SMI
PRODUCTS, INC.
INFORMATION
STATEMENT PURSUANT TO SECTION 14(f)
OF
THE SECURITIES EXCHANGE ACT OF 1934 AND SEC RULE 14f-1
NOTICE
OF POTENTIAL CHANGE IN THE COMPOSITION OF THE BOARD OF
DIRECTORS
August
22, 2007
This
Information Statement is being furnished to holders of record of the common
stock, par
value
$0.001 per share (the “SMI Common Stock”), of
SMI
Products, Inc., a Delaware corporation (the “Company,” “we,” “us” or “our”), in
accordance with the requirements of Section 14(f) of the Securities Exchange
Act
of 1934, as amended (the “Exchange Act”), and Rule 14f-1 promulgated under the
Exchange Act.
No
vote or other action by our stockholders is required in response to this
Information Statement. Proxies are not being
solicited.
INTRODUCTION
On
August
15, 2007, SMI Products, Inc. (the “Company”) entered into an Agreement and Plan
of Merger (the “Merger Agreement”) with Nile Therapeutics, Inc., a Delaware
corporation (“Nile”) and the Company’s wholly-owned subsidiary, Nile Merger Sub,
Inc., a Delaware corporation (“MergerCo”), pursuant to which Nile will complete
an acquisition and recapitalization transaction (the “Merger”) with the Company.
This
information statement is being furnished because pursuant to the terms of the
Merger Agreement, certain persons may be elected or designated as directors
of
the Company otherwise than at a meeting of the stockholders, and the persons
so
elected or designated will constitute a majority of the directors of the
Company. Pursuant to the requirements of Section 14(f) of the Exchange Act
and
Rule 14f-1 promulgated under the Exchange Act, the Company is required to
transmit notice of such proposed action to the Company’s stockholders at least
10 days in advance of the effectiveness of such action. In this case, the
proposed action would take place at the later to occur of 10 days following
the
mailing of this Information Statement to the Company’s stockholders or the
closing of the Merger. In the event the Merger fails to close, there will be
no
change in the composition of the Company’s board of directors or management.
At
the
closing of the Merger:
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Pursuant
to the Merger Agreement, we will cause MergerCo to merge with and
into
Nile, with Nile remaining as the surviving corporation and a wholly
owned
subsidiary of the Company;
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In
connection with the Merger,
each of the then issued and outstanding shares of common
stock, $0.001 par value per share (“Nile Common
Stock”)
of
Nile
will be automatically converted into such number of shares of the
SMI
Common Stock, determined by dividing (x) 23,750,000 by (y) the aggregate
number of shares of Nile
Common Stock issued and outstanding immediately prior to the effective
time, on a fully diluted basis, after giving effect to the conversion,
exchange and exercise of all securities (including rights, warrants
and
options) directly or indirectly convertible for Nile
Common Stock whether or not such securities are presently convertible,
exchangeable or exercisable) (the “Exchange Ratio”), so that, after giving
effect to such Merger, the holders of Nile Common Stock, on a
fully-diluted basis, will hold approximately 95% of the issued and
outstanding shares of SMI Common Stock. All outstanding warrants,
options
and other rights to purchase or acquire shares of Nile
Common Stock outstanding immediately prior to the Merger shall convert
into the right to purchase that number of shares of SMI Common Stock
based
upon and at exercise prices adjusted by the Exchange Ratio).
After completion of the Merger (as defined below), Nile’s former
stockholders will collectively hold approximately 95% of SMI Common
Stock;
and
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|
|
o |
In
connection with the Merger, Geoffrey Alison will resign as our sole
director and Peter M. Strumph, Peter M. Kash, Joshua A. Kazam, and
David
M. Tanen, all of whom are currently directors of Nile, will be appointed
directors of the Company immediately following the effective time
of the
Merger (the “Effective Time”). Additionally, upon completion of the
Merger, the officers of the Company immediately prior to the Effective
Time of the Merger shall resign their respective offices, and the
current
officers of Nile shall be appointed as our officers. See
“Change of Control”.
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The
Merger is subject to customary conditions of closing, including
a financing (the “Financing”) requirement regarding Nile.
However, there can be no assurance that the conditions to closing will be
fulfilled or that the Merger will ultimately be consummated.
Because
of the proposed change in the composition of our board of directors and the
exchange of securities pursuant to the Merger Agreement, there will be a change
in control of the Company on the date the Merger is completed.
As
of
August 21, 2007, SMI
had
100,000,000 shares of SMI Common
Stock authorized
for issuance, of which there are 755,100 shares of SMI Common Stock issued
and
outstanding,
and
10,000,000 shares of preferred stock authorized, no shares of which are issued
and outstanding. Each share of SMI Common Stock is entitled to one vote. We
have
no other voting or non-voting class or series of capital stock
outstanding.
Please
read this Information Statement carefully. It describes the terms of the
Merger Agreement and contains certain biographical and other information
concerning the persons who are expected to become our executive officers and
directors after completion of the Merger.
CHANGE
OF CONTROL
On
August
11, 2006, the Company, certain holders of the Company’s debt, certain
stockholders of the Company and James Charuk, the record holder of 66.5% of
the
Company’s issued and outstanding SMI Common Stock, entered into a Stock Purchase
Agreement (“Stock Purchase Agreement”) with Fountainhead Capital Partners
Limited (“Fountainhead Capital”), pursuant to which the sellers agreed to sell
to Fountainhead Capital the debtholders’ notes and 5,551,000 shares of the
Company’s common stock for a purchase price, in the aggregate, of $637,500, plus
the amount of any cash or cash equivalents on the Company’s balance sheet as of
the closing of the transactions contemplated by the Stock Purchase Agreement.
