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:
[x] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14A-6(e)(2)) [ ] Definitive Proxy Statement [ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Netsmart Technologies, Inc.
(Name of Registrant as Specified In Its Charter)
N.A.
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] 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:
..............................................................
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: ...............................................
<PAGE>
Netsmart Technologies, Inc.
146 Nassau Avenue
Islip, New York 11751
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
August 27, 1998
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting of Stockholders (the
"Annual Meeting") of Netsmart Technologies, Inc., a Delaware corporation (the
"Company"), will be held at the offices of the Company, 146 Nassau Avenue,
Islip, New York 11751 on August 27, 1998, at 9:00 A.M. local time, for the
purpose of considering and acting upon the following matters:
(1) The election of six (6) directors to serve until the 1999 Annual
Meeting of Stockholders and until their successors shall be
elected and qualified;
(2) The approval of a one-for-three reverse split of the Common Stock.
(3) The approval of the 1998 Long-Term Incentive Plan.
(4) The approval of Richard A. Eisner & Company, LLP as the Company's
independent certified public accountants for the year ending
December 31, 1998; and
(5) The transaction of such other and further business as may
properly come before the meeting.
The Board of Directors of the Company has fixed the close of business on
July 15, 1998 as the record date (the "Record Date") for the determination of
stockholders entitled to notice of and to vote at the 1998 Annual Meeting. A
list of stockholders eligible to vote at the 1998 Annual Meeting will be
available for inspection during normal business hours for purposes germane to
the meeting during the ten days prior to the meeting at the offices of the
Company, 146 Nassau Avenue, Islip, New York 11751.
The enclosed Proxy Statement contains information pertaining to the
matters to be voted on at the Annual Meeting. A copy of the Company's Annual
Report to Stockholders for 1997 is being mailed with this Proxy Statement.
By order of the Board of Directors
Anthony F. Grisanti
Secretary
Islip, New York
July 27, 1998
THE MATTERS BEING VOTED ON AT THE ANNUAL MEETING ARE IMPORTANT TO THE COMPANY,
AND CERTAIN OF THE MATTERS REQUIRE THE APPROVAL OF THE HOLDERS OF A MAJORITY OF
THE OUTSTANDING SHARES OF COMMON STOCK. IN ORDER THAT YOUR VOTE IS COUNTED AT
THE ANNUAL MEETING, PLEASE EXECUTE, DATE AND PROMPTLY MAIL THE ENCLOSED PROXY
CARD IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. THE GIVING OF A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON AT
THE ANNUAL MEETING IF THE PROXY IS REVOKED IN THE MANNER SET FORTH IN THE PROXY
STATEMENT.
<PAGE>
NETSMART TECHNOLOGIES, INC.
PROXY STATEMENT
1998 Annual Meeting of Stockholders
GENERAL INFORMATION
-------------------
The accompanying proxy and this Proxy Statement are furnished in
connection with the solicitation by the Board of Directors of Netsmart
Technologies, Inc., a Delaware corporation (the "Company"), of proxies for use
at the Company's 1998 Annual Meeting of Stockholders (the "Annual Meeting") to
be held at the offices of the Company, 146 Nassau Avenue, Islip, New York 11751,
on August 27, 1998 at 9:00 A.M. or at any adjournment thereof. This Proxy
Statement and the related proxy and the 1997 Annual Report to Stockholders (the
"Annual Report") are being mailed to stockholders of the Company on or about
July 27, 1998.
At the Annual Meeting, stockholders will vote on (a) the election of six
(6) directors to serve until the 1999 Annual Meeting of Stockholders and until
their successors shall be elected and qualified, (b) the approval of a one-
for-three reverse split in the Company's common stock, (c) the approval of the
1998 Long-Term Incentive Plan, (d) the approval of Richard A. Eisner & Company,
LLP as the Company's independent certified public accountants for the year
ending December 31, 1998, and (e) the transaction of such other and further
business as may properly come before the meeting. The Board of Directors does
not know of any other matters which will be voted upon at the Annual Meeting.
Stockholders are encouraged to review the detailed discussion presented
in this Proxy Statement and either return the completed and executed proxy or
attend the Annual Meeting.
Record Date; Outstanding Shares; Voting Rights and Proxies
Stockholders of record at the close of business on July 15, 1998 (the
"Record Date"), are entitled to notice and to vote at the Annual Meeting. As of
the close of business on the Record Date there were outstanding 8,360,762 shares
of common stock of the Company ("Common Stock"). The holders of the Common Stock
are entitled to one vote for each share owned of record on the Record Date.
The presence in person or by proxy of holders of a majority of the
shares of voting stock of the Company entitled to be voted will constitute a
quorum for the transaction of business at the Annual Meeting. If a stockholder
files a proxy or attends the Annual Meeting, his or her shares are counted as
being present at the Annual Meeting for purposes of determining whether there is
a quorum, even if the stockholder abstains from voting on all matters. The vote
required for the election of directors and approval of other proposals is set
forth in the discussion of each proposal.
Each stockholder of the Company is requested to complete, sign, date and
return the enclosed proxy without delay in order to ensure that his or her
shares are voted at the Annual Meeting. The return of a signed proxy will not
affect a stockholder's right to attend the Annual Meeting and vote in person.
Any stockholder giving a proxy has the right to revoke it at any time before it
is exercised by executing and returning a proxy bearing a later date, by giving
a written notice of revocation to the Secretary of the Company, or by attending
the Annual Meeting and voting in person. There is no required form for a proxy
revocation. All properly executed proxies not revoked will be voted at the
Annual Meeting in accordance with the instructions contained therein.
If a proxy is signed and returned, but no specification is made with
respect to any or all of the proposals listed therein, the shares represented by
such proxy will be voted for all the proposals, including the Election of
Directors. Abstentions and broker non-votes are not counted as votes "for" or
"against" a proposal, but where the affirmative
- 1 -
<PAGE>
<TABLE>
vote on the subject matter is required for approval, abstentions and broker
non-votes are counted in determining the number of shares present or
represented.
Cost of Solicitation
The Company will bear the costs of soliciting proxies. In addition to
the solicitation of proxies by mail, directors, officers and employees of the
Company, who will receive no compensation in addition to their regular salary,
may solicit proxies by mail, telecopier, telephone or personal interview. The
Company will request that brokers and other custodians, nominees and fiduciaries
forward proxy material to the beneficial holders of the Common Stock held of
record by such persons, where appropriate, and will, upon request, reimburse
such persons for their reasonable out-of-pocket expenses incurred in connection
therewith.
BENEFICIAL OWNERSHIP OF SECURITIES AND SECURITY HOLDINGS OF MANAGEMENT
----------------------------------------------------------------------
Set forth below is information as of June 15, 1998, as to each person
owning of record or known by the Company, based on information provided to the
Company by the persons named below, to own beneficially at least 5% of the
Company's Common Stock and all officers and directors as a group.
<S> <C> <C>
Percent of Outstanding
----------------------
Name and Address(1) Shares Common Stock
- ----------------- ------ ------------
SIS Capital Corp. 3,542,872(2) 39.7%
Consolidated Technology Group Ltd.
160 Broadway
New York, NY 10038
Seymour Richter 3,542,872(2,3) 39.7%
160 Broadway
New York, NY 10038
James L. Conway 293,750(4) 3.4%
Edward D. Bright 131,766(5) 1.6%
John F. Phillips 131,766(6) 1.6%
Gerald O. Koop 84,670(7) 1.0%
Anthony F. Grisanti 67,384(8) *
Joseph G. Sicinski -- --
All directors and officers as a group 4,252,208(9) 45.2%
(seven individuals)
- ----------
<FN>
(1) Unless otherwise indicated, each person has the sole voting and sole
investment power and direct beneficial ownership of the shares.
(2) Represents (a) 2,977,872 shares of Common Stock owned by SIS Capital
Corp. ("SISC") and (b) 565,000 shares of Common Stock issuable upon
exercise of Series B Warrants owned by SISC which are exercisable at
$2.00 per share (15,000 shares) and $4.00 per share (550,000 shares).
The warrants expire on December 31, 1999. SISC is a wholly-owned
subsidiary of Consolidated Technology Group Ltd. ("Consolidated"), which
is a public company. Mr. Edward D. Bright is chairman of the board and a
director of Consolidated and Mr. Seymour Richter is president and acting
chief executive officer of Consolidated. Messrs. Bright and Richter
constitute two of the three directors of Consolidated. By virtue of his
position as president and acting chief executive officer of
Consolidated, Mr. Richter may be deemed to have power to vote and
dispose of the shares owned by Consolidated.
(3) Mr. Richter disclaims beneficial interest in any of the securities
owned by SISC or Consolidated.
</FN>
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
- ----------
<FN>
(4) Includes 268,750 shares of Common Stock issuable upon exercise of Series
B Warrants owned by Mr. Conway, which are exercisable at $2.00 per share
(100,000 shares) and $4.00 per share (168,750 shares) and expire
December 31, 1999.
(5) Includes 65,766 shares of Common Stock issuable upon exercise of
outstanding options held by Mr. Bright.
(6) Includes 65,766 shares of Common Stock issuable upon exercise of
outstanding options held by Mr. Phillips.
(7) Includes 23,953 shares of Common Stock issuable upon exercise of
outstanding options held by Mr. Koop.
(8) Includes 47,464 shares of Common Stock issuable upon exercise of
outstanding options held by Mr. Grisanti.
(9) Footnotes 2 through 8 are incorporated by reference.
</FN>
ELECTION OF DIRECTORS
---------------------
Directors of the Company are elected annually by the stockholders to
serve until the next annual meeting of stockholders and until their respective
successors are duly elected. The bylaws of the Company provide that the number
of directors comprising the whole board shall be determined from time to time by
the Board of Directors. The Board of Directors has established the size of the
board for the ensuing year at six directors and is recommending that the six
incumbent directors of the Company be re-elected. If any nominee becomes
unavailable for any reason, a situation which is not anticipated, a substitute
nominee may be proposed by the Board of Directors, and any shares represented by
proxy will be voted for any substitute nominee, unless the Board reduces the
number of directors.
The Board of Directors is presently comprised of six individuals,
Messrs. James L. Conway, Edward D. Bright, John F. Phillips, Gerald O. Koop,
Seymour Richter and Joseph G. Sicinski. The Annual Meeting is the first
annual meeting of the Company since the Company's initial public offering in
August 1996. Messrs. Conway and Phillips were directors of the Company at the
time of the Company's initial public offering. Messrs. Bright and Richter were
elected to the board in April 1998, effective upon the resignation of Messrs.
Lewis S. Schiller and Norman J. Hoskin. Messrs. Koop and Sicinski were elected
to the board in June 1998.
The following table sets forth certain information concerning the
nominees for director:
<S> <C> <C> <C>
Name Age Position with the Company Director Since
---- --- ------------------------- --------------
Edward D. Bright(1) 61 Chairman of the board and director 1998
James L. Conway 50 President, chief executive officer and director 1996
John F. Phillips 60 Vice president - marketing and director 1994
Gerald O. Koop 59 Chief executive officer of Creative Socio-Medics 1998
Corp. and director
Seymour Richter1 61 Director 1998
Joseph G. Sicinski1 66 Director 1998
<FN>
1 Member of the audit and compensation committees.
Mr. Edward D. Bright has been chairman of the board and a director of
the Company since April 1998. In April 1998, Mr. Bright was also elected as
chairman, secretary, treasurer and a director of Consolidated, a public company
whose business, in addition to its interest in the Company, includes technical
temporary staffing services through Trans Global Services, Inc. ("Trans
Global"), a public corporation in which Consolidated is the controlling
stockholder, and telecommunications services, through a subsidiary, and chairman
of the board and a director of
</FN>
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</TABLE>
<PAGE>
Trans Global. From January 1996 until April 1998, Mr. Bright was an executive
officer of or advisor to Creative Socio Medics Corp. ("CSM"), a subsidiary of
the Company which was acquired from Advanced Computer Techniques, Inc. ("ACT")
in June 1994. From June 1994 until January 1996, he was chief executive officer
of the Company. He was a senior executive officer and a director of CSM and ACT
for more than two years prior to June 1994.
