SCHEDULE 14A
Information Required in Proxy Statement
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[X] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant
to Rule 14a-11(c) or Rule 14a-12
SUNSTAR HEALTHCARE, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
2. Aggregate number of securities to which transaction applies:
<PAGE>
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:
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<PAGE>
SUNSTAR HEALTHCARE, INC.
300 International Parkway, Suite 230
Heathrow, Florida 32746
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held June 7, 1999
---------------
TO THE STOCKHOLDERS OF SUNSTAR HEALTHCARE, INC.:
The Annual Meeting of Stockholders of SunStar Healthcare, Inc. (the
"Company") will be held at the offices of the Company, 300 International
Parkway, Suite 230, Heathrow, Florida, at 11:00 A.M. on June 7, 1999, for the
following purposes:
(1) To elect four directors of the Company to hold office
until the next Annual Meeting of Stockholders and until
their successors shall have been duly elected and
qualified;
(2) To approve the Company's 1999 Stock Option Plan; and
(3) To consider and transact such other business as may
properly come before the meeting or any adjournment
thereof.
A Proxy Statement, form of proxy and the Annual Report to Stockholders
of the Company for the fiscal year ended December 31, 1998 are enclosed
herewith. Only holders of record of Common Stock of the Company at the close of
business on April 15, 1999 will be entitled to notice of, and to vote at, the
Annual Meeting and any adjournments thereof. A complete list of the stockholders
entitled to vote will be available for inspection by any stockholder during the
meeting. In addition, the list will be open for examination by any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least 10 days prior to the meeting at the offices of the Company,
located at 300 International Parkway, Suite 230, Heathrow, Florida 32746.
By Order of the Board of Directors,
David A. Jesse, Secretary
Heathrow, Florida
April 30, 1999
- --------------------------------------------------------------------------------
ALL STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. IF YOU DO NOT
EXPECT TO BE PRESENT, PLEASE DATE AND SIGN THE ENCLOSED FORM OF PROXY AND RETURN
IT PROMPTLY USING THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
SUNSTAR HEALTHCARE, INC.
300 International Parkway, Suite 230
Heathrow, Florida 32746
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement is furnished in connection with the
solicitation by the board of directors (the "Board of Directors") of SunStar
Healthcare, Inc., a Delaware corporation (the "Company"), of proxies in the form
enclosed. Such proxies will be voted at the Annual Meeting of Stockholders of
the Company to be held at the offices of the Company, 300 International Parkway,
Suite 230, Heathrow, Florida, at 11:00 A.M. on Monday, June 7, 1999 (the
"Meeting") and at any adjournments thereof, for the purposes set forth in the
accompanying Notice of Annual Meeting of Stockholders.
The principal executive offices of the Company are located at 300
International Parkway, Suite 230, Heathrow, Florida 32746, and its telephone
number is (407) 304-1066. This Proxy Statement and accompanying form of proxy
are being mailed on or about May 4, 1999 to all stockholders of record on April
15, 1999 (the "Record Date").
Any stockholder giving a proxy has the power to revoke the same
at any time before it is voted by delivering a written notice to the Secretary
of the Company at its offices, by executing a later-dated proxy or by attending
the Meeting and voting in person. The cost of soliciting proxies will be borne
by the Company. The Company has no contract or arrangement with any party in
connection with the solicitation of proxies. Following the mailing of the proxy
materials, solicitation of proxies may be made by officers and employees of the
Company by mail, telephone, telegram or personal interview. Properly executed
proxies will be voted in accordance with instructions given by stockholders at
the places provided for such purpose in the accompanying proxy. Unless contrary
instructions are given by stockholders, the shares represented by such proxies
are intended to be voted in favor of the election of the six nominees for
director named herein. The Board of Directors does not know of any other matters
that may be brought before the Meeting nor does it foresee or have reason to
believe that proxy holders will have to vote for substitute or alternate
nominees. In the event that any other matter should come before the Meeting or
any nominee is not available for election, the persons named in the enclosed
proxy will have discretionary authority to vote all proxies not marked to the
contrary with respect to such matters in accordance with their best judgment.
<PAGE>
VOTING SECURITIES
Stockholders of record as of the close of business on the Record
Date will be entitled to notice of, and to vote at, the Meeting or any
adjournments thereof. On the Record Date, there were 2,919,330 outstanding
shares of common stock, par value $.001 per share, of the Company (the "Common
Stock"). Each holder of Common Stock is entitled to one vote for each share held
by such holder. The presence, in person or by proxy, of the holders of a
majority of the outstanding shares of Common Stock is necessary to constitute a
quorum at the Meeting. Directors will be elected by a plurality of the votes
cast by the shares of Common Stock represented in person or by proxy at the
Meeting. If less than a majority of outstanding shares entitled to vote are
represented at the Meeting, a majority of the shares so represented may adjourn
the Meeting to another date, time or place, and notice need not be given of the
new date, time and place if the new date, time or place is announced at the
Meeting before an adjournment is taken.
Proxies submitted which contain abstentions or broker non-votes
will be deemed present at the Meeting for purposes of determining the presence
of a quorum. Shares of Common Stock that are voted to abstain with respect to
any matter will be considered cast with respect to that matter. Shares subject
to broker non-votes with respect to any matter will not be considered cast with
respect to that matter.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership of Common Stock at April 25, 1999 by (i) each person or
group known by the Company to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock; (ii) each director and nominee for director
of the Company; (iii) each of the executive officers named in the Summary
Compensation Table herein under "Executive Compensation;" and (iv) all directors
and executive officers of the Company as a group. Except as otherwise indicated
below, each of the parties has sole voting and investment power with respect to
all shares indicated below.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Beneficial Owners(1) Beneficial Ownership(2) Percent of Class
- ---------------------- ----------------------- ------------------
<S> <C> <C>
Warren D. Stowell 255,000(3) (4) 8.0%
David A. Jesse 75,000(4) (5) 2.5%
Bernard Levine, M.D. 208,600(6) 7.1%
Jerry Balter 7,500(6) *
David L. Rosier 8,500(6) *
National Home Health Care Corp.
700 White Plains Road
Scarsdale, NY 10583 890,000 30.5%
All directors and executive officers as a group 554,600(4) 17.0%
(6 persons)
- -----------
</TABLE>
* Less than 1%
(1) Unless otherwise indicated, the address of each of these persons
is SunStar Healthcare, Inc., 300 International Parkway, Suite
230, Heathrow, Florida 32746.
(2) Includes 2,919,330 shares of Common Stock outstanding on April
25, 1999 and, with respect to each holder of options exercisable
within 60 days, 372,500 shares of Common Stock underlying such
options.
(3) Includes 250,000 shares of Common Stock issuable under currently
exercisable options.
(4) Does not include an additional 474,330 shares of Common Stock as
to which such parties have shared voting power. Such shares were
sold pursuant to the Private Placement on July 16, 1998 in which
subscription agreements were entered into whereby each investor
agreed to vote its shares as directed by Mr. Stowell or Mr.
Jesse, as officers and directors of the Company, and granted its
irrevocable proxy to Messrs. Stowell and Jesse in connection with
such voting agreement. Either of Messrs. Stowell and Jesse has
the right to vote, in their sole and exclusive discretion, such
shares with respect to certain
<PAGE>
financing proposals upon which the Company's stockholders may
vote. These stockholder voting agreements and irrevocable proxies
terminate on July 16, 1999.
(5) Represents shares of Common Stock issuable pursuant to currently
exercisable stock options and options exercisable within the next
60 days.
(6) Includes 7,500 shares of Common Stock issuable pursuant to
immediately exercisable stock options.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Meeting, stockholders will elect four directors to serve
until the next Annual Meeting of Stockholders and until the respective successor
of each is elected and qualified. Unless otherwise indicated, the shares
represented by all proxies received by the Board of Directors will be voted at
the Meeting in accordance with their terms and, in the absence of contrary
instructions, for the election of Warren D. Stowell, David A. Jesse, Jerry
Balter and David L. Rosier to serve until the next Annual Meeting of
Stockholders and until their successors are elected and qualified. Although it
is anticipated that each nominee will be available to serve as a director,
should any nominee be unavailable to serve, proxies will be voted by the Board
of Directors.
