SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
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
[X ] Definitive Information Statement by Rule 14c-5(d)(2))
DISEASE SCIENCES, INC.
(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 or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
DISEASE SCIENCES, INC.
TO OUR SHAREHOLDERS:
This information statement is being provided to the stockholders of
Disease Sciences, Inc. Our Board of Directors has approved, and recommended the
adoption by our stockholders, of our 2000 Management and Director Equity
Incentive and Compensation Plan.
As a matter of regulatory compliance we are sending you this
Information Statement which describes the purpose and provisions our 2000
Management and Director Equity Incentive and Compensation Plan.
Please feel free to call us at 561-487-3655 should you have any
questions on the enclosed Information Statement. We thank you for your continued
interest in the Disease Sciences, Inc.
For the Board of Directors
of DISEASE SCIENCES, INC.
/s/ Dr. Wayne Goldstein
Dr. Wayne Goldstein, President
DISEASE SCIENCES, INC.
20283 State Road 7
Suite 400
Boca Raton, FL 33498
INFORMATION STATEMENT
WE ARE NOT ASKING YOU FOR A PROXY, AND
YOU ARE REQUESTED NOT TO SEND US A PROXY.
GENERAL
This Information Statement is being furnished to the stockholders of
Disease Sciences, Inc., a Delaware corporation formerly known as
AuctionAnything.com, Inc., in connection with the proposed adoption of our 2000
Management and Director Equity Incentive and Compensation Plan (the "Plan") by
the written consent of the holders of a majority in interest of our voting
capital stock which consists of our common stock ("Common Stock"). On August 21,
2000, our Board of Directors approved and recommended by written consent that
the Plan be adopted by our stockholders. The Plan will be adopted by our
stockholders upon the filing with us of the written consent of the holders of
not less than a majority in interest of our Common Stock. If the Plan was not
adopted by written consent, it would have been required to be considered by our
stockholders at a special stockholders' meeting convened for the specific
purpose of approving the Plan.
The elimination of the need for a special meeting of stockholders to
approve the Plan is made possible by Section 228 of the Delaware General
Corporation Law (the "Delaware Law") which provides that the written consent of
the holders of outstanding shares of voting capital 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 a special meeting. Pursuant to Section
422 of the Internal Revenue Code of 1986, as amended (the "IRS Code"), the Plan
is required to be adopted by the a majority of our stockholders within 12 months
from its approval by our Board of Directors. In order to eliminate the costs and
management time involved in holding a special meeting, our Board of Directors
voted to utilize the written consent of the holders of a majority in interest of
our Common Stock.
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Dr. Wayne Goldstein and Mr. Brian S. John, our officers and directors
who own in the aggregate 59,999,920 shares of our Common Stock representing
approximately 73.4% of our outstanding Common Stock, have indicated that they
intend to give their written consent to the adoption of the Plan described in
this Information Statement. The written consent of such persons to the adoption
of the Plan will become effective upon the filing of their written consents with
our Secretary. We anticipate that the filing of such written consents will occur
on or before August 15, 2001. A copy of the Plan is set forth as Exhibit A to
this Information Statement. The date on which this Information Statement was
first sent to stockholders is on or about July 26, 2001. The record date
established by us for purposes of determining the number of outstanding shares
of our Common Stock is July 20, 2001 (the "Record Date").
Pursuant to Delaware Law, we are required to provide prompt notice of
the taking of the corporate action without a meeting to the stockholders of
record who have not consented in writing to such action. Inasmuch as we will
have provided this Information Statement to our stockholders of record on the
Record Date, no additional action will be undertaken pursuant to such written
consents, and no dissenters' rights under Delaware Law are afforded to our
stockholders as a result of the adoption of the Plan.
EXECUTIVE OFFICES
Our principal executive offices are located at 20283 State Road 7,
Suite 400, Boca Raton, FL 33498. Our telephone number is (561) 487-3655.
OUTSTANDING VOTING STOCK OF DISEASE SCIENCES
As of the Record Date, there were 80,768,922 shares of our Common Stock
outstanding. The Common Stock constitutes the sole class of our voting
securities. Each share of Common Stock entitles the holder thereof to one vote
on all matters submitted to stockholders. The following table sets forth Common
Stock ownership information as of the Record Date with respect to (i) each
person known to us to be the beneficial owner of more than 5% of our Common
Stock; (ii) each of our directors; (iii) each person intending to file a written
consent to the adoption of the Plan described herein; and (iv) all of our
directors, executive officers and designated stockholders as a group. This
information as to beneficial ownership was furnished to us by or on behalf of
the persons named. Unless otherwise indicated, the business address of each
person listed is 20283 State Road 7, Suite 400, Boca Raton, FL 33498.
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Shares Beneficially
Name of Owned
Beneficial Owner Number Percent
Dr. Wayne Goldstein 35,000,000 43.4%
Brian S. John 24,999,920 30.9%
Bryant Villeponteau, Ph.D. 0 -
Raymond J. Hotaling(1) 7,921,694 9.8%
Martin M. Meads(1) 7,059,745 8.7 %
All officers and directors
as a group (three persons) 59,999,920 74.3 %
(1) Messrs. Hotaling and Meads were formerly members of our Board of Directors
and our officers. Their address is 35 West Pine Street, Suite 227, Orlando,
Florida 32801
ADOPTION OF OUR 2000 MANAGEMENT AND DIRECTOR EQUITY
INCENTIVE AND COMPENSATION PLAN
Our Board of Directors has approved, and recommends that the
stockholders approve, the Plan.
Reasons for the Adoption of the Plan
The purpose of the Plan is to advance our interests and those of our
stockholders by providing a means of attracting and retaining key employees,
directors and consultants. In order to serve this purpose, we believe this Plan
encourages and enables key employees, directors and consultants to participate
in our future prosperity and growth by providing them with incentives and
compensation based on our performance, development and financial success.
Participants in the Plan may include our officers, directors, other key
employees and consultants who have responsibilities affecting our management,
development or financial success.
Our Board of Directors cannot predict what effect, if any, the adoption
by our stockholders of the Plan will have on the market price of our Common
Stock.
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A Description of the Plan
We have reserved an aggregate of 10,000,000 shares of Common Stock for
issuance under the Plan. At the Record Date we had outstanding options under the
Plan to purchase 250,000 shares of our Common Stock at an exercise price of
$0.20 per share. Until such time as we have completed an initial public
offering, our Board of Directors (or at their discretion a committee of our
board members) administers the Plan including, without limitation, the selection
of recipients of awards under the Plan, the granting of stock options,
restricted share or performance shares, the determination of the terms and
conditions of any such awards, the interpretation of the Plan and any other
action they deem appropriate in connection with the administration of the Plan.
Following our initial public offering, the Plan will be administered by a
committee of our Board of Directors who will be comprised of not less than two
non-employee directors. This provision of the Plan, however, does not guarantee
we will ever undertake an IPO. As of the date of this Information Statement, we
presently have no plans to proceed with such a transaction.
Awards may be made under the Plan in the form of Plan options, shares
of our Common Stock subject to a vesting schedule based upon certain performance
objectives ("performance shares") and shares subject to a vesting schedule based
on the recipient's continued employment ("restricted shares"). Plan options may
either be options qualifying as incentive stock options under Section 422 of the
IRS Code, or options that do not so qualify. Any incentive stock option granted
under our Plan must provide for an exercise price of not less than 100% of the
fair market value of the underlying shares on the date of such grant, but the
exercise price of any incentive option granted to an eligible employee owning
more than 10% of our Common Stock must be at least 110% of such fair market
value as determined on the date of the grant. Only persons who are our officers
or other key employees are eligible to receive incentive stock options and
performance share grants. Any non-qualified stock option granted under our Plan
must provide for an exercise price of not less than 50% of the fair market value
of the underlying shares on the date of such grant.
The term of each Plan option and the manner in which it may be
exercised is determined by the Board of Directors, provided that no Plan option
may be exercisable more than three years after the date of its grant and, in the
case of an incentive option granted to an eligible employee owning more than 10%
of our Common Stock, no more than five years after the date of the grant. The
exercise price of the stock options may be paid in either:
- cash, or
- delivery of unrestricted shares of our Common Stock having a
fair market value on the date of delivery equal to the
exercise price, or
- surrender of shares of our Common Stock subject to the stock
option which has a fair market value equal to the total
exercise price at the time of exercise, or
- a combination of the foregoing methods.