Mr. James L. Conway has been president and a director of the Company
since January 1996 and chief executive officer since April 1998. From 1993 until
April 1998, he was president of S-Tech, which, until April 1998, was a
wholly-owned subsidiary of Consolidated which manufactures specialty vending
equipment for postal, telecommunication and other industries. From 1997 until
April 1998, Mr. Conway was also president of other subsidiaries of Consolidated
engaged in manufacturing. From 1990 to 1993, he was a consultant to General
Aero Products Corp., a Long Island based defense manufacturing firm, as debtor
in possession following its filing under Chapter 11 of the Federal Bankruptcy
Act in 1989. Mr. Conway is also a director of Trans Global.
Mr. John F. Phillips has been a director of the Company and vice
president of CSM since June 1994, when CSM was acquired, and vice
president-marketing of the Company since 1996. He has also been vice president
- -- marketing of the Company from June 1994 to January 1996. He was a senior
executive officer and director of CSM and ACT for more than five years prior to
June 1994. From January 1993 to June 1994, he was chairman of the Board of CSM
and ACT. From 1986 until December 1992, he was president of CSM and ACT.
Mr. Gerald O. Koop has been a director of the Company since June 1998.
He has held management positions with CSM for more than the past five years,
most recently as its chief executive officer, a position he has held since 1996.
Mr. Seymour Richter has been a director of the Company since April 1998.
Since April 1998, he has been president, acting chief executive officer and a
director of Consolidated. From July 1995 until April 1998, Mr. Richter was
employed by Patterson Travis Operating Account, Inc., a private company that
makes investments for its own account. For more than five years prior thereto,
he was the chief executive officer of Touch Base Ltd., an independent selling
organization in the apparel industry. Mr. Richter is also a director Trans
Global.
Mr. Joseph G. Sicinski has been a director of the Company since June
1998. He is president and a director of the Trans Global, a position he held
with Trans Global and its predecessor since September 1992. Since April 1998, he
has also been chief executive officer of Trans Global.
Messrs. Bright and Richter were elected to the board following the
resignation of Messrs. Lewis S. Schiller and Norman J. Hoskin in April 1998.
Messrs. Koop and Sicinski were elected as directors in June 1998.
In 1997, the Board of Directors created audit and compensation
committees, both of which consists of Messrs. Bright, Richter and Sicinski, each
of whom is a non-employee director. The audit committee has the authority to
approve the Company's audited financial statements, to meet with the Company's
independent auditors, to review with the auditors and with management any
management letter issued by the auditors and to generally exercise the power
normally accorded an audit committee of a public corporation. In addition, any
transactions between the Company or its subsidiaries, on the one hand, and any
officer, director or principal stockholder or any affiliate of any officer,
director or principal stockholder, on the other hand, requires the prior
approval of the audit committee.
The compensation committee serves as the stock option committee pursuant
to the Company's stock option plans. In addition, it reviews and approves any
changes in compensation for the Company's executive officers.
Directors are elected for a term of one year.
None of the Company's officers and directors are related.
- 4 -
<PAGE>
The Company's certificate of incorporation includes certain provisions,
permitted under Delaware law, which provide that a director of the Company shall
not be personally liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for any transaction from which
the director derived an improper personal benefit, or (iv) for certain conduct
prohibited by law. The Certificate of Incorporation also contains broad
indemnification provisions. These provisions do not affect the liability of any
director under Federal or applicable state securities laws.
Approval Required
- -----------------
Provided that a quorum is present at the Annual Meeting, the six
directors receiving the most votes are elected as directors for a term of one
year and until their successors are elected and qualified.
The Board of Directors recommends a vote FOR the nominees listed above.
Meetings, Committees of the Board of Directors and Directors Compensation
- -------------------------------------------------------------------------
In 1997, the Board of Directors created audit and compensation
committees. The audit committee has the authority to approve the Company's
audited financial statements, to meet with the Company's independent auditors,
to review with the auditors and with management any management letter issued by
the auditors and to generally exercise the power normally accorded an audit
committee of a public corporation. In addition, any transactions between the
Company or its subsidiaries, on the one hand, and any officer, director or
principal stockholder or any affiliate of any officer, director or principal
stockholder, on the other hand, requires the prior approval of the audit
committee.
The compensation committee serves as the stock option committee for the
Company's stock option plans and reviews and approves any changes in
compensation for the Company's executive officers.
During 1997, the compensation committee had one meeting and the audit
committee did not have any meetings.
Excluding actions by unanimous written consent, during 1997 the Board of
Directors held one meeting. Messrs. James L. Conway and John Phillips, the only
directors who were directors during 1997, attended such meeting.
During 1997, the Company did not pay any fees to directors. Commencing
June 1998, the Company pays each director who is not employed by the Company a
monthly fee of $750, and the chairman of the board a monthly fee of $1,500.
EXECUTIVE OFFICERS
Set forth below are the executive officers of the Company and
information concerning the one officer who is not also a director of the
Company.
- 5 -
<PAGE>
<TABLE>
Name Position
---- --------
James L. Conway President and chief executive officer
Anthony F. Grisanti Chief financial officer, treasurer and secretary
John F. Phillips Vice president -- marketing
Gerald O. Koop Chief executive officer of CSM
Mr. Anthony F. Grisanti has been treasurer of the Company since June
1994, secretary since February 1995 and chief financial officer since January
1996. He was chief financial officer of CSM and ACT for more than five years
prior thereto.
EXECUTIVE COMPENSATION
----------------------
Set forth below is information with respect to compensation paid or
accrued by the Company for 1997, 1996 and 1995 to its chief executive officer
and to each other officer whose compensation exceeded $100,000 for 1997.
SUMMARY COMPENSATION TABLE
<S> <C> <C> <C> <C> <C>
Annual Compensation Long-Term Compensation (Awards)
------------------- -------------------------------
Restricted Stock Options, SARs
---------------- -------------
Name and Principal Position Year Salary Bonus Awards (Dollars) (Number)
- --------------------------- ---- ------ ----- ---------------- -----------
Lewis S. Schiller, CEO(1) 1997 -- -- -- --
1996 -- -- -- --
1995 -- -- -- 52,500
James L. Conway, president 1997 $125,000 -- -- --
1996 77,408 -- -- 268,750
Leonard M. Luttinger, vice 1997 136,895 -- -- --
president(2) 1996 62,500 $67,262 -- 156,250
1995 125,000 -- -- 176,678
John F. Phillips, vice president 1997 109,500 89,657 -- --
- - marketing 1996 100,000 33,906 -- 27,000
1995 123,900 -- -- 38,768
Anthony F. Grisanti, chief 1997 87,600 73,888 -- --
financial officer 1996 80,000 23,500 -- 15,000
1995 80,000 -- -- 32,464
<FN>
1 Mr. Schiller resigned as an officer and director of the Company in April
1998. Mr. Schiller has received no compensation from the Company. During
the years ended December 31, 1997, 1996 and 1995, the total compensation
paid or accrued by Consolidated to Mr. Schiller was $974,000, $340,000
and $250,000, respectively.
2 Mr. Luttinger resigned as an officer and director in June 1998.
The annual salary payable by Consolidated to Mr. Schiller pursuant to
his employment agreement with Consolidated was $250,000, subject to a cost of
living increase, prior to September 1, 1996. Effective September 1, 1996, Mr.
Schiller's annual salary from Consolidated was increased to $500,000. In
addition, Mr. Schiller's employment agreement provided him with incentive
compensation from Consolidated based on the results of Consolidated's operations
and Mr. Schiller owned 10% of Consolidated's or SISC's equity interest in each
of their operating subsidiaries and investments. Mr. Schiller has received 10%
of SISC's equity interest in the Company for
</FN>
</TABLE>
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<PAGE>
nominal consideration. Mr. Schiller has also received 10% of other securities
owned by SISC, including securities of other subsidiaries of SISC. In April
1998, in connection with his resignation as an officer and director of
Consolidated and its subsidiaries, including the Company, Consolidated purchased
Mr. Schiller's employment contract, as a result of which the agreement is no
longer in effect.
Employment Contracts, Compensation Agreements and Termination of Employment and
Change in Control Arrangements
In June 1994, the Company entered into five-year employment agreements
with Messrs. Leonard M. Luttinger, John F. Phillips and Anthony F. Grisanti,
which provide for annual base salaries of $125,000, $125,000 and $80,000,
respectively. The agreements provide for an annual cost of living adjustment,
an automobile allowance and a bonus of 4% of income before income taxes for
Messrs. Luttinger and Phillips and 2% of income before income taxes for Mr.
Grisanti. The maximum bonus is 300% of salary for Messrs. Luttinger and
Phillips and 200% of salary for Mr. Grisanti. For 1996, Messrs. Luttinger and
Phillips agreed to reduced base salaries of $62,500 and $100,000, respectively,
with certain incentives if certain targets are attained. For 1997, Mr. Phillips
agreed to a reduced base salary of $109,000 plus commissions. Mr. Luttinger's
contract was terminated in June 1998, when he resigned as an officer and
director.
In August 1996, the Company entered into an agreement with Mr. James L.
Conway pursuant to which it pays him an annual salary of $125,000, subject to a
cost of living adjustment, an automobile allowance and a bonus of 5% of income
before income taxes up to a maximum of 300% of his salary. Prior to August 1996,
Mr. Conway received a salary of $52,000 per year.
The current rate of compensation for the Company's officers is $160,000
for Mr. Conway, $112,800 for Mr. Phillips, $92,700 for Mr. Koop and $91,240 for
Mr. Grisanti. Mr. Phillips is also entitled to a commission of 2% of all data
center revenue. In addition, the Company has a commission pool of 10% of new
sales. Messrs. Koop and Grisanti receive a portion of such pool.
In July 1998, the Company entered into five-year employment agreements
with Messrs. James L. Conway, John F. Phillips, Gerald O. Koop and Anthony F.
Grisanti. Pursuant to these agreements, Messrs. Conway, Phillips, Koop and
Grisanti receive a base salary of $160,000, $140,000, $140,000 and $120,000,
respectively, with an annual cost of living adjustment. Except for Mr. Conway,
whose compensation became effective July 1998, the salaries for the other
officers become effective in January 1999. The agreements provide that the
executives are eligible to participate in a bonus pool to be determined annually
by the Compensation Committee. The agreements also provide each of the
executives with a $1,000 per month automobile allowance. In the event the
executive's dismissal or resignation or a material change in his duties or in
the event of a termination of employment by the executive or the Company as a
result of a change of control, the executive may receive severance payments of
between 24 and 36 months' compensation. A month's compensation means the then
current monthly salary plus one-twelfth of the bonus for the prior year.
Option Exercises and Outstanding Options
The following table sets forth information concerning the exercise of
options and warrants during the year ended December 31, 1997 and the year-end
value of options held by the Company's officers named in the Summary
Compensation Table. No stock appreciation rights ("SARs") have been granted.
