<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-28728
NETLIVE COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3848652
-------- ----------
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
584 Broadway, New York, NY 10012
--------------------------------
(Address of principal executive offices)
(212) 343-7082
--------------
(Issuer's telephone number, including area code)
Indicate by check mark whether the Issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Issuer was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at November 1, 1997
----- --------------------------------
Common Stock, $0.0001 par value 2,950,000
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NETLIVE COMMUNICATIONS, INC.
(a development stage company)
INDEX
Page
Number
------
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of September 30, 1997 (unaudited)
and as of March 31, 1997 (audited) 3
Statement of Operations for the three and six month periods ended
September 30, 1997 and 1996 (unaudited), and the period from
August 23, 1995 (inception) to September 30, 1997 (unaudited) 4
Statement of Cash Flows for the six month periods ended
September 30, 1997 and 1996 (unaudited) and the period from
August 23, 1995 (inception) to September 30, 1997 (unaudited) 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan
of Operation 8
PART II OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 13
2
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PART I: FINANCIAL INFORMATION
ITEM 1. Financial Statements
NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Balance Sheet
<TABLE>
<CAPTION>
September 30,1997 March 31, 1997
----------------- --------------
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 733,986 $ 32,958
Marketable securities 994,735 2,984,826
Prepaid expenses and other current assets 82,822 32,435
----------- -----------
TOTAL CURRENT ASSETS 1,811,543 3,050,219
Property and Equipment, net 114,772 93,853
Deferred income tax asset, net of valuation
allowance -- --
----------- -----------
Other Assets 35,746 50,112
----------- -----------
TOTAL ASSETS $ 1,962,061 $ 3,194,184
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable & accrued expenses $ 159,637 $ 414,633
----------- -----------
TOTAL CURRENT LIABILITIES 159,637 414,633
----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock--$.0001 par value; authorized 1,000,000
shares, none issued -- --
Common Stock--$.0001 par value: authorized 19,000,000
shares, issued and outstanding 2,950,000 shares 295 295
Additional paid-in capital 5,864,448 5,996,948
Deficit accumulated during development stage (3,377,672) (2,288,588)
Deferred Compensation (684,647) (929,104)
----------- -----------
STOCKHOLDERS' EQUITY 1,802,424 2,779,551
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,962,061 $ 3,194,184
=========== ===========
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
3
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NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Statement of Operations
<TABLE>
<CAPTION>
Period from
Three months Three months Six months Six months August 23,1995
ended ended ended ended (date of inception)
September 30, September 30, September 30, September 30, to September 30,
1997 1996 1997 1996 1997
----------- ----------- ----------- ----------- -----------
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C>
Net revenue -- -- $ 10,256 -- $ 17,945
----------- ----------- ----------- ----------- -----------
Selling, general & administrative expenses:
Salaries $ 116,461 $ 99,077 $ 237,445 $ 192,176 $ 875,178
Research and development 142,341 68,850 290,210 133,980 859,065
Professional fees 84,931 38,235 272,235 61,909 674,563
Rent 10,054 11,813 28,253 22,849 86,455
Depreciation & amortization 13,331 6,431 24,722 11,611 57,996
Interest expense and financing costs -- -- -- 169,932 196,123
Interest and dividend income (20,170) (19,425) (51,805) -- (165,491)
Other 136,264 74,152 298,280 107,983 811,728
----------- ----------- ----------- ----------- -----------
Total expenses 483,212 279,133 1,099,340 700,440 3,395,617
----------- ----------- ----------- ----------- -----------
Net loss $ (483,212) $ (279,133) $(1,089,084) $ (700,440) $(3,377,672)
=========== =========== =========== =========== ===========
Net loss per common share $ (0.16) $ (0.11) $ (0.37) $ (0.30) --
=========== =========== =========== =========== ===========
Weighted average number of common shares
outstanding 2,950,000 2,646,563 2,950,000 2,348,292 --
=========== =========== =========== =========== ===========
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
4
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NETLIVE COMMUNICATIONS, INC.
(a development stage company)
Statement of Cash Flows
<TABLE>
<CAPTION>
Period from
Six Six August 23, 1995
months ended months ended (inception) to
September 30, 1997 September 30, 1996 September 30,1997
(unaudited) (unaudited) (unaudited)
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net Loss $(1,089,084) $ (700,440) $(3,377,672)
Adjustments to reconcile net loss to net cash used in
operating activities:
Expenses paid by stockholders, contributed to Company -- -- 12,006
Amortization of deferred compensation expense 111,957 37,500 211,603
Amortization of debt issue costs and discount on
notes payable -- 186,131 190,000
Depreciation and amortization 24,414 11,611 57,688
Changes in operating assets and liabilities:
Increase in prepaid expenses and other current assets (50,387) (109,600) (82,822)
(Increase) decrease in other assets 14,366 (57,500) (30,309)
Increase (decrease) in accounts payable and accrued
expenses (254,996) (13,846) 159,637
----------- ----------- -----------
Net cash used in operating activities (1,243,730) (646,144) (2,859,869)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (45,333) (26,084) (135,835)
Acquisition of intangibles -- (1,920) (6,140)
Purchase of available-for-sale securities -- -- (4,984,826)
Proceeds from sales of available-for-sale securities 1,990,091 -- 3,990,091
----------- ----------- -----------
Net cash provided by (used in) investing activities 1,944,758 (28,004) (1,136,710)
----------- ----------- -----------
Cash flows from financing activities:
Net proceeds from issuance of common stock -- 4,737,057 4,816,697
Principal payments on obligations under capital leases -- (2,528) (17,632)
Proceeds from issuance (repayment of) notes payable -- (250,000) --
Debt issue costs -- -- (25,000)
Deferred offering costs -- -- (43,500)
----------- ----------- -----------
Net cash provided from financing activities -- 4,484,529 4,730,565
----------- ----------- -----------
Net increase in cash and cash equivalents 701,028 3,810,381 733,986
Cash and cash equivalents at beginning of period 32,958 160,395 --
----------- ----------- -----------
Cash and cash equivalents at end of period $ 733,986 $ 3,970,776 $ 733,986
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest -- $ 7,155 $ 6,123
=========== =========== ===========
Supplemental schedule of noncash financing and
investing activities:
Contributed property and equipment -- -- $ 18,290
=========== =========== ===========
Capital lease obligations incurred --
-- $ 17,632
=========== =========== ===========
Common stock issued for services related to
initial public offering -- -- $ 14,875
=========== =========== ===========
Common stock and stock options issued under
employment agreement and for services $ 60,000 $ 300,000 $ 1,088,750
=========== =========== ===========
Termination of common stock granted under the
performance share program (192,500) -- (192,500)
=========== =========== ============
</TABLE>
The accompanying notes should be read in conjunction with the financial
statements.