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning the
nominees for director and executive officers of the Company:
Name Age Position
- ------------------ -------- -------------------------------------------------
Warren D. Stowell 47 President, Chief Executive Officer and Chairman
David A. Jesse 50 Executive Vice President, Chief Operating Officer
Jerry Balter 46 Director
David L. Rosier 61 Director
The Company's directors are elected at each Annual Meeting of
Stockholders of the Company to serve for a term of one year or until their
successors are duly elected and qualified. Officers serve at the discretion of
the Board of Directors. The terms of office of all officers and directors expire
at the time of the annual meeting each year.
WARREN D. STOWELL has been President and Chief Executive Officer
of the Company since December 1995, Chairman of the Board of Directors of the
Company since March 1996, and President and Chief Executive Officer of the
Company's subsidiary, SunStar Health Plan, Inc. (formerly known as Boro Medical
Corp.), since November 1, 1995. From 1993 through 1995 Mr. Stowell served as
Chief Operating Officer, Insurance Division, for Ramsay HMO, Inc., an HMO, life
and health insurance company and property and casualty insurance company
operating in Florida.
-4-
<PAGE>
From 1991 until 1993 Mr. Stowell was President and Chief Executive Officer of
Care Florida, Inc. From 1988 to 1991 Mr. Stowell served as President and Chief
Executive Officer of H.I.P. Network of Florida. Mr. Stowell has 20 years of HMO
management experience.
DAVID A. JESSE has been Executive Vice President, Chief Operating
Officer and a director of the Company since January 1996. Prior to his
association with the Company, Mr. Jesse had been a principal of Masters & Jesse
Co., LPA, a legal professional association, commencing in 1993. From 1992 to
1993 he was Vice President and General Counsel of Care Florida, Inc., a health
maintenance organization based in Miami, Florida. From 1988 to 1992 Mr. Jesse
was an associate with the law firm of Climaco, Climaco, Seminiatore, Lefkowitz &
Garafoli in its healthcare law department. Prior thereto, from 1984 to 1987, Mr.
Jesse was the Vice President and General Counsel of HealthAmerica Corporation of
Ohio, a health maintenance organization based in Cleveland, Ohio.
JERRY BALTER has been the Managing Partner of The Ulysses Group
Advisors, Inc., an advisory firm providing strategic and financial advice to
emerging healthcare and high technology companies, since 1990. From 1986 until
1990, he was employed by Robertson Stephens & Company in the healthcare
investment banking group. Mr. Balter was appointed to the Board of Directors of
the Company in April 1999.
DAVID L. ROSIER has been Director of Corporate Finance of
Brookstreet Securities Corporation, Inc., an investment banking firm, since
1993. Prior thereto, he was Senior Vice President and Strategic Marketing
Director of American Principals Holdings, Inc., an investment firm, from 1979
until 1984, West Regional Manager for Amtrak from 1972 until 1974, and Vice
President of Marketing for Hertz International Corporation, Inc. from 1970 until
1972. Mr. Rosier was appointed to the Board of Directors of the Company in April
1999.
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held eight meetings during the fiscal year
ended December 31, 1998 ("fiscal 1998") and acted by unanimous written consent
on four occasions. Each director attended (i) at least 75% of all of the
meetings of the Board of Directors during fiscal 1998 and (ii) all of the
meetings of all the committees on which he served.
The Company's Audit Committee is currently composed of Messrs.
Balter and Rosier. The function of the Audit Committee is to make
recommendations concerning the selection each year of independent auditors of
the Company, to review the effectiveness of the Company's internal accounting
methods and procedures, and to review the results and scope of the audit and
other services provided by the Company's independent auditors. The Audit
Committee held one meeting during fiscal 1998; in addition, its members met
informally from time to time.
The Compensation Committee is currently composed of Messrs.
Balter and Rosier. The function of the Compensation Committee is to review and
recommend to the Board of Directors policies, practices and procedures relating
to compensation of key employees and to administer employee benefit plans. The
Compensation Committee held one meeting during fiscal 1998; in addition, its
members met informally from time to time. The Company does not have a nominating
committee.
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<PAGE>
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires the Company's directors and executive officers,
and persons who own more than 10% of the Company's Common Stock, to file with
the Securities and Exchange Commission ("SEC") and Nasdaq initial reports of
beneficial ownership and reports of changes in beneficial ownership of Common
Stock of the Company. Such persons are also required by SEC regulations to
furnish the Company with copies of all such Section 16(a) forms they file. To
the Company's knowledge, based solely on a review of the copies of all such
reports furnished to the Company, there were no late or delinquent filings.
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<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual
and long term compensation during the Company's last three fiscal years of the
Company's Chief Executive Officer and other most highly compensated executive
officers of the Company, whose salary and bonus for fiscal 1998 exceeds
$100,000, for services rendered in all capacities to the Company and its
subsidiaries:
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
SECURITIES
UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- --------------------------- ---- ------ ----- ------------ -------------
<S> <C> <C> <C> <C> <C>
Warren D. Stowell 1998 $174,231 $ ---- ------- $----
President and Chief Executive 1997 129,904 ---- -------
Officer(1) 1996 95,193 ---- 250,000(2)
David A. Jesse 1998 $149,423 $ ---- ------- $----
Executive Vice President, Chief 1997 106,576 15,000 -------
Operating Officer and Secretary (3) 1996 17,692 ---- 75,000(4)
- ----------------------
(1) Mr. Stowell is President and Chief Executive Officer of SunStar Healthcare,
Inc. and its subsidiary, SunStar Health Plan, Inc.
(2) Granted pursuant to Mr. Stowell's employment agreement. All of the options
are currently exercisable.
(3) Mr. Jesse is Executive Vice President and Chief Operating Officer of SunStar
Healthcare, Inc. and its subsidiary, SunStar Health Care, Inc.
(4) Represents an option for 25,000 shares of Common Stock granted pursuant to
Mr. Jesse's employment agreement and an option for 50,000 shares of Common
Stock granted pursuant to the Company's 1996 Stock Option Plan, all of which
options are currently exercisable.
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted during fiscal 1998 to those individuals
named in the preceding Summary Compensation Table.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE
None of the options held by those individuals listed in the
Summary Compensation Table were exercised in fiscal 1998. The following table
sets forth information concerning the value of unexercised options at December
31, 1998 for those individuals listed in the Summary Compensation Table.
-7-
<PAGE>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS AT FISCAL YEAR IN THE MONEY OPTIONS
ACQUIRED END AT FISCAL YEAR END
ON EXERCISE VALUE EXERCISABLE / EXERCISABLE /
NAME (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE (1)
- ------------------- ------------- ------------ ---------------------- -------------------
<S> <C> <C> <C> <C>
Warren D. Stowell ---- ---- 250,000 / 0 $907,500 / 0
David A. Jesse ---- ---- 58,333 / 16,667 90,750 / 0
</TABLE>
- ------------------
(1) Determined based on the fair market value of underlying securities (the
last sale price ($3.88) per share of Common Stock on The Nasdaq
SmallCap Market) at fiscal year end (December 31, 1998), minus the
exercise price.
STANDARD REMUNERATION OF DIRECTORS
The Company's non-employee directors are paid a fee of $2,500 for
each meeting of the Board of Directors attended. All directors are reimbursed
for their reasonable out-of-pocket expenses incurred in connection with their
attendance at meetings of the Board of Directors and for other expenses incurred
in their capacity as directors of the Company. Under the Company's 1996 Stock
Option Plan, each non-employee director of the Company upon becoming a director
is entitled to receive a non-qualified stock option for 7,500 shares of Common
Stock exercisable at a price equal to the fair market value of the Common Stock
on the date of grant.