- 7 -
<PAGE>
<TABLE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
<S> <C> <C> <C> <C>
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options1 at Options at Fiscal
Fiscal Year End Year End2
Shares Acquired Value Exercisable/ Exercisable/
Name Upon Exercise Realized Unexercisable Unexercisable
---- --------------- -------- ------------- -------------
Lewis S. Schiller(3) -- -- 166,667/ --/
-- --
James L. Conway -- -- 268,750/ --/
-- --
Leonard M. Luttinger -- -- 183,018/ $15,098/
-- --
John F. Phillips -- -- 65,768/ 22,814/
-- --
Anthony F. Grisanti -- -- 47,464/ 19,817/
-- --
<FN>
1 The number of shares of Common Stock subject to options includes shares
of Common Stock issuable upon exercise of warrants.
2 The determination of "in the money" options at December 31, 1997, is
based on the closing price of the Common Stock on the Nasdaq SmallCap
Market on December 31, 1997, which was $.875.
3 Warrants held by Mr. Schiller include warrants issued to him by the
Company and warrants transferred to him by SISC.
See "Approval of the 1998 Long-Term Incentive Plan" for information
concerning the Company's stock option plans.
During 1997, there were no repricing of options or regrants of options
upon the cancellation of previously granted options. On June 30, 1998, the
Compensation Committee approved the grant of options to purchase 126,500 shares
of Common Stock at $.50 per share, which was the fair market value on the date
of grant, upon cancellation options to purchase an equal number of shares of
Common Stock which were granted in April 1996 and had an exercise price of $2.00
per share. The option grants included grants to Messrs. Edward D. Bright (27,000
shares), John F. Phillips (27,000 shares) Gerald O. Koop (18,000 shares) and
Anthony F. Grisanti (15,000 shares).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During 1997, pursuant to an informal agreement between the Company and
SMI, Inc. ("SMI"), a corporation of which Mr. Storm Morgan, who was then a
director of the Company, was the sole stockholder and an officer and director,
the Company paid SMI $124,000 for services provided by Mr. Morgan, $47,161 for
expenses and consultants incurred by SMI on behalf of the Company and $9,000 in
commissions. Mr. Morgan was not required to devote any minimum amount of time to
the business of the Company.
</FN>
</TABLE>
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<PAGE>
<TABLE>
In June 1998, the Company sold its CarteSmart business to Granite
Technologies, Inc., a corporation formed by the Messrs. Leonard M. Luttinger and
Storm Morgan. In connection with the sale, Mr. Luttinger, who was vice president
and a director of the Company, and Mr. Morgan, who was a director of the
Company, resigned from their positions with the Company. In consideration for
the sale of the CarteSmart business, Granite issued its $500,000 promissory note
and an equity interest in Granite and agreed to pay certain royalties to the
Company. Granite also granted Netsmart the right to sell its smart card and
kiosk software and related products in the behavioral health field.
In 1994, in connection with the execution of the agreement to acquire
CSM, SISC granted to Messrs. Edward D. Bright, John F. Phillips and Anthony F.
Grisanti options to purchase from SISC 66,000, 66,000 and 19,920 shares of
Common Stock, respectively, at $.232 per share. Such options were exercised in
1997.
The Company has an agreement with Consolidated pursuant to which it pays
Consolidated $15,000 per month through August 1999. Pursuant to this agreement,
the Company paid a subsidiary of Consolidated $180,000 during 1997.
In connection with the resignations of Messrs. Lewis S. Schiller, Norman
J. Hoskin and E. Gerald Kay as directors and officers of the Company in April
1998, the Company exchanged general releases with such persons.
In connection with the Company's accounts receivable financing, Mr.
Anthony F. Grisanti issued his guaranty which is limited to the losses or
liability resulting from certain irregularities by the Company in the submission
of invoices for advances and the failure to pay over the proceeds from accounts
to the lender. The Company knows of no such irregularities. The advances under
this facility were $935,000 at December 31, 1997 and $1,354,000 at June 30,
1998. The maximum borrowings under the facility, subject to the borrowing
formula, is $1,250,000, which is to increase to $1,500,000 on August 1, 1998.
The lender has, from time to time, permitted the Company to exceed the present
borrowing limitation.
Performance Graph
The following graph, based on data provided by the Center for Research
in Security Prices, shows changes in the value of $100 invested on August 14,
1996, when the trading in the Company's Common Stock commenced following its
initial public offering, of: (a) shares of Company Common Stock; (b) the Nasdaq
stock index (US companies); and (c) an SIC peer group consisting of Nasdaq
listed companies in SIC code 7370 through 7379, which computer and data
processing companies. The values of each investment at the end of each period
are derived from compounded daily returns that include all dividends. Total
stockholder returns from each investment can be calculated from the year-end
investment values shown beneath the graph provided below.
<S> <C> <C> <C> <C> <C> <C>
8/14/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
------- -------- ------- ------- ------- --------
Netsmart Technologies, Inc. 100.0 32.5 44.5 33.7 57.8 8.4
Nasdaq Stock Market (US companies) 100.0 113.6 107.4 127.1 148.6 139.4
Nasdaq computer and data processing stocks 100.0 112.1 104.1 133.5 146.0 137.8
The index level for all indices was set at 100.0 on August 14, 1996,
when trading in the Company's Common Stock commenced.
</TABLE>
- 9 -
<PAGE>
APPROVAL OF ONE-FOR-THREE REVERSE SPLIT
The Board of Directors has approved, subject to stockholder approval, a
one-for-three reverse split (the "Reverse Split") of the Company's Common Stock.
As a result of the Reverse Split, each share of Common Stock outstanding at the
effective time of the Reverse Split, will, without any action on the part of the
holder thereof, become one-third share of Common Stock. The par value of the
Common Stock will not be affected by the Reverse Split. For purposes of the
discussion of this proposal, the Common Stock, as presently constituted, is
referred to as the "Old Common Stock" and the Common Stock resulting from the
Reverse Split is referred to as the "New Common Stock."
The Reverse Split will become effective upon the filing with the
Secretary of State of an amendment to the Company's certificate of incorporation
which states that, upon the filing of the Certificate of Amendment, each share
of Common Stock then issued and outstanding would automatically become and be
converted into one-third share of Common Stock.
Principal Effects of the Reverse Split
- --------------------------------------
The principal effects of the Reverse Split will be as follows:
1. Based upon the 8,360,762 shares of Old Common Stock outstanding on
the Record Date, the Reverse Split would decrease the outstanding shares of Old
Common Stock by two-thirds, and, upon the effectiveness of the Reverse Split,
approximately 2,786,920 shares of New Common Stock would be outstanding.
2. On the Record Date, each option and warrant to purchase shares of
Common Stock will become an option or warrant to purchase one-third of the
number of shares of New Common Stock at an exercise price which will be three
times the former exercise price. As a result, outstanding warrants and options
to purchase an aggregate of 3,576,723 shares of Old Common Stock shares will
become warrants and options to purchase approximately 1,192,241 shares of New
Common Stock at an exercise price equal to three times the exercise price in
effect prior to the Reverse Split. Thus, for example, the warrants to purchase
Old Common Stock at $2.00 per share and $4.00 per share will become warrants to
purchase one-third the number of shares of New Common Stock at exercise prices
of $6.00 per share and $12.00 per share, respectively.
3. The number of shares of Common Stock issuable pursuant to the
Company's stock option plans will be reduced to one-third of the number of
shares of Common Stock which were subject to the plans prior to the Reverse
Split.
The Company will obtain new CUSIP numbers for the New Common Stock and
publicly traded warrants effective at the time of the Reverse Split. Following
the effectiveness of the Reverse Split, the Company will provide each record
holder of Old Common Stock and publicly traded warrants with information to
enable such holder to obtain new stock and warrant certificates.
Subject to the provisions for elimination of fractional shares, as
described below, consummation of the Reverse Split will not result in a change
in the relative equity position or voting power of the holders of Old Common
Stock.
Assuming the Reverse Split is approved and implemented, the Certificate
of Amendment amending the Certificate of Incorporation will be filed with the
Secretary of State of Delaware as promptly as practicable thereafter. The
Reverse Split would become effective as of the date of such filing (the
"Effective Date").
Purposes of the Reverse Stock Split
- -----------------------------------
- 10 -
<PAGE>
The Reverse Split would decrease the number of shares of Old Common
Stock outstanding and presumably increase the per share market price for the New
Common Stock. Theoretically, the number of shares outstanding should not, by
itself, affect the marketability of the stock, the type of investor who acquires
it, or the Company's reputation in the financial community, but in practice this
is not necessarily the case, as many investors look upon a stock trading at a
low price as unduly speculative in nature and, as a matter of policy, avoid
investment in such stocks.
The Common Stock is traded on the Nasdaq SmallCap Market, which
requires, among other things, that the Common Stock have a price which is at
least $1.00 per share. Nasdaq has advised the Company that, unless the stock
price is at least $1.00 for a period of ten days, it will delist the Common
Stock from the Nasdaq SmallCap Market. In the event the Common Stock is
delisted, trading, if any, in the Common Stock would thereafter be conducted in
the over-the-counter market in the so-called "pink sheets" or the OTC Electronic
Bulletin Board. Consequently, the liquidity of the Common Stock could be
impaired, not only in the number of shares which could be bought and sold, but
also through delays in the timing of transactions, reduction in potential
security analysts' and news media's coverage of the Company, and lower prices
for the Common Stock than might otherwise be attained.
If the Common Stock is delisted from the Nasdaq SmallCap Market, the
Company will not be able to have the Common Stock relisted unless it meets the
Nasdaq requirements for initial listing. Although at March 31, 1998, the Company
met the tests for the continued listing of the Common Stock on the Nasdaq
SmallCap Market, it did not meet the initial listing requirements. Accordingly,
in the event that the Common Stock is delisted from the Nasdaq SmallCap Market,
there can be no assurance that the Company will be listed on the Nasdaq SmallCap
Market in the future.
Furthermore, if the Common Stock is delisted from the Nasdaq SmallCap
Market, it is possible that the Common Stock may become subject to Rule 15g-9
under the Exchange Act, which imposes additional sales practice requirements on
broker-dealers which sell such securities to persons other than established
customers and institutional accredited investors. For transactions covered by
Rule 15g-9, a broker-dealer must make a special suitability determination for
the purchaser and have received the purchaser's written consent to the
transaction prior to sale. Consequently, Rule 15g-9, if applicable, may affect
the ability of broker-dealers to sell the Common Stock and may affect the
ability of stockholders to sell their Common Stock.
The Board of Directors believes that the Reverse Split is in the best
interest of the Company and its stockholders. The price of the Old Common Stock
during the period from January 1, 1998 through July 8, 1998 ranged from a low
closing price of $.375 per share to a high closing price of $1.50 per share. On
July 8, 1998, the closing price of the Old Common Stock was $.625 per share. The
Company may require additional capital for its operations and does not believe
that it will be able to raise the necessary capital unless the price of the
Common Stock is higher than the current Common Stock price levels. However, no
assurance can be given that the Reverse Split will result in any increase in the
market price per share or that the Company will be able to complete any
financing following the Reverse Split.