These shares represented approximately 73.5% of the issued and outstanding
capital stock of the Company calculated on a fully-diluted basis. Effective
February 9, 2007, the Company implemented a 1 for 10 share reverse stock split
in connection with its reincorporation from Nevada to Delaware.
We
have
entered into the Merger Agreement with Nile and MergerCo, pursuant to which
we
will issue to Nile stockholders, in consideration of all of the outstanding
capital stock of Nile, the same number of shares of SMI Common Stock. Upon
completion of the Merger, Nile stockholders will hold approximately 95% of
the
issued and outstanding SMI Common Stock. All outstanding warrants, options
and
other rights to purchase or acquire shares of Nile Common Stock outstanding
immediately prior to the Effective Time shall convert into the right to purchase
the same number of shares of SMI Common Stock.
Upon
the
closing of the Merger, Mr.
Geoffrey
Alison will resign as our sole director and Peter M. Strumph, Peter M. Kash,
Joshua A. Kazam, and David M. Tanen, all of whom are currently directors of
Nile, will be appointed directors of the Company immediately following the
Effective Time. Additionally, upon completion of the Merger, the officers of
the
Company immediately prior to the Effective Time shall resign their respective
offices, and the current officers of Nile shall be appointed as our officers.
All of the aforementioned changes are specifically conditioned on the closing
of
the Merger.
SECURITY
OWNERSHIP OF CERTAIN
BENEFICIAL
OWNERS AND MANAGEMENT
|
Name
|
|
Number
of Shares
Beneficially
Owned(1)
|
|
Percent
of
Outstanding
Shares(1)
|
|
|
Fountainhead
Capital Partners Limited
|
|
|
|
|
|
|
PO
Box 456
Portman
House
Hue
Street
St
Helier
Jersey
JE4 5RP
|
|
|
555,100
|
|
|
73.50
|
%
|
|
|
|
|
|
|
|
|
|
|
Geoffrey
Alison
|
|
|
|
|
|
|
|
|
5000
Noeline Ave.
Encino,
CA 91436
|
|
|
0
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
Officers
and directors as a group (four persons)
|
|
|
0
|
|
|
0.00
|
%
|
|
(1)
|
For
the purposes of this table, a person is deemed to have “beneficial
ownership” of any shares of capital stock that such person has the right
to acquire within 60 days of August 21, 2007. All percentages for
SMI Common Stock are calculated based upon a total of 755,100 shares
outstanding as of August 21, 2007, plus, in the case of the person
for
whom the calculation is made, that number of shares of SMI Common
Stock
that such person has the right to acquire within 60 days of August
31,
2007.
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The
following table sets forth (a) the number of shares of Nile Common Stock; and
(b) the number of shares SMI Common Stock beneficially owned as of the date
hereof and immediately following the Merger by (i) those persons or groups
known
to beneficially own more than 5% of Nile Common Stock prior to the closing
of
the Merger, (ii) those persons or groups known to who will likely beneficially
own more than 5% of SMI Common Stock following the Merger, (iii) each current
director and each person that will become a director following completion of
the
Merger, (iv) each current named executive officer and each person that will
become a named executive officer following completion of the Merger, (v) all
current directors and named executive officers as a group and (vi) all directors
and named executive officers on and after the completion of the Merger as a
group. The information is determined in accordance with Rule 13d-3 promulgated
under the Exchange Act. Except as indicated below, the stockholders listed
below possess sole voting and investment power with respect to their shares.
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Name
of Beneficial Owner
|
Number
of Shares of Nile Common Stock Beneficially Owned Prior to Merger
(1)
|
Beneficial
Ownership of Nile Prior to Merger (1)
|
Number
of Shares of SMI Common Stock Beneficially Owned Post Merger
(2)
|
Beneficial
Ownership Post Merger (2)
|
|
Peter
M. Strumph (3)
2850
Telegraph Avenue
Berkeley,
CA 94704
|
0
|
0.00%
|
0
|
0.00%
|
|
Daron
Evans (4)
2850
Telegraph Avenue
Berkeley,
CA 94704
|
0
|
0.00%
|
0
|
0.00%
|
|
Peter
M. Kash (5)
689
Fifth Avenue, 14th Floor, New York, NY 10022
|
716,900
|
9.37%
|
2,138,595
|
8.88%
|
|
Joshua
A. Kazam (6)
689
Fifth Avenue, 14th Floor, New York, NY 10022
|
729,000
|
9.53%
|
2,174,691
|
9.03%
|
|
David
M. Tanen (7)
689
Fifth Avenue, 14th Floor, New York, NY 10022
|
596,500
|
7.80%
|
1,779,428
|
7.39%
|
|
Scott
L. Navins
689
Fifth Avenue, 14th Floor, New York, NY 10022
|
75,000
|
0.98%
|
223,734
|
0.93%
|
|
Mayo
Foundation For Medical Education and Research (8)
200
First Street SW, Rochester, MN 59905-0001
|
523,010
|
6.84%
|
1,560,199
|
6.48%
|
|
Officers,
Directors, and 5% shareholders as a group
|
2,640,410
|
34.51%
|
10,364,364
|
32.72%
|
*
Represents less than 1%.
|
(1)
|
For
purposes of calculating beneficial ownership prior to the Merger,
assumes
the number of shares of Nile Common Stock deemed to be outstanding
immediately prior to the Merger is
7,651,663.