5
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NETLIVE COMMUNICATIONS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles and reflect all
adjustments (consisting of normal recurring adjustments) which, in the opinion
of management, are necessary for a fair presentation of the results for the
periods shown. The results of operations for such periods are not necessarily
indicative of the results expected for the full fiscal year or for any future
period. The accompanying financial statements should be read in conjunction
with the audited financial statements of NetLive Communications, Inc.
("NetLive" or the "Company") as of March 31, 1997 and for the year then ended
and the notes thereto included in the Company's Form 10-KSB and amendment
thereto. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. The Company believes, however, that
the disclosures in this report are adequate to make the information presented
not misleading in any material respect. There have been no significant changes
of accounting policy since March 31, 1997.
NOTE 2
PRIVATE PLACEMENT AND PUBLIC OFFERING
During May, 1996, the Company completed a private placement offering of
securities in which it issued 200,000 shares of Common Stock at an offering
price of $2.50 per share with proceeds to the Company of approximately
$376,000, which is net of approximately $124,000 of offering expenses. The
Company used a portion of the net proceeds to repay $250,000 of aggregate
principal amount of notes payable and approximately $4,500 of interest. The
Company recorded a charge to earnings of approximately $165,000 during the
quarter ended September 30, 1996 in connection with the repayment of the notes
payable.
In August 1996, the Company completed an initial public offering ("IPO")
of 950,000 shares of its common stock at $5.50 per share and 730,000 common
stock purchase warrants for $0.10 per warrant. The net proceeds to the Company,
after deducting underwriting commissions and expenses of the offering of
approximately $1.1 million, were approximately $4.2 million. Additionally, the
Company received net proceeds of approximately $9,500 from the issuance of
common stock purchase warrants and the underwriters warrant pursuant to an
over-allotment option.
6
<PAGE>
NETLIVE COMMUNICATIONS, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 3
NET LOSS PER COMMON SHARE
The net loss per common share is calculated using the weighted average
number of common shares outstanding during the period. For purposes of this
calculation, shares of common stock issued prior to the filing of the
registration statement relating to the IPO, and shares issuable upon exercise
of all common stock purchase warrants and options outstanding, with exercise
prices below the IPO price of $5.50, have been included in weighted average
number of shares outstanding, since inception, using the treasury stock method.
Common stock equivalents issued after the IPO are not included in the weighted
average number of shares since the effect would be antidilutive.
The Company plans to adopt Financial Accounting Standards No. 128
Earnings Per Share during the year ended March 31, 1998. Management believes
the adoption of this standard will not have a material effect.
NOTE 4
INCOME TAXES
No provision for income taxes has been made for all periods presented
since the Company had net operating losses. These net operating losses have
resulted in a deferred tax asset at September 30, 1997. Due to the uncertainty
regarding the ultimate amount of income tax benefits to be derived from the
Company's net operating losses, the Company has recorded a valuation allowance
for the entire amount of the deferred tax asset at September 30, 1997.
NOTE 5
EMPLOYEE STOCK OPTIONS AND PERFORMANCE SHARE PROGRAM
The Company maintains stock option plans to motivate and reward its
employees, officers and directors. In May, 1996, in connection with an
employment agreement, the Company issued options to purchase 100,000 shares of
common stock to an employee under its 1996 stock option plan. In connection
with the issuance of the options, the Company recorded deferred compensation of
$300,000 to reflect the difference between the fair market price of the stock
and the exercise price of the options at the date of issuance. The deferred
compensation is being amortized over three years, the term of the employment
agreement. During the three and six month periods ended September 30, 1997, the
Company recorded a charge to earnings of $25,000 and $50,000, respectively, for
amortization of deferred compensation.