Exchange of Certificate and Elimination of Fractional Share Interests
On the Effective Date, each three shares of Old Common Stock will
automatically be combined and changed into one share of New Common Stock. No
additional action on the part of the Company or any stockholder will be required
in order to effect the Reverse Split. Stockholders will be requested to exchange
their certificates representing shares of Common Stock held prior to the Reverse
Split for new certificates representing shares of Old Common Stock. Stockholders
will be furnished the necessary materials and instructions to effect such
exchange promptly following the Effective Date. Certificates representing shares
of Old Common Stock subsequently presented for transfer will be transferred on
the books and records of the Company after giving effect to the Reverse Split.
Stockholders should not submit any certificates until requested to do so. In the
event any certificate representing shares of Old Common Stock is not presented
for exchange upon request by the Company, any
- 11 -
<PAGE>
dividends that may be declared after the Effective Date of the Reverse Split
with respect to the Common Stock represented by such certificate will be
withheld by the Company until such certificate has been properly presented for
exchange, at which time all such withheld dividends which have not yet been paid
to a public official pursuant to relevant abandoned property laws will be paid
to the holder thereof or his designee, without interest.
No fractional shares of New Common Stock will be issued to any
stockholder. Accordingly, stockholders of record who would otherwise be entitled
to receive fractional shares of New Common Stock, will, upon surrender of their
certificates representing shares of Old Common Stock, receive a cash payment in
lieu thereof equal to the fair value of such fractional share. On the Effective
Date, holders of less than three shares of Old Common Stock will, as a result of
the Reverse Split, no longer be stockholders of the Company. The Board of
Directors had determined that the fair value of the Common Stock will be based
on the closing price of the Common Stock on the Effective Date (as adjusted to
reflect the Reverse Split) or, if there are no reported sales on such date, the
average of the last reported bid price on such day shall be used.
Federal Income Tax Consequences of the Reverse Split
- ----------------------------------------------------
The combination of each three shares of the Old Common Stock into one
share of New Common Stock should be a tax-free transaction under the Internal
Revenue Code of 1986, as amended, and the holding period and tax basis of the
Old Common Stock will be transferred to the New Common Stock received in
exchange therefor.
Generally, cash received in lieu of fractional shares will be treated as
a sale of the fractional shares (although in unusual circumstances such cash
might possibly be deemed a dividend), and stockholders will recognize gain or
loss based upon the difference between the amount of cash received and the basis
in the surrendered fractional share.
This discussion should not be considered as tax or investment advice,
and the tax consequences of the Reverse Split may not be the same for all
stockholders. Stockholders should consult their own tax advisors to know their
individual Federal, state, local and foreign tax consequences.
Financial Statements
- --------------------
The Company's audited consolidated financial statements, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" with
respect to such financial statements, which are included in the Annual Report,
together with the unaudited financial statements for the three months ended
March 31, 1998 and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" with respect to such financial statements, which are
included in the Company's Form 10-Q for the three months ended March 31, 1998,
are incorporated by reference in this Proxy Statement. See "Incorporation by
Reference."
Vote Required
- -------------
The amendment to the certificate of incorporation requires the approval
of the holders of a majority of the outstanding shares of Common Stock.
The Board of Directors recommends a vote FOR the Reverse Split.
- 12 -
<PAGE>
APPROVAL OF THE 1998 LONG TERM INCENTIVE PLAN
The Board of Directors believes that in order to attract and retain the
services of executive and other key employees, it is necessary for the Company
to have the ability and flexibility to provide a compensation package which
compares favorably with those offered by other companies. Accordingly, in June
1998, the Board of Directors adopted, subject to stockholder approval, the 1998
Long Term Incentive Plan (the "1998 Plan"), covering 840,000 shares of Common
Stock. If the Reverse Split is approved, the number of shares subject to the
1998 Plan will be 280,000.
The Company has one other stock option plan, the 1993 Long Term
Incentive Plan (the "1993 Plan"), which was adopted by the Board of Directors
and stockholders in July 1993. The 1993 Plan was amended in October 1993, April
1994, October 1994 and February 1996. The Plan does not have an expiration date.
The 1993 Plan is authorized to grant options or other equity-based incentives
for 511,000 shares of the Common Stock. As of June 30, 1998, 164,777 shares had
been issued pursuant to the 1993 Plan and 317,144 shares of Common Stock were
subject to outstanding options at exercise prices per share of $.232 (100,537
shares), $.345 (90,107 shares) and $2.00 (126,500 shares). As June 30, 1998,
there were 29,079 shares available for grant under the 1993 Plan together with
any shares subject to outstanding options which expire unexercised.
Awards under the 1993 Plan may be made to key employees, including
officers of and consultants to the Company, its subsidiaries and affiliates, but
may not be granted to any director unless the director is also an employee of or
consultant to the Company or any subsidiaries or affiliates. The 1993 Plan
imposes no limit on the number of officers and other key employees to whom
awards may be made; however, no person shall be entitled to receive in any
fiscal year awards which would entitle such person to acquire more than 3% of
the number of shares of Common Stock outstanding on the date of grant.
The 1993 Plan and the 1998 Plan (collectively, the "Plans") are
administered by a committee (the "Committee") of at least two non-employee
directors appointed by the board. The compensation committee serves as the
Committee under the various stock option plans. The Committee has broad
discretion in determining the persons to whom stock options or other awards are
to be granted and the terms and conditions of the award, including the type of
award, the exercise price and term and restrictions and forfeiture conditions.
If no Committee is appointed, the functions of the Committee shall be performed
by the Board of Directors. The compensation committee consists of Messrs. Edward
D. Bright, Seymour Richter and Joseph G. Sicinski.
Set forth below is a summary of the 1998 Plan, but this summary is
qualified in its entirety by reference to the full text of the 1998 Plan, as
amended, a copy of which is included as Exhibit A to this Proxy Statement. The
Plan, which expires in June 2008 unless terminated earlier by the Board of
Directors, gives the Board of Directors broad authority to modify the Plan, and,
in particular, to eliminate any provisions which are not required in order to
meet the requirements of Rule 16b-3 of the Securities and Exchange Commission
pursuant with the Securities Exchange Act of 1934, as amended.
The 1998 Plan is authorized for 840,000 shares of the Common Stock,
which, if the Reverse Split is approved, will become 280,000 shares. If shares
subject to an option under the 1998 Plan cease to be subject to such option, or
if shares awarded under the 1998 Plan are forfeited or otherwise terminate
without a payment being made to the participant in the form of stock, such
shares will again be available for future issuance under the 1998 Plan. The 1998
Plan imposes no limit on the number of officers and other key employees to whom
awards may be made.
Awards under the 1998 Plan may be made to key employees, including
officers and directors of the Company and its subsidiaries, and consultants and
others who perform services for the Company and its subsidiaries, except that
non-employee directors are not eligible for options under the 1998 Plan, except
that the 1998 Plan provides for (i) the grant on June 30, 1998, the date the
1998 Plan was adopted by the Board of Directors, to each non-employee director
other than the chairman of the board of a non-qualified stock option to purchase
15,000 shares of Common
- 13 -
<PAGE>
Stock, (ii) the grant on June 30, 1998 to the chairman of the board of a
non-qualified stock option to purchase 90,000 shares of Common Stock, and (iii)
the automatic grant to each non-employee directors of a non-qualified option to
purchase 15,000 shares of Common Stock on April 1st of each year, commencing
April 1, 1999. If the Reverse Split is approved, the number of shares subject to
the automatic option grant will be 5,000 shares. The options granted to
non-employee directors as well as the options to be granted pursuant to the
annual grant have a term of five years from the date of grant and become
exercisable as to 50% of the shares of Common Stock subject to the option six
months from the date of grant and as to the remaining shares of Common Stock
twelve months from the date of grant. The options granted to the non-employee
directors on June 30, 1998 have an exercise price of $.50 per share, which was
the fair market value such date. Messrs. Edward D. Bright, who is chairman of
the board, Seymour Richter and Joseph G. Sicinski are the directors who qualify
as non-employee directors under the 1998 Plan as of the date of this Proxy
Statement.
Both the initial option grants and the annual automatic option grants to
non-employee directors are non-qualified stock options and have a term of five
years and become fully exercisable six months from the date of grant provided
that the option holder is a director on such date, except that they become
immediately exercisable if a change of control, as defined in the 1998 Plan,
should occur. The 1998 Plan also provides certain cashout rights in the event of
a change of control.
The Committee has the authority to grant the following types of awards
under the 1998 Plan: incentive or non-qualified stock options; stock
appreciation rights; restricted stock; deferred stock; stock purchase rights
and/or other stock-based awards. The 1998 Plan is designed to provide the
Company with broad discretion to grant incentive stock-based rights.
Tax consequences of awards provided under the 1998 Plan are dependent
upon the type of award granted. The grant of an incentive or non-qualified stock
options does not result in any taxable income to the recipient or deduction to
the Company. Upon exercise of a non-qualified stock option, the recipient
recognizes income in the amount by which the fair market value on the date of
exercise exceeds the exercise price of the option, and the Company receives a
corresponding tax deduction. In the case of an incentive stock option, no income
is recognized to the employee, and no deduction is available to the Company, if
the stock issued upon exercise of the option is not transferred within two years
from the date of grant or one year from the date of exercise, whichever occurs
later. However, the exercise of an incentive stock option may result in
additional taxes through the application of the alternative minimum tax. In the
event of a sale or other disqualifying transfer of stock issued upon exercise of
an incentive stock option, the employee realizes income, and the Company
receives a tax deduction, equal to the amount by which the lesser of the fair
market value at the date of exercise or the proceeds from the sale exceeds the
exercise price. The issuance of stock pursuant to a stock grant results in
taxable income to the recipient at the date the rights to the stock become
nonforfeitable, and the Company receives a deduction in such amount. However, if
the recipient of the award makes an election in accordance with the Internal
Revenue Code of 1986, as amended, the amount of his or her income is based on
the fair market value on the date of grant rather than the fair market value on
the date the rights become nonforfeitable. When compensation is to be recognized
by the employee, appropriate arrangements may be required to be made with
respect to the payment of withholding tax.
No options were granted during 1997.
The following table sets forth information concerning options granted
pursuant to the 1998 Plan as of June 30, 1998. No SARs were granted.
- 14 -
<PAGE>
<TABLE>
1998 Long-Term Incentive Plan
<S> <C> <C>
Number of Shares Exercise Price
Name and Position Underlying Options Granted Per Share
----------------- -------------------------- ---------
James L. Conway president and chief 120,000 $.50
executive officer
John F. Phillips, vice president-marketing 90,000 .50
Anthony F. Grisanti, chief financial officer 90,000 .50
All current executive officers 390,000 .50
Edward D. Bright 90,000 .50
Gerald O. Koop 90,000 .50
Seymour Richter 15,000 .50
Joseph G. Sicinski 15,000 .50
All other employees 270,000 .50
If the Reverse Split is approved, the number of shares subject to these
options will be one-third of the number shown in the chart, and the exercise
price will be $1.50 per share. All of the foregoing options become exercisable
as to 50% of the shares of Common Stock subject to the option six months from
the date of grant and as to the remaining shares of Common Stock twelve months
from the date of grant.
Contemporaneously with the grant of the foregoing options pursuant to
the 1998 Plan, the Compensation Committee granted options to purchase 126,500
shares of Common Stock at $.50 per share in connection with the cancellation of
options to purchase an equal number of shares of Common Stock which were granted
in April 1996. The options included options granted to Messrs. Bright (27,000
shares), Phillips (27,000 shares), Koop (18,000 shares) and Grisanti (15,000
shares).
Vote Required
- -------------
The proposal to approve the 1998 Plan requires the approval of a
majority of the shares of Common Stock present and voting, provided that a
quorum is present.