THE COMPANY'S 1996 STOCK OPTION PLAN
In February 1996, the Board of Directors of the Company adopted,
and National Home Health Care Corp. ("NHHC") (the Company's sole stockholder at
that time) approved, the Company's 1996 Stock Option Plan (the "1996 Plan")
pursuant to which 200,000 shares of Common Stock currently are reserved for
issuance upon the exercise of options designated at either (i) options intended
to constitute incentive stock options ("ISOs") under the Internal Revenue Code
of 1986, as amended (the "Code"), or (ii) non-qualified options. ISOs may be
granted under the 1996 Plan to employees and officers of the Company.
Non-qualified options may be granted to consultants, directors (whether or not
they are employees), employees or officers of the Company.
The 1996 Plan is intended to qualify under Rule 16b-3 under the
Exchange Act. The 1996 Plan may be administered by the Board of Directors or a
committee appointed by the Board of Directors. The 1996 Plan is currently
administered by the Company's Compensation Committee, which is comprised of
independent directors. The Compensation Committee, within the limitations of the
1996 Plan, determines the persons to whom options may be granted, the number of
shares to be covered by each option, whether the options granted are intended to
be ISOs, the duration and rate of exercise of each option, the exercise price
per share and the manner of exercise and the time, manner and form of payment
upon exercise of an option. Unless sooner terminated, the 1996 Plan will expire
on February 13, 2006.
The aggregate fair market value of shares for which ISOs granted
to any employee exercisable for the first time by such employee during any
calendar year (under all stock option plans of the
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<PAGE>
Company) may not exceed $100,000, and options to purchase no more than 50,000
shares may be granted under the 1996 Plan to any single optionee in any calendar
year. Non-qualified options granted under the 1996 Plan may not be granted at a
price less than 90% of the fair market value of the Common Stock on the date of
grant. Options granted under the 1996 Plan will expire not more than ten years
from the date of grant (five years in the case of ISOs granted to persons
holding 10% or more of the voting stock of the Company). All options granted
under the 1996 Plan are not transferable during an optionee's lifetime but are
transferable at death by will or by the laws of descent and distribution. In
general, upon termination of employment of an optionee, all options granted to
such person which are not exercisable on the date of such termination
immediately terminate, and any options that are exercisable terminate 90 days
following the termination of employment.
The 1996 Plan contains anti-dilution provisions authorizing
appropriate adjustments in certain circumstances. Shares of Common Stock subject
to options which expire without being exercised or which are canceled as a
result of cessation of employment are available for further grants. No shares of
Common Stock may be issued to any optionee until the full exercise price has
been paid. The Board of Directors or the committee, as the case may be, may
grant individual options under the 1996 Plan with more stringent provisions than
those specified in the 1996 Plan.
The 1996 Plan provides that each non-employee director
automatically receives, upon first becoming a non-employee director, a grant of
an option to purchase 7,500 shares of Common Stock at an exercise price equal to
the fair market value of the Common Stock. Each non-employee director option
expires five years from the date of grant.
The Company has granted options to purchase an aggregate of
105,000 shares under the 1996 Plan, exclusive of non-employee director options
to purchase an additional 30,000 shares, none of which options has been
exercised.
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<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Upon consummation of the initial public offering on May 15, 1996,
NHHC continued to own 37.6% of the outstanding Common Stock of the Company.
Certain directors of the Company are also officers, directors and/or principal
stockholders of NHHC and, consequently, may be able, through NHHC, to direct the
election of the Company's directors, effect significant corporate events and
generally direct the affairs of the Company. The Company does not intend to
enter into any transactions with NHHC or its affiliates by a majority of the
independent and disinterested members of the Board of Directors and, to the
extent deemed necessary or appropriate by the Board of Directors, the Company
will obtain a fairness opinion and stockholder approval in connection with any
such transaction.
The Company has granted to Mr. Stowell and Mr. Jesse options to
purchase 250,000 and 25,000 shares, respectively, of Common Stock at an exercise
price of $.25 per share in connection with their respective employment with the
Company. Such options held by Messrs. Stowell and Jesse are currently
exercisable. Commencing two years after May 15, 1996, the Company has agreed to
use its best efforts to file a registration statement under the Securities Act
to register the shares of Common Stock issuable to Messrs. Stowell and Jesse
pursuant to the exercise of such options.
The Company has agreed to use its best efforts to include 83,000
shares of Common Stock held by NHHC in a registration statement to be filed
under the Securities Act two years after May 15, 1996.
Ms. Robyn Stowell has been employed by the Company since August
1996 as Vice President of Medical Operations and received $112,947 in salary and
no bonus in fiscal 1998. During fiscal 1997, Ms. Stowell was granted a stock
option under the Company's 1996 Plan for 25,000 shares of Common Stock with an
exercise price of $4.00 per share. Options to purchase 16,667 shares are
currently exercisable and the remaining 8,333 options will be exercisable
commencing December 16, 1999. The options terminate on December 15, 2006. Ms.
Stowell is the wife of Mr. Stowell.
Mr. Rosier is Director of Corporate Finance of Brookstreet
Securities Corporation, Inc. ("Brookstreet"), which acted as placement agent
(the "Placement Agent") for the Company's recent private placement of units of
Series A Preferred Stock and warrants. As Placement Agent, Brookstreet received
a retail commission of 8% of the aggregate amount of the offering, not including
non-accountable Placement Agent expenses of 3% of the aggregate amount of the
offering and non-accountable marketing expenses of 2% of the aggregate amount of
the offering. In addition, the Placement Agent is to receive five-year warrants
to purchase up to 100,000 shares of Common Stock at $1.50 per share, on a pro
rata basis, up to the sale of $1,500,000 in the offering, and up to 500,000
shares of Common Stock at $4.00 per share, on a pro rata basis, up to the sale
of $6,000,000 in the offering. Approximately $5,000,000 was raised in the
offering.
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<PAGE>
PROPOSAL 2
APPROVAL OF THE COMPANY'S 1999 STOCK OPTION PLAN
On January 25, 1999, the Company's Board of Directors approved
the Company's 1999 Stock Option Plan (the "1999 Plan") and directed that the
1999 Plan be submitted to the Company's stockholders for approval at the
Meeting. The Board of Directors adopted the 1999 Plan, which covers 500,000
shares of Common Stock, upon evaluating the Company's existing compensation
programs and the Company's long-range goals and expansion plans. The Board
concluded that the addition of a stock option plan was necessary for the Company
to continue to attract, motivate and retain qualified employees and directors.
If Proposal 2 is approved by stockholders, the Company plans to include the
shares of Common Stock covered by the 1999 Plan in a registration statement on
Form S-8, which the Company plans to file promptly with the SEC.
THE 1999 PLAN
The following is a discussion of certain terms of the 1999 Plan:
Types of Grants and Eligibility
The 1999 Plan is designed to provide an incentive to key
employees (including officers and directors who are key employees), non-employee
directors and consultants of the Company and its present and future subsidiaries
and to offer an additional inducement in obtaining the services of such
individuals. The 1999 Plan provides for the grant of "incentive stock options"
("ISOs") within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code"), and nonqualified stock options ("NQSOs").
Shares Subject to the 1999 Plan
The aggregate number of shares of Common Stock for which options
may be granted under the 1999 Plan may not exceed 500,000; provided, however,
that the maximum number of shares of Common Stock with respect to which options
may be granted to any individual in any fiscal year may not exceed 100,000. Such
shares of Common Stock may consist either in whole or in part of authorized but
unissued shares of Common Stock or shares of Common Stock held in the treasury
of the Company. Shares of Common Stock subject to an option which for any reason
expires, is canceled or is terminated unexercised or which ceases for any reason
to be exercisable may again become available for the granting of options under
the 1999 Plan.
Administration of the 1999 Plan
The 1999 Plan is administered by the Board of Directors which, to
the extent it shall determine, may delegate its powers with respect to the
administration of the 1999 Plan to a committee of the Board of Directors (the
"Committee") consisting of not less than two directors, each of whom shall be a
"non-employee director" within the meaning of rules and regulations promulgated
by the Securities and Exchange Commission. References in the 1999 Plan to
determinations or actions by the Committee shall be deemed to include
determinations and actions by the Board of Directors.