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All Plan options are nonassignable and nontransferable, except by will
or by the laws of descent and distribution and, during the lifetime of the
optionee, may be exercised only by such optionee. At the discretion of the Board
of Directors, it may approve the irrevocable transfer, without payment, of
non-qualified options to the option holder's spouse, children, grandchildren,
nieces or nephews, or to the trustee of a trust for the principal benefit of one
or more such persons, or to a partnership whose partners are one or more of such
persons. If an optionee's employment is terminated for any reason, other than
due to his or her death, disability or termination for cause, or if an optionee
is not our employee but is a member of our Board of Directors and his or her
service as a director is terminated for any reason, other than due to his or her
death or disability, the Plan option granted may be exercised on the earlier of
the expiration date or 90 days following the date of termination. If the
optionee dies during the term of his or her employment, the Plan option granted
to him or her shall lapse to the extent unexercised on the earlier of the
expiration date of the Plan option or the date one year following the date of
the optionee's death. If the optionee's employment, membership on the Board of
Directors or engagement as a consultant terminates by reason of the optionee's
retirement, then the Plan option granted may be exercised until the earlier of
90 days following the date of termination or the expiration date. If the
optionee is permanently and totally disabled within the meaning of Section
22(c)(3) of the IRS Code, the Plan option granted to him or her lapses to the
extent unexercised on the earlier of the expiration date of the option or one
year following the date of such disability.
At the time of the restricted share grant, the Board of Directors may
determine the vesting schedule of such shares and that after vesting, such
shares may be further restricted as to transferability or be subject to
repurchase by us or forfeiture upon the occurrence of certain events. Awards of
restricted shares must be accepted by the participant within 30 days of the
grant.
At the time of the award of performance shares, the Board of Directors
shall establish a range of performance goals to be achieved during the
performance period, including, without limitation, earnings, return on capital,
or any performance goal approved by our stockholders in accordance with Section
162(m) of the IRS Code. Attainment of the highest performance goal for the
performance period will earn 100% of the performance shares awarded for the
performance period; failure to attain the lowest performance goal will result in
the participant earning no performance shares. Attainment of the performance
goals will be calculated from our financial statements, excluding changes in
federal income tax rates and the effect of non-recurring and extraordinary
items. The performance goals may vary for difference performance periods and
need not be the same for each participant receiving an award during a
performance period.
If the participant's employment by us, membership on our Board of
Directors, or engagement by us as a consultant is terminated before the end of
any performance period, or upon the participant's death, retirement or
disability, the Board of Directors, taking into consideration the performance of
such participant and our performance over the performance period, may authorize
the issuance to the participant or his or her legal representative or designated
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beneficiary all or a portion of the performance shares which would have been
issued to him or her had the participant's employment, board membership or
consulting engagement continued to the end of the performance period. If the
participant's employment, board membership or consulting engagement terminates
before the end of the performance period for any other reason, all performance
shares are forfeited.
Notwithstanding the foregoing, but subject to any stockholder approval
or other requirements of Section 162(m) of the IRS Code, the Board of Directors
in its discretion and as determined at the time of award of the performance
shares, may provide the participant with the option of receiving cash in lieu of
the performance shares in an amount determined at the time of award including,
without limitation, by one or more of the following methods:
- the fair market value of the number of shares subject to the
performance shares agreement on the date of award, or
- part or all of any increase in the fair market value since
such date, or
- part or all of any dividends paid or payable on the number of
shares subject to the performance share agreement, or
- any other amounts which in the board's sole discretion are
reasonably related to the achievement of the applicable
performance goals, or
- any combination of the foregoing.
The purchase price for restricted shares or performance shares granted
under the Plan shall be set by the Board of Directors but may not be less than
par value. Payment of the purchase price for the restricted shares or
performance share may be made in either,
- cash, or
- by delivery of unrestricted shares of our Common Stock having
a fair market value on the date of such delivery equal to the
total purchase price, or
- a combination of either of these methods.
The restricted stock awards, performance stock awards and stock options
are subject to accelerated vesting in the event of our change of control. We
may, at our option, terminate all unexercised stock options 30 days after a
change in control and pay to the participant holding these unexercised options
cash in an amount equal to the difference between fair market value and the
exercise price of the stock option. If the fair market value is less than the
exercise price, we may terminate the options without payment to the holder. The
per share purchase price of shares subject to Plan options granted under the
Plan or related to performance share awards or restricted share awards may be
adjusted in the event of certain changes in our capitalization, but any such
adjustment shall not change the total purchase price payable upon the exercise
in full of such option or award. No participant in our Plan has any rights as a
stockholder until the shares subject to the Plan options or stock awards have
been duly issued and delivered to him or her.
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We have an option to purchase any shares of our Common Stock which have
been issued to Plan participants pursuant to restricted stock awards,
performance stock awards or stock options if the participant ceases to be our
employee, a member of our Board of Directors or a consultant to us for any
reason. We must exercise our repurchase right at the time of termination. The
purchase price for any shares we repurchase will be equal to the fair market
value of the our total stockholder's equity divided by the total outstanding
shares of our Common Stock on the last day of that calendar month, calculated on
a fully-diluted basis. If we exercise our repurchase right, we much close the
transaction within 20 days from the termination date. At closing, we are
entitled to delivery a one-year promissory note as payment for the purchase
price or, at our option, we may pay same in cash at closing.
We also have a right of first refusal to meet the offer if the holder
of any shares of our Common Stock awarded or issued pursuant to our Plan desires
to sell such shares to a third party.
The Board of Directors may amend, suspend or terminate our Plan at any
time, except that no amendment shall be made which:
- increases the total number of shares subject to the Plan or
changes the minimum purchase price therefore (except in either
case in the event of adjustments due to changes in our
capitalization), or
- affects outstanding Plan options or any exercise right
thereunder, or
- extends the term of any Plan option beyond 10 years, or
- extends the termination date of the Plan.
Unless the Plan shall be earlier suspended or terminated, the Plan
shall terminate 10 years from the date of the Plan's adoption by our
stockholders. Any such termination of our Plan shall not affect the validity of
any Plan options previously granted thereunder.
Federal Income Tax Effects
The following discussion applies to our Plan and is based on federal
income tax laws and regulations in effect on June 30, 2001. It does not purport
to be a complete description of the federal income tax consequences of the Plan,
nor does it describe the consequences of state, local or foreign tax laws which
may be applicable. Accordingly, any person receiving a grant under the Plan
should consult with his or her own tax adviser.
Our Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974 and is not qualified under Section 401(a) of the IRS
Code.
An employee granted an incentive stock option does not recognize
taxable income either at the date of grant or at the date of its timely
exercise. However, the excess of the fair market value of Common Stock received
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upon exercise of the incentive stock option over the option exercise price is an
item of tax preference under Section 57(a)(3) of the IRS Code and may be subject
to the alternative minimum tax imposed by Section 55 of the IRS Code. Upon
disposition of stock acquired on exercise of an incentive stock option,
long-term capital gain or loss is recognized in an amount equal to the
difference between the sales price and the incentive stock option exercise
price, provided that the option holder has not disposed of the stock within two
years from the date of grant and within one year from the date of exercise. If
the incentive stock option holder disposes of the acquired stock (including the
transfer of acquired stock in payment of the exercise price of an incentive
stock option) without complying with both of these holding period requirements
("Disqualifying Disposition"), the option holder will recognize ordinary income
at the time of such Disqualifying Disposition to the extent of the difference
between the exercise price and the lesser of the fair market value of the stock
on the date the incentive stock option is exercised (the value six months after
the date of exercise may govern in the case of an employee whose sale of stock
at a profit could subject him to suit under Section 16(b) of the Securities
Exchange Act of 1934) or the amount realized on such Disqualifying Disposition.
Any remaining gain or loss is treated as a short-term or long-term capital gain
or loss, depending on how long the shares are held. In the event of a
Disqualifying Disposition, the incentive stock option tax preference described
above may not apply (although, where the Disqualifying Disposition occurs
subsequent to the year the incentive stock option is exercised, it may be
necessary for the employee to amend his or her return to eliminate the tax
preference item previously reported). We are not entitled to a tax deduction
upon either exercise of an incentive stock option or disposition of stock
acquired pursuant to such an exercise, except to the extent that the option
holder recognized ordinary income in a Disqualifying Disposition.
If the holder of an incentive stock option pays the exercise price, in
full or in part, with shares of previously acquired Common Stock, the exchange
should not affect the incentive stock option tax treatment of the exercise. No
gain or loss should be recognized on the exchange, and the shares received by
the employee, equal in number to the previously acquired shares exchanged
therefor, will have the same basis and holding period for long-term capital gain
purposes as the previously acquired shares. The employee will not, however, be
able to utilize the old holding period for the purpose of satisfying the
incentive stock option statutory holding period requirements. Shares received in
excess of the number of previously acquired shares will have a basis of zero and
a holding period which commences as of the date the Common Stock is issued to
the employee upon exercise of the incentive stock option. If an exercise is
effected using shares previously acquired through the exercise of an incentive
stock option, the exchange of the previously acquired shares will be considered
a disposition of such shares for the purpose of determining whether a
Disqualifying Disposition has occurred.
