an Incentive Stock Option exercisable on the date of the
termination of employment may be exercised for a period of thirty days or until
the expiration of the stated term of the option, whichever period is shorter. In
the event of the Optionee's death, any originally granted Incentive Stock Option
exercisable at the date of death may be exercised by the legal heirs of the
Optionee from the date of death until the expiration of the stated term of the
option or six months from the date of death, whichever event first occurs. In
the event of disability of the Optionee, any originally granted Incentive Stock
Options shall expire on the stated date that the Option would otherwise have
expired or 12 months from the date of disability, whichever event first occurs.
The termination and other provisions of a non-statutory stock option shall be
fixed by the Board of Directors at the date of grant of each respective option.
COMMON STOCK AWARD. "Common Stock Award" are shares of Common Stock
that will be issued to a recipient at the end of a restriction period, if any,
specified by the Board if he or she continues to be an employee, director or
consultant of us. If the recipient remains an employee, director or consultant
at the end of the restriction period, the applicable restrictions will lapse and
we will issue a stock certificate representing such shares of Common Stock to
the participant. If the recipient ceases to be an employee, director or
consultant of us for any reason (including death, disability or retirement)
before the end of the restriction period unless otherwise determined by the
Board, the restricted stock award will be terminated.
Eligibility
-----------
The Company's officers, employees, directors and consultants of Ace and
its subsidiaries are eligible to be granted stock options, and Common Stock
Awards. Eligibility shall be determined by the Board; however, all Options and
Stock Awards granted to officers and directors must be approved by the Board.
Termination or Amendment of the 2005 Plan
-----------------------------------------
The Board may at any time amend, discontinue, or terminate all or any
part of the 2005 Plan, provided, however, that unless otherwise required by law,
the rights of a participant may not be impaired without his or her consent, and
provided that we will seek the approval of our stockholders for any amendment if
such approval is necessary to comply with any applicable federal or state
securities laws or rules or regulations.
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Awards
------
From January 2005 through June 30, 2005, we granted options to purchase
2,742,000 shares of our Common Stock under the 2005 Plan. All options are
exercisable at $1.00 share. Unless sooner terminated, the 2005 Plan will expire
on January 3, 2015 and no awards may be granted after that date.
It is not possible to predict the individuals who will receive future
awards under the 2005 Plan or the number of shares of Common Stock covered by
any future award because such awards are wholly within the discretion of the
Board, except that on March 1 of each year, options to purchase 50,000 shares at
the then fair market value are automatically to Dean L. Julia and Michael
Trepeta pursuant to their employment agreements. The table below contains
information on the known benefits that have been granted to certain persons and
group of persons under the 2005 Plan as of May 31, 2005.
----------------------------------------------------- ---------------- ----------------- -----------------------
NUMBER OF RANGE OF VALUE OF UNEXERCISED
SHARES SUBJECT EXERCISE PRICE OPTIONS AT
NAME AND POSITION TO OPTIONS ($) PER SHARE MAY 31, 2005
----------------------------------------------------- ---------------- ----------------- -----------------------
Dean L. Julia,
Chief Executive Officer (2) 250,000 1.00 (1)
----------------------------------------------------- ---------------- ----------------- -----------------------
Michael D. Trepeta, President (2) 250,000 1.00 (1)
----------------------------------------------------- ---------------- ----------------- -----------------------
Sean McDonald, Chief Financial Officer 50,000 1.00 (1)
----------------------------------------------------- ---------------- ----------------- -----------------------
Three Executive Officers
as a group 550,000 1.00 (1)
----------------------------------------------------- ---------------- ----------------- -----------------------
One Non-Employee Not
Director -0- applicable -0-
----------------------------------------------------- ---------------- ----------------- -----------------------
Non-Executive Officer Employees
and Independent Consultants (3) 2,192,000 1.00 (1)
----------------------------------------------------- ---------------- ----------------- -----------------------
------------
(1) Value is normally calculated by multiplying (a) the difference between
the market value per share at June 30, 2005 and the option exercise
price by (b) the number of shares of Common Stock underlying the option.
Due to a lack of a trading market for the Company's Common Stock at year
end and at May 31, 2005, no value is given to the options as of May 31,
2005 or at year end on December 31, 2004.
(2) Does not include options to purchase 50,000 shares to be granted as of
March 1 of each year of his employment contract exercisable at the then
fair market value of our Common Stock at the date of each grant.