During February 1997, the board of directors of the Company adopted a
performance share program, which authorized the establishment of a trust. The
Company contributed 300,000 shares of the Company's common stock to the trust
to be held therein until distributed to employees, as defined. Restrictions on
the awards granted to date expire annually over a five year period. As of
September 30, 1997, awards relating to an aggregate of 106,000 shares of common
stock had been made to employees. As of September 30, 1997, previously issued
awards relating to 28,000 shares of common stock had been forfeited due to
employee departures and the awards outstanding net of awards forfeited
aggregated 78,000 shares of common stock. The market value of the 106,000
shares on the date of grant was $728,750, which was recorded as deferred
compensation and is shown as a separate component of stockholders' equity. The
deferred compensation is being charged to selling, general and administrative
expenses over the five year vesting period. In September 1997, an award for
10,000 shares of common stock was made to an employee. The market value on the
date of grant was $60,000, which has been recorded as deferred compensation and
is shown as a separate component of stockholders' equity. The deferred
compensation is being charged to selling, general and administrative expenses
over the 1 year vesting period. Compensation charged to selling, general and
administrative expense was $61,957 and $25,519 for the six months and three
months ended September 30, 1997, respectively. In connection with the
forfeiture of the 28,000 shares of common stock, the Company adjusted deferred
compensation relating to the issuance of these awards by $192,500.
On October 8, 1997, the stockholders of the Company adopted a stock option
plan (the "1997 Plan"). Six hundred thousand shares have been authorized for
issuance under the 1997 Plan. The Company has not yet issued any options under
the 1997 Plan. See Part II, Item 4.
7
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THIS FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF
THE U.S. SECURITIES LITIGATION REFORM ACT OF 1995. THESE STATEMENTS INVOLVE
UNKNOWN RISKS AND UNCERTAINTIES THAT MAY CAUSE THE COMPANY'S ACTUAL RESULTS OR
OUTCOMES TO BE MATERIALLY DIFFERENT FROM THOSE ANTICIPATED AND DISCUSSED
HEREIN. IN ASSESSING THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN, READERS
ARE URGED TO READ CAREFULLY ALL RISK FACTORS AND CAUTIONARY STATEMENTS
CONTAINED IN THIS FORM 10-QSB AND IN OTHER FILINGS MADE BY THE NETLIVE
COMMUNICATIONS, INC. WITH THE SECURITIES AND EXCHANGE COMMISSION.
PLAN OF OPERATION
The Company, a development stage company, was incorporated on August 23,
1995 in the State of Delaware. The Company is engaged principally in the design
and development of Internet call center software technologies to license to
businesses. The Company expects to take advantage of the convergence of the
rapid expansion and increasing technological sophistication of the call center
industry and the widespread growth of the Internet as a communications medium.
The Company continues to seek strategic alliances and joint ventures that
complement the Company's overall business strategy. No such alliances or
ventures have been consummated to date. Based on this strategy, the Company
directs a significant percentage of its capital reserves towards operating
expenses and towards non-operating expenses associated with business
development, and anticipates continuing to do so for the near future. Net
losses were $483,212 and $1,089,084 during the three months and six months
ended September 30, 1997, as compared to $279,133 and $700,440 during the three
months and six months ended September 30, 1996, respectively. Net loss per
share was $0.16 and $0.37 during the three months and six months ended
September 30, 1997, as compared to $0.11 and $0.30 during the three months and
six months ended September 30, 1996.
The Company has only a limited operating history upon which an evaluation
of the Company and its prospects can be based. Testing of the Company's
technology has been delayed, and, to date, the Company has not produced or sold
any commercial products. Nor has the Company generated any significant
revenues. The Company's prospects must be considered in light of the risks,
expenses and difficulties frequently encountered by companies in their early
stage of development, particularly companies in new and rapidly evolving
markets. To address these risks, the Company must, among other things, respond
to competitive developments, continue to attract, retain and motivate qualified
employees, and continue to develop its technologies and commercialize products
and services incorporating such technologies. There can be no assurance that
the Company will be successful in addressing such risks. The Company has
incurred net losses since inception through the quarter ended September 30,
1997. As of September 30, 1997, the Company had an accumulated deficit during
the development stage of $3,377,672. There can be no assurance that the Company
will achieve or maintain profitability.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of expenses
for administration, office operations, finance and general management
activities, including legal, accounting and other professional fees. Selling,
general and administrative expenses were $483,212 (including research and
development expenses) and $1,099,340 for the three and six months ended
September 30, 1997, as compared to $279,133 and $700,440 for the three and six
months ended September 30, 1996. This increase was primarily attributable to
the hiring of additional personnel and otherwise expanding operations. Included
in Selling, General and Administrative expenses are salaries aggregating
$116,461 and $237,445 for the three months and six months ended September 30,
1997, as compared to $99,077 and $192,176 for the three months and six months
ended September 30, 1996.
The Company experienced a material decrease in selling, general and
administrative expenses during the second quarter of fiscal 1998 as opposed to
the first quarter of fiscal 1998, during which selling, general and
administrative expenses were $616,128. This decrease was largely attributable
to decreased legal costs. During the first quarter of fiscal 1998, the Company
experienced extraordinary legal costs, which arose from a threatened proxy
contest by May Davis Group, Inc. ("May Davis"), the underwriter for the
Company's initial public offering, and affiliated parties. Following extensive
negotiations, the Company entered into a Settlement and Voting Agreement with
May Davis and such parties on June 12, 1997, which was subsequently amended on
September 23, 1997.
8
<PAGE>
Research and Development
Research and development expenses consist primarily of salaries of
software development staff. The research and development expenses were $142,341
and $290,210 for the three and six month periods ended September 30, 1997, as
compared to $68,850 and $133,980 for the three and six month periods ended
September 30, 1996. This increase was primarily attributable to increased
staffing costs. Management believes that research and development activities
are the single most critical area for investment in the Company and, as a
result, anticipates the hiring of additional software engineers in an effort to
develop and achieve commercial sales of the Company's systems. The Company
anticipates spending approximately $400,000 of its available cash and
marketable securities during the last two quarters of fiscal 1998 on research
and development.