In respect to the holder of non-qualified options, the option holder
does not recognize taxable income on the date of the grant of the non-qualified
option, but recognizes ordinary income generally at the date of exercise in the
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amount of the difference between the option exercise price and the fair market
value of the Common Stock on the date of exercise. However, if the holder of
non-qualified options is subject to the restrictions on resale of Common Stock
under Section 16 of the Securities Exchange Act of 1934, such person generally
recognizes ordinary income at the end of the six-month period following the date
of exercise in the amount of the difference between the option exercise price
and the fair market value of the Common Stock at the end of the six-month
period. Nevertheless, such holder may elect within 30 days after the date of
exercise to recognize ordinary income as of the date of exercise. The amount of
ordinary income recognized by the option holder is deductible by us in the year
that income is recognized.
In connection with the issuance of stock grants as compensation, the
recipient must include in gross income the excess of the fair market value of
the property received over the amount, if any, paid for the property in the
first taxable year in which beneficial interest in the property either is
"transferable" or is not subject to a "substantial risk of forfeiture." A
substantial risk of forfeiture exists where rights and property that have been
transferred are conditioned, directly or indirectly, upon the future performance
(or refraining from performance) of substantial services by any person, or the
occurrence of a condition related to the purpose of the transfer, and the
possibility of forfeiture is substantial if such condition is not satisfied.
Stock grants received by a person who is subject to the short swing profit
recovery rule of Section 16(b) of the Securities Exchange Act of 1934 is
considered subject to a substantial risk of forfeiture so long as the sale of
such property at a profit could subject the stockholder to suit under that
section. The rights of the recipient are treated as transferable if and when the
recipient can sell, assign, pledge or otherwise transfer any interest in the
stock grant to any person. Inasmuch as the recipient would not be subject to the
short swing profit recovery rule of Section 16(b) of the Securities Exchange Act
of 1934 and the stock grant, upon receipt following satisfaction of condition
prerequisites to receipt, will be presently transferable and not subject to a
substantial risk of forfeiture, the recipient would be obligated to include in
gross income the fair market value of the stock grant received once the
conditions to receipt of the stock grant are satisfied.
Restrictions Under Federal Securities Laws
The sale of our Common Stock issuable upon pursuant to our Plan must be
made in compliance with federal and state securities laws. Our officers,
directors and 10% or greater stockholders, as well as certain other persons or
parties who may be deemed to be "affiliates" of ours under federal securities
laws, should be aware that resales by affiliates can only be made pursuant to an
effective registration statement, Rule 144 promulgated under the Securities Act
or other applicable exemption. Our officers, directors and 10% and greater
stockholders may also be subject to the "short swing" profit rule of Section
16(b) of the Securities Exchange Act of 1934.
No Dissenter's Rights
Under Delaware Law, stockholders are not entitled to dissenter's rights
of appraisal with respect to the adoption of the Plan.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Wayne Goldstein
------------------------------
Dr. Wayne Goldstein, President
9
EXHIBIT A
2000 MANAGEMENT AND DIRECTOR EQUITY
INCENTIVE AND COMPENSATION PLAN
Section 1. Purposes of Plan.
----------------
The purpose of this 2000 Management and Director Equity Incentive and
Compensation Plan (the "Plan") of AUCTIONANYTHING.COM, INC., a Delaware
corporation (the "Company"), is to advance the interests of the Company and its
stockholders by providing a means of attracting and retaining key employees,
directors and consultants for the Company and its subsidiary corporations. In
order to serve this purpose, the Plan encourages and enables key employees,
directors and consultants to participate in the Company's future prosperity and
growth by providing them with incentives and compensation based on the Company's
performance, development, and financial success. These objectives will be
promoted by granting to key employees equity-based awards in the form of: (a)
Incentive Stock Options ("ISOs"), which are intended to qualify under Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"); and (b)
shares of the Company's common stock, $0.001 par value (the "Shares"), (or their
economic equivalent) that will be subject to a vesting schedule based on certain
performance objectives ("Performance Shares"). In addition, key employees,
directors and consultants may receive (i) stock options which are not intended
to qualify as ISOs ("NQSOs") (ISOs and NQSOs are referred to together
hereinafter generally as "Stock Options") and (ii) Shares that will be subject
to a vesting schedule based on the recipient's continued employment ("Restricted
Shares"). These awards are referred to generally hereafter as the "Awards"). For
purposes of this Plan, "subsidiary" shall mean a subsidiary corporation as
defined in Section 424(f) of the Code.
Section 2. Administration of Plan.
The Plan shall be administered by a committee (the "Committee") of not
less than two directors of the Company appointed by the Company's Board of
Directors (the "Board"); provided that members of the Committee shall be
"Non-Employee Directors" within the meaning of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and "outside directors"
within the meaning of Section 162(m) of the Code. The members of the Committee
shall serve at the pleasure of the Board, which may remove members from the
Committee or appoint new members to the Committee from time to time, and members
of the Committee may resign by written notice to the Chairman of the Board or
the Secretary of the Company. The Committee shall have the power and authority
to: (a) select Eligible Employees (as defined in Section 3, below) as recipients
of Awards (such recipients, "Participants"); (b) grant Stock Options, Restricted
Shares, or Performances Shares, or any combination thereof; (c) determine the
number and type of Awards to be granted; (d) determined the terms and
conditions, not inconsistent with the terms hereof, of any Award, including
without limitation, time and performance restrictions; (e) adopt, alter, and
repeal such administrative rules, guidelines, and practices governing the Plan
as it shall, from time to time, deem advisable; (f) interpret the terms and
provisions of the Plan and any Award granted and any agreements relating
thereto; and (g) take any other actions the Committee considers appropriate in
10
connection with, and otherwise supervise the administration of, the Plan. All
decisions made by the Committee pursuant to the provisions hereof, including
without limitation, decisions with respect to employees to be granted Awards and
the number and type of Awards, shall be made in the Committee's sole discretion
and shall be final and binding on all persons.
Notwithstanding any foregoing provision to the contrary, until such
time as the Company has completed an initial public offering (an "IPO) for its
common shares pursuant to a registration statement filed under the Securities
Act of 1933, as amended (the "1933 Act"), including registration of the Shares
under Section 12 of the 1934 Act, the Plan may be administered by the Board or,
in the Board's discretion at any time or from time to time, by a committee of
not less than two directors, and, in that case, the Board or such committee, as
applicable, shall have all the powers and duties described in the first
paragraph of this Section 2 and all the other powers and duties of the Committee
as set forth in this Plan.
Section 3. Participants in Plan.
--------------------
The persons eligible to receive Awards under the Plan ("Eligible
Employees") shall include officers, directors, other key employees and
consultants of the Company or one or more of its subsidiaries who, in the
opinion of the Committee, have responsibilities affecting the management,
development, or financial success of the Company or such subsidiaries; provided,
however, that with respect to ISOs and Performance Shares, the persons eligible
to receive such awards shall be limited to officers or other key employees
designated by the Committee.
Section 4. Shares Subject to Plan.
----------------------
The maximum aggregate number of Shares which may be issued under the
Plan shall be 10,000,000 Shares. The Shares which may be issued under the Plan
may be authorized but unissued Shares or issued Shares reacquired by the Company
and held as treasury Shares.
If any Shares that have previously been the subject of a Stock Option
cease to be the subject of a Stock Option (other than by reason of exercise), or
if any Restricted Shares or Performance Shares granted hereunder are forfeited
by the holder, or if any Stock Option or other Award terminates without a
payment or transfer being made to the Award recipient in the form of Shares, or
if any Shares (whether or not restricted) previously distributed under the Plan
are returned tot he Company in connection with the exercise of an Award
(including without limitation in payment of the exercise price or tax
withholding), such Shares shall again be available for distribution in
connection with future Awards under the Plan.
Section 5. Grant of Awards.
---------------
ISOs, NQSOs, Restricted Shares, and Performance Shares may be granted
alone or in addition to other Awards granted under the Plan. Any Awards granted
under the Plan shall be in such form as the Committee may from time to time
approve, consistent with the Plan, and the provisions of Awards need not be the
same with respect to each Participant.