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<PAGE>
Subject to the express provisions of the 1999 Plan, the Committee
has the authority, in its sole discretion, with respect to options to determine,
among other things: the key employees, consultants and non-employee directors
who are to receive options; the type of option to be granted to a key employee,
the times when an option is to be granted; the number of shares of Common Stock
to be subject to each option; the term of each option; the date each option is
to become exercisable; whether an option is to be exercisable in whole, in part
or in installments, and, if in installments, the number of shares of Common
Stock to be subject to each installment, whether the installments are to be
cumulative, the date each installment is to become exercisable and the term of
each installment; whether to accelerate the date of exercise of any option or
installment; whether shares of Common Stock may be issued on exercise of an
option as partly paid, and, if so, the dates when future installments of the
exercise price are to become due and the amounts of such installments; the
exercise price of each option; the form of payment of the exercise price;
whether to restrict the sale or other disposition of the shares of Common Stock
acquired upon the exercise of an option and, if so, whether and under what
conditions to waive any such restriction; and whether to subject the exercise of
all or any portion of an option to the fulfillment of contingencies as specified
in an applicable stock option contract. With respect to all options, the
Committee has such discretion to determine the amount, if any, necessary to
satisfy the obligation of the Company, a subsidiary or a parent to withhold
taxes or other amounts; with the consent of the optionee, to cancel or modify an
option, provided that the modified provision is permitted to be included in an
option granted under the 1999 Plan on the date of the modification; to
prescribe, amend and rescind rules and regulations relating to the 1999 Plan;
and to make all other determinations necessary or advisable for administering
the 1999 Plan.
Exercise Price
The exercise price of the shares of Common Stock under each
option is to be determined by the Committee; provided, however, that the
exercise price is not to be less than 100% of the fair market value of the
Common Stock subject to such option on the date of grant; and further provided,
that if, at the time an ISO is granted, the optionee owns shares possessing more
than 10% of the total combined voting power of all classes of stock of the
Company, of any of its subsidiaries or of a parent, the exercise price of such
ISO may not be less than 110% of the fair market value of the Common Stock
subject to such ISO on the date of grant.
Term
The term of each option granted pursuant to the 1999 Plan is
established by the Committee, in its sole discretion, as set forth in the
applicable stock option contract; provided, however, that the term of each ISO
granted pursuant to the 1999 Plan is to be for a period not exceeding ten years
from the date of grant thereof, and further provided, that if, at the time an
ISO is granted, the optionee owns shares possessing more than ten percent of the
total combined voting power of all classes of stock of the Company, of any of
its subsidiaries or of a parent, the term of the ISO is to be for a period not
exceeding five years from the date of grant.
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<PAGE>
Exercise
An option (or any part or installment thereof), to the extent
then exercisable, is to be exercised by giving written notice to the Company at
its principal office stating which option is being exercised and specifying the
number of shares of Common Stock as to which such option is being exercised.
Payment in full of the aggregate exercise price may be made (a) in cash or by
certified check, or (b) if the applicable stock option contract at the time of
grant so permits, with previously acquired shares of Common Stock having an
aggregate fair market value, on the date of exercise, equal to the aggregate
exercise price of all options being exercised, or (c) with any combination of
cash, certified check or shares of Common Stock.
Termination of Relationship
Any holder of an option whose relationship with the Company (and
its parent and subsidiaries) as an employee or a consultant has terminated for
any reason other than his death or disability may exercise such option, to the
extent exercisable on the date of such termination, at any time within three
months after the date of termination, but not thereafter and in no event after
the date the option would otherwise have expired; provided, however, that if his
relationship is terminated either (a) for cause, or (b) without the consent of
the Company, said option terminates immediately. Options granted to employees or
consultants under the 1999 Plan are not affected by any change in the status of
the holder so long as he or she continues to be an employee of, or a consultant
to, the Company, its parent or any of its subsidiaries (regardless of having
been transferred from one corporation to another).
Death or Disability
If an optionee dies (a) while he is an employee of, or a
consultant to, the Company, its parent or any of its subsidiaries, (b) within
three months after the termination of such relationship (unless such termination
was for cause or without the consent of the Company), or (c) within one year
following the termination of such relationship by reason of disability, the
options that were granted to him as an employee or consultant may be exercised,
to the extent exercisable on the date of his death, by his executor,
administrator or other person at the time entitled by law to exercise his rights
under such option, at any time within one year after death, but not thereafter
and in no event after the date the option would otherwise have expired.
Any optionee whose relationship as an employee of, or consultant
to, the Company, its parent or any of its subsidiaries has terminated by reason
of disability may exercise his option, to the extent exercisable upon the
effective date of such termination, at any time within one year after such date,
but not thereafter and in no event after the date the option would otherwise
have expired.
Adjustments Upon Changes in Common Stock
Notwithstanding any other provision of the 1999 Plan, in the
event of any change in the outstanding Common Stock by reason of a stock
dividend, recapitalization, merger or consolidation in which the Company is the
surviving corporation, or a spin-off, split-up, combination or exchange of
shares or the like which results in a change in the number or kind of shares of
Common Stock
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<PAGE>
which is outstanding immediately prior to such event, the Committee will adjust
the aggregate number and kind of shares subject to each outstanding option and
the exercise price thereof. Such adjustments will be conclusive and binding on
all parties.
Notwithstanding any other provision of the 1999 Plan, in the
event of: (i) any transaction (including a series of transactions occurring
within 60 days or occurring pursuant to a plan), that has the result that
stockholders of the Company immediately before such transaction cease to own at
least 50.1% of the voting stock of the Company or of any entity that results
from the participation of the Company in a reorganization, consolidation,
merger, liquidation or any other form of corporate transaction; (ii) approval by
the Company's stockholders of a plan of merger, consolidation, reorganization,
liquidation or dissolution in which the Company does not survive (unless the
approved merger, consolidation, reorganization, liquidation or dissolution is
subsequently abandoned); or (iii) approval by the Company's stockholders of a
plan for the sale, lease, exchange or other disposition of all or substantially
all of the property and assets of the Company (unless such plan is subsequently
abandoned), each outstanding option shall become immediately vested and fully
exercisable.
Amendments and Termination of the 1999 Plan
No option may be granted under the 1999 Plan after January 24,
2009. The Board of Directors, without further approval of the Company's
stockholders, may at any time suspend or terminate the 1999 Plan, in whole or in
part, or amend it from time to time in such respects as it may deem advisable,
including, without limitation, in order that ISOs granted thereunder meet the
requirements for "incentive stock options" under the Code and to comply with the
provisions of certain rules and regulations promulgated by the Securities and
Exchange Commission, among other things; provided, however, that no amendment
may be effective without the requisite prior or subsequent stockholder approval
which would (a) except as required for anti-dilution adjustments, increase the
maximum number of shares of Common Stock for which options may be granted under
the 1999 Plan, (b) change the eligibility requirements for individuals entitled
to receive options under the 1999 Plan or (c) make any other change for which
applicable law requires stockholder approval.
Non-Transferability of Options
No option granted under the 1999 Plan may be transferable
otherwise than by will or the laws of descent and distribution, and options may
be exercised, during the lifetime of the holder thereof, only by such holder or
such holder's legal representatives. Except to the extent provided above,
options may not be assigned, transferred, pledged, hypothecated or disposed of
in any way (whether by operation of law or otherwise) and may not be subject to
execution, attachment or similar process.
Withholding Taxes
The Company, its parent or any of its subsidiaries may withhold
cash, shares of Common Stock to be issued upon exercise of an option having an
aggregate fair market value on the relevant date or any combination thereof in
an amount equal to the amount which the Committee determines is necessary to
satisfy the obligation of the Company, its parent or any of its subsidiaries to
withhold federal, state and local income taxes or other amounts incurred by
reason of the grant, vesting, exercise or disposition of an option, or the
disposition of the underlying shares of Common Stock.
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<PAGE>
Alternatively, the Company may require the holder to pay to the Company such
amount, in cash, promptly upon demand.
Federal Income Tax Treatment
The following is a general summary of the federal income tax
consequences under current tax law of ISOs and NQSOs. It does not purport to
cover special rules relating to, among other things, the exercise of an option
with previously acquired shares nor state or local income or other tax
consequences inherent in the ownership and exercise of stock options and the
ownership and disposition of the underlying shares.