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(2)
|
For
purposes of calculating beneficial ownership following the Merger,
assumes
the number of shares of SMI Common Stock deemed to be outstanding
is
24,075,792.
|
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(3)
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Following
the Merger, Mr. Strumph will exchange certain Nile stock options
for stock
options to purchase 989,583 shares of SMI Common Stock (the “Employment
Options”), which shall vest, if at all, and become exercisable in three
equal installments on the day before each anniversary of Mr. Strumph’s
employment agreement. In addition, Mr. Strumph will exchange certain
Nile
stock options for options to purchase 886,929 shares of SMI Common
Stock
(the “Performance Options”), which shall vest, if at all, and become
exercisable upon the successful completion of annual corporate and
individual milestones. The options shall have an exercise price equal
to
the fair market value of Nile Common Stock, or approximately $2.65.
Mr.
Strumph also has the right to be granted certain Technology Options.
See
- “Employment Agreements.”
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(4)
|
Following
the closing of a financing, Mr. Evans will exchange certain Nile
stock
options for options to purchase 239,899 shares of SMI Common Stock
(the
“Employment Options”), which shall vest, if at all, and become exercisable
in three equal installments on the day before each anniversary of
Mr.
Evans’ employment agreement. In addition, Mr. Evans will exchange certain
Nile stock for options to purchase up to 288,461 shares of SMI Common
Stock (the “Performance Options”), which shall vest, if at all, and become
exercisable upon the successful completion of annual corporate and
individual milestones. The options shall have an exercise price equal
to
the fair market value of the Nile Common Stock, or approximately
$2.65.
Mr. Evans also has the right to be granted certain Technology Options.
See
- “Employment Agreements.”
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|
(5)
|
Includes
536,960 shares of SMI Common Stock that will be held by Mr. Kash’s wife
for the benefit of each of their four minor children following the
Merger.
|
|
(6)
|
Includes
178,787 shares of SMI Common Stock that will be owned by the Kash
Family
Trust following the Merger, for which Mr. Kazam serves as Trustee.
Mr.
Kazam controls the right to vote and dispose of the shares held by
the
Kash Family Trust, but has no pecuniary interest therein. Also includes
663,743 shares of SMI Common Stock that will be held by the Kazam
Family
Trust following the Merger, and 149,156 shares of SMI Common Stock
that
will be held by Mr. Kazam’s wife for the benefit of their minor daughter
following the Merger.
|
|
(7)
|
Includes
149,156 shares of SMI Common Stock that will be held by Mr. Tanen’s wife
for the benefit of their minor daughter following the
Merger.
|
|
(8)
|
Includes
68,641 shares of Nile Common Stock issuable to Mayo pursuant to the
terms
of the Mayo License Agreement in consideration for certain grant
funding.
See
- “License and Intellectual
Property.”
|
EXECUTIVE
OFFICERS, DIRECTORS AND KEY EMPLOYEES
Upon
the
closing of the Merger, Geoffrey Alison will resign as our sole director and
Peter M. Strumph, Peter M. Kash, Joshua A. Kazam, and David M. Tanen, all of
whom are currently directors of Nile, will be appointed directors of the Company
immediately following the Effective Time. Additionally, upon completion of
the
Merger, the officers of the Company immediately prior to the Effective Time
shall resign their respective offices, and the current officers of Nile shall
be
appointed as our officers.
The
following discussion sets forth information regarding our current executive
officers, directors and key employees and our proposed executive officers and
directors after the closing of the Merger. If any proposed director listed
in the table below should become unavailable for any reason, which we do not
anticipate, our director will vote for any substitute nominee or nominees who
may be designated by Nile prior to the date the new directors take
office.
Each
member of our board of directors shall serve until his successor is elected
and
qualified.
Current
Executive Officers and Directors
|
Name
|
|
Age
|
|
Positions
|
|
Geoffrey
Alison
|
|
35
|
|
President,
Treasurer, Secretary, Director
|
Mr.
Geoffrey Alison
Mr.
Geoffrey
Alison has served as a President, Treasurer, Secretary and a director of
SMI since August 2006. Mr. Alison has been registered with the NASD since 1999
and has worked as a General Securities Principal for various securities firms
including Stock USA, Inc (January 1999 - October 2001) and Assent, LLC (November
2001 - August 2004). From September 2004 through the present date, Mr. Alison
has been a registered General Securities Principal with ECHOtrade, a
Philadelphia Exchange member firm, as a securities trader for his own capital
and benefit. From July 2003 through January 2005, he served as Chief Financial
Officer, Secretary and a director of Intrac, Inc. (OTCBB: ITRD) and from January
2005 through January 2006, he served as President, Secretary and a director
of
Cape Coastal Trading Corporation (OTCBB: CCTR). In October, 2002, Mr. Alison
co-created Greenvest Industries, Inc. which manufactures pet products under
the
brand name Happy Tails Pet Beds. Mr. Alison is currently President and Chief
Executive Officer of Greenvest Industries, Inc.