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Each Award granted under the Plan shall be authorized by the Committee
and shall be evidenced by a written Stock Option Agreement, Restricted Share
Agreement, or Performance Share Agreement, as the case may be (collectively,
"Award Agreements"), in the form approved by the Committee from time to time,
which shall be dated as of the date approved by the Committee in connection with
the grant, signed by an officer of the Company authorized by the Committee, and
signed by the Participant, and which shall describe the Award and state that the
Award is subject to all the terms and provisions of the Plan and such other
terms and provisions, not inconsistent with the Plan, as the Committee may
approve. The date on which the Committee approves the granting of an Award shall
be deemed to be the date on which the Award is granted for all purposes, unless
the Committee otherwise specifies in its approval. The granting of an Award
under the Plan, however, shall be effective only if and when a written Award
Agreement is duly executed and delivered by or on behalf of the Company and the
Participants.
Section 6. Stock Options.
-------------
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions not
inconsistent with the terms of the Plan as the Committee deems appropriate. Each
Stock Option grant shall be evidenced by a written Stock Option Agreement,
executed as set forth in Section 5, above, which shall be consistent with the
Plan, including without limitation the following provisions:
(a) Exercise Price.
--------------
The exercise price per Share issuable upon exercise of an ISO shall be
no less than the fair market value per Share on the date the ISO is granted;
provided that if the Participant at the time an ISO is granted owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any subsidiary, the exercise price per Share shall be at
least 110% of the fair market value of the Shares subject to the ISO on the date
of grant. The exercise price per Share issuable upon exercise of an NQSO shall
be no less than fifty percent (50%) of the fair market value per Share on the
date the NQSO is granted. For the purposes of the Plan, the fair market value of
the Shares shall mean, as of any given date, the (i) last reported sale price on
the New York Stock Exchange on the most recent previous trading day, (ii) last
reported sale price on The Nasdaq Stock Market on the most recent previous
trading day, (iii) mean between the high and low bid and ask prices, as reported
by the National Association of Securities Dealers, Inc. on the most recent
previous trading day, or (iv) last reported sale price on any other stock
exchange on which the Shares are listed on the most recent previous trading day,
whichever is applicable; provided that if none of the foregoing is applicable,
then the fair market value of the Shares shall be the value determined in good
faith by the Committee, in its sole discretion.
(b) Vesting and Exercise of Options.
-------------------------------
A Stock Option shall be exercisable only with respect to the Shares
which have become vested pursuant to the terms of that Stock Option. Each Stock
12
Option shall become vested with respect to Shares subject to that Stock Option
on such date or dates and on the basis of such other criteria, including without
limitation, the performance of the Company, as the Committee may determine, in
its discretion, and as shall be specified in the applicable Stock Option
Agreement. The Committee shall have the authority, in its discretion, to
accelerate the time at which a Stock Option shall be exercisable whenever it may
determine that such action is appropriate by reason of changes in applicable tax
or other law or other changes in circumstances occurring after the grant of such
Stock Option.
(c) Term.
----
No Stock Option shall be exercisable after the expiration of ten years
from the date on which that Stock Option is granted. With respect to ISOs, if
the Participant at the time the ISO is granted owns stock possessing more than
10% of the total combined voting power of all classes of stock of the Company or
any subsidiary, the ISO shall not be exercisable after the expiration of five
years from the date on which the ISO is granted.
(d) Method of Exercise.
------------------
A Stock Option may be exercised, in whole or in part, by giving written
notice to the Company stating the number of Shares (which must be a whole
number) to be purchased. Upon receipt of payment of the full purchase price for
such Shares by certified or bank cashier's check or other form of payment
acceptable to the Company, or, if approved by the Committee, by (i) delivery of
unrestricted Shares having a fair market value on the date of such delivery
equal to the total exercise price, (ii) surrender of Shares subject to the Stock
Option which have a fair market value equal to the total exercise price at the
time of exercise, or (iii) a combination of the preceding methods, and subject
to compliance with all other terms and conditions of the Plan and the Stock
Option Agreement relating to such Stock Option, the Company shall issue, as soon
as reasonably practicable after receipt of such payment, such Shares to the
person entitled to receive such Shares, or such person's designated
representative. Such Shares may be issued in the form of a certificate, by book
entry, or otherwise, in the Company's sole discretion.
13
(e) Restrictions on Shares Subject to Stock Options.
-----------------------------------------------
Shares issued upon the exercise of any Stock Option may be made subject
to such disposition, transferability or other restrictions or conditions as the
Committee may determine, in its discretion, and as shall be set forth in the
applicable Stock Option Agreement, including but not limited to, restrictions on
the sale of such Shares prior to an IPO.
(f) Transferability.
---------------
Except as provided in this paragraph, Stock Options shall not be
transferable, and any attempted transfer (other than as provided in this
paragraph) shall be null and void. Except for Stock Options transferred as
provided in this paragraph, all Stock Options shall be exercisable during a
Participant's lifetime only by the Participant or the Participant's legal
representative. Without limiting the generality of the foregoing, (i) ISOs may
be transferred only upon the Participant's death and only by will or the laws of
descent and distribution and, in the case of such a transfer, shall be
exercisable only by the transferee or such transferee's legal representative,
(ii) NQSOs may be transferred by will or the laws of descent and distribution
and, in the case of such a transfer, shall be exercisable only by the transferee
or such transferee's legal representative, and (iii) the Committee may, in its
sole discretion and in the manner established by the Committee, provide for the
irrevocable transfer, without payment of consideration, of any NQSO by a
Participant to such Participant's spouse, children, grandchildren, nieces, or
nephews or to the trustee of a trust for the principal benefit of one or more
such persons or to a partnership whose only partners are one or more such
persons, and, in the case of such transfer, such NQSO shall be exercisable only
by the transferee or such transferee's legal representative.
(g) Termination of Employment by Reason of Death or Disability.
----------------------------------------------------------
If a Participant's employment, membership on the Board of Directors of
the Company or engagement as a consultant to the Company terminates by reason of
the Participant's death or disability (as defined in Section 22(e)(3) of the
Code with respect to ISOs, and, with respect to NQSOs, as defined by the
Committee in its sole discretion at the time of grant and set forth in the Stock
Option Agreement), then (i) unless otherwise determined by the Committee within
60 days of such death or disability, to the extent a Stock Option held by such
Participant is not vested as of the date of death or disability, such Stock
Option shall automatically terminate on such date, and (ii) to the extent a
Stock Option held by such Participant is vested (whether pursuant to its terms,
a determination of the Committee under the preceding clause (i), or otherwise)
as of the date of death or disability, such Stock Option may thereafter be
exercised by the Participant, the legal representative of the Participant's
estate, the legatee of the Participant under the will of the Participant, or the
distributee of the Participant's estate, whichever is applicable, for a period
of one year (or, with respect to NQSOs, such other period as the Committee may
specify at or after grant or death or disability) from the date of death or
disability or until the expiration of the stated term of such Stock Option,
whichever period is shorter.
14
(h) Termination of Employment by Reason of Retirement.
-------------------------------------------------
If a Participant's employment, membership on the Board of Directors of
the Company or engagement as a consultant to the Company terminates by reason of
the Participant's retirement, then each NQSO held by such Participant may
thereafter be exercised by the Participant according to its terms, including
without limitation, for such period after such termination as shall be set forth
in the applicable Stock Option Agreement, and each ISO held by such Participant
may thereafter be exercised by the Participant for a period of 90 days from the
date of such termination of employment, or until the expiration of the stated
term of such ISO, whichever period is shorter. For purposes of the Plan,
"retirement" shall mean voluntary termination of employment with the Company and
its subsidiaries, membership on the Board of Directors of the Company and its
subsidiaries or engagement as a consultant to the Company and its subsidiaries
by a Participant after attaining age 60 and having at least two years of service
with the Company or any one or more of its subsidiaries or, in the case of a
director, completion of a number of years of service on the Board of Directors
of the Company as specified in the Stock Option Agreement or, in the case of a
consultant, completion of a number of years of service to the Company as a
consultant as specified in the Stock Option Agreement.
(i) Other Termination of Employment.
-------------------------------
If a Participant's employment, membership on the Board of Directors of
the Company or engagement as a consultant to the Company terminates for any
reason other than death, disability, or retirement, then (i) to the extent any
Stock Option held by such Participant is not vested as of the date of such
termination, such Stock Option shall automatically terminate on such date; and
(ii) to the extent any Stock Option held by such Participant is vested as of the
date of such termination, such Stock Option may thereafter be exercised for a
period of 90 days (or, with respect to NQSOs, such other period as the Committee
may specify at or after grant or termination of employment) from the date of
such termination or until the expiration of the stated term of such Stock
Option, whichever period is shorter; provided that, upon the termination of the
Participant's employment, membership on the Board of Directors or engagement as
a consultant by the Company or its subsidiaries for Cause (as defined in an
applicable Stock Option Agreement), any and all unexercised Stock Options
granted to such Participant shall immediately lapse and be of no further force
or effect. For purposes of the Plan, whether termination of a Participant's
employment by, membership on the Board of Directors of the Company or engagement
as a consultant is for "Cause" shall be determined by the Committee, in its sole
discretion.