Generally, a holder does not recognize taxable income for federal
income tax purposes upon the grant of an ISO or NQSO.
In the case of an ISO, no taxable income is recognized upon
exercise of the option. If the optionee disposes of the shares acquired pursuant
to the exercise of an ISO more than two years after the date of grant and more
than one year after the transfer of the shares to him, the optionee will
recognize long-term capital gain or loss and the Company will not be entitled to
a deduction. However, if the optionee disposes of such shares within the
required holding period (a "disqualifying disposition"), a portion of his gain
equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price (but not more than the gain realized on the
disposition) will be treated as ordinary income and the Company will generally
be entitled to a deduction for such amount. Any additional gain or loss will be
treated as a long-term or short-term capital gain or loss. Long-term capital
gain is generally taxed at a more favorable rate than ordinary income. Proposed
legislation would make such treatment even more favorable. There can be no
assurance, however, that such proposed legislation will be enacted.
Upon the exercise of a NQSO, the holder recognizes ordinary
income in an amount equal to the excess, if any, of the fair market value of the
shares on the date of exercise over the exercise price of the NQSO; the holder's
basis in the shares acquired is equal to the amount, if any, paid upon exercise,
increased by the amount of ordinary income required to be recognized; and the
Company is generally entitled to a deduction for the amount of ordinary income
recognized by the holder. If the optionee later sells the shares acquired
pursuant to the NQSO, he or she will recognize long-term or short-term capital
gain or loss depending upon the optionee's holding period for the stock.
Pursuant to currently applicable rules under Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the grant of
an option (and not its exercise) to a person who is subject to the reporting and
short-swing profit provisions under Section 16 of the Exchange Act (a "Section
16 Person") begins the six-month period of potential short-swing liability. The
taxable event for the exercise of a NQSO that has been outstanding at least six
months ordinarily will be the date of exercise. If a NQSO is exercised by a
Section 16 Person within six months after the date of grant, however, taxation
ordinarily will be deferred until the date which is six months after the date of
grant, unless the person has filed a timely election pursuant to Section 83(b)
of the Code to be taxed on the date of exercise. Pursuant to a recent amendment
to the rules under Section 16(b) of the Exchange Act, the six month period of
potential short-swing liability may be eliminated if the option grant (i) is
approved in advance by the Company's board of directors (or a committee
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<PAGE>
composed solely of two or more non-employee directors) or (ii) approved in
advance, or subsequently ratified by the Company's stockholders no later than
the next annual meeting of stockholders. Consequently, while there can be no
assurance that either of the conditions described in clauses (i) or (ii) above
will be satisfied with respect to awards made under the 1999 Plan, the taxable
event for the exercise of a NQSO that satisfies either of the conditions
described in clauses (i) or (ii) above will be the date of exercise.
In addition to the federal income tax consequences described
above, an optionee who exercises an ISO may be subject to the alternative
minimum tax, which is payable to the extent it exceeds the optionee's regular
tax. For this purpose, upon the exercise of an ISO, the excess of the fair
market value of the shares on the date of exercise over the exercise price
therefor is an increase to his alternative minimum taxable income. In addition,
the optionee's basis in such shares is increased by such amount for purposes of
computing the gain or loss on the disposition of the shares for alternative
minimum tax purposes. If an optionee is required to pay an alternative minimum
tax, the amount of such tax which is attributable to deferral preferences
(including the ISO adjustment) is allowed as a credit against the optionee's
regular tax liability in subsequent years. To the extent the credit is not used,
it is carried forward.
NEW PLAN BENEFITS
Subject to stockholder approval of the 1999 Plan, set forth below
is the number of shares of Common Stock underlying options currently determined
to be granted under the 1999 Plan to each of the persons indicated:
Name and Position Dollar Value Number of Options (1)
----------------- ------------ ---------------------
Warren D. Stowell (CEO) $0 0
David A. Jesse (COO) $0 0
Executive Group $0 0
Non-Executive Director Group $0 0
Non-Executive Officer Employee Group $0 0
- ---------------
(1) No grants of options under the 1999 Plan have been determined.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THIS PROPOSAL.
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<PAGE>
MISCELLANEOUS
STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be included in the Company's
proxy statement and form of proxy for presentation at the 1999 Annual Meeting of
Stockholders (the "1999 Meeting") pursuant to Rule 14a-8 ("Rule 14a-8"), as
promulgated under the Exchange Act, must be received by the Company not later
than February 7, 2000. For any stockholder proposal submitted for presentation
at the 1999 Meeting outside the processes of Rule 14a-8, such proposal must be
received by the Company not later than April 23, 2000.
OTHER MATTERS
Management does not intend to bring before the Meeting for action
any matters other than those specifically referred to above and is not aware of
any other matters which are proposed to be presented by others. If any other
matters or motions should properly come before the Meeting, the persons named in
the Proxy intend to vote thereon in accordance with their judgment on such
matters or motions, including any matters or motions dealing with the conduct of
the Meeting.
VOTING REQUIREMENTS
Assuming a quorum is present, directors shall be elected by a
plurality of the votes of the shares of Common Stock present in person or
represented by proxy at the Meeting and entitled to vote on such matter. The
affirmative vote of the majority of shares of Common Stock present in person or
represented by proxy at the Meeting and entitled to vote on such matter will be
required for approval of the 1999 Plan. Shares of Common Stock that are voted to
abstain with respect to any matter will be considered cast with respect to that
matter. Shares subject to broker non-votes with respect to any matter will not
be considered cast with respect to that matter.
By Order of the Board of Directors
David A. Jesse
Secretary
Dated: Heathrow, Florida
April 30, 1999
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<PAGE>
PROXY
SUNSTAR HEALTHCARE, INC.
ANNUAL MEETING OF STOCKHOLDERS
------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned Stockholder of Common Stock of SunStar Healthcare, Inc.
(the "Company") hereby revokes all previous proxies, acknowledges receipt of the
Notice of the Stockholders' Meeting to be held on June 7, 1999, and hereby
appoints Warren D. Stowell and David A. Jesse, and each of them, as proxies of
the undersigned, with full power of substitution, to vote and otherwise
represent all of the shares of the undersigned at said meeting and at any
adjournment or adjournments thereof with the same effect as if the undersigned
were present and voting the shares. The shares represented by this proxy shall
be voted in the following manner:
(1) Election of directors
|_| FOR all nominees listed below (except as indicated)
|_| WITHHOLD AUTHORITY to vote for all nominees listed below
TO WITHHOLD AUTHORITY FOR ANY INDIVIDUAL NOMINEE, STRIKE THROUGH THAT
NOMINEE'S NAME IN THE LIST BELOW:
Warren D. Stowell
David A. Jesse
Jerry Balter
David L. Rosier
(2) Approval of the 1999 Stock Option Plan
|_| FOR |_| AGAINST |_| ABSTAIN
(3) In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.
[CONTINUED AND TO BE SIGNED ON REVERSE SIDE]
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<PAGE>
THE SHARES REPRESENTED BY THIS PROXY, DULY EXECUTED, WILL BE VOTED IN ACCORDANCE
WITH THE SPECIFICATION MADE. IF NO SPECIFICATION IS MADE, THE SHARES REPRESENTED
BY THIS PROXY WILL BE VOTED FOR EACH OF THE ABOVE NOMINEES, AND FOR SUCH OTHER
MATTERS AS MAY PROPERLY COME BEFORE THE MEETING AS THE PROXYHOLDERS DEEM
ADVISABLE.
Dated: __________________, 1999
--------------------------------
Signature
--------------------------------
Print Name
--------------------------------
(Title, if appropriate)
This proxy should be signed by the Stockholder(s) exactly as his or her name
appears hereon. Persons signing in a fiduciary capacity should so indicate. If
shares are held by joint tenants or as community property, both should sign. If
a corporation, this proxy should be signed in full corporate name by the
president or other authorized officer and should bear the corporate seal. If a
partnership, please sign in partnership name by authorized person.