(3) The options to purchase 2,192,000 shares have been granted to
non-affiliated persons who serve as employees or independent consultants
(primarily consisting of sales representatives and legal counsel) to the
Company, including, options to purchase 460,000 shares, 270,000 shares
and 270,000 shares granted to Robert Durkin, Robert Pedlow and Paul
Borde, respectively, employees of the Company. One option holder, Robert
Durkin, will become a 5% or greater stockholder of the Company by virtue
of our stockholders' approval of the Amendment to the 2005 Plan, as his
options to purchase 460,000 shares as well as those granted to Messrs.
Pedlow and Borde were granted subject to stockholder approval of the
proposed amendment contained in Appendix I.
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SHARES SUBJECT TO THE PLAN
The maximum number of shares of Common Stock that may be issued
pursuant to awards granted under the Plan is 2,000,000 shares, which will
increase to 4,000,000 shares if the proposed amendment in Appendix I is approved
by stockholders. Shares granted under the Plan may be either authorized and
unissued shares or issued shares reacquired by the Company and held in treasury.
The Plan does not limit the number of shares of Common Stock with respect to
which options or Stock Awards may be granted to any individual during any
calendar year. The aggregate number of shares issuable under the Plan and the
number of shares subject to options and awards to be granted under the Plan are
subject to adjustment in the event of certain mergers, reorganizations,
consolidations, recapitalizations, dividends (other than a regular cash
dividend), stock split or other change in corporate structure affecting the
Common Stock. Shares subject to options that expire, terminate or are canceled
unexercised, shares of stock that have been forfeited to the Company and shares
that are not issued as a result of forfeiture or termination of an award may be
reissued under the Plan.
U.S. FEDERAL INCOME TAX CONSEQUENCES
The U.S. Federal income tax discussion set forth below is intended for
general information only. State and local income tax consequences are not
discussed, and may vary from locality to locality.
Nonstatutory Stock Options. Under present U.S. Treasury regulations, an
optionee who is granted a nonstatutory option will not realize taxable income at
the time the option is granted. In general, an optionee will be subject to U.S.
Federal income tax on an amount of ordinary income equal to the excess of the
fair market value of the shares on the date of exercise over the option exercise
price of those shares, and the Company will receive a corresponding deduction.
Income tax withholding requirements apply to such excess upon exercise. The
optionee's tax basis in the shares acquired upon exercise will be equal to the
option price plus the amount of ordinary income upon which he is taxed. Upon
subsequent disposition of the shares, the optionee will generally realize
capital gain or loss, long-term or short-term, depending upon the length of time
the shares are held after the option is exercised.
Incentive Stock Options ("ISO"). An ISO optionee is not taxed at the
time an ISO is granted. The tax consequences upon exercise and later disposition
depend upon whether the optionee was an employee of the Company or a subsidiary
at all times from the date of grant until three months preceding exercise (one
year in the case of death or disability) and on whether the optionee holds the
shares for more than one year after exercise and two years after the date of
grant of the option.
If the optionee satisfies both the employment rule and the holding
rule, for U.S. Federal income tax purposes, the optionee will not realize income
upon exercise of the option and the Company will not be allowed a corresponding
income tax deduction at any time. The difference between the option exercise
price and the amount realized upon disposition of the shares by the optionee
will constitute a long-term capital gain or a long-term capital loss, as the
case may be.
If the optionee meets the employment rule, but fails to observe the
holding rule (a "disqualifying disposition"), the optionee generally recognizes
as ordinary income, in the year of the disqualifying disposition, the excess of
the fair market value of the shares at the date of exercise over the option
price.
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Any excess of the disqualifying disposition sale price over the fair
market value at the date of exercise will be recognized by the optionee as
capital gain (long-term or short-term, depending on the length of time the stock
was held after the option was exercised). If, however, the disqualifying
disposition sale price is less than the fair market value at the date of
exercise, then the ordinary income recognized by the optionee is generally
limited to the excess of the disqualifying disposition sale price over the
option exercise price. In both situations, the Company's tax deduction is
limited to the amount of ordinary income recognized by the optionee. Under
current Internal Revenue Service guidelines, the Company is not required to
withhold any Federal income tax in the event of a disqualifying disposition.