15
(j) Effect of Termination of Participant's Employment on Transferee.
---------------------------------------------------------------
Except as otherwise permitted by the Committee in its sole discretion,
no Stock Option held by a transferee of a Participant pursuant to Section
6(f)(iii), above, shall remain exercisable for any period of time longer than
would otherwise be permitted under Section 6(g), (h), and (i) without
specification of other periods by the Committee as provided herein.
(k) ISO Limitations and Savings Clause.
----------------------------------
The aggregate fair market value (determined as of the time of grant) of
the Shares with respect to which ISOs are exercisable for the first time by the
Participant during any calendar year under the Plan and any other stock option
plan of the Company and its affiliates shall not exceed $100,000 unless
otherwise permitted by Code Section 422 as an unused limit carryover to such
year.
Any provision of the Plan to the contrary notwithstanding, without the
consent of each Participant affected, no provision of the Plan relating to ISOs
shall be interpreted, amended, or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
Section 422 of the Code or so as to disqualify any ISO under such Code Section
422.
Section 7. Restricted Shares.
-----------------
Restricted Shares awarded under the Plan shall be subject to the
following terms and conditions and such additional terms and conditions not
inconsistent with the terms of the Plan as the Committee deems appropriate. Each
Restricted Share grant shall be evidenced by a written Restricted Share
Agreement, executed as set forth in Section 5, above, which shall be consistent
with the Plan, including without limitation the following provisions:
(a) Price.
-----
The purchase price for Restricted Shares shall be any price set by the
Committee but may not be less than the par value of such Restricted Shares.
Payment in full of the purchase price, if any, shall be made by certified or
bank cashier's check or other form of payment acceptable to the Company, or, if
approved by the Committee, by (i) delivery of unrestricted Shares having a fair
market value on the date of such delivery equal to the total purchase price, or
(ii) a combination of the preceding methods.
16
(b) Acceptance of Restricted Shares.
-------------------------------
At the time of the Restricted Share Award, the Committee may determine
that such Shares shall, after vesting, be further restricted as to
transferability or be subject to repurchase by the Company or forfeiture upon
the occurrence of certain events determined by the Committee, in its sole
discretion, and specified in the Restricted Share Agreement. Awards of
Restricted Shares must be accepted by the Participant within 30 days (or such
other period as the Committee may specify at grant) after the grant date by
executing the Restricted Share Agreement. The Participant shall not have any
rights with respect to the grant of Restricted Shares unless and until the
Participant has executed the Restricted Share Agreement, delivered a fully
executed copy thereof to the Company, and otherwise complied with the applicable
terms and conditions of the Award.
(c) Share Restrictions.
------------------
Subject to the provisions of the Plan and the applicable Restricted
Share Agreement, during such period as may be set by the Committee, in its
discretion, and as shall be set forth in the applicable Restricted Share
Agreement (the "Restriction Period"), the Participant shall not be permitted to
sell, transfer, pledge, assign, or otherwise encumber the Restricted Shares. The
Committee shall have the authority, in its sole discretion, to accelerate the
time at which any or all of the restrictions shall lapse with respect to any
Restricted Shares. Unless otherwise determined by the Committee at or after
grant or termination of the Participant's employment, Board membership or
engagement, if the Participant's employment by, membership on the Board of
Directors of or engagement as a consultant to the Company and its subsidiaries
terminates during the Restriction Period, all Restricted Shares held by such
Participant and still subject to restriction shall be forfeited by the
Participant, and the Company shall repay to such Participant the purchase price
paid by such Participant for such forfeited Restricted Shares.
(d) Stock Issuances and Restrictive Legends.
---------------------------------------
Upon execution and delivery of the Restricted Share Agreement as
described above and receipt of payment of the full purchase price, if any, for
the Restricted Shares subject to such Restricted Share Agreement, the Company
shall, as soon as reasonably practicable thereafter, issue the Restricted
Shares. Restricted Shares may be issued in the form of a certificate, by book
entry, or otherwise, in the Company's sole discretion, and shall bear an
appropriate restrictive legend. Notwithstanding the foregoing to the contrary,
the Committee may, in its sole discretion, issue Restricted Shares (whether or
not such Restricted Shares are, at the time of such issuance, the subject of an
Award) to the trustee of a trust set up by the Committee, consistent with the
terms and conditions of the Plan, to hold such Restricted Shares until the
restrictions thereon have lapsed (in full or in part, in the Committee's sole
discretion), and the Committee may require that, as a condition of any
Restricted Share Award, the Participant shall have delivered to the Company or
such trustee, as appropriate, a stock power, endorsed in blank, relating to the
Restricted Shares covered by the Award.
17
(e) Shareholder Rights.
------------------
Unless otherwise provided in the applicable Restricted Share Agreement,
no Participant (or his executor or administrator or other transferee) shall have
any rights of a shareholder in the Company with respect to the Restricted Shares
covered by an Award unless and until the Restricted Shares have been duly issued
and delivered to him under the Plan.
(f) Expiration of Restriction Period.
--------------------------------
Upon the expiration of the Restriction Period without prior forfeiture
of the Restricted Shares (or rights thereto) subject to such Restriction Period,
unrestricted Shares shall be issued and delivered to the Participant.
Section 8. Performance Shares.
------------------
Performance Shares awarded under the Plan shall be subject to the
following terms and conditions and such additional terms and conditions not
inconsistent with the terms of the Plan as the Committee deems appropriate. Each
Performance Share grant shall be evidenced by a written Performance Share
Agreement, executed as set forth in Section 5, above, which shall be consistent
with the Plan, including without limitation the following provisions:
(a) Performance Periods and Goals.
-----------------------------
(i) The performance period for each Award of Performance
Shares shall be of such duration as the Committee shall establish at the time of
the Award (the "Performance Period"). There may be more than one Award in
existence at any one time, and Performance Periods may differ.
(ii) At the time of each Award of Performance Shares, the
Committee shall establish a range of performance goals (the "Performance Goals")
to be achieved during the Performance Period. The Performance Goals shall be
determined by the Committee using such measures of the performance of the
Company over the Performance Period as the Committee shall select, including
without limitation earnings, return on capital, or any performance goal approved
by the shareholders of the Company in accordance with Section 162(m) of the
Code. Performance Shares awarded to Participants will be earned as determined by
the Committee with respect to the attainment of the Performance Goals set for
the Performance Period. Attainment of the highest Performance Goal for the
Performance Period will be 100% of the Performance Shares awarded for the
Performance Period; failure to attain the lowest Performance Goal for the
Performance Period will earn none of the Performance Shares awarded for the
Performance Period.
(iii) Attainment of the Performance Goals will be calculated
from the consolidated financial statements of the Company but shall exclude (A)
the effects of changes in federal income tax rates, (B) the effects of unusual,
non-recurring, and extraordinary items as defined by Generally Accepted
Accounting Principles ("GAAP"), and (C) the cumulative effect of changes in
accounting principles in accordance with GAAP. The Performance Goals may vary
18
for different Performance Periods and need not be the same for each Participant
receiving an Award for a Performance Period. The Committee may, in its sole
discretion, subject to the limitations of Section 17, vary the terms and
conditions of any Performance Share Award, including without limitation the
Performance Period and Performance Goals, without shareholder approval, as
applied to any recipient who is not a "covered employee" with respect to the
Company as defined in Section 162(m) of the Code. In the event applicable tax or
securities laws change to permit the Committee discretion to alter the governing
performance measures as they pertain to covered employees without obtaining
shareholder approval of such changes, the Committee shall have sole discretion
to make such changes without obtaining shareholder approval.
(b) Price.
-----
The purchase price for Performance Shares shall be any price set by the
Committee but may not be less than the par value of such Performance Shares.
Payment in full of the purchase price, if any, shall be made by certified of
bank cashier's check or other form of payment acceptable to the Company, or, if
approved by the Committee, by (i) delivery of unrestricted Shares having a fair
market value on the date of such delivery equal to the total purchase price, or
(ii) a combination of the preceding methods.
(c) Acceptance of Performance Shares.