Officers,
Directors and Key Employees Following Merger
|
Name
|
|
Age
|
|
Positions
|
|
Peter
M. Strumph
|
|
44
|
|
Chief
Executive Officer and Director
|
|
Daron
Evans
|
|
33
|
|
Chief
Operating Officer
|
|
Jennifer
Hodge
|
|
39
|
|
Vice
President, Clinical Operations
|
|
Peter
M. Kash
|
|
46
|
|
Director
|
|
Joshua
A. Kazam
|
|
30
|
|
Director
|
|
David
M. Tanen
|
|
36
|
|
Secretary
and Director
|
|
Scott
L. Navins
|
|
36
|
|
Treasurer
|
Peter
M.
Strumph. Mr.
Strumph serves as the Chief Executive Officer of Nile, and possesses over 10
years of cardiovascular drug development experience. Prior to joining Nile,
Mr.
Strumph served as the Senior Vice President, Operations for CV Therapeutics,
Inc., (“CVT”), which discovers, develops, commercializes and sells
cardiovascular therapeutic products. At CVT, Mr. Strumph had responsibility
for
several functions, including pharmaceutical development and manufacturing,
marketing, quality assurance/control, clinical trial operations, project
management and alliance management. Additionally, Mr. Strumph was a member
of
the CEO Executive Staff and served as the Chair of the Product Development
Committee. Prior to joining CVT in 1997, Mr. Strumph served as Manager,
Operations Planning and Development at Biogen, Inc. where he played an active
role in Biogen’s transition from a research based company to a fully integrated
profitable biotechnology company. Mr. Strumph received his MBA in Finance and
Healthcare Management from The Wharton School at the University of Pennsylvania
and his B.A.S., in Systems Science and Engineering from The University of
Pennsylvania. He also served as a Lieutenant in the United States
Navy.
Daron
Evans. Mr.
Evans
serves as the Chief Operating Officer of Nile. Mr. Evans has extensive
experience in drug development with over 10 years of professional experience.
Prior to joining Nile, Mr. Evans served as Director of Business Assessment
at
Vistakon, a Johnson & Johnson company, where he led efforts to improve
R&D efficiency and speed to market. Prior to that he was a Director of
Portfolio & Business Analytics for Scios R&D (Johnson & Johnson),
where he was responsible for a portfolio of 6 clinical stage programs and 5
preclinical stage programs. While at Scios, Mr. Evans also served as Project
Manager for nesiritide's European Registration Trial. Mr. Evans also has
experience as co-founder of a biotechnology diagnostic company, and has worked
as a Management Consultant in the pharmaceutical industry with Booz Allen
Hamilton. Mr. Evans received his MS in Biomedical Engineering from a joint
program at UT Southwestern Medical School and UT Arlington School of
Engineering, his MBA from the Fuqua School of Business at Duke University,
and
his BS Chemical Engineering from Rice University.
Jennifer
Hodge.
Ms.
Hodge serves as the Vice President of Clinical Development of Nile. Ms. Hodge
has 18 years of extensive drug development experience spanning discovery through
commercialization, which experience was gained in the US, Canada and the United
Kingdom. Prior to joining Nile, Ms. Hodge served as the Director of Project
Management for CVT. Since 2000, while at CVT, Ms. Hodge has undertaken a variety
of assignments of increasing scope and responsibility including the management
of clinical trial operations staff, program-level clinical operations
responsibility, project manager for several development projects, leadership
of
the project management function, starting and running CVT’s alliance management
function, Project Team Leader for two pipeline development products, and
membership on the CVT Product Development Committee. In addition, Ms. Hodge
was
responsible for critical special assignments including project managing the
infrastructure and product-related activities associated first commercial
launch, study start-up planning and contract negotiations for CVT’s largest
clinical trial (the 6,500 patient outcomes study MERLIN TIMI 36), and developing
processes which improved the link between development project spending and
financial reporting and forecasting. Prior to CVT, Ms Hodge was a Global
Clinical Team Leader at Quintiles, had Clinical Research Associate positions
at
Otsuka and Solvay, and had pharmacologist and development manager
responsibilities at the James Black Foundation in London. Ms. Hodge received
her
bachelor’s degree in Biology with Honors in Pharmacology from the University of
Edinburgh.
Peter
M. Kash. In
September 2004, Mr. Kash co-founded Two River Group Holdings, LLC (“Two River”)
a venture capital firm that specializes in the creation of new companies to
acquire rights to commercially develop early stage biotechnology products,
where
he serves the President and Chairman of Two River’s managing member, Two River
Group Management, LLC. Mr. Kash is also the President and Chairman of Riverbank
Capital Securities, Inc. (“Riverbank”) a NASD broker dealer. From 1992 until
2004, Mr. Kash was a Senior Managing Director of Paramount BioCapital, Inc.,
a
NASD member broker dealer, specializing in conducting private financings for
public and private development stage biotechnology companies as well as
Paramount BioCapital Investments, LLC, a venture capital company. Mr. Kash
also
served as Director of Paramount Capital Asset Management, Inc. (the Paramount
companies are collectively referred to as “Paramount”), the general partner of
several biotechnology-related hedge funds and as member of the General Partner
of the Orion Biomedical Fund, LP, a private equity fund. Mr. Kash currently
serves as a member of Board of Directors of several privately held biotechnology
companies. Mr. Kash received his B.S. in Management Science from SUNY Binghamton
and his MBA in Banking and International Finance from Pace University. Mr.