Interest Expense, Financing Costs and Interest Income
There were no interest expenses and financing costs in either the second
quarter of fiscal 1998 or the second quarter of fiscal 1997. Interest and
dividend income was $20,170 and $51,805 for the three and six months ended
September 30, 1997, as compared to $19,425 and zero for the three and six
months ended September 30, 1996. All sums represent interest earned on
investments of the proceeds from the initial public offering.
Provision for Income Taxes
The Company has no provision for income taxes for all periods presented
since it incurred net losses for such periods
Liquidity and Capital Resources
The Company's cash and cash equivalent and marketable securities
aggregated $1,728,721 at September 30, 1997, as compared to $3,017,784 at March
31, 1997. Net cash used in operations was $1,243,730 for the six months ended
September 30, 1997, as compared to $646,144 used in operations for the six
months ended September 30, 1996. The increase in net cash used in operations
from period to period was primarily attributable to the costs from hiring
additional personnel and otherwise expanding operations and costs associated
with the threatened proxy contest by May Davis and affiliated parties,
described above.
The uses of cash during the quarter ended September 30, 1997 were financed
almost exclusively by the sale in August 1996, of 950,000 shares of common
stock and 839,500 warrants to purchase common stock (including the exercise of
the underwriter's overallotment option relating to 109,500 warrants) which
resulted in proceeds of $4.2 million, net of offering expenses, as well as the
sale, in March and May 1996, of an aggregate of 400,000 shares of common stock
and 1,000,000 warrants in a private placement which resulted in proceeds of
$376,000, net of offering expenses.
Net cash provided by (used in) investing activities was $1,944,758 for the
six months ended September 30, 1997, as compared to ($28,004) for the six
months ended September 30, 1996. The change in investing activities was
primarily due to proceeds from sales of available for sale securities.
There was no cash provided by financing activities during the six months
ended September 30, 1997, as compared to $4,484,529 for the six months ended
September 30, 1996. The decrease in net cash provided by financing activities
primarily reflects the receipt of proceeds from the Company's initial public
offering in August, 1996.
The Company does not expect any purchase or sale of plant or significant
equipment during fiscal 1998.
The Company believes that significant ongoing investment in all areas of
the business will continue to be critical to its success. The Company believes
that its existing cash and marketable securities will be sufficient to fund the
Company's operations for approximately six to nine months. There can be no
assurance that the Company's cost estimates are accurate or that the Company's
cash and marketable securities will provide sufficient working capital for
operations. The Company expects that it will have to raise additional funds,
and anticipates actively seeking such capital, during the next six to nine
months for additional research and development, and sales and marketing. Such
additional capital may take the form of equity issuance, debt issuance or a
combination thereof. The Company has entered into a non-exclusive agreement
with a financial advisor to assist it in such financing activities. The Company
currently does not have any commitments to obtain additional financing and
there can be no assurance that such financing will be available or, if so, that
it can be obtained on terms satisfactory to the Company. In the event that the
Company cannot obtain additional funds when needed, the Company will be forced
to significantly curtail or cease its activities, which would likely result in
loss to investors of all or a substantial portion of their investment.
9
<PAGE>
PART II OTHER INFORMATION
ITEMS 1, 2, 3 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
ITEM 4
The Company held its annual meeting of stockholders on October 8, 1997 in
New York, New York (the "Annual Meeting"). The following four proposals were
adopted:
(1) The stockholders ratified amendments to the Company's By-Laws and
Certificate of Incorporation to, among other things, increase the number of
directors of the Company to seven and to institute a classified Board of
Directors. To effect these amendments, Sections 1(a) and 1(c) of Article III of
the By-laws were deleted in their entirety, certain additions to Articles III
and IV were incorporated, and Articles IX, X and XI were added to the Company's
Certificate of Incorporation. This summary is qualified by reference to the
full text of the amendments to the Company's Certificate of Incorporation and
By-laws which are set forth as Exhibits 3.1 and 3.2 to this Report. The
classified Board of Directors divides the Company's Board of Directors into
three classes of directors. Pursuant to these amendments, the terms of the
directors will be as follows: (i) Class I Directors shall serve for a term
expiring at the Company's 1998 Annual Meeting of Stockholders; (ii) Class II
Directors shall serve for a term expiring at the Company's 1999 Annual Meeting
of Stockholders; and (iii) Class III Directors shall serve for a term expiring
at the Company's 2000 Annual Meeting of Stockholders. In addition, the Chairman
of the Board will be elected directly by the Company's stockholders. The
Company proposed these amendments to comply with its obligations under the
Settlement and Voting Agreement (the "Voting Agreement") it entered into as of
June 12, 1997 with May Davis Group, Inc. ("May Davis"), Owen May, Dibo Attar,
Dennis E. Sal and seven investment funds as to which Mr. Attar acts as
advisors. The Voting Agreement, which was amended on September 23, 1997, was
entered into to, among other things, resolve certain corporate governance
issues relating to the Company. The proposal to amend the charter and by-laws
received 1,974,899 votes for, 3,200 votes against and 10,000 votes to abstain.
(2) Seven directors, constituting the entire board, were elected at the
Annual Meeting to serve until their respective successors are elected and
qualified. Adam L. Goldberg and Marcel M. Yung were elected as Class I
Directors and shall serve for a term of one year expiring at the Company's 1998
Annual Meeting of Stockholders. John E. Meier and Michael Wolf were elected as
Class II Directors and shall serve for a term of two years expiring at the
Company's 1999 Annual Meeting of Stockholders. Michael Kharitonov (as Chairman
of the Board), Andrew J. Schwartz and Jeffrey Wolf were elected as Class III
Directors and shall serve for a term of three years expiring at the Company's
2000 Annual Meeting of Stockholders. Each director received 1,986,299 votes for
and 1,800 votes withheld.