--------------------------------
At the time of the Performance Share Award, the Committee may determine
that such Shares shall, after vesting pursuant to the Performance Period and
Performance Goad provisions described above, be further restricted as to
transferability or be subject to repurchase by the Company or forfeiture upon
the occurrence of certain events determined by the Committee, in its sole
discretion, and specified in the Performance Share Agreement. Awards of
Performance Shares must be accepted by the Participant within 30 days (or such
other period as the Committee may specify at grant) after the grant date by
executing the Performance Share Agreement. The Participant shall not have any
rights with respect to the grant of Performance Shares unless and until the
Participant has executed the Performance Share Agreement, delivered a fully
executed copy thereof to the Company, and otherwise complied with the applicable
terms and conditions of the Award.
19
(d) Share Restrictions.
------------------
Subject to the provisions of the Plan and the applicable Performance
Share Agreement, during the Performance Period and any additional Restriction
Period (as defined in Section 7(c), above), the Participant shall not be
permitted to sell, transfer, pledge, assign, or otherwise encumber the
Performance Shares. The Committee shall have the authority, in its sole
discretion, to accelerate the time at which any or all of the restrictions shall
lapse with respect to any Performance Shares. Unless otherwise determined by the
Committee at or after grant or termination of the Participant's employment,
Board membership or engagement, if the Participant's employment by, membership
on the Board of Directors of or engagement as a consultant to the Company and
its subsidiaries terminates during the Performance Period or the Restriction
Period, all Performance Shares held by such Participant and still subject to
restriction shall be forfeited by the Participant, and the Company shall repay
to such Participant the purchase price paid by such Participant for such
forfeited Performance Shares.
(e) Stock Issuances and Restrictive Legends.
---------------------------------------
Despite the execution and delivery of the Performance Share Agreement
as described above, the Company shall have no obligation to issue the
Performance Shares prior to the vesting of the Performance Shares, provided that
the Company shall issue the Performance Shares as soon as reasonably practicable
after such vesting and after payment in full of the purchase price, if any, for
such Performance Shares. Performance Shares may be issued, whenever issued, in
the form of a certificate, by book entry, or otherwise, in the Company's sole
discretion, and shall bear such restrictive legend as is consistent with
applicable restrictions, if any, including without limitation those represented
by the Performance Period and Performance Goals and those described in Section
8(d), above. The Committee may require that, whenever issued, the Performance
Shares be issued to and held by the Company or a trustee until the restrictions
on such Performance Shares have lapsed (in full or in part), and that, as a
condition of any Performance Share Award, the Participant shall have delivered a
stock power, endorsed in blank, relating to the Performance Shares covered by
the Award.
(f) Shareholder Rights.
------------------
Unless otherwise provided in the applicable Performance Share
Agreement, no Participant (or his executor or administrator or other transferee)
shall have any rights of a shareholder in the Company with respect to the
Performance Shares covered by an Award unless and until the Performance Shares
have been duly issued and delivered to him under the Plan.
20
(g) Expiration of Restricted Period.
-------------------------------
Subject to fulfillment of the terms and conditions of the applicable
Performance Share Agreement and any other vesting requirements related to the
applicable Performance Period or Performance Goals, upon the expiration of the
Restriction Period without prior forfeiture of the Performance Shares (or rights
thereto) subject to such Restriction Period, unrestricted Shares shall be issued
and delivered to the Participant.
(h) Termination of Employment.
-------------------------
If a Participant's employment by the Company and its subsidiaries,
membership on the Board of Directors of the Company and its subsidiaries or
engagement as a consultant to the Company and its subsidiaries terminates before
the end of any Performance Period with the consent of the Committee, or upon the
Participant's death, retirement (as defined in Section 6(h), above), or
disability (as defined by the Committee in its discretion at the time of grant
and set forth in the Performance Share Agreement), the Committee, taking into
consideration the performance of such Participant and the performance of the
Company over the Performance Period, may authorize the issuance to such
Participant (or his legal representative or designated beneficiary) of all or a
portion of the Performance Shares which would have been issued to him had his
employment, Board membership or engagement continued to the end of the
Performance Period. If the Participant's employment by the Company and its
subsidiaries, membership on the Board of Directors of the Company and its
subsidiaries or engagement as a consultant to the Company and its subsidiaries
terminates before the end of any Performance Period for any other reason, all
Performance Shares shall be forfeited.
(i) Election to Receive Cash in Lieu of Shares.
------------------------------------------
Notwithstanding the foregoing to the contrary (but subject to any
shareholder approval or other requirements of Section 162(m) of the Code), the
Committee may, in its sole discretion and as set forth in the applicable
Performance Share Agreement, provide the Participant with the option to elect to
receive, instead of Performance Shares, cash in an amount determined pursuant to
such Performance Share Agreement, including without limitation any one or more
of the following: (i) the fair market value of the number of Shares subject to
the Performance Share Agreement as of the date thereof, (ii) part or all of any
increase in such fair market value since such date, (iii) part or all of any
dividends paid or payable on the number of Shares subject to such Performance
Share Agreement since the date thereof, (iv) any other amounts which, in the
Committee's sole discretion and as set forth in the applicable Performance Share
Agreement, are reasonably related to the achievement of the applicable
Performance Goals, or (v) any combination of the foregoing. Such election and
any cash payment resulting therefrom shall be made at such time or times as
shall be specified in the Performance Share Agreement.
21
Section 9. Restriction on Exercise After Termination.
-----------------------------------------
Notwithstanding any provision of this Plan to the contrary, no
unexercised right created under this Plan (an "Unexercised Right") and held by a
Participant on the date of termination of such Participant's employment,
membership on the Board of Directors of the Company or engagement as a
consultant for any reason shall be exercisable after such termination if, prior
to such exercise, the Participant (a) takes other employment or renders services
to others without the written consent of the Company, (b) violates any
non-competition, confidentiality, conflict of interest, or similar provision set
forth in the Award Agreement pursuant to which such Unexercised Right was
awarded, or (c) otherwise conducts himself in a manner adversely affecting the
Company in the sole discretion of the Committee.
Section 10. Withholding Tax.
---------------
The Company, at its option, shall have the right to require the
Participant or any other person receiving Shares, Restricted Shares, or
Performance Shares (including cash in lieu of Performance Shares) to pay the
Company the amount of any taxes which the Company is required to withhold with
respect to such Shares, Restricted Shares, or Performance Shares or, in lieu of
such payment, to retain or sell without notice a number of such Shares
sufficient to cover the amount required to be so withheld. The Company, at its
option, shall have the right to deduct from all dividends paid with respect to
Shares, Restricted Shares, and Performance Shares the amount of any taxes which
the Company is required to withhold with respect to such dividend payments. The
Company, at its option, shall also have the right to require a Participant to
pay to the Company the amount of any taxes which the Company is required to
withhold with respect to the receipt by the Participant of Shares pursuant to
the exercise of a Stock Option, or, in lieu thereof, to retain, or sell without
notice, a number of Shares sufficient to cover the amount required to be
withheld. The obligations of the Company under the Plan shall be conditional on
such payment or other arrangements acceptable to the Company.
Section 11. Securities Law Restrictions.
---------------------------
No right under the Plan shall be exercisable and no Share shall be
delivered under the Plan except in compliance with all applicable federal and
state securities laws and regulations. The Company shall not be required to
deliver any Shares or other securities under the Plan prior to such registration
or other qualification of such Shares or other securities under any state or
federal law, rule, or regulation as the Committee shall determine to be
necessary or advisable.
The Committee may require each person acquiring Shares under the Plan
(a) to represent and warrant to and agree with the Company in writing that such
person is acquiring the Shares without a view to the distribution thereof, and
(b) to make such additional representations, warranties, and agreements with
respect to the investment intent of such person or persons as the Committee may
reasonably request. Any certificates for such Shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
22
All Shares or other securities delivered under the Plan shall be
subject to such stop-transfer orders and other restrictions as the Committee may
deem advisable under the rules, regulations, and other requirements of the
Securities and Exchange Commission, any stock exchange upon which the Shares are
then listed, and any applicable federal or state securities law, and the
Committee may cause a legend or legends to be put on any certificates evidencing
such Shares to make appropriate reference to such restrictions.
Section 12. Change in Control.
-----------------
(a) Accelerated Vesting and Company Purchase Option.