Common Stock Awards. Recipients of shares of restricted common stock
that are not "transferable" and are subject to "substantial risk of forfeiture"
at the time of grant will not be subject to Federal income taxes until lapse or
release of the restrictions on the shares. The recipient's income and our
deduction will be equal to the fair market value of the shares on the date of
lapse or release of such restrictions.
Section 162(m)
--------------
Under Section 162(m) of the Code, the Company may deduct, for federal
income tax purposes, compensation paid to its chief executive officer and its
four other most highly compensated executive officers only to the extent that
such compensation does not exceed $1,000,000 for any individual during any year,
provided that compensation that qualifies as "performance-based compensation" is
not counted toward the $1,000,000 limit. The 2005 Plan includes features
necessary for awards thereunder to qualify as "performance-based compensation."
OTHER BUSINESS
As of the date of this Information Statement, the Board of Directors of
the Company knows of no other business which will be presented for consideration
of the stockholders of the Company.
AVAILABILITY OF SECURITIES AND EXCHANGE
COMMISSION'S FORM 10-SB.
THE COMPANY'S REGISTRATION STATEMENT ON FORM 10-SB, AS AMENDED, INCLUDES AUDITED
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2004 AND EXHIBITS THERETO,
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION; SUCH REGISTRATION
STATEMENT IS AVAILABLE WITHOUT CHARGE TO THE STOCKHOLDERS UPON WRITTEN REQUEST.
SUCH MATERIAL CAN BE OBTAINED BY WRITING TO ACE MARKETING & PROMOTIONS, INC.,
ATTENTION SHAREHOLDER RELATIONS AT 457 ROCKAWAY AVENUE, VALLEY STREAM, NY 11581.
SHAREHOLDER COMMUNICATIONS
The Board will give appropriate attention to written communications
that are submitted by shareholders, and will respond if and as appropriate.
Absent unusual circumstances and subject to any required assistance or advice
from legal counsel, Dean L. Julia, Chief Executive Officer, is primarily
responsible for monitoring communications from shareholders and for providing
copies or summaries of such communications to the other directors as he
considers appropriate.
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Communications will be forwarded to all directors if they relate to
important substantive matters and include suggestions or comments that Mr. Dean
L. Julia, Chief Executive Officer, considers to be important to the directors to
know. In general, communications relating to corporate governance and long-term
corporate strategy are more likely to be forwarded than communications relating
to ordinary business affairs, personal grievances and matters as to which we may
receive repetitive or duplicative communications.
Shareholders who wish to send communications on any topic to the Board
should address such communications in care of Dean L. Julia, Chief Executive
Officer, at Ace Marketing & Promotions, Inc., 457 Rockaway Avenue, Valley
Stream, NY 11581.
SHAREHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any shareholder who intends to present a proposal at the next annual
meeting of shareholders must deliver the proposal to the Chief Executive Officer
of Ace Marketing & Promotions, Inc., 457 Rockaway Avenue, Valley Stream, NY
11581:
o Not later than March 15, 2006, if the proposal is submitted for
inclusion in our proxy materials for that meeting pursuant to Rule
14a-8 under the Securities Exchange Act of 1934; and
o Not later than March 15, 2006, if the proposal is submitted outside the
processes of Rule 14a-8 under the Securities and Exchange Act of 1934,
in which case we are not required to include the proposal in our
proxy materials. Such nominations and proposals for the next annual
meeting of shareholders, other than those made by or on behalf of the
Board of Directors, shall be made by notice in writing delivered or
mailed by first class United States mail, postage prepaid, to the
Chairman.
ACE MARKETING & PROMOTIONS, INC.
By: /s/ Dean L. Julia, Chief Executive Officer
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APPENDIX I
AMENDMENT
TO
2005 EMPLOYEE BENEFIT
AND CONSULTING COMPENSATION PLAN
SECTION 6. TOTAL NUMBER OF SHARES OF COMMON STOCK
The total number of shares of Common Stock reserved for issuance by the
Company either directly or underlying Options granted under this Plan from
inception to date is 4,000,000. The total number of shares of Common Stock
reserved for such issuance may be increased only by a resolution adopted by
the Board of Directors and amendment of the Plan. Stockholder approval of
such increase or other Modification of the Plan within one year of
Effective Date shall be required in the event Incentive Stock Options are
granted or to be granted under the Plan. Common Stock issued under the Plan
may be authorized and unissued or reacquired Common Stock of the Company.