(3) The stockholders ratified the proposal to select Goldstein, Golub,
Kessler & Company, P.C., independent certified public accountants, to serve as
auditors for the Company for the fiscal year ended March 31, 1998. Goldstein,
Golub, Kessler & Company, P.C. has been the Company's auditors since its
inception. The proposal to ratify Goldstein, Golub, Kessler & Company, P.C.
received 1,988,099 votes for, zero votes against and zero votes to abstain.
(4) The stockholders ratified the adoption of the 1997 NetLive
Communications, Inc. Stock Option Plan (the "1997 Plan"). The 1997 Plan was
adopted to enable the Company to compete for talent in a highly competitive job
market. Six hundred thousand shares of Common Stock have been authorized for
issuance under the 1997 Plan. The 1997 Plan imposes no limit on the number of
officers and other key employees to whom awards may be made. The 1997 Plan will
be administered by a committee of at least two non-employee directors to be
appointed by the Company's Board of Directors. The foregoing summary of the
1997 Plan is qualified in its entirety by reference to the full text of the
1997 Plan, a copy of which is annexed as Exhibit 10.15 to this Report. The
proposal to ratify the 1997 Plan received 1,973,299 votes for, 14,800 votes
against and zero votes to abstain.
10
<PAGE>
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits: The following exhibits are filed herewith or incorporated
herein by reference:
1.1 Underwriting Agreement (1)
3.1 Articles of Incorporation, as amended to date(1) (6)
3.2 By-Laws (1) (2) (7)
4.1 Form of Underwriter's Warrant(1)
4.2 Form of Financial Advisory and Investment Banking Agreement with
the Underwriter(1)
4.3 Form of Common Stock Certificate(1)
4.4 Form of Common Stock Purchase Warrant(1)
4.5 Form of Common Stock Purchase Warrant used for Bridge Loans(1)
4.6 Form of Warrant Agreement(1)
10.1 Employment Agreement with Laurence Rosen(1)
10.2 Employment Agreement with Michael Kharitonov(1)
10.3 Employment Agreement with Jeffrey Wolf, as amended(1)
10.4 Amendment No. 1 to Employment Agreement with Michael Kharitonov(1)
10.5 Employment Agreement with Vladislav Rysin(1)
10.6 License Agreement with Jeane Dixon(1)
10.7 Company's 1996 Incentive Stock Option Plan (1)(9)
10.8 NetLive Communications, Inc. Performance Share Program and
Performance Share Program Trust(3)
10.9 Settlement and Voting Agreement, dated as of June 12, 1997,
among the Company, May Davis Group, Inc. et al.(4)
10.10 Letter agreement, dated as of June 12, 1997, between the Company
and Gary Rogers(4)
10.11 Severance Agreement, dated as of June 12, 1997, between the
Company and Laurence M. Rosen and exhibits thereto including the
Consulting Agreement.(4)
10.12 Amendment to Settlement and Voting Agreement, dated
as of September 23, 1997, by and among the Company, May Davis
Group, Inc. et al. (5)
10.13 Amendment to Underwriting Agreement, dated as of September
23, 1997, by and between the Company and May Davis Group, Inc. (5)
10.14 Letter Agreement, dated as of September 23, 1997, by and
between the Company and Gary Rogers (5)
10.15 Company's 1997 Stock Option Plan (8)
27.1 Financial Data Schedule (8)
- -----------------
(1) Filed with the Company's Registration Statement filed on Form SB-2 (File
No. 333-4057).
(2) Amendment to Article II, Section 7 of the Company's By-laws filed with the
Company's Current Report on Form 8-K dated January 28, 1997.
(3) Filed with the Company's Current Report on Form 8-K dated February 27,
1997.
(4) Filed with the Company's Current Report on Form 8-K dated July 3, 1997
(5) Filed with the Company's Current Report on Form 8-K dated October 8, 1997
(6) Additional Articles IX, X and XI are filed herewith.
(7) The amendment to Article III, Sections 1(a), 1(c), 6 and 9 and the
amendment to Article IV, Sections 1(b), 1(c) and 3 are filed herewith.
(8) Filed herewith.
(9) Amended and corrected version filed herewith.
11
<PAGE>
(b) Reports on Form 8-K
A Form 8-K was filed by the Company on July 3, 1997. This filing disclosed
under Item 5 the Company's entry into a June 12, 1997 Settlement and Voting
Agreement with May Davis Group, Inc., the underwriter for the Company's initial
public offering in August 1996, and several of its affiliates. The filing also
disclosed under Item 5 the Company's entry into a June 12, 1997 Severance
Agreement and ancillary agreements with Laurence Rosen, as well as the
resignation of Mr. Rosen as the Company's Chief Executive Officer, President,
Chief Financial Officer, Treasurer and as a member of the Company's Board of
Directors.
A Form 8-K was filed by the Company on October 8, 1997. This filing disclosed
under Item 5 the Company's entry, as of September 23, 1997, into (1) an
amendment to the June 12, 1997 Settlement and Voting Agreement with May Davis
Group, Inc and several of its affiliates, (2) a letter agreement with Gary
Rogers, and (3) an amendment to the Underwriting Agreement with May Davis
Group, Inc.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Issuer has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NETLIVE COMMUNICATIONS, INC.