-----------------------------------------------
Notwithstanding any provision of this Plan or any Award Agreement to
the contrary (unless such Award Agreement contains a provision referring
specifically to this Section 12 and stating that this Section 12 shall not be
applicable to the Award evidenced by such Award Agreement), if a Change in
Control (each as defined below) occurs, then:
(i) Any and all Stock Options theretofore granted and not
fully vested shall thereupon become vested and exercisable in full and shall
remain so exercisable in accordance with their terms, and the restrictions
applicable to any or all Restriction Shares and Performance Shares shall lapse
and such Shares and Awards shall be fully vested; provided that no Stock Option
or other Award right which has previously been exercised or otherwise terminated
shall become exercisable; and\
(ii) The Company may, at its option, terminate any or all
unexercised Stock Options and portions thereof not more than 30 days after such
Change in Control; provided that the Company shall, upon such termination and
with respect to each Stock Option so terminated, pay to the Participant (or such
Participant's transferee, if applicable) theretofore holding such Stock Option
cash in an amount equal to the difference between the fair market value (as
defined in Section 6(a), above) of the Shares subject to the Stock Option at the
time the company exercises its option under this Section 12(a)(ii) and the
exercise price of the Stock Option; and provided further that if such fair
market value is less than such exercise price, then the Committee may, in its
discretion, terminate such Stock Option without any payment.
(b) Definition of Change in Control.
-------------------------------
For purposes of the Plan, a "Change in Control" shall mean the
happening of any of the following:
(i) When any "person" as defined in Section 3(a)(9) of the
1934 Act and as used in Sections 13(d) and 14(d) thereof, including a "group" as
defined in Section 13(d) of the 1934 Act, but excluding Around The World
Holdings, LLC, the Company, any subsidiary of the Company, and any employee
benefit plan sponsored or maintained by the Company or any subsidiary of the
23
Company (including any trustee of such plan acting as trustee), directly or
indirectly, becomes the "beneficial owner" (as defined in Rule 13d-3 under the
1934 Act) of securities of the Company representing 50% or more of the combined
voting power of the Company's then outstanding securities;
(ii) When, during any period of 18 consecutive months during
the existence of the Plan, the individuals who, at the beginning of such period,
constitute the Board (the "Incumbent Directors") cease for any reason other than
death to constitute at least a majority of the Board; provided, however, that a
director who was not a director at the beginning of such 18-month period shall
be deemed to have satisfied such 18-month requirement (and be an Incumbent
Director) if such director was elected by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors either actually (because they were directors at the
beginning of such 18-month period) or by prior operation of this Section
12(b)(ii); or
(iii) The occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company,
a subsidiary of the Company, or any of their respective affiliates through
purchase of assets, by merger, or otherwise.
Notwithstanding the foregoing to the contrary, a change in control
shall not be deemed to be a Change in Control for purposes of this Plan if the
Incumbent Directors of the Board approve or had approved such change (A)
described in Sections 12(b)(i), (ii), (iii), or 12(c)(i) of this Plan, or (B)
prior to the commencement by any person other than the Company of a tender offer
for Shares.
Section 13. Changes in Capital Structure.
----------------------------
In the event the Company changes its outstanding Shares by reason of
stock splits, stock dividends, or any other increase or reduction of the number
of outstanding Shares without receiving consideration in the form of money,
services, or property deemed appropriate by the Board, in its sole discretion,
the aggregate number of Shares subject to the Plan shall be proportionately
adjusted and the number of Shares and the exercise price for each Share subject
to the unexercised portion of any then-outstanding Award shall be
proportionately adjusted with the objective that the Participant's proportionate
interest in the Company shall remain the same as before the change without any
change in the total exercise price applicable to the unexercised portion of any
then-outstanding Awards, all as determined by the Committee in its sole
discretion.
In the event of any other recapitalization or any merger,
consolidation, or other reorganization of the Company, the Committee shall make
such adjustment, if any, as it may deem appropriate to accurately reflect the
number and kind of shares deliverable, and the exercise prices payable, upon
subsequent exercise of any then-outstanding Awards, as determined by the
Committee in its sole discretion.
The Committee's determination of the adjustments appropriate to be made
under this Section 13 shall be conclusive upon all Participants under the Plan.
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Section 14. No Enlargement of Employee Rights.
---------------------------------
The adoption of this Plan and the grant of one or more Awards to an
employee of the Company or any of its subsidiaries shall not confer any fight to
the employee to continue in the employ of the Company or any such subsidiary and
shall not restrict or interfere in any way with the fight of his employer to
terminate his employment at any time, with or without cause.
Section 15. Rights as a Shareholder.
-----------------------
No Participant or his executor or administrator or other transferee
shall have any rights of a stockholder in the Company with respect to the Shares
covered by an Award unless and until such Shares have been duly issued and
delivered to him under the Plan.
Section 16. Acceleration of Rights.
----------------------
The Committee shall have the authority, in its discretion, to
accelerate the time at which a Stock Option or other Award right shall be
exercisable whenever it may determine that such action is appropriate by reason
of changes in applicable tax or other laws or other changes in circumstances
occurring after the grant of the Award.
Section 17. Interpretation, Amendment, or Termination of the Plan.
-----------------------------------------------------
The interpretation by the Committee of any provision of the Plan or of
any Award Agreement executed pursuant to the grant of an Award under the Plan
shall be final and conclusive upon all Participants or transferees under the
Plan. The Board, without further action on the part of the shareholders of the
Company, may from time to time alter, amend, or suspend the Plan or may at any
time terminate the Plan, provided that: (a) no such action shall materially and
adversely affect any outstanding Stock Option or other right under the Plan
without the consent of the holder of such Stock Option or other fight; and (b)
except for the adjustments provided for in Section 13, above, no amendment may
be made by Board action without shareholder approval if the amendment would (i)
materially increase the benefits accruing to Participants under the Plan, (ii)
materially increase the number of Shares which may be issued under the Plan,
(iii) materially modify the requirements as to eligibility for participation in
the Plan, (iv) extend the maximum option period of Stock Options, or (v) effect
any other change which requires shareholder approval under applicable law or
regulation. Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in applicable tax and securities
laws and accounting rules, as well as other developments.
25
Section 18. Unfunded Status of the Plan.
---------------------------
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments or deliveries of Shares not
yet made by the Company to a Participant or transferee nothing contained herein
shall give any such Participant or transferee any rights that are greater than
those of a general creditor of the Company. The Committee may authorize the
creation of trusts or other arrangements to meet obligations created under the
Plan to deliver Shares or payments hereunder consistent with the foregoing.
Section 19. Protection of Board and Committee.
---------------------------------
No member of the Board or the Committee shall have any liability for
any determination or other action made or taken in good faith with respect to
the Plan or any Award granted under the Plan.
Section 20. Government Regulations.
----------------------
Notwithstanding any provision of the Plan or any Award Agreement
executed pursuant to the Plan, the Company's obligations under the Plan and such
Award Agreement shall be subject to all applicable laws, rules, and regulations
and to such approvals as may be required by any governmental or regulatory
agencies, including without limitation any stock exchange on which the Company's
Shares may then be listed.
Section 21. Governing Law.
-------------
The Plan shall be construed under and governed by the laws of the State
of Delaware.
Section 22. Genders and Numbers.
-------------------
When permitted by the context, each pronoun used in the Plan shall
include the same pronoun in other genders and numbers.
Section 23. Captions.
--------
The captions of the various sections of the Plan are not part of the
context of the Plan, but are only labels to assist in locating those sections,
and shall be ignored in construing the Plan.
Section 24. Effective Date.
--------------
The Plan shall be effective August 21, 2000. The Plan shall be
submitted to the shareholders of the Company for approval and ratification as
soon as practicable but in any event not later than 12 months after the adoption
of the Plan by the Board. If the Plan is not approved and ratified by the
shareholders of the Company within 12 months after the adoption of the Plan by
the Board, the Plan and all Awards granted under the Plan shall became null and
void and have no further force or effect.
26
Section 25. Term of Plan.
------------
No Award shall be granted pursuant to the Plan on or after 10th
Anniversary of Effective Date, but Awards granted prior to such tenth
anniversary may extend beyond that date.
Section 26. Private Company Provisions.
--------------------------
Notwithstanding any of the foregoing provisions of the Plan to the
contrary, unless and until such time as the Company has completed an IPO (as
defined in Section 2, above), the following provisions shall apply:
(a) Restrictive Legend.
------------------
If one or more Stock Options or other rights under the Plan are
exercised pursuant to exemptions from the Federal and state securities laws: (a)
any Shares issued upon exercise of those Stock Options or rights may not be sold
or otherwise transferred, and the Company shall not be required to transfer any
such Shares, unless they have been registered under the Federal and state
securities laws or a valid exemption from such registration is available; and
(b) the Company may cause each certificate or other documentation evidencing the
ownership of any Shares issued upon exercise of those Stock Options or rights to
be imprinted with a legend in the following form:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, or
any state securities law and may not be sold or otherwise
transferred without such registration unless a valid exemption
from such registration is available and the corporation has
received an opinion of, or satisfactory to, its counsel that
such transfer would not violate any Federal or state
securities laws.