The Board of Directors recommends a vote FOR the proposal.
SELECTION OF INDEPENDENT AUDITORS
---------------------------------
It is proposed that the stockholders approve the selection of Richard A.
Eisner & Company, LLP as the independent public accountant for the Company for
the year ending December 31, 1998. In June 1998, the Board of Directors selected
Richard A. Eisner & Company, LLP to serve as the Company's independent public
accountant for the year ending December 31, 1998. However, in the event approval
of the proposal is not obtained, the selection of the independent auditors will
be reconsidered by the Board of Directors.
Prior to June 1994, when the Company, through an affiliate, acquired the
assets of CSM, Richard A. Eisner & Company, was the independent public
accountant for CSM. Since June 1994, except for incidental services relating to
CSM's financial statements for periods prior to June 1994, Richard A. Eisner &
Company, LLP did not perform any services for the Company or CSM. At no time
since its engagement has Richard A. Eisner & Company, LLP had any direct or
indirect financial interest in or any connection with the Company or any of its
subsidiaries other than as independent accountant. Representatives of such firm
are expected to attend the Annual Meeting and will be available to answer
questions.
</TABLE>
- 15 -
<PAGE>
The decision to change accountants was made by the Board of Directors.
The Company's independent accountant since its organization in 1992 was Moore
Stephens, P.C., whose report is included in the annual report on Form 10-K for
the year ended December 31, 1997. There were no disagreements with Moore
Stephens, P.C., whether or not resolved, on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure.
Representatives of such firm are not expected to be present at the Annual
Meeting.
Vote Required
- -------------
The proposal to approve the selection of Richard A. Eisner & Company,
LLP as the Company's independent accountant requires the approval of a majority
of the shares of Common Stock present and voting, provided that a quorum is
present.
The Board of Directors recommends a vote FOR the proposal.
INCORPORATION BY REFERENCE
--------------------------
The Company incorporates into this Proxy Statement the audited financial
statements for the years ended December 31, 1997 and 1996 together with the
related Management's Discussion and Analysis of Financial Condition and Results
of Operations, which are included in the Annual Report, and unaudited financial
statements for the quarter ended March 31, 1998, together with the related
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included in the Company's Form 10-Q for the three months
ended March 31, 1998. A copy of the Annual Report is being mailed to
stockholders of record on the Record Date concurrently with the mailing of this
Proxy Statement. Additional copies of the Annual Report and copies of the Form
10-Q will be provided by the Company without charge upon request. Requests for
copies of the Annual Report or Form 10-Q should be made as provided under "Other
Matters."
OTHER MATTERS
-------------
Any proposal which a stockholder wishes to present at the 1999 Annual
Meeting of Stockholders must be received by the Company at its executive offices
at 146 Nassau Avenue, Islip, New York 11751, not later than March 31, 1999.
Copies of the Company's Form 10-K for the year ended December 31, 1997
and Form 10-Q for the quarter ended March 31, 1998, without exhibits, may be
obtained without charge by writing to Mr. Anthony F. Grisanti, Chief Financial
Officer, Netsmart Technologies, Inc., 146 Nassau Avenue, Islip, New York 11751.
Exhibits will be furnished upon request and upon payment of a handling charge of
$.25 per page, which represents the Company's reasonable cost on furnishing such
exhibits.
The Board of Directors does not know of any other matters to be brought
before the meeting. If any other matters are properly brought before the
meeting, the persons named in the enclosed proxy intend to vote such proxy in
accordance with their best judgment on such matters.
By Order of the Board of Directors
James L. Conway
President
July 27, 1998
- 16 -
<PAGE>
PROXY
-----
NETSMART TECHNOLOGIES, INC.
1998 Annual Meeting of Stockholders -- August 27, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James L. Conway and Anthony F.
Grisanti or either one of them acting in the absence of the other, with full
power of substitution or revocation, proxies for the undersigned, to vote at the
1998 Annual Meeting of Stockholders of Netsmart Technologies, Inc. (the
"Company"), to be held at 9:00 a.m., local time, on Thursday, August 27, 1998,
at the offices of the Company, 146 Nassau Avenue, Islip, New York 11751, and at
any adjournment or adjournments thereof, according to the number of votes the
undersigned might cast and with all powers the undersigned would possess if
personally present.
(1) To elect the following six (6) directors:
Edward D. Bright, James L. Conway, John F. Phillips, Gerald O.
Koop, Seymour Richter and Joseph G. Sicinski
[ ] FOR all nominees listed above (except as marked to the contrary
below).
[ ] Withhold authority to vote for all nominees listed above.
INSTRUCTION: To withhold authority to vote for any individual
nominee, print that nominee's name below.
----------------------------------------------------
(2) To approve a one-for-three reverse split of the Common Stock.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) To approve the 1998 Long-Term Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) To approve the selection of Richard A. Eisner & Company, LLP as
the independent certified public accountants of the Company for
the year ending December 31, 1998.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(5) In their discretion, upon the transaction of such other business
as may properly come before the meeting;
all as set forth in the Proxy Statement, dated July 27, 1998.
- 17 -
<PAGE>
The shares represented by this proxy will be voted on Items 1, 2,
3 and 4 as directed by the stockholder, but if no direction is indicated, will
be voted FOR Items 1, 2, 3 and 4.
If you plan to attend the meeting please indicate below:
I plan to attend the meeting [ ]
Dated: _________________________, 1998
_____________________________
_____________________________
(Signature(s))
Please sign exactly as name(s) appear
hereon. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as such.
Please date, sign and mail this proxy
in the enclosed envelope, which
requires no postage if mailed in the
United States.
- 18 -
Exhibit A
NETSMART TECHNOLOGIES, INC.
1998 Long-Term Incentive Plan
1. Purpose; Definitions.
The purpose of the Netsmart Technologies, Inc. 1998 Long-Term Incentive
Plan (the "Plan") is to enable Netsmart Technologies, Inc. (the "Company") to
attract, retain and reward key employees of the Company and its Subsidiaries and
Affiliates, and others who provide services to the Company and its Subsidiaries
and Affiliates, and strengthen the mutuality of interests between such key
employees and such other persons and the Company's stockholders, by offering
such key employees and such other persons incentives and/or other equity
interests or equity-based incentives in the Company, as well as
performance-based incentives payable in cash.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any corporation, partnership, limited liability
company, joint venture or other entity, other than the Company and its
Subsidiaries, that is designated by the Board as a participating employer under
the Plan, provided that the Company directly or indirectly owns at least 20% of
the combined voting power of all classes of stock of such entity or at least 20%
of the ownership interests in such entity.
(b) "Board" means the Board of Directors of the Company.
(c) "Book Value" means, as of any given date, on a per share basis (i)
the stockholders' equity in the Company as of the last day of the immediately
preceding fiscal year as reflected in the Company's consolidated balance sheet,
subject to such adjustments as the Committee shall specify at or after grant,
divided by (ii) the number of then outstanding shares of Stock as of such
year-end date, as adjusted by the Committee for subsequent events.
(d) "Cause" means a felony conviction of a participant, or the failure
of a participant to contest prosecution for a felony, or a participant's willful
misconduct or dishonesty, or breach of trust or other action by which the
participant obtains personal gain at the expense of or to the detriment of the
Company or, if the participant has an employment agreement with the Company, a
Subsidiary or Affiliate, an event which constitutes "cause" as defined in such
employment agreement.
(e) "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
(f) "Commission" means the Securities and Exchange Commission or any
successor thereto.
(g) "Committee" means the Committee referred to in Section 2 of the
Plan. If at any time no Committee shall be in office, then the functions of the
Committee specified in the Plan shall be exercised by the Board.
(h) "Company" means Netsmart Technologies, Inc., a Delaware corporation,
or any successor corporation.
(i) "Deferred Stock" means an award made pursuant to Section 8 of the
Plan of the right to receive Stock at the end of a specified deferral period.
(j) "Disability" means disability as determined under procedures
established by the Committee for purposes of the Plan.
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(k) "Early Retirement" means retirement, with the express consent for
purposes of the Plan of the Company at or before the time of such retirement,
from active employment with the Company and any Subsidiary or Affiliate pursuant
to the early retirement provisions of the applicable pension plan of such
entity.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, from time to time, and any successor thereto.
(m) "Fair Market Value" means, as of any given date, the market price of
the Stock as determined by or in accordance with the policies established by the
Committee in good faith; provided, that, in the case of an Incentive Stock
Option, the Fair Market Value shall be determined in accordance with the Code
and the Treasury regulations under the Code.
(n) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
(o) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3 of the Commission pursuant to the Exchange Act or any successor definition
adopted by the Commission; provided that in the event that said rule (or
successor rule) shall not have such a definition, the term Non-Employee Director
shall mean a director of the Company who is not otherwise employed by the
Company or any Subsidiary or Affiliate.
(p) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(q) "Normal Retirement" means retirement from active employment with the
Company and any Subsidiary or Affiliate on or after age 65.
(r) "Other Stock-Based Award" means an award under Section 10 of the
Plan that is valued in whole or in part by reference to, or is otherwise based
on, Stock.
(s) "Plan" means this Netsmart Technologies, Inc. 1998 Long-Term
Incentive Plan, as hereinafter amended from time to time.
(t) "Restricted Stock" means an award of shares of Stock that is
subject to restrictions under Section 7 of the Plan.
(u) "Retirement" means Normal Retirement or Early Retirement.
(v) "Stock" means the Common Stock, par value $.01 per share, of the
Company or any class of common stock into which such common stock may hereafter
be converted or for which such common stock may be exchanged pursuant to the
Company's certificate of incorporation or as part of a recapitalization,
reorganization or similar transaction.
(w) "Stock Appreciation Right" means the right pursuant to an award
granted under Section 6 of the Plan to surrender to the Company all (or a
portion) of a Stock Option in exchange for an amount equal to the difference
between (i) the Fair Market Value, as of the date such award or Stock Option (or
such portion thereof) is surrendered, of the shares of Stock covered by such
Stock Option (or such portion thereof), subject, where applicable, to the
pricing provisions in Paragraph 6(b)(ii) of the Plan and (ii) the aggregate
exercise price of such Stock Option or base price with respect to such award (or
the portion thereof which is surrendered).
(x) "Stock Option" or "Option" means any option to purchase shares of
Stock (including Restricted Stock and Deferred Stock, if the Committee so
determines) granted pursuant to Section 5 of the Plan.
(y) "Stock Purchase Right" means the right to purchase Stock pursuant to
Section 9 of the Plan.
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(z) "Subsidiary" means any corporation or other business association,
including a partnership (other than the Company) in an unbroken chain of
corporations or other business associations beginning with the Company if each
of the corporations or other business associations (other than the last
corporation in the unbroken chain) owns equity interests (including stock or
partnership interests) possessing 50% or more of the total combined voting power
of all classes of equity in one of the other corporations or other business
associations in the chain.
In addition, the terms "Change in Control," "Potential Change in
Control" and "Change in Control Price" shall have meanings set forth,
respectively, in Paragraphs 11(b), (c) and (d) of the Plan.
2. Administration.
(a) The Plan shall be administered by a Committee of not less than two
Non-Employee Directors, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. If and to the extent that no Committee exists
which has the authority to so administer the Plan, the functions of the
Committee specified in the Plan shall be exercised by the Board. Notwithstanding
the foregoing, in the event that the Company is not subject to the Exchange Act
or in the event that the administration of the Plan by a Committee of
Non-Employee Directors is not required in order for the Plan to meet the test of
Rule 16b-3 of the Commission under the Exchange Act, or any subsequent rule,
then the Committee need not be composed of Non-Employee Directors.