Date: 11/14/97 By: /s/ Michael Kharitonov
- ------------------------------ ------------------------------------
Michael Kharitonov
Chief Executive Officer and
President
Date: 11/14/97 By: /s/ Andrew Schwartz
- ------------------------------ ------------------------------------
Andrew Schwartz
Chief Financial Officer, Treasurer and
Secretary (Principal Accounting and
Financial Officer)
13
<PAGE>
EXHIBIT 3.1
AMENDMENTS TO THE COMPANY'S CERTIFICATE OF INCORPORATION
The amendments to the Company's Certificate of Incorporation shall add new
Articles IX, X and XI as follows:
"Article IX: Number of Directors: The number of directors of the
Corporation shall be seven.
Article X: Classified Board of Directors: The directors, other than
those who may be elected by the holders of any class or series of stock having
a preference over the Common Stock as to dividends or upon liquidation pursuant
to the terms of this Certificate of Incorporation or any resolution or
resolutions providing for the issuance of any such series of stock adopted by
the Board of Directors, shall be classified with respect to the time for which
they severally hold office into three classes, as nearly equal in number as
possible. The initial Class I Directors shall serve for a term expiring at the
first annual meeting of stockholders of the Corporation following the adoption
of this amendment of this Certificate; the initial Class II Directors shall
serve for a term expiring at the second annual meeting of stockholders
following this amendment of this Certificate; and the initial Class III
Directors shall serve for a term expiring at the third annual meeting of
stockholders following the adoption of this amendment of this Certificate. Each
director in each such class shall hold office until his or her successor is
duly elected and qualified or until his earlier death, disability, resignation
or removal. At each annual meeting of stockholders beginning with the first
annual meeting of stockholders following the adoption of this amendment of this
Certificate, the successors of the class of directors whose term expires at
that meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders to be held in the third year following the year of
their election, with each director in each such class to hold office until his
or her successor is duly elected and qualified or until his earlier death,
disability, resignation or removal.
Article XI: Vacancies. If any seat on the Board becomes vacant during
its initial term following the 1997 Annual Meeting, such vacancy shall be
filled as follows: (i) in the case of Class III Directors, or their successors,
by the vote of a majority of the remaining Class III Directors, (ii) in the
case of the Class II Directors or Designee "A" of the Class I Directors, or
their successors (all such Directors being referred to as the "Independent
Directors"), by the vote of a majority of the remaining Independent Directors,
and (iii) in the case of Designee "B" of the Class I Directors, or his
successors, by May Davis Group, Inc., Owen May, Dibo Attar, Dennis E. Sal,
Davstar II Mdg. Investments Corp. N.V., Jasminville Corp., N.V., Celestial
Dreams Corp. N.V., Eaglehurst Corp. N.V., Signal Hill N.V., Wellington Corp.
N.V. and Ganaterra Corp. N.V., so long as such person is not an officer or
employee of May Davis Group, Inc. and is reasonably acceptable to the Board."
<PAGE>
EXHIBIT 3.2
AMENDMENTS TO THE COMPANY'S BY-LAWS
Article III of the By-Laws of the Company, relating to the Board of
Directors, shall be amended as follows:
1. Sections 1(a) and 1(c) of Article III, which are set forth
below, are deleted in their entirety:
Section 1 - Number, Election and Term of Office:
"(a) The number of directors of the Corporation shall be as
determined by resolution of the Board of Directors."
"(c) Each director shall hold office until the annual meeting of the
stockholders next succeeding his election, and until his successor is elected,
and qualified, or until his prior death, resignation or removal."
2. Article III, Section 6 is amended by the addition of a new
last sentence to read in its entirety as follows:
"Section 6 - Chairman:
At all meetings of the Board of Directors, the Chairman of
the Board, if any and if present, shall preside. If there
shall be no Chairman, or he shall be absent, then the
President shall preside, and in his absence, a Chairman
chosen by the directors shall preside. The Chairman of the
Board shall be elected by the stockholders of the Corporation
and he shall hold office until the expiration of his term as
director or until his death, resignation or removal for
cause."
3. Article III, Section 9 is amended by the addition of an
initial clause in the first sentence to read in its entirety as follows:
"Section 9 - Vacancies:
Except as provided in the Corporation's Certificate of
Incorporation, any vacancy in the Board of Directors
occurring by reason of an increase in the number of
directors, or by reason of the death, resignation,
disqualification, removal (unless a vacancy created by the
removal of a director by the stockholders shall be filled by
the stockholders at the meeting at which the removal was
effected) or inability to act of any director, or otherwise,
shall be filled for the unexpired portion of the term by a
majority vote of the remaining directors, though less than a
quorum, at any regular meeting or special meeting of the
Board of Directors called for that purpose."
<PAGE>
4. At the end of Article IV, Section 1(b), Article IV, Section 1(c)
and Article IV, Section 3, commas shall be substituted for the periods; the
following language shall be added: "except as provided in Article III, Section
6 hereof" (the text of Article III, Section 6 is set forth above); and such
provisions amended to read in their entirety as follows:
Article IV, Section 1(b): "The officers of the Corporation
shall be elected by the Board of Directors at the regular annual meeting of the
Board following the annual meeting of stockholders, except as provided in
Article III, Section 6 hereof."
Article IV, Section 1(c): "Each officer shall hold office
until the annual meeting of the Board of Directors next succeeding his
election, and until his successor shall have been elected and qualified, or
until his death, resignation or removal, except as provided in Article III,
Section 6 hereof."