27
(b) Restriction on Transfers.
------------------------
No Shares awarded under the Plan or issued upon exercise of a Stock
Option or other right under the Plan may be sold or otherwise transferred while
the holder of those Shares is an employee of the Company or any subsidiary
corporation.
(c) Purchase Option.
---------------
If any Participant ceases to be an employee of the Company and its
subsidiary corporations, a member of the Board of Directors of the Company and
its subsidiaries or a consultant to the Company and its subsidiaries for any
reason (including without limitation his death, disability, retirement,
resignation, replacement discharge, or any other reason), then the Company shall
have the exclusive right and option to purchase from such Participant, the
executor or administrator of his estate, or his other successor in interest, as
the case may be (for purposes of this subsection, the "Selling Shareholder"),
any or all of the Shares which may have been purchased by or awarded to the
Participant under the Plan (including without limitation any Shares purchased
upon exercise of a Stock Option or other right after termination of the
Participant's employment, engagement or Board membership and any additional
Shares which the Participant may have received as a result of any stock splits,
stock dividends, or similar sources as a result of receiving Shares under the
Plan).
In order to exercise its purchase option under this subsection, the
Company shall give written notice to the Selling Shareholder, stating that the
Company thereby exercises its option under this subsection, at any time after
termination of the Participant's employment. The purchase price for the Shares
under this subsection shall be equal to: (i) the fair market value of the total
shareholders' equity of the Company, as determined by an appraisal which shall
be made by an independent firm of certified public accountants selected by the
Board and which shall be approved by the Board, if such appraisal was so made
and approved not earlier than 15 months prior to the termination of the
Participant's employment or, if not, a new appraisal made by such an independent
firm and approved by the Board, plus or minus any increases or decreases in the
book value of the total shareholders' equity of the Company from the effective
date of such appraisal to the last day of the calendar month of termination of
the Participant's employment (whether such termination was before or after the
effective date of such appraisal), divided by (ii) the total outstanding common
shares of the Company as of the last day of that calendar month, calculated on a
fully diluted basis under generally accepted accounting principles. In the event
of any disagreement between the Selling Shareholder and the Company concerning
calculation of the purchase price for the Shares under this subsection, the
calculation shall be made by any independent firm of certified public
accountants selected by the Board, whose determination shall be final and
conclusive on all interested parties. All costs of any such appraisal shall be
borne by the Company, and all costs of any calculation of the purchase price by
an independent firm of certified public accountants to resolve any such
disagreement shall be borne equally by the Selling Shareholder and the Company.
If the Company exercises its option under this subsection, the purchase
and sale of the Shares shall be closed within 20 business days after
28
determination of the purchase price, at a time and place reasonably specified by
the Company. At the closing, the Selling Shareholder shall assign and transfer
the Shares to the Company free and clear of all encumbrances or other claims,
and the Company shall execute and deliver to the Selling Shareholder the
Company's promissory note: (i) dated as of the closing date, (ii) payable to the
order of the Selling Shareholder, (iii) in a principal amount equal to the full
purchase price, (iv) payable on or before the first anniversary of the closing
date, (v) with interest payable at maturity calculated on the unpaid principal
amount from the closing date to the payment date at a rate per annum equal to
the then-current yield-to-maturity on United States Treasury securities of
comparable maturity, as determined in good faith by the Company, plus 100 basis
points. The Company may elect, in its discretion, to pay all or any part of the
purchase price by good and sufficient check at the closing, in which event the
Company's promissory note shall be eliminated or reduced by that amount, as the
case may be. The Company may prepay its promissory note at any time without
penalty.
(d) First-Refusal Option.
--------------------
(i) If the holder of any Shares awarded under the Plan or
issued upon exercise of one or more Stock Options or rights under the Plan
desires to sell, and receives a bona fide written offer to buy, all or any part
of his Shares, for a price computed and payable in dollars and such holder is
not an employee, consultant or director of the Company or any its subsidiaries,
such holder may sell such Shares, but only pursuant to the following provisions
of this subsection. Such holder shall obtain from the person or persons who
propose to buy such Shares (collectively, the "Buyer") a written offer to buy
such Shares (the "Offer") which shall include the following provisions: (A) the
number of Shares to be purchased, the price, the terms of payment, and the other
terms and conditions of the proposal; (B) agreement by the Buyer that the Offer
shall be irrevocable for a specified period of time expiring not earlier than 20
business days after the date that notice of the Offer is given to the Company;
and (C) the consideration received from such holder for the Buyer's agreement
that the Offer shall be irrevocable for the specified period of time. At the
time of obtaining the Offer, such holder shall part with adequate consideration
to bind the Buyer to his agreement that the Offer shall be irrevocable for the
specified period of time.
(ii) Upon obtaining an Offer that such holder desires to
accept, such holder shall give written notice of the Offer and its acceptability
to the Company, enclosing a photocopy of the Offer, and shall make the signed
original of the Offer available to the Company for examination upon request. The
Company shall have the exclusive right and option to purchase all, but only all,
of the Shares described in the Offer under whichever of the following three sets
of price and terms and conditions that it elects, in its discretion: (A) for the
purchase price and upon the other terms and conditions specified in the Offer;
or (B) for the purchase price and upon the other terms and conditions which
would be applicable under Section 26(c), above, if the employment, Board
membership or engagement of such holder had terminated on the date when such
holder gave written notice of the Offer; or (C) for the purchase price specified
in the Offer and upon the other terms and conditions which would be applicable
under Section 26(c), above, if the employment, Board membership or engagement of
such holder had terminated on the date when such holder gave written notice of
the Offer (including without limitation execution and delivery of the Company's
promissory note meeting the requirements of Section 26(c), above).
29
(iii) In order to exercise its purchase option under this
subsection, the Company shall give written notice to such holder, stating that
the Company thereby exercises its option under this subsection, at any time not
later than 10 business days after the Company receives the written notice from
such holder. If the Company exercises its option under this subsection, the
purchase and sale of such Shares shall be closed, at a time and place reasonably
specified by the Company, within 20 business days after the later of: (A) the
date when the Company exercises its option under this subsection; or (B) the
date when the purchase price has been determined. In that event, the terms for
payment of the purchase price and the other terms and conditions for purchase
shall be not less favorable to the Company that those specified in the Offer.
(iv) If the Company fails to exercise its purchase option
under this subsection, such holder may sell the Shares specified in the Offer to
the Buyer at the price and on the terms and conditions of the Offer, subject to
compliance with all other requirements in the Plan. Upon completion of the sale
of the Shares pursuant to the preceding sentence, the Shares shall remain
subject to all requirements and restrictions of the Plan, including without
limitation the Company's option to purchase the Shares in the event of any
subsequent sale or other transfer, as described in this Section 26(d).
Section 27. Savings Clause.
--------------
In case any one or more of the provisions of this Plan or any Award
shall be held invalid, illegal, or unenforceable in any respect, the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and the invalid, illegal, or unenforceable
provision shall be deemed null and void; however, to the extent permissible by
law, any provision which could be deemed null and void shall first be construed,
interpreted, or revised retroactively to permit this Plan or such Award, as
applicable, to be construed so as to foster the intent of this Plan. This Plan
and all Awards are intended to comply in all respects with applicable law and
regulation, including Section 422 of the Code, Rule l6b-3 under the 1934 Act
(with respect to persons subject to Section 16 of the 1934 Act ("Reporting
Persons")), and Section 162(m) of the Code (with respect to covered employees as
defined under Section 162(m) of the Code ("Covered Employees")). In case any one
or more of the provisions of this Plan or any Award shall be held to violate or
be unenforceable in any respect under Code Section 422, Rule 16b-3, or Code
Section 162(m), then, to the extent permissible by law, any provision which
could be deemed to violate or be unenforceable under Code Section 422, Rule
16b-3, or Code Section 162(m) shall first be construed, interpreted, or revised
retroactively to permit the Plan or such Award, as applicable, to be in
compliance with Code Section 422, Rule 16b-3, and Code Section'162(m).
Notwithstanding anything in this Plan to the contrary, the Committee, in its
sole discretion, may bifurcate the Plan so as to restrict, limit, or condition
the use of any provision of this Plan to Participants who are Reporting Persons
or Covered Employees without so restricting, limiting, or conditioning this Plan
with respect to other Participants.
30
Executed this 21 day of August, 2000.
AUCTIONANYTHING.COM, INC.
By:/s/Raymond Hotaling
-----------------------------
Raymond Hotaling
President
31