Kash
is currently seeking his doctorate in Jewish education at the Yeshiva
University. Mr. Kash will devote only a portion of his time to the business
of
the Company. Mr. Kash has been a Director of Nile since its
inception.
Joshua
A. Kazam. In
September 2004, Mr. Kazam co-founded Two River and currently serves as Vice
President and Director of Two River’s managing member, Two River Group
Management, LLC. Mr. Kazam also serves as an Officer and Director of Riverbank.
From 1999 to 2004, Mr. Kazam was a Managing Director of Paramount, where he
was
responsible for ongoing operations of venture investments, and as the Director
of Investment for the Orion Biomedical Fund, LP. Mr. Kazam currently serves
as a director of Velcera, Inc. a publicly reporting company, and an officer
or
director of several privately held companies. Mr. Kazam is a graduate of the
Wharton School of the University of Pennsylvania. He will devote only a portion
of his time to the business of the Company. Mr. Kazam has been a Director of
Nile since its inception.
David
M. Tanen. In
September 2004, Mr. Tanen co-founded Two River and currently serves as Vice
President and Director of Two River’s managing member, Two River Group
Management, LLC. Mr. Tanen also serves as an Officer and Director of Riverbank.
Prior to founding Two River, from October 1996 to September 2004, Mr. Tanen
was
served as a Director of Paramount. Mr. Tanen also served as member of the
General Partner of the Orion Biomedical Fund, LP. Mr. Tanen currently serves
as
an officer or director of several privately held biotechnology companies. Mr.
Tanen received his B.A. from The George Washington University and his J.D.
from
Fordham University School of Law. He will devote only a portion of his time
to
the business of the Company. Mr. Tanen has been a Director of Nile since its
inception.
Scott
L. Navins. Mr.
Navins currently serves as Treasurer of the Company. Since October 2005, Mr.
Navins has been Vice President of Finance at Two River, where he is responsible
for all accounting, finance and control activities. Prior to joining Two River,
Mr. Navins was the Senior Controller at Westbrook Partners from 2003, where
he
managed the accounting for a $560 million real estate private equity fund,
including financial and partner reporting, tax coordination, maintaining
internal controls and overseeing a $300 million credit facility, among other
things. Before that, Mr. Navins was a Senior Manager at Morgan Stanley, where
he
managed the accounting for a $2.4 billion real estate private equity fund.
Prior
to that Mr. Navins was an Associate in the Finance Group at BlackRock, Inc.
and
the Controller for a high-tech venture capital fund. Mr. Navins graduated with
honors from The George Washington University in 1993, where he earned a
Bachelors Degree in Accountancy. Mr. Navins will devote only a portion of his
business time to the Company’s business.
Board
of Directors’ Meetings
During
the fiscal year ending December 31, 2006, our board of directors did not hold
any meetings.
Director
Compensation
Compensation
of Company Directors
Since
inception, the Company has not compensated directors for their services.
Compensation
of Nile Directors
Nile
does
not
compensate any non-employee member of our board of directors for serving as
a
board member, although the Nile, in its sole discretion, may decide to do so
in
the future.
Audit,
Nominating and Compensating Committees
Because
we only have one director, our board of directors has no standing Compensation,
Nominating Committee or other committees performing similar functions, and
acts
as the Audit Committee. The Company has no operations, only limited resources.
Our director believes that the costs of establishing such committees, including
the funds necessary to recruit and retain independent directors to serve on
such
committees and document the committees’ policies, procedures and activities,
including seeking the help of counsel therefore, would be better spent on
complying with requisite disclosure rules and seeking an acquisition, sale,
merger or other business combination opportunity for the Company.
Communication
with our Director
Stockholders
or other interested parties may communicate directly with our director by
sending mail to Geoffrey Alison at122 Ocean Park Blvd., Suite 307, Santa Monica,
CA 90405.
Director
Attendance at Stockholders Meetings
The
Company expects its director to attend annual meetings of the stockholders.
The
Company has not held an annual meeting of the stockholders.
Compliance
with Section 16(a) of the Exchange Act
Section
16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
executive officers and directors, and persons who beneficially own more than
10%
of the Company’s Common Stock, to file initial reports of ownership, and reports
of changes of ownership, of the Company’s equity securities with the SEC and
furnish copies of those reports to the Company. Based on a review of reports
furnished to the Company and information available to the Company regarding
the
record ownership of shares, the Company has determined that all reports were
timely filed.
Executive
Compensation
Compensation
of the Company
Executives
Since
our
inception, none of our officers have been paid any compensation for their
services to the Company as executive officers.
Compensation
of Nile Executives
|
SUMMARY
COMPENSATION TABLE
|
|
Name
and principal position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards ($)
|
Option
Awards ($)
|
Non-Equity
Incentive Plan Compensation ($)
|
Nonqualified
Deferred Compensation Earnings ($)
|
All
Other Compensation ($)
|
Total
($)
|
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Peter
M. Strumph, Chief Executive Officer (1)
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2006
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Daron
Evans, Chief Operating Officer (2)
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2006
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Jennifer
Hodge, Vice President, Clinical Operations (3)
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2006
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Allen
Gordon, Chief Exexutive Officer (4)
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2006
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Joshua
Kazam, President (5)
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2006
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Chief
Executive Officer
On
May
16, 2007, Nile entered into a three year employment agreement with Mr. Strumph
to serve as the Chief Executive Officer of Nile. Pursuant to the agreement,
Mr.