Article IV, Section 3: "Any officer may be removed, either
with or without cause, and a successor elected by a majority vote of the Board
of Directors at any time, except as provided in Article III, Section 6 hereof."
2
<PAGE>
EXHIBIT 10.7
NETLIVE COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
1. Purpose of the Plan. The Netlive Communications, Inc. 1996 Stock Option
Plan (the "Plan") is intended to advance the interests of Netlive
Communications, Inc. (the "Company") by inducing persons of outstanding ability
and potential to join and remain with the Company, by encouraging and enabling
employees to acquire proprietary interests in the Company, and by providing the
participating employees with an additional incentive to promote the success of
the Company. This is accomplished by providing for the granting of "Options"
(which term as used herein includes both "Incentive Stock Options" and
"Nonstatutory Stock Options," as later defined, to qualified employees. In
addition, the Plan also provides for the granting of "Nonstatutory Stock
Options" to all non-employee Directors of the Company, as consideration for
their services and for attending meetings of the Board of Directors, and also
provides for the granting of "Nonstatutory Stock Options" to consultants and
advisors who provide services to the Company.
2. Administration. The Plan shall be administered by a committee
(the "Committee") consisting of at least two (2) Directors chosen by the
Board of Directors, each of which is a "disinterested person", as such term is
defined in Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Except as herein specifically provided, the
interpretation and construction by the Committee of any provision of the Plan
or of any Option granted under it shall be final and conclusive. The receipt of
Options by Directors, or any members of the Committee, shall not preclude their
vote on any matters in connection with the administration or interpretation of
the Plan, except as otherwise provided by law.
3. Shares subject to the Plan. The stock subject to grant under the Plan
shall be shares of the Company's common stock, $.0001 par value (the "Common
Stock"), whether authorized but unissued or held in the Company's treasury or
shares purchased from stockholders expressly for use under the Plan. The
maximum number of shares of Common Stock which may be issued pursuant to
Options granted under the Plan shall not exceed eight hundred thousand
(800,000) shares, subject to adjustment in accordance with the provisions of
Section 13 hereof. The Company shall at all times while the Plan is in force
reserve such number of shares of Common Stock as will be sufficient to satisfy
the requirements of all outstanding Options granted under the Plan. In the
event any Option granted under the Plan shall expire or terminate for any
reason without having been exercised in full or shall cease for any reason to
be exercisable in whole or in part, the unpurchased shares subject thereto
shall again be available for Options under this Plan.
<PAGE>
4. Stock Option Agreement. Each Option granted under the Plan shall be
authorized by the Committee and shall be evidenced by a Stock Option Agreement
which shall be executed by the Company and by the person to whom such Option is
granted. The Stock Option Agreement shall specify the number of shares of
Common Stock as to which any Option is granted, the period during which the
Option is exercisable and the option price per share thereof.
5. Discretionary Grant Participation. The class of persons which shall be
eligible to receive discretionary grants of Options under the Plan shall be all
key employees (including officers) of either the Company or any subsidiary
corporation of the Company and consultants and advisors who provide services to
the Company or any subsidiary of the Company, other than in connection with the
offer or sale of securities in a capital raising transaction. Employees shall
be entitled to receive (i) Incentive Stock Options, as described in Section 7
hereafter and (ii) Nonstatutory Stock Options, as described in Section 8
hereafter. Consultants and advisors shall be entitled only to receive
Nonstatutory Stock Options. The Committee, in its sole discretion, but subject
to the provisions of the Plan, shall determine the employees, consultants or
advisors to whom Options shall be granted and the number of shares to be
covered by each Option taking into account the nature of the employment or
services rendered by the individuals being considered, their annual
compensation, their present and potential contributions to the success of the
Company and such other factors as the Committee may deem relevant.
6. Non-Employee Director Participation.
(a) On the date any person first becomes a non-employee Director, such
person shall automatically be granted, without further action by the Committee,
an option to purchase 5,000 shares of the Company's Common Stock.
(b) On each January 1st during the term of the Plan, non-employee
Directors of the Company then serving in such capacity, shall each be granted
an Option to purchase 5,000 shares of the Company's Common Stock.
(c) The option price of the shares subject to the Options set forth in
Sections 6(a) and 6(b) hereof shall be the fair market value (as defined in
Section 7(f) hereafter) of the Company's Common Stock on the date such Options
are granted. All of such Options shall be Nonstatutory Stock Options, as
described in Section 8 hereafter. The Options granted pursuant to this Section
6 shall vest entirely on the date they are granted and shall be exercisable for
a period of ten (10) years.
2
<PAGE>
7. Incentive Stock Options. The Committee may grant Options under the Plan
which are intended to meet the requirements of Section 422 of the Internal
Revenue Code of 1986 (the "Code") (such an Option referred to herein as an
"Incentive Stock Option"), and which are subject to the following terms and
conditions and any other terms and conditions as may at any time be required by
Section 422 of the Code:
(a) No Incentive Stock Option shall be granted to individuals other than
key employees of the Company or of a subsidiary corporation of the Company.
(b) Each Incentive Stock Option under the Plan must be granted prior to
February 22, 2006, which is within ten (10) years from the date the Plan was
adopted by the Board of Directors.
(c) The option price of the shares subject to any Incentive Stock Option
shall not be less than the fair market value of the Common Stock at the time
such Incentive Stock Option is granted; provided, however, if an Incentive
Stock Option is granted to an individual who owns, at the time the Incentive
Stock Option is granted, more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of a subsidiary
corporation of the Company, the option price of the shares subject to the
Incentive Stock Option shall be at least one hundred ten percent (110%) of the
fair market value of the Common Stock at the time the Incentive Stock Option is
granted.