TO ASSURE YOUR REPRESENTATION AT THE ANNUAL MEETING, PLEASE MARK,
SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE
ENCLOSED ENVELOPE
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<PAGE>
APPENDIX A
1999 STOCK OPTION PLAN
of
SUNSTAR HEALTHCARE, INC.
1. PURPOSES OF THE PLAN. This stock option plan (the "Plan") is
intended to provide an incentive to key employees (including directors and
officers who are key employees) and to consultants and directors who are not
employees of SUNSTAR HEALTHCARE, INC., a Delaware corporation (the "Company"),
or any of its Subsidiaries (as defined in Paragraph 19), and to offer an
additional inducement in obtaining the services of such persons. The Plan
provides for the grant of "incentive stock options" ("ISOs") within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
and nonqualified stock options which do not qualify as ISOs ("NQSOs"). The
Company makes no representation or warranty, express or implied, as to the
qualification of any option as an "incentive stock option" under the Code.
2. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Paragraph 12, the aggregate number of shares of Common Stock, $.001 par value
per share, of the Company ("Common Stock") for which options may be granted
under the Plan shall not exceed 500,000. Such shares of Common Stock may, in the
discretion of the Board of Directors of the Company (the "Board of Directors"),
consist either in whole or in part of authorized but unissued shares of Common
Stock or shares of Common Stock held in the treasury of the Company. Subject to
the provisions of Paragraph 13, any shares of Common Stock subject to an option
which for any reason expires, is canceled or is terminated unexercised or which
ceases for any reason to be exercisable, shall again become available for the
granting of options under the Plan. The Company shall at all times during the
term of the Plan reserve and keep available such number of shares of Common
Stock as will be sufficient to satisfy the requirements of the Plan.
3. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Board of Directors which, to the extent it shall determine, may delegate its
powers with respect to the administration of the Plan to a committee of the
Board of Directors (the "Committee") consisting of not less than two directors
(or such greater number as required by law), each of whom shall be a
"non-employee director" within the meaning of Rule 16b-3 (or any successor rule
or regulation) promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). References in the Plan to determinations or actions by the
Committee shall be deemed to include determinations and actions by the Board of
Directors. Except as otherwise provided by the Board of Directors, the By-laws
of the Company or applicable law, a majority of the members of the Committee
shall constitute a quorum, and the acts of a majority of the members present at
any meeting at which a quorum is present, and any acts approved in writing by
all members without a meeting, shall be the acts of the Committee.
Subject to the express provisions of the Plan, the Committee
shall have the authority, in its sole discretion, to determine: the key
employees, consultants and Non-Employee
<PAGE>
Directors (as defined in Paragraph 19) who shall be granted options; the type of
option to be granted to a key employee; the times when an option shall be
granted; the number of shares of Common Stock to be subject to each option; the
term of each option; the date each option shall become exercisable; whether an
option shall be exercisable in whole, in part or in installments and, if in
installments, the number of shares of Common Stock to be subject to each
installment, whether the installments shall be cumulative, the date each
installment shall become exercisable and the term of each installment; whether
to accelerate the date of exercise of any option or installment; whether shares
of Common Stock may be issued upon the exercise of an option as partly paid and,
if so, the dates when future installments of the exercise price shall become due
and the amounts of such installments; the exercise price of each option; the
form of payment of the exercise price; whether to restrict the sale or other
disposition of the shares of Common Stock acquired upon the exercise of an
option and, if so, whether and under what conditions to waive any such
restriction; whether and under what conditions to subject all or a portion of
the grant or exercise of an option or the shares acquired pursuant to the
exercise of an option to the fulfillment of certain restrictions or
contingencies as specified in the contract referred to in Paragraph 11 hereof
(the "Contract") including, without limitation, restrictions or contingencies
relating to entering into a covenant not to compete with the Company, any of its
Subsidiaries or a Parent (as defined in Paragraph 19), to financial objectives
for the Company, any of its Subsidiaries or a Parent, a division of any of the
foregoing, a product line or other category, and/or to the period of continued
employment of the optionee with the Company, any of its Subsidiaries or a
Parent, and to determine whether such restrictions or contingencies have been
met; whether an optionee has a Disability (as defined in Paragraph 19); the
amount, if any, necessary to satisfy the obligation of the Company, a Subsidiary
or Parent to withhold taxes or other amounts; the fair market value of a share
of Common Stock; to construe the respective Contracts and the Plan; with the
consent of the optionee, to cancel or modify an option, provided, that the
modified provision is permitted to be included in an option granted under the
Plan on the date of the modification, and further, provided, that in the case of
a modification (within the meaning of Section 424(h) of the Code) of an ISO,
such option as modified would be permitted to be granted on the date of such
modification under the terms of the Plan; to prescribe, amend and rescind rules
and regulations relating to the Plan; and to make all other determinations
necessary or advisable for administering the Plan. Any controversy or claim
arising out of or relating to the Plan, any option granted under the Plan or any
Contract shall be determined unilaterally by the Committee in its sole
discretion. The determinations of the Committee on the matters referred to in
this Paragraph 3 shall be conclusive and binding on the parties. No member or
former member of the Committee shall be liable for any action, failure to act or
determination made in good faith with respect to the Plan, any Contract or any
option hereunder.
4. ELIGIBILITY. The Committee may from time to time, in its sole
discretion, consistent with the purposes of the Plan, grant options to (a) key
employees (including officers and directors who are key employees) of the
Company or any of its Subsidiaries, (b) consultants to the Company or any of its
Subsidiaries and (c) Non-Employee Directors. Such options granted shall cover
such number of shares of Common Stock as the Committee may determine, in its
sole
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<PAGE>
discretion, as set forth in the applicable Contract; provided, however, that the
maximum number of shares subject to options that may be granted to any employee
in any fiscal year of the Company under the Plan (the "162(m) Maximum") may not
exceed 100,000; and further, provided, that the aggregate market value
(determined at the time the option is granted in accordance with Paragraph 5) of
the shares of Common Stock for which any eligible employee may be granted ISOs
under the Plan or any other plan of the Company, or of a Parent or a Subsidiary
of the Company, which are exercisable for the first time by such optionee during
any calendar year shall not exceed $100,000. Such ISO limitation shall be
applied by taking ISOs into account in the order in which they were granted. Any
option granted in excess of such ISO limitation amount shall be treated as a
NQSO to the extent of such excess.
5. EXERCISE PRICE. The exercise price of the shares of Common
Stock under each option shall be determined by the Committee, in its sole
discretion, as set forth in the applicable Contract; provided, however, that the
exercise price shall not be less than 100% of the fair market value of the
Common Stock subject to such option on the date of grant; and further, provided,
that if, at the time an ISO is granted, the optionee owns (or is deemed to own
under Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries or of a Parent, the exercise price of such ISO shall not be less
than 110% of the fair market value of the Common Stock subject to such ISO on
the date of grant.
The fair market value of a share of Common Stock on any day
shall be (a) if the principal market for the Common Stock is a national
securities exchange, the average of the highest and lowest sales prices per
share of Common Stock on such day as reported by such exchange or on a composite
tape reflecting transactions on such exchange, (b) if the principal market for
the Common Stock is not a national securities exchange and the Common Stock is
quoted on The Nasdaq Stock Market ("Nasdaq"), and (i) if actual sales price
information is available with respect to the Common Stock, the average of the
highest and lowest sales prices per share of Common Stock on such day on Nasdaq,
or (ii) if such information is not available, the average of the highest bid and
lowest asked prices per share of Common Stock on such day on Nasdaq, or (c) if
the principal market for the Common Stock is not a national securities exchange
and the Common Stock is not quoted on Nasdaq, the average of the highest bid and
lowest asked prices per share of Common Stock on such day as reported on the OTC
Bulletin Board Service or by National Quotation Bureau, Incorporated or a
comparable service; provided, however, that if clauses (a), (b) and (c) of this
Paragraph are all inapplicable, or if no trades have been made or no quotes are
available for such day, the fair market value of the Common Stock shall be
determined by the Board of Directors or the Committee by any method consistent
with applicable regulations adopted by the Treasury Department relating to stock
options.