Strumph will also serve as a member of our Board of Directors during the term
of
his agreement. Mr. Strumph commenced his employment on June 4, 2007. Mr. Strumph
will receive a base salary equal to $310,000.00 per annum. In addition, Mr.
Strumph is eligible to receive an annual performance based bonus (the
“Performance Bonus”) of up to $150,000 upon the successful completion of annual
corporate and individual milestones at an exemplary metric (i.e., ahead of
schedule, under budget, etc.). Mr. Strumph is also entitled to a cash bonus
upon
the successful completion of a merger or acquisition transaction. Mr.
Strumph
may also receive a variable cash bonus upon
a
change of control depending upon the valuation ascribed to Nile. Nile has also
agreed to pay for up to $1,000,000 of life insurance for Mr. Strumph. He will
be
entitled to up to four (4) weeks of vacation per year and may participate in
Company sponsored benefit plans (i.e., health, dental, etc.).
Following
the closing of Merger, pursuant to the terms of Mr. Strumph’s Employment
Agreement, the Company will exchange certain Nile stock options issued to Mr.
Strumph for stock options to purchase 989,583 shares of SMI Common Stock (the
“Employment Options”), which shall vest, if at all, and become exercisable in
three equal installments on the day before each anniversary of Mr. Strumph’s
employment agreement. In addition, we will exchange other Nile stock options
issued to Mr. Strumph for options to purchase 886,929 shares of Nile Common
Stock (the “Performance Options”), which shall vest, if at all, and become
exercisable upon the successful completion of annual corporate and individual
milestones in an exemplary manner (e.g., ahead of schedule, under
budget).
The
Employment Options and Performance Options shall have an exercise price equal
to
the fair market value of SMI Common Stock following the Merger, which we
anticipate will be approximately $2.65 per share. Additionally, in the event
that the Company acquires by license, acquisition or otherwise, an additional
biotechnology product or series of biotechnology products for development that
is first identified by Mr. Strumph, then Nile shall grant to Mr. Strumph options
(the “Technology Options”) to purchase additional shares of SMI Common Stock
based
upon the stage of development of the licensed technology.
The
Technology Options shall be exercisable for five years at an exercise price
equal to the fair market value of the SMI Common Stock on the date of the
grant.
In
the
event that Mr. Strumph’s employment is terminated as a result of his death or
disability, the Company will pay him or his estate (a) his
base salary for a period of six months thereafter; (b) expense reimbursement
amounts through the date of his death or disability, (c) any accrued but unpaid
performance bonus for a year prior to the year in which the Executive’s
employment is terminated; (d) a pro rata performance bonus for the year in
which
the Executive’s employment is terminated; and (e) all Employment Options shall
vest immediately and become exercisable. In
the
event that Mr. Strumph’s employment is terminated by the Company for “cause” or
by Mr. Strumph other than for “good reason”, then the Company shall pay to him
his base salary, accrued but unpaid Performance Bonus and expense reimbursement
through the date of his termination. He shall have no further entitlement to
any
other compensation or benefits from the Company except as provided in the
Company’s compensation and benefit plans. All of stock options, other than any
Technology Options, that have not previously vested shall expire
immediately. In
the
event that Mr. Strumph’s employment is terminated upon a change of control, by
Mr. Strumph for “good reason” or by the Company for any other reason then the
Company will (a) continue to pay to Mr. Strumph his base salary, Performance
Bonus (based on the assumption that a realistic metric is achieved) and benefits
for a period of one (1) year following such termination; (b) pay Mr. Strumph
any
accrued but unpaid Performance Bonus for the year in which the Executive’s
employment is terminated; (c) pay Mr. Strumph any expense reimbursement amounts
owed through the date of termination; and (d) all unvested Employment Options
shall vest and become exercisable immediately and shall remain exercisable
for a
period of not less than five years.
Chief
Operating Officer
On
January 19, 2007, Nile entered into a three year employment agreement with
Daron
Evans, to serve as Chief Operating Officer of Nile. Mr. Evans commenced his
employment on February 19, 2007 and received a $25,000 signing bonus and the
Company agreed to reimburse him for qualified moving expenses incurred in
connection with his relocation to California. Mr. Evans will receive a base
salary equal to $175,000 per annum. In addition, Mr. Evans is eligible to
receive an annual performance based bonus (the “Performance Bonus”) of up to
$60,000 based upon the successful completion of annual corporate and individual
milestones at an exemplary metric. The
Company has also agreed to pay for up to $1,000,000 of life insurance for Mr.
Evans. He will be entitled to up to three weeks of vacation per year and may
participate in Company sponsored benefit plans (i.e., health, dental,
etc.).
Pursuant
to Mr. Evans Employment Contract, Nile loaned Mr. Evans Forty Seven Thousands
Dollars ($47,000.00) in order to assist him in the satisfaction of certain
obligations owed to his prior employer, which is evidenced by a promissory
note
bearing interests at 4.75%.This promissory note will be repaid to Nile in three
annual installments to be subtracted from Mr. Evans’ Performance Bonus, and will
be repaid by within 10 days of termination of Mr. Evans’ employment prior to the
end of his employment term.