(b) The Committee shall have full authority to grant, pursuant to the
terms of the Plan, to officers and other persons eligible under Section 4 of the
Plan: Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred
Stock, Stock Purchase Rights and/or Other Stock-Based Awards. In particular, the
Committee shall have the authority:
(i) to select the officers and other eligible persons to whom
Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock,
Stock Purchase Rights and/or Other Stock-Based Awards may from time to time be
granted pursuant to the Plan;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Deferred Stock, Stock Purchase Rights and/or Other Stock-Based Awards, or
any combination thereof, are to be granted pursuant to the Plan, to one or more
eligible persons;
(iii) to determine the number of shares to be covered by each
such award granted pursuant to the Plan;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted under the Plan, including, but not
limited to, the share price or exercise price and any restriction or limitation,
or any vesting, acceleration or waiver of forfeiture restrictions regarding any
Stock Option or other award and/or the shares of Stock relating thereto, based
in each case on such factors as the Committee shall, in its sole discretion,
determine;
(v) to determine whether, to what extent and under what
circumstances a Stock Option may be settled in cash, Restricted Stock and/or
Deferred Stock under Paragraph 5(b)(x) or (xi) of the Plan, as applicable,
instead of Stock;
(vi) to determine whether, to what extent and under what
circumstances Option grants and/or other awards under the Plan and/or other cash
awards made by the Company are to be made, and operate, on a tandem basis with
other awards under the Plan and/or cash awards made outside of the Plan in a
manner whereby the exercise of one award precludes, in whole or in part, the
exercise of another award, or on an additive basis;
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(vii) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award under
this Plan shall be deferred either automatically or at the election of the
participant, including any provision for any determination or method of
determination of the amount (if any) deemed be earned on any deferred amount
during any deferral period;
(viii) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Stock purchased by exercising such Rights; and
(ix) to determine an aggregate number of awards and the type of
awards to be granted to eligible persons employed or engaged by the Company
and/or any specific Subsidiary, Affiliate or division and grant to management
the authority to grant such awards, provided that no awards to any person
subject to the reporting and short-swing profit provisions of Section 16 of the
Exchange Act may be granted awards except by the Committee.
(c) The Committee shall have the authority to adopt, alter and repeal
such rules, guidelines and practices governing the Plan as it shall, from time
to time, deem advisable; to interpret the terms and provisions of the Plan and
any award issued under the Plan and any agreements relating thereto, and
otherwise to supervise the administration of the Plan.
(d) All decisions made by the Committee pursuant to the provisions of
the Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and Plan participants.
3. Stock Subject to Plan.
(a) The total number of shares of Stock reserved and available for
distribution under the Plan shall be eight hundred forty thousand (840,000)
shares of Common Stock. In the event that awards are granted in tandem such that
the exercise of one award precludes the exercise of another award then, for the
purpose of determining the number of shares of Stock as to which awards shall
have been granted, the maximum number of shares of Stock issuable pursuant to
such tandem awards shall be used.
(b) Subject to Paragraph 6(b)(v) of the Plan, if any shares of Stock
that have been optioned cease to be subject to a Stock Option, or if any such
shares of Stock that are subject to any Restricted Stock or Deferred Stock
award, Stock Purchase Right or Other Stock-Based Award granted under the Plan
are forfeited or any such award otherwise terminates without a payment being
made to the participant in the form of Stock, such shares shall again be
available for distribution in connection with future awards under the Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, stock distribution, reverse
split, combination of shares or other change in corporate structure affecting
the Stock, such substitution or adjustment shall be made in the aggregate number
of shares reserved for issuance under the Plan, in the base number of shares, in
the number and option price of shares subject to outstanding Options granted
under the Plan, in the number and purchase price of shares subject to
outstanding Stock Purchase Rights under the Plan, and in the number of shares
subject to other outstanding awards granted under the Plan as may be determined
to be appropriate by the Committee, in its sole discretion, provided that the
number of shares subject to any award shall always be a whole number. Such
adjusted option price shall also be used to determine the amount payable by the
Company upon the exercise of any Stock Appreciation Right associated with any
Stock Option.
4. Eligibility.
(a) Officers and other key employees and directors of, and consultants
and independent contractors to, the Company and its Subsidiaries and Affiliates
(but excluding, except as to Paragraph 4(b) of the Plan, Non-Employee
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Directors) who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company and/or its Subsidiaries and
Affiliates are eligible to be granted awards under the Plan.
(b) (i) On the date of the adoption of the Plan, there shall be granted
(A) to each person who is a Non- Employee Director, other than the chairman of
the board of the Company, a non-qualified stock option to purchase fifteen
thousand (15,000) shares of Common Stock and (B) to the chairman of the board a
non-qualified stock option to purchase ninety thousand (90,000) shares of Common
Stock. Such options shall have an exercise price per share equal to the Fair
Market Value of one share of Common Stock on the date of grant.
(ii) On each April 1 of each year, commencing April 1, 1999, each
person who is a Non-Employee Director on such date shall automatically be
granted a nonqualified option to purchase fifteen thousand (15,000) shares of
Common Stock (or such lesser number of shares of Common Stock as remain
available for grant at such date under the Plan, divided by the number of
Non-Employee Directors at such date). Such options shall be exercisable at a
price per share equal to the greater of the Fair Market Value on the date of
grant or the par value of one share of Common Stock.
(iii) The non-qualified options granted pursuant to Paragraphs
4(b)(i) and (ii) of the Plan shall become exercisable cumulatively as to fifty
percent (50%) of the shares of Common Stock subject to the option six (6) months
from the date of grant and shall become exercisable as to the remaining fifty
percent (50%) of such shares twelve (12) months from the date of grant, and
shall expire on the earlier of (i) five years from the date of grant, or (ii)
twelve (12) months from the date such Non-Employee Director ceases to be a
director of the Company if such Non-Employee Director ceases to be a director
because of his death or Disability or (iii) seven (7) months from the date such
Non-Employee Director ceases to be a director if such Non-Employee Director
ceases to be a director other than as a result of his death or Disability. The
provisions of this Paragraph 4(b) may not be amended more than one (1) time in
any six (6) month period other than to comply with changes in the Code or the
Employee Retirement Income Security Act ("ERISA") or the rules thereunder.
5. Stock Options.
(a) Administration. Stock Options may be granted alone, in addition to
or in tandem with other awards granted under the Plan and/or cash awards made
outside of the Plan. Any Stock Option granted under the Plan shall be in such
form as the Committee may from time to time approve. Stock Options granted under
the Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified
Stock Options. The Committee shall have the authority to grant to any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights).
(b) Option Grants. 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, in
its sole discretion, shall deem desirable:
(i) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant.
(ii) Option Term. The term of each Stock Option shall be fixed by
the Committee, but no Stock Option shall be exercisable more than ten (10) years
after the date the Option is granted.
(iii) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Committee at or after grant. If the Committee provides, in its sole
discretion, that any Stock Option is exercisable only in installments, the
Committee may waive such installment
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<PAGE>
exercise provisions at any time at or after grant in whole or in part, based on
such factors as the Committee shall, in its sole discretion, determine.
(iv) Method of Exercise.
(A) Subject to whatever installment exercise provisions
apply under Paragraph 5(b)(iii) of the Plan, Stock Options may be exercised in
whole or in part at any time during the option period, by giving written
notice of exercise to the Company specifying the number of shares to
be purchased. Such notice shall be accompanied by payment in full of the
purchase price, either by check, note or such other instrument, securities
or property as the Committee may accept. As and to the extent determined by
the Committee, in its sole discretion, at or after grant, payments in full
or in part may also be made in the form of Stock already owned by the optionee
or, in the case of the exercise of a Non-Qualified Stock Option, Restricted
Stock or Deferred Stock subject to an award hereunder (based, in each case,
on the Fair Market Value of the Stock on the date the option is exercised, as
determined by the Committee).
(B) If payment of the option exercise price of a
Non-Qualified Stock Option is made in whole or in part in the form of Restricted
Stock or Deferred Stock, the Stock issuable upon such exercise (and any
replacement shares relating thereto) shall remain (or be) restricted or
deferred, as the case may be, in accordance with the original terms of the
Restricted Stock award or Deferred Stock award in question, and any additional
Stock received upon the exercise shall be subject to the same forfeiture
restrictions or deferral limitations, unless otherwise determined by the
Committee, in its sole discretion, at or after grant.
(C) No shares of Stock shall be issued until full payment
therefor has been received by the Company. In the event of any exercise by note
or other instrument, the shares of Stock shall not be issued until such note or
other instrument shall have been paid in full, and the exercising optionee
shall have no rights as a stockholder until such payment is made.
(D) Subject to Paragraph 5(b)(iv)(C) of the Plan, an
optionee shall generally have the rights to dividends or other rights of a
stockholder with respect to shares subject to the Option when the optionee has
given written notice of exercise, has paid in full for such shares, and, if
requested, has given the representation described in Paragraph 14(a) of the
Plan.
(v) Non-Transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(vi) Termination by Death. Subject to Paragraph 5(b)(ix) of the
Plan with respect to Incentive Stock Options, if an optionee's employment by the
Company and any Subsidiary or Affiliate terminates by reason of death, any Stock
Option held by such optionee may thereafter be exercised, to the extent such
option was exercisable at the time of death or on such accelerated basis as the
Committee may determine at or after grant (or as may be determined in accordance
with procedures established by the Committee), by the legal representative of
the estate or by the legatee of the optionee under the will of the optionee, for
a period of one year (or such other period as the Committee may specify at
grant) from the date of such death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.
(vii) Termination by Reason of Disability or Retirement. Subject
to Paragraph 5(b)(ix) of the Plan with respect to Incentive Stock Options, if an
optionee's employment by the Company and any Subsidiary or Affiliate terminates
by reason of a Disability or Normal or Early Retirement, any Stock Option held
by such optionee may thereafter be exercised by the optionee, to the extent it
was exercisable at the time of termination or on such accelerated basis as the
Committee may determine at or after grant (or as may be determined in accordance
with procedures established by the Committee), for a period of one year (or such
other period as the Committee may
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specify at grant) from the date of such termination of employment or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter; provided, however, that, if the optionee dies within such one-year
period (or such other period as the Committee shall specify at grant), any
unexercised Stock Option held by such optionee shall thereafter be exercisable
to the extent to which it was exercisable at the time of death for a period of
one year from the date of such death or until the expiration of the stated term
of such Stock Option, whichever period is the shorter. In the event of
termination of employment by reason of Disability or Normal or Early Retirement,
if an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, such Stock Option
will thereafter be treated as a Non-Qualified Stock Option.
(viii) Other Termination. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee) at or after
grant, if an optionee's employment by the Company and any Subsidiary or
Affiliate terminates for any reason other than death, Disability or Normal or
Early Retirement, the Stock Option shall thereupon terminate; provided, however,
that if the optionee is involuntarily terminated by the Company or any
Subsidiary or Affiliate without Cause, including a termination resulting from
the Subsidiary, Affiliate or division in which the optionee is employed or
engaged, ceasing, for any reason, to be a Subsidiary, Affiliate or division of
the Company, such Stock Option may be exercised, to the extent otherwise
exercisable on the date of termination, for a period of three months (or seven
months in the case of a person subject to the reporting and short-swing profit
provisions of Section 16 of the Exchange Act) from the date of such termination
or until the expiration of the stated term of such Stock Option, whichever is
shorter.