6. TERM. The term of each option granted pursuant to the Plan
shall be such term as is established by the Committee, in its sole discretion,
as set forth in the applicable Contract; provided, however, that the term of
each ISO granted pursuant to the Plan shall be for a period
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<PAGE>
not exceeding 10 years from the date of grant thereof; and further, provided,
that if, at the time an ISO is granted, the optionee owns (or is deemed to own
under Section 424(d) of the Code) stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, of any of its
Subsidiaries or of a Parent, the term of the ISO shall be for a period not
exceeding five years from the date of grant. Options shall be subject to earlier
termination as hereinafter provided.
7. EXERCISE. An option (or any part or installment thereof), to
the extent then exercisable, shall be exercised by giving written notice to the
Company at its principal office stating which option is being exercised,
specifying the number of shares of Common Stock as to which such option is being
exercised and accompanied by payment in full of the aggregate exercise price
therefor (or the amount due on exercise if the applicable Contract permits
installment payments) (a) in cash or by certified check or (b) if the applicable
Contract permits, with previously acquired shares of Common Stock having an
aggregate fair market value on the date of exercise (determined in accordance
with Paragraph 5) equal to the aggregate exercise price of all options being
exercised, or with any combination of cash, certified check or shares of Common
Stock having such value. The Company shall not be required to issue any shares
of Common Stock pursuant to any such option until all required payments,
including any required withholding, have been made.
A person entitled to receive Common Stock upon the exercise
of an option shall not have the rights of a stockholder with respect to such
shares of Common Stock until the date of issuance of a stock certificate for
such shares or in the case of uncertificated shares, an entry is made on the
books of the Company's transfer agent representing such shares; provided,
however, that until such stock certificate is issued or book entry is made, any
optionee using previously acquired shares of Common Stock in payment of an
option exercise price shall continue to have the rights of a stockholder with
respect to such previously acquired shares.
In no case may a fraction of a share of Common Stock be
purchased or issued under the Plan.
8. TERMINATION OF RELATIONSHIP. Except as may otherwise be
expressly provided in the applicable Contract, an optionee whose relationship
with the Company, its Parent and Subsidiaries as an employee or a consultant has
terminated for any reason (other than as a result of the death or Disability of
the optionee) may exercise his options, to the extent exercisable on the date of
such termination, at any time within three months after the date of termination,
but not thereafter and in no event after the date the option would otherwise
have expired; provided, however, that if such relationship is terminated either
(a) for Cause (as defined in Paragraph 19), or (b) without the consent of the
Company, such option shall terminate immediately. Except as may otherwise be
expressly provided in the applicable Contract, options granted under the Plan to
an employee or consultant shall not be affected by any change in the status of
the optionee so long as the optionee continues to be an employee of, or a
consultant to, the Company, or any of the
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<PAGE>
Subsidiaries or a Parent (regardless of having changed from one to the other or
having been transferred from one corporation to another).
For the purposes of the Plan, an employment relationship
shall be deemed to exist between an individual and the Company, any of its
Subsidiaries or a Parent if, at the time of the determination, the individual
was an employee of such corporation for purposes of Section 422(a) of the Code.
As a result, an individual on military, sick leave or other bona fide leave of
absence shall continue to be considered an employee for purposes of the Plan
during such leave if the period of the leave does not exceed 90 days, or, if
longer, so long as the individual's right to reemployment with the Company, any
of its Subsidiaries or a Parent is guaranteed either by statute or by contract.
If the period of leave exceeds 90 days and the individual's right to
reemployment is not guaranteed by statute or by contract, the employment
relationship shall be deemed to have terminated on the 91st day of such leave.
Except as may otherwise be expressly provided in the
applicable Contract, an optionee whose relationship with the Company as a
Non-Employee Director ceases for any reason (other than as a result of his death
or Disability) may exercise his options, to the extent exercisable on the date
of such termination, at any time within three months after the date of
termination, but not thereafter and in no event after the date the option would
otherwise have expired; provided, however, that if such relationship is
terminated for Cause, such option shall terminate immediately. Except as may
otherwise be expressly provided in the applicable Contract, options granted to a
Non-Employee Director shall not be affected by the optionee becoming an employee
of the Company, any of its Subsidiaries or a Parent.
Nothing in the Plan or in any option granted under the Plan
shall confer on any optionee any right to continue in the employ of, or as a
consultant to, the Company, any of its Subsidiaries or a Parent, or as a
director of the Company, or interfere in any way with any right of the Company,
any of its Subsidiaries or a Parent to terminate the optionee's relationship at
any time for any reason whatsoever without liability to the Company, any of its
Subsidiaries or a Parent.
9. DEATH OR DISABILITY OF AN OPTIONEE. Except as may otherwise be
expressly provided in the applicable Contract, if an optionee dies (a) while he
is an employee of, or consultant to, the Company, any of its Subsidiaries or a
Parent, (b) within three months after the termination of such relationship
(unless such termination was for Cause or without the consent of the Company) or
(c) within one year following the termination of such relationship by reason of
his Disability, the options that were granted to him as an employee or
consultant may be exercised, to the extent exercisable on the date of his death,
by his Legal Representative (as defined in Paragraph 19) at any time within one
year after death, but not thereafter and in no event after the date the option
would otherwise have expired.
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Except as may otherwise be expressly provided in the
applicable Contract, any optionee whose relationship as an employee of, or
consultant to, the Company, its Parent and Subsidiaries has terminated by reason
of such optionee's Disability may exercise the options that were granted to him
as an employee or consultant, to the extent exercisable upon the effective date
of such termination, at any time within one year after such date, but not
thereafter and in no event after the date the option would otherwise have
expired.
Except as may otherwise be expressly provided in the
applicable Contract, any optionee whose relationship as a Non-Employee Director
ceases as a result of his death or Disability may exercise the options that were
granted to him as a Non-Employee Director, to the extent exercisable on the date
of such termination, at any time within one year after the date of termination,
but not thereafter and in no event after the date the option would otherwise
have expired. In the case of the death of the Non-Employee Director, the option
may be exercised by his Legal Representative.
10. COMPLIANCE WITH SECURITIES LAWS. The Committee may require, in
its sole discretion, as a condition to the exercise of any option that either
(a) a Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (b)
there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such exercise. Nothing herein shall
be construed as requiring the Company to register shares subject to any option
under the Securities Act or to keep any Registration Statement effective or
current.
The Committee may require, in its sole discretion, as a
condition to the receipt of an option or the exercise of any option that the
optionee execute and deliver to the Company his representations and warranties,
in form, substance and scope satisfactory to the Committee, which the Committee
determines are necessary or convenient to facilitate the perfection of an
exemption from the registration requirements of the Securities Act, applicable
state securities laws or other legal requirement, including without limitation
that (a) the shares of Common Stock to be issued upon the exercise of the option
are being acquired by the optionee for his own account, for investment only and
not with a view to the resale or distribution thereof, and (b) any subsequent
resale or distribution of shares of Common Stock by such optionee will be made
only pursuant to (i) a Registration Statement under the Securities Act which is
effective and current with respect to the shares of Common Stock being sold, or
(ii) a specific exemption from the registration requirements of the Securities
Act, but in claiming such exemption, the optionee shall prior to any offer of
sale or sale of such shares of Common Stock provide the Company with a favorable
written opinion of counsel satisfactory to the Company, in form, substance and
scope satisfactory to the Company, as to the applicability of such exemption to
the proposed sale or distribution.
In addition, if at any time the Committee shall determine,
in its sole discretion, that the listing or qualification of the shares of
Common Stock subject to any option on any
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securities exchange, Nasdaq or under any applicable law, or the consent or
approval of any governmental agency or regulatory body, is necessary or
desirable as a condition to, or in connection with, the granting of an option or
the issuing of shares of Common Stock thereunder, such option may not be granted
and such option may not be exercised in whole or in part unless such listing,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Committee.
11. CONTRACTS. Each option shall be evidenced by an appropriate
Contract which shall be duly executed by the Company and the optionee, and shall
contain such terms, provisions and conditions not inconsistent herewith as may
be determined by the Committee. The terms of each option and Contract need not
be identical.