Following
the closing of Merger, pursuant to the terms of Mr. Evans’ Employment Agreement,
we will exchange certain Nile stock options issued to Mr. Evans for stock
options to purchase 239,899 shares of SMI Common Stock (the “Employment
Options”), which shall vest, if at all, and become exercisable in three equal
installments on the day before each anniversary of Mr. Evans’ employment
agreement. In addition, we will exchange certain Nile stock options issued
to
Mr. Evans for options to purchase 288,461 shares of SMI Common Stock (the
“Performance Options”), which shall vest, if at all, and become exercisable upon
the successful completion of annual corporate and individual milestones in
an
exemplary manner (e.g., ahead of schedule, under budget). The Employment Options
and Performance Options shall have an exercise price equal to the fair market
value of SMI Common Stock following the Merger, which we anticipate will be
approximately $2.65 per share. Additionally, in the
event
that the Company acquires by license, acquisition or otherwise, an additional
biotechnology product or series of biotechnology products for development that
is first identified by Mr. Evans, then The Company shall grant to Mr. Evans
options (the “Technology Options”) to purchase additional
shares of SMI Common Stock based upon the stage of development of the licensed
technology.
The
Technology Options shall be exercisable for five years at an exercise price
equal to the fair market value of the SMI Common Stock on the date of the
grant.
In
the
event that Mr. Evans employment is terminated as a result of his death or
disability, the Company will pay him or his estate (a) his
base salary for a period of six months thereafter; (b) expense reimbursement
amounts through the date of his death or disability, (c) any accrued but unpaid
Performance Bonus for a year prior to the year in which the Executive’s
employment is terminated; (d) a pro rata performance bonus for the year in
which
the Executive’s employment is terminated; and (e) all Employee Options shall
vest immediately and become exercisable.
In the
event that Mr.
Evans’
employment is terminated by the Company for “cause” or by Mr.
Evans
other
that for “good reason”, then the Company shall pay to him his base salary,
accrued but unpaid Performance Bonus and expense reimbursement through the
date
of his termination. He shall have no further entitlement to any other
compensation or benefits from the Company except as provided in the Company’s
compensation and benefit plans. All Employee Options and Performance Options
that have not previously vested shall expire immediately.
In the
event that Mr.
Evans
employment
is terminated upon a change of control, by Mr.
Evans
for
“good
reason” (which shall include relocation outside of the San Francisco
metropolitan area) or by the Company for any other reason then that Company
will
(a) continue to pay to Mr.
Evans
his
base
salary, performance bonus and benefits for a period of one (1) year following
such termination; (b) pay Mr.
Evans
any
accrued but unpaid performance bonus for the year prior to the year in which
the
Executive’s employment is terminated; (c) pay Mr.
Evans
any
expense reimbursement amounts owed through the date of termination; and (d)
all
unvested stock options shall vest and become exercisable immediately and shall
remain exercisable for a period of not less than five years.
Vice
President, Clinical Operations
On
August
8, 2007, Nile entered into a Letter Agreement (the “Letter”) with Ms. Jennifer
Hodge to serve as our Vice President of Clinical Development. Ms. Hodge will
commence her employment on August 31, 2007. Ms. Hodge will be employed at-will
and will receive an annual base salary equal to $170.000 and will be eligible
to
receive an annual discretionary bonus of up to 30% of her base
salary
based
upon the successful accomplishment of individual and corporate performance
goals
to be agreed upon annually between Ms. Hodge and the Chief Executive Officer
of
Nile, which amount shall be pro-rated for the year 2007. Ms.
Hodge
will also be entitled to up to four weeks of vacation per year and may
participate in Company sponsored benefit plans (i.e., health, dental,
etc.).
Following
the closing of Merger, pursuant to the terms of the Letter Agreement. we will
exchange certain Nile stock options granted to Ms.
Hodge
for stock options (the “Employment Options”) to purchase 289,989 shares of SMI
Common Stock. One
quarter of the Employment Options shall vest and become
exercisable on the first anniversary of the Letter. Thereafter, the Employment
Options shall vest in equal amounts and become exercisable on the last day
of
each calendar month until all remaining Employment Options are fully vested
and
exercisable. The Employment Options shall have an exercise price equal to the
fair market value of SMI Common Stock following the Merger, which we anticipate
will be approximately $2.65 per share. Additionally, in the event that the
Company acquires by license, acquisition or otherwise, an additional
biotechnology product or series of biotechnology products for development that
is first identified by Ms. Hodge, then Nile shall grant to Ms. Hodge options
(the “Technology Options”) to purchase additional shares of SMI Common Stock
based upon the stage of development of the licensed technology. The
Technology Options shall be exercisable for five years at an exercise price
equal to the fair market value of the SMI Common Stock on the date of the grant.
On
August
10, 2007, Nile entered into a Separation Agreement and General Release (the
“Separation Agreement “) with Dr. Allan Gordon, a former executive of Nile.
Pursuant to the terms of the Separation Agreement, Nile will continue to Dr.
Gordon his base salary, performance bonus and benefits until May 21, 2008.
In
addition, Nile will grant options to Dr. Gordon to purchase a number of
approximately 200,000 shares of Nile Common Stock following the closing of
the
Financing. The options shall have an exercise price equal to the price per
share
of Nile Common Stock sold in the Financing. The options will convert at the
Exchange Ratio into options to purchase shares of SMI Common Stock and the
exercise price will be adjusted accordingly. The Company will also provide
the
executive with limited “piggy-back” registration rights and will reimburse him
for attorney’s fees in an amount up to $12,500. In addition, the parties agree
to release each other from any claims arising out of Dr. Gordon’s employment
with Nile.