(d) No Incentive Stock Option granted under the Plan shall be exercisable
after the expiration of ten (10) years from the date of its grant. However, if
an Incentive Stock Option is granted to an individual who owns, at the time the
Incentive Stock Option is granted, more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of a subsidiary
corporation, of the Company, such Incentive Stock Option shall not be
exercisable after the expiration of five (5) years from the date of its grant.
Every Incentive Stock Option granted under the Plan shall be subject to earlier
termination as expressly provided in Section 11 hereof.
(e) For purposes of determining stock ownership under this Section 7, the
attribution rules of Section 425(d) of the Code shall apply.
(f) For purposes of the Plan, fair market value shall be determined by the
Committee and, if the Common Stock is listed on a national securities exchange
or traded on the Over-the-Counter market, the fair market value shall be the
closing price of the Common Stock on such exchange, or on the Over-the-Counter
market as reported by the National Quotation Bureau, Incorporated, as the case
may be, on the day on which the Option is granted or on the day on which a
determination of fair market value is required under the Plan, or, if there is
no trading or closing price on that day, the closing price on the most recent
day preceding the day for which such prices are available.
3
<PAGE>
8. Nonstatutory Stock Options. The Committee may grant Options under the
Plan which are not intended to meet the requirements of Section 422 of the
Code, as well as Options which are intended to meet the requirements of Section
422 of the Code, but the terms of which provide that they will not be treated
as Incentive Stock Options (referred to herein as a "Nonstatutory Stock
Option"). Nonstatutory Stock Options which are not intended to meet these
requirements shall be subject to the following terms and conditions:
(a) A Nonstatutory Stock Option may be granted to any person eligible to
receive an Option under the Plan pursuant to Section 5 hereof.
(b) Persons eligible to receive Nonstatutory Stock Options pursuant to
Section 6 hereof are granted Options automatically under the Plan, without any
determination by the Committee.
(c) Subject to the price provisions of Section 6 hereof, the option price
of the shares subject to a Nonstatutory Stock Option shall be determined by the
Committee, in its absolute discretion, at the time of the grant of the
Nonstatutory Stock Option.
(d) Subject to the provisions of Section 6 hereof, a Nonstatutory Stock
Option granted under the Plan may be of such duration as shall be determined by
the Committee (not to exceed 10 years), and shall be subject to earlier
termination as expressly provided in Section 11 hereof.
9. Rights of Option Holders. The holder of any Option granted under the
Plan shall have none of the rights of a stockholder with respect to the shares
covered by his Option until such shares shall be issued to him upon the
exercise of his Option.
10. Transferability. No Option granted under the Plan shall be
transferable by the individual to whom it was granted otherwise than by Will or
the laws of decent and distribution, and, during the lifetime of such
individual, shall not be exercisable by any other person, but only by him or
her.
4
<PAGE>
11. Termination of Employment or Death.
(a) If the employment of an employee by the Company or any subsidiary
of the Company shall be terminated voluntarily, either upon retirement or
otherwise, or involuntarily other than for Cause (as defined below), then his
Options shall expire upon the expiration date provided in such Options, subject
to the provisions of subparagraph (f). If an employee is terminated for Cause,
his Option shall terminate immediately upon notice of such termination of
employment. For purposes of this Plan, "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, dishonesty or gross negligence.
If an Incentive Stock Option is exercised after the periods specified under
Section 422A of the Code, or any successor provision, necessary for the same
to qualify as incentive stock options, such Option will thereafter be treated
as a Non-Qualified Stock Option. For purposes of this subparagraph, an
employee who leaves the employ of the Company to become an employee of a
subsidiary corporation of the Company or a corporation (or subsidiary or
parent corporation of the corporation) which has assumed the Option of the
Company as a result of a corporate reorganization, etc., shall not be
considered to have terminated his employment.
(b) If the holder of any Options under the Plan dies (i) while
employed by the Company or a subsidiary of the Company, or (ii) within three
(3) months after the termination of his employment or services other than
voluntarily by the employee or for cause, then such Options may, subject to
the provisions of subparagraph (f) of this Section 11, be exercised by the
estate of the employee or by a person who acquired the right to exercise such
Options by bequest or inheritance or by reason of the death of such employee
at any time within one (1) year after such death.
(c) If the holder of any Options under the Plan ceases employment
because of permanent and total disability (within the meaning of Section
22(e)(3) of the Code) while employed by the Company or a subsidiary of the
Company, then such Options may, subject to the provision of subparagraph
(f) of this Section 11, be exercised at any time within one (1) year after
his termination of employment due to this disability.
(d) If the services of a non-employee Director of the Company shall
be terminated by the Company for cause, then his Options shall expire
forthwith. If such services shall terminate for any other reason (including
the death or disability of a non-employee Director), he shall resign as a
director of the Company or his term shall expire, then such Options may be
exercised at any time within one (1) year after such termination, subject to
the provisions of subparagraph (f) of this Section 11. In the event of the
death of a non-employee Director, his Options may be exercised by his estate
or by a person who acquired the right to exercise such Options by bequest or
inheritance or by reason of the death of such non-employee Director at any time
within one (1) year after such death.
5
<PAGE>
(e) Upon the death of any consultant or advisor to the Company or any of
its subsidiaries, who is granted any Options hereunder, such