12. ADJUSTMENTS UPON CHANGES IN COMMON STOCK. (a) Notwithstanding
any other provision of the Plan, in the event of a stock dividend,
recapitalization, merger or consolidation in which the Company is the surviving
corporation, or a spin-off, split-up, combination or exchange of shares or the
like which results in a change in the number or kind of shares of Common Stock
which is outstanding immediately prior to such event, the Committee shall
appropriately adjust the aggregate number and kind of shares subject to the
Plan, the aggregate number and kind of shares subject to each outstanding option
and the exercise price thereof. Such adjustments shall be conclusive and binding
on all parties and may provide for the elimination of fractional shares which
might otherwise be subject to options without payment therefor.
(b) Notwithstanding any other provision of the Plan, in the
event of: (i) any transaction (which shall include a series of transactions
occurring within 60 days or occurring pursuant to a plan), that has the result
that stockholders of the Company immediately before such transaction cease to
own at least 50.1% of the voting stock of the Company or of any entity that
results from the participation of the Company in a reorganization,
consolidation, merger, liquidation or any other form of corporate transaction;
(ii) approval by the Company's stockholders of a plan of merger, consolidation,
reorganization, liquidation or dissolution in which the Company does not survive
(unless the approved merger, consolidation, reorganization, liquidation or
dissolution is subsequently abandoned); or (iii) approval by the Company's
stockholders of a plan for the sale, lease, exchange or other disposition of all
or substantially all of the property and assets of the Company (unless such plan
is subsequently abandoned), each outstanding option shall become immediately
vested and fully exercisable.
13. AMENDMENTS AND TERMINATION OF THE PLAN. The Plan was adopted
by the Board of Directors on January 25, 1999. No may be granted under the Plan
after January 24, 2009. The Board of Directors, without further approval of the
Company's stockholders, may at any time suspend or terminate the Plan, in whole
or in part, or amend it from time to time in such respects as it may deem
advisable, including, without limitation, in order that ISOs granted hereunder
meet the requirements for "incentive stock options" under the Code, to comply
with the
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provisions of Rule 16b-3 promulgated under the Exchange Act, Section 162(m)
under the Code and to conform to any change in applicable law, regulations,
rulings or interpretations of any administrative agency; provided, however, that
no amendment shall be effective without the requisite prior or subsequent
stockholder approval which would (a) except as contemplated in Paragraph 12,
increase the maximum number of shares of Common Stock for which options may be
granted under the Plan or the 162(m) Maximum, (b) change the eligibility
requirements to receive options hereunder or (c) make any other change for which
applicable law requires stockholder approval. No termination, suspension or
amendment of the Plan shall, without the consent of the optionee, adversely
affect his rights under any option granted under the Plan. The power of the
Committee to construe and administer any option granted under the Plan prior to
the termination or suspension of the Plan nevertheless shall continue after such
termination or during such suspension.
14. NON-TRANSFERABILITY. No option granted under the Plan shall be
transferable otherwise than by will or the laws of descent and distribution, and
options may be exercised, during the lifetime of the optionee, only by the
optionee or his Legal Representatives. Except to the extent provided above,
options may not be assigned, transferred, pledged, hypothecated or disposed of
in any way (whether by operation of law or otherwise) and shall not be subject
to execution, attachment or similar process, and any such attempted assignment,
transfer, pledge, hypothecation or disposition shall be null and void ab initio
and of no force or effect.
15. WITHHOLDING TAXES. The Company, a Subsidiary or Parent may
withhold (a) cash, (b) shares of Common Stock to be issued upon exercise of an
option having an aggregate fair market value on the relevant date (determined in
accordance with Paragraph 5), or (c) any combination thereof, in an amount equal
to the amount which the Committee determines is necessary to satisfy the
obligation of the Company, a Subsidiary or Parent to withhold federal, state and
local income taxes or other amounts incurred by reason of the grant, vesting,
exercise or disposition of an option, or the disposition of the underlying
shares of Common Stock. Alternatively, the Company may require the holder to pay
to the Company such amount, in cash, promptly upon demand.
16. LEGENDS; PAYMENT OF EXPENSES. The Company may endorse such
legend or legends upon the certificates for shares of Common Stock issued upon
exercise of an option under the Plan and may issue such "stop transfer"
instructions to its transfer agent in respect of such shares as it determines,
in its discretion, to be necessary or appropriate to (a) prevent a violation of,
or to perfect an exemption from, the registration requirements of the Securities
Act and any applicable state securities laws, (b) implement the provisions of
the Plan or any agreement between the Company and the optionee with respect to
such shares of Common Stock, or (c) permit the Company to determine the
occurrence of a "disqualifying disposition," as described in Section 421(b) of
the Code, of the shares of Common Stock issued or transferred upon the exercise
of an ISO granted under the Plan.
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The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option granted under
the Plan, as well as all fees and expenses incurred by the Company in connection
with such issuance.
17. USE OF PROCEEDS. The cash proceeds received upon the exercise
of an option under the Plan shall be added to the general funds of the Company
and used for such corporate purposes as the Board of Directors may determine.
18. SUBSTITUTIONS AND ASSUMPTIONS OF OPTIONS OF CERTAIN
CONSTITUENT CORPORATIONS. Anything in this Plan to the contrary notwithstanding,
the Board of Directors may, without further approval by the stockholders,
substitute new options for prior options of a Constituent Corporation (as
defined in Paragraph 19) or assume the prior options of such Constituent
Corporation.
19. DEFINITIONS. For purposes of the Plan, the following terms
shall be defined as set forth below:
(a) "Cause" shall mean (i) in the case of an employee or
consultant, if there is a written employment or consulting agreement between the
optionee and the Company, any of its Subsidiaries or a Parent which defines
termination of such relationship for cause, cause as defined in such agreement,
and (ii) in all other cases, cause as defined by applicable state law.
(b) "Constituent Corporation" shall mean any corporation
which engages with the Company, any of its Subsidiaries or a Parent in a
transaction to which Section 424(a) of the Code applies (or would apply if the
option assumed or substituted were an ISO), or any Parent or any Subsidiary of
such corporation.
(c) "Disability" shall mean a permanent and total disability
within the meaning of Section 22(e)(3) of the Code.
(d) "Legal Representative" shall mean the executor,
administrator or other person who at the time is entitled by law to exercise the
rights of a deceased or incapacitated optionee with respect to an option granted
under the Plan.
(e) "Non-Employee Director" shall mean a person who is a
director of the Company, but is not an employee of the Company, any of its
Subsidiaries or a Parent.
(f) "Parent" shall have the same definition as "parent
corporation" in Section 424(e) of the Code.
(g) "Subsidiary" shall have the same definition as
"subsidiary corporation" in Section 424(f) of the Code.
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20. GOVERNING LAW; CONSTRUCTION. The Plan, the options and
Contracts hereunder and all related matters shall be governed by, and construed
in accordance with, the laws of the State of Delaware, without regard to
conflict of law provisions that would defer to the substantive laws of another
jurisdiction.
Neither the Plan nor any Contract shall be construed or
interpreted with any presumption against the Company by reason of the Company
causing the Plan or Contract to be drafted. Whenever from the context it appears
appropriate, any term stated in either the singular or plural shall include the
singular and plural, and any term stated in the masculine, feminine or neuter
gender shall include the masculine, feminine and neuter.
21. PARTIAL INVALIDITY. The invalidity, illegality or
unenforceability of any provision in the Plan, any option or Contract shall not
affect the validity, legality or enforceability of any other provision, all of
which shall be valid, legal and enforceable to the fullest extent permitted by
applicable law.
22. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by
a majority of the votes present in person or by proxy and entitled to vote
hereon at the next duly held meeting of the Company's stockholders at which a
quorum is present. No options granted hereunder may be exercised prior to such
approval; provided, however, that the date of grant of any option shall be
determined as if the Plan had not been subject to such approval. Notwithstanding
the foregoing, if the Plan is not approved by a vote of the stockholders of the
Company on or before January 25, 2000, then the Plan and any options granted
hereunder shall terminate.
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