(5)
Joshua Kazam served as President of Nile until January 15, 2007. During this
time, he did not receive any compensation.
Option
Grants in Last Fiscal Year
Company
Option Grants
No
options to purchase shares of SMI Common Stock were granted by the Company
to
any named executive officer during the fiscal year ended December 31,
2006.
Nile
Option Grants
No
options to purchase shares of Nile Common Stock were granted by Nile to any
named executive officer during the fiscal year ended December 31,
2006.
Aggregated
Option Exercises in Last Fiscal Year and Fiscal Year End Option
Values
Company
Option Exercises and Holdings
No
options to purchase the Company’s capital stock are currently outstanding.
Nile
Option Exercises and Holdings
During
the fiscal year ended December 31, 2006, no options to purchase capital stock
of
Nile held by named executive officers were exercised.
Certain
Relationships and Related Transactions
Company
Relationships and Related Transactions
At
June
30, 2007 SMI was indebted to Fountainhead Capital, a shareholder holding
approximately 73.5% of SMI Common Stock, in the amount of $165,901, comprised
of
(i) six (6) convertible promissory notes aggregating a principal balance of
$92,558 due and payable on August 11, 2008; (ii) a convertible promissory note
with a principal balance of $31,637 due on September 30, 2007, (iii) a
convertible promissory note with a principal balance of $8,116 due on March
31,
2008 and (iv) a convertible promissory note with a principal balance of $33,590
due on June 30, 2008 (together, the “SMI Notes”, and each bearing an interest
rate of 2% per annum). As a condition to the closing of the Merger, the
principal balance of the SMI Notes and all accrued interest thereunder shall
be
converted into a number of shares of SMI Common Stock, which when aggregated
with shares of SMI Common Stock presently held by all holders of SMI Common
Stock shall be equal to 1,250,000 shares of SMI Common Stock.
Nile
Relationships and Related Transactions
Nile
was
incorporated in August 2005 by Two River Group Holdings, LLC (“Two River”), a
New York based merchant banking and venture capital firm specializing in the
creation of development stage biotechnology companies. Peter M. Kash, Joshua
A.
Kazam and David M. Tanen, each a director and substantial stockholder of Nile,
are the managing members of Two River. Mr. Tanen also serves as Nile’s
Secretary, and Mr. Scott Navins, the Vice President of Finance for Two River,
serves as Nile’s Treasurer. Additionally, certain employees of Two River, who
are also stockholders of Nile, perform substantial operational activity for
Nile, including without limitation financial, clinical and regulatory
activities.
Mr.
Kash,
Mr. Kazam and Mr. Tanen are also officers and directors of Riverbank Capital
Securities, Inc., a NASD member broker dealer (“Riverbank”). Nile has
engaged Riverbank
to assist it on a best-efforts basis to place the Financing and the consummation
of the Merger. Riverbank will not receive any selling commission for its
services in connection with the Offering. Nile will, however, reimburse
Riverbank a non-accountable expense allowance of One Hundred Thousand Dollars
($100,000) for its expenses incurred in connection with the Financing. Nile
has
also agreed to indemnify Riverbank against any claims that may arise out of
the
Financing. Riverbank may, with the consent of Nile, engage additional
third-party finders or brokers, who may be paid selling commissions for their
services.
Nile
has
engaged Dr. John Burnett, the inventor of CD-NP, Nile’s lead product, as a
consultant, pursuant to which Dr. Burnett serves as Chairman of Nile’s
Scientific Advisory Board and will advise Nile with respect to the scientific
development of CD-NP.
In
addition to the potential milestone payments discussed above, that certain
exclusive,
worldwide, royalty-bearing license agreement (the “License Agreement”) with Mayo
Foundation for Medical Education and Research (“Mayo”) for the rights to issued
patents, patent applications and know-how relating to CD-NP for all therapeutic
uses,
requires Nile to issue shares of Nile Common Stock to Mayo for an equivalent
dollar amount of grants received in excess of $300,000, but not exceeding
$575,000 in grants. The shares are to be issued upon the completion the first
equity financing after the receipt of the grant money. As of the date hereof,
Nile has received $482,235 in grants. Accordingly, contemporaneously with the
Closing, Nile will issue to Mayo shares of Nile Common Stock having a fair
market value of $182,835, which would be equal to 23,010 shares of SMI Common
Stock. In addition, to the extent Nile receives up to an additional $82,765
in
grant money from Mayo, Nile would be obligated to issue additional shares to
Mayo contemporaneously with the closing of the first equity financing
thereafter.
In
connection with the acquisition of Nile’s second product candidate, 2NXT-99,
Nile will pay a finder’s fee to certain non-affiliated employees of Two River,
which will consist of an aggregate of $100,000 in cash and warrants to purchase
an aggregate of 75,000 shares of Nile Common Stock which, after the Merger,
will
be exchanged for warrants to purchase that number of shares of SMI Common Stock
as determined by the Exchange Ratio, pursuant to the Merger
Agreement.
Pursuant
to a Consulting Agreement entered into between Nile and Fountainhead Capital
Partners Limited (“Fountainhead Capital”), Nile has agreed to pay to a $500,000
consulting fee to Fountainhead Capital upon completion of the
Merger.
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this information statement to be signed on its behalf by the
undersigned hereunto duly authorized.
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SMI
PRODUCTS, INC.
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Dated:
August 22, 2007
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/s/
Geoffrey Alison
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Geoffrey
Alison, President
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