(ix) Incentive Stock Options.
(A) Anything in the Plan to the contrary notwithstanding,
no term of the Plan relating to Incentive Stock Options 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, without the consent of the optionee(s) affected, to disqualify
any Incentive Stock Option under such Section 422.
(B) To the extent required for "incentive stock option"
status under Section 422(d) of the Code (taking into account applicable Treasury
regulations and pronouncements), the Plan shall be deemed to provide that
the aggregate Fair Market Value (determined as of the time of grant) of
the Stock with respect to which Incentive Stock Options are exercisable
for the first time by the optionee during any calendar year under the Plan
and/or any other stock option plan of the Company or any Subsidiary or
parent corporation (within the meaning of Section 425 of the Code) shall not
exceed $100,000. If Section 422 is hereafter amended to delete the
requirement now in Section 422(d) that the plan text expressly provide for
the $100,000 limitation set forth in Section 422(d), then this Paragraph 5(b)
ix)(B) shall no longer be operative and the Committee may accelerate the dates
on which the incentive stock option may be exercised.
(C) To the extent permitted under Section 422 of the Code
or the applicable regulations thereunder or any applicable Internal Revenue
Service pronouncement:
(I) If (x) a participant's employment is terminated
by reason of death, Disability or Retirement and (y) the portion of any
Incentive Stock Option that is otherwise exercisable during the
post-termination period specified under Paragraphs 5(b)(vi) and (vii) of
the Plan, applied without regard to the $100,000 limitation contained in
Section 422(d) of the Code, is greater than the portion of such option that is
immediately exercisable as an "incentive stock option" during such
post-termination period under Section 422, such excess shall be treated as a
Non-Qualified Stock Option; and
(II) if the exercise of an Incentive Stock Option
is accelerated by reason of a Change in Control, any portion of such option
that is not exercisable as an Incentive Stock Option by reason of the $100,000
limitation contained in Section 422(d) of the Code shall be treated as a
Non-Qualified Stock Option.
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(x) Buyout Provisions. The Committee may at any time offer to buy
out for a payment in cash, Stock, Deferred Stock or Restricted Stock an option
previously granted, based on such terms and conditions as the Committee shall
establish and communicate to the optionee at the time that such offer is made.
(xi) Settlement Provisions. If the option agreement so provides
at grant or is amended after grant and prior to exercise to so provide (with the
optionee's consent), the Committee may require that all or part of the shares to
be issued with respect to the spread value of an exercised Option take the form
of Deferred or Restricted Stock which shall be valued on the date of exercise on
the basis of the Fair Market Value (as determined by the Committee) of such
Deferred or Restricted Stock determined without regard to the deferral
limitations and/or forfeiture restrictions involved.
6. Stock Appreciation Rights.
(a) Grant and Exercise.
(i) Stock Appreciation Rights may be granted in conjunction with
all or part of any Stock Option granted under the Plan. In the case of a
Non-Qualified Stock Option, such rights may be granted either at or after the
time of the grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of such Stock
Option.
(ii) A Stock Appreciation Right or applicable portion thereof
granted with respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option,
subject to such provisions as the Committee may specify at grant where a Stock
Appreciation Right is granted with respect to less than the full number of
shares covered by a related Stock Option.
(iii) A Stock Appreciation Right may be exercised by an optionee,
subject to Paragraph 6(b) of the Plan, in accordance with the procedures
established by the Committee for such purpose. Upon such exercise, the optionee
shall be entitled to receive an amount determined in the manner prescribed in
said Paragraph 6(b). Stock Options relating to exercised Stock Appreciation
Rights shall no longer be exercisable to the extent that the related Stock
Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to which they relate
shall be exercisable in accordance with the provisions of this Section 6 and
Section 5 of the Plan; provided, however, that any Stock Appreciation Right
granted to an optionee subject to Section 16(b) of the Exchange Act subsequent
to the grant of the related Stock Option shall not be exercisable during the
first six months of its term, except that this special limitation shall not
apply in the event of death or Disability of the optionee prior to the
expiration of the six-month period. The exercise of Stock Appreciation Rights
held by optionees who are subject to Section 16(b) of the Exchange Act shall
comply with Rule 16b-3 thereunder to the extent applicable.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash and/or shares of Stock equal in
value to the excess of the Fair Market Value of one share of Stock over the
option price per share specified in the related Stock Option multiplied by the
number of shares in respect of which the Stock Appreciation Right shall have
been exercised, with the Committee having the right to determine the form of
payment. When payment is to be made in shares of Stock, the number of shares to
be paid shall be calculated on the basis of the Fair Market Value of the shares
on the date of exercise. When payment is to be made
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in cash, such amount shall be based upon the Fair Market Value of the Stock on
the date of exercise, determined in a manner not inconsistent with Section 16(b)
of the Exchange Act and the rules of the Commission thereunder.
(iii) Stock Appreciation Rights shall be transferable only when
and to the extent that the underlying Stock Option would be transferable under
Paragraph 5(b)(v) of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right is related shall
be deemed to have been exercised only to the extent of the number of shares
issued under the Stock Appreciation Right at the time of exercise based on the
value of the Stock Appreciation Right at such time.
(v) In its sole discretion, the Committee may grant Stock
Appreciation Rights that become exercisable only in the event of a Change in
Control and/or a Potential Change in Control, subject to such terms and
conditions as the Committee may specify at grant; provided that any such Stock
Appreciation Rights shall be settled solely in cash.
(vi) The Committee, in its sole discretion, may also provide
that, in the event of a Change in Control and/or a Potential Change in Control,
the amount to be paid upon the exercise of a Stock Appreciation Right shall be
based on the Change in Control Price, subject to such terms and conditions as
the Committee may specify at grant.
7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either
alone, in addition to or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. The Committee shall determine the
eligible persons to whom, and the time or times at which, grants of Restricted
Stock will be made, the number of shares to be awarded, the price (if any) to be
paid by the recipient of Restricted Stock, subject to Paragraph 7(b) of the
Plan, the time or times within which such awards may be subject to forfeiture,
and all other terms and conditions of the awards. The Committee may condition
the grant of Restricted Stock upon the attainment of specified performance goals
or such other factors as the Committee may, in its sole discretion, determine.
The provisions of Restricted Stock awards need not be the same with respect to
each recipient.
(b) Awards and Certificates.
(i) The prospective recipient of a Restricted Stock award shall
not have any rights with respect to such award unless and until such recipient
has executed an agreement evidencing the award and has delivered a fully
executed copy thereof to the Company, and has otherwise complied with the
applicable terms and conditions of such award.
(ii) The purchase price for shares of Restricted Stock may be
equal to or less than their par value and may be zero.
(iii) Awards of Restricted Stock must be accepted within a period
of 60 days (or such shorter period as the Committee may specify at grant) after
the award date, by executing a Restricted Stock Award Agreement and paying the
price, if any, required under Paragraph 7(b)(ii).
(iv) Each participant receiving a Restricted Stock award shall be
issued a stock certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of such participant, and shall bear
an appropriate legend referring to the terms, conditions, and restrictions
applicable to such award.
(v) The Committee shall require that (A) the stock certificates
evidencing shares of Restricted Stock be held in the custody of the Company
until the restrictions thereon shall have lapsed, and (B) as a condition of any
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Restricted Stock award, the participant shall have delivered a stock power,
endorsed in blank, relating to the Restricted Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 7 shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of the Plan and the award
agreement, during a period set by the Committee commencing with the date of such
award (the "Restriction Period"), the participant shall not be permitted to
sell, transfer, pledge or assign shares of Restricted Stock awarded under the
Plan. Within these limits, the Committee, in its sole discretion, may provide
for the lapse of such restrictions in installments and may accelerate or waive
such restrictions in whole or in part, based on service, performance and/or such
other factors or criteria as the Committee may determine, in its sole
discretion.
(ii) Except as provided in this paragraph 7(c)(ii) and Paragraph
7(c)(i) of the Plan, the participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a stockholder of the Company, including
the right to vote the shares and the right to receive any regular cash dividends
paid out of current earnings. The Committee, in its sole discretion, as
determined at the time of award, may permit or require the payment of cash
dividends to be deferred and, if the Committee so determines, reinvested,
subject to Paragraph 14(e) of the Plan, in additional Restricted Stock to the
extent shares are available under Section 3 of the Plan, or otherwise
reinvested. Stock dividends, splits and distributions issued with respect to
Restricted Stock shall be treated as additional shares of Restricted Stock that
are subject to the same restrictions and other terms and conditions that apply
to the shares with respect to which such dividends are issued, and the Committee
may require the participant to deliver an additional stock power covering the
shares issuable pursuant to such stock dividend, split or distribution. Any
other dividends or property distributed with regard to Restricted Stock, other
than regular dividends payable and paid out of current earnings, shall be held
by the Company subject to the same restrictions as the Restricted Stock.
(iii) Subject to the applicable provisions of the award agreement
and this Section 7, upon termination of a participant's employment with the
Company and any Subsidiary or Affiliate for any reason during the Restriction
Period, all shares still subject to restriction will vest, or be forfeited, in
accordance with the terms and conditions established by the Committee at or
after grant.
(iv) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
certificates for an appropriate number of unrestricted shares, and other
property held by the Company with respect to such Restricted Shares, shall be
delivered to the participant promptly.
(d) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
Stock Option or performance-based or other award designed to guarantee a minimum
value, payable in cash or Stock to the recipient of a Restricted Stock award,
subject to such performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
8. Deferred Stock.
(a) Administration. Deferred Stock may be awarded either alone, in
addition to or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. The Committee shall determine the eligible
persons to whom and the time or times at which Deferred Stock shall be awarded,
the number of shares of Deferred Stock to be awarded to any person, the duration
of the period (the "Deferral Period") during which, and the conditions under
which, receipt of the Stock will be deferred, and the other terms and conditions
of the award in addition to those set forth in Paragraph 8(b). The Committee may
condition the grant of Deferred Stock upon the attainment of specified
performance goals or such other factors or criteria as the Committee shall, in
its sole discretion, determine. The provisions of Deferred Stock awards need not
be the same with respect to each recipient.
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(b) Terms and Conditions. The shares of Deferred Stock awarded pursuant
to this Section 8 shall be subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and the award agreement
referred to in Paragraph 8(b)(vi) of the Plan, Deferred Stock awards may not be
sold, assigned, transferred, pledged or otherwise encumbered during the Deferral
Period. At the expiration of the Deferral Period (or the Elective Deferral
Period referred to in Paragraph 8(b)(v) of the Plan, where applicable), share
certificates representing the shares covered by the Deferred Stock award shall
be delivered to the participant or his legal representative.
(ii) Unless otherwise determined by the Committee at grant,
amounts equal to any dividends declared during the Deferral Period with respect
to the number of shares covered by a Deferred Stock award will be paid to the
participant currently, or deferred and deemed to be reinvested in additional
Deferred Stock, or otherwise reinvested, all as determined at or after the time
of the award by the Committee, in its sole discretion.
(iii) Subject to the provisions of the award agreement and this
Section 8, upon termination of a participant's employment with the Company and
any Subsidiary or Affiliate for any reason during the Deferral Period for a
given award, the Deferred Stock in question will vest, or be forfeited, in
accordance with the terms and conditions established by the Committee at or
after grant.
(iv) Based on service, performance and/or such other factors or
criteria as the Committee may determine, the Committee may, at or after grant,
accelerate the vesting of all or any part of any Deferred Stock award and/or
waive the deferral limitations for all or any part of such award.
(v) A participant may elect to further defer receipt of an award
(or an installment of an award) for a specified period or until a specified
event (the "Elective Deferral Period"), subject in each case to the Committee's
approval and to such terms as are determined by the Committee, all in its sole
discretion. Subject to any exceptions adopted by the Committee, such election
must generally be made at least twelve months prior to completion of the
Deferral Period for such Deferred Stock award (or such installment).
(vi) Each award shall be confirmed by, and subject to the terms
of, a Deferred Stock agreement executed by the Company and the participant.
(c) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
Stock Option or performance-based or other award designed to guarantee a minimum
value, payable in cash or Stock to the recipient of a deferred stock award,
subject to such performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
9. Stock Purchase Rights.
(a) Awards and Administration. The Committee may grant eligible
participants Stock Purchase Rights which shall enable such participants to
purchase Stock (including Deferred Stock and Restricted Stock):
(i) at its Fair Market Value on the date of grant;
(ii) at a percentage of such Fair Market Value on such date, such
percentage to be determined by the Committee in its sole discretion;
(iii) at an amount equal to Book Value on such date; or
(iv) at an amount equal to the par value of such Stock on such
date.
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<PAGE>
The Committee shall also impose such deferral, forfeiture and/or other
terms and conditions as it shall determine, in its sole discretion, on such
Stock Purchase Rights or the exercise thereof. The terms of Stock Purchase
Rights awards need not be the same with respect to each participant. Each Stock
Purchase Right award shall be confirmed by, and be subject to the terms of, a
Stock Purchase Rights Agreement.
(b) Exercisability. Stock Purchase Rights shall generally be exercisable
for such period after grant as is determined by the Committee not to exceed
sixty (60) days. However, the Committee may provide, in its sole discretion,
that the Stock Purchase Rights of persons potentially subject to Section 16(b)
of the Exchange Act shall not become exercisable until six months and one day
after the grant date, and shall then be exercisable for ten trading days at the
purchase price specified by the Committee in accordance with Paragraph 9(a) of
the Plan.
10. Other Stock-Based Awards.
(a) Administration.
(i) Other awards of Stock and other awards that are valued in
whole or in part by reference to, or are otherwise based on, Stock ("Other
Stock-Based Awards"), including, without limitation, performance shares,
convertible preferred stock (to the extent a series of preferred stock has been
or may be created by, or in accordance with a procedure set forth in, the
Company's certificate of incorporation), convertible debentures, warrants,
exchangeable securities and Stock awards or options valued by reference to Fair
Market Value, Book Value or performance of the Company or any Subsidiary,
Affiliate or division, may be granted either alone or in addition to or in
tandem with Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred
Stock or Stock Purchase Rights granted under the Plan and/or cash awards made
outside of the Plan.
(ii) Subject to the provisions of the Plan, the Committee shall
have authority to determine the persons to whom and the time or times at which
such award shall be made, the number of shares of Stock to be awarded pursuant
to such awards, and all other conditions of the awards. The Committee may also
provide for the grant of Stock upon the completion of a specified performance
period. The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant to this
Section 10 shall be subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and the award agreement
referred to in Paragraph 10(b)(v) of the Plan, shares of Stock subject to awards
made under this Section 10 may not be sold, assigned, transferred, pledged or
otherwise encumbered prior to the date on which the shares are issued, or, if
later, the date on which any applicable restriction, performance or deferral
period lapses.
(ii) Subject to the provisions of the Plan and the award
agreement and unless otherwise determined by the Committee at grant, the
recipient of an award under this Section 10 shall be entitled to receive,
currently or on a deferred basis, interest or dividends or interest or dividend
equivalents with respect to the number of shares covered by the award, as
determined at the time of the award by the Committee, in its sole discretion,
and the Committee may provide that such amounts (if any) shall be deemed to have
been reinvested in additional Stock or otherwise reinvested.
(iii) Any award under Section 10 and any Stock covered by any
such award shall vest or be forfeited to the extent so provided in the award
agreement, as determined by the Committee, in its sole discretion.
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<PAGE>
(iv) In the event of the participant's Retirement, Disability or
death, or in cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the remaining limitations
(if any) imposed with respect to any or all of an award pursuant to this Section
10.
(v) Each award under this Section 10 shall be confirmed by, and
subject to the terms of, an agreement or other instrument by the Company and by
the participant.
(vi) Stock (including securities convertible into Stock) issued
on a bonus basis under this Section 10 may be issued for no cash consideration.
11. Change in Control Provisions.
(a) Impact of Event. In the event of a "Change in Control," as defined
in Paragraph 11(b) of the Plan, or a "Potential Change in Control," as defined
in Paragraph 11(c) of the Plan, except to the extent otherwise determined by the
Committee or the Board at or after grant (subject to any right of approval
expressly reserved by the Committee or the Board at the time of such
determination), the following acceleration and valuation provisions shall apply:
(i) Any Stock Appreciation Rights outstanding for at least six
months and any Stock Options awarded under the Plan not previously exercisable
and vested shall become fully exercisable and vested.
(ii) The restrictions and deferral limitations applicable to any
Restricted Stock, Deferred Stock, Stock Purchase rights and Other Stock-Based
Awards, in each case to the extent not already vested under the Plan, shall
lapse and such shares and awards shall be deemed fully vested.
(iii) The value of all outstanding Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock, Stock Purchase Rights and
Other Stock-Based Awards, in each case to the extent vested, shall be purchased
by the Company ("cashout") in a manner determined by the Committee, in its sole
discretion, on the basis of the "Change in Control Price" as defined in
Paragraph 11(d) of the Plan as of the date such Change in Control or such
Potential Change in Control is determined to have occurred or such other date as
the Committee may determine prior to the Change in Control.
(b) Definition of "Change in Control". For purposes of Paragraph 11(a)
of the Plan, a "Change in Control" means the happening of any of the following:
(i) When any "person" (as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) of the Exchange Act,
including a "group" as defined in Section 13(d) of the Exchange Act, but
excluding the Company and any Subsidiary and any employee benefit plan sponsored
or maintained by the Company or any Subsidiary and any trustee of such plan
acting as trustee) directly or indirectly becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of
securities of the Company representing twenty-five percent or more of the
combined voting power of the Company's then outstanding securities; provided,
however, that a Change of Control shall not arise if such acquisition is
approved by the board of directors or if the board of directors or the Committee
determines that such acquisition is not a Change of Control or if the board of
directors authorizes the issuance of the shares of Common Stock (or securities
convertible into Common Stock or upon the exercise of which shares of Common
Stock may be issued) to such persons; or
(ii) When, during any period of twenty-four 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, Disability or Retirement to constitute at least a majority
thereof, provided, however, that a director who was not a director at the
beginning of such 24-month period shall be deemed to have satisfied such
24-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
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<PAGE>
actually (because they were directors at the beginning of such 24-month period)
or by prior operation of this Paragraph 11(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
or a Subsidiary through purchase of assets, or by merger, or otherwise.
(c) Definition of Potential Change in Control. For purposes of Paragraph
11(a) of the Plan, a "Potential Change in Control" means the happening of any
one of the following:
(i) The approval by stockholders of an agreement by the Company,
the consummation of which would result in a Change in Control of the Company as
defined in Section 11(b) of the Plan; or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or a
Subsidiary or any Company employee benefit plan or any trustee of such plan
acting as such trustee) of securities of the Company representing five percent
or more of the combined voting power of the Company's outstanding securities and
the adoption by the Board of Directors of a resolution to the effect that a
Potential Change in Control of the Company has occurred for purposes of the
Plan.
(d) Change in Control Price. For purposes of this Section 11, "Change in
Control Price" means the highest price per share paid in any transaction
reported on the principal stock exchange on which the Stock is traded or the
average of the highest bid and asked prices as reported by NASDAQ, or paid or
offered in any bona fide transaction related to a potential or actual Change in
Control of the Company at any time during the sixty-day period immediately
preceding the occurrence of the Change in Control (or, where applicable, the
occurrence of the Potential Change in Control event), in each case as determined
by the Committee except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the optionee exercises
such Stock Appreciation Rights or, where applicable, the date on which a cashout
occurs under Paragraph 11(a)(iii).
12. Amendments and Termination.
(a) The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would impair the
rights of an optionee or participant under a Stock Option, Stock Appreciation
Right (or Limited Stock Appreciation Right), Restricted or Deferred Stock award,
Stock Purchase Right or Other Stock-Based Award theretofore granted, without the
optionee's or participant's consent, and no amendment will be made without
approval of the stockholders if such amendment requires stockholder approval
under state law or if stockholder approval is necessary in order that the Plan
comply with Rule 16b-3 of the Commission under the Exchange Act or any
substitute or successor rule or if stockholder approval is necessary in order to
enable the grant pursuant to the Plan of options or other awards intended to
confer tax benefits upon the recipients thereof.
(b) The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights or any holder without the holder's consent. The Committee may
also substitute new Stock Options for previously granted Stock Options (on a one
for one or other basis), including previously granted Stock Options having
higher option exercise prices.
(c) Subject to the provisions of Paragraphs 12(a) and (b) of the Plan,
the Board shall have broad authority to amend the Plan to take into account
changes in applicable securities and tax laws and accounting rules, as well as
other developments, and, in particular, without limiting in any way the
generality of the foregoing, to eliminate any provisions which are not required
to included as a result of any amendment to Rule 16b-3 of the Commission
pursuant to the Exchange Act.
13. Unfunded Status of Plan.
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The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained in this Plan shall
give any such participant or optionee any rights that are greater than those of
a general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards under this Plan; provided, however, that, unless the Committee
otherwise determines with the consent of the affected participant, the existence
of such trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan.
14. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to
a Stock Option or other award under the Plan to represent to and agree with the
Company in writing that the optionee or participant is acquiring the shares
without a view to distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer. All certificates or shares of Stock or other
securities delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Commission, any stock exchange
upon which the Stock is then listed, and any applicable Federal or state
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
(c) Neither the adoption of the Plan nor the grant of any award pursuant
to the Plan shall confer upon any employee of the Company or any Subsidiary or
Affiliate any right to continued employment with the Company or a Subsidiary or
Affiliate, as the case may be, nor shall it interfere in any way with the right
of the Company or a Subsidiary or Affiliate to terminate the employment of any
of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Committee regarding the
payment of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations may be settled with Stock, including Stock
that is part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company and its Subsidiaries or Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or in Deferred Stock or other types
of Plan awards) at the time of any dividend payment shall only be permissible if
sufficient shares of Stock are available under Section 3 of the Plan for such
reinvestment (taking into account then outstanding Stock Options, Stock Purchase
Rights and other Plan awards).
15. Effective Date of Plan.
The Plan shall be effective as of the date the Plan is approved by the
Board, subject to the approval of the Plan by a majority of the votes cast by
the holders of the Company's Common Stock at the next annual or special meeting
of stockholders. Any grants made under the Plan prior to such approval shall be
effective when made (unless otherwise specified by the Committee at the time of
grant), but shall be conditioned on, and subject to, such approval of the Plan
by such stockholders.
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16. Term of Plan.
Stock Option, Stock Appreciation Right, Restricted Stock award, Deferred
Stock award, Stock Purchase Right or Other Stock-Based Award may be granted
pursuant to the Plan, until ten (10) years from the date the Plan was approved
by the Board, unless the Plan shall be terminated by the Board, in its
discretion, prior to such date, but awards granted prior to such termination may
extend beyond that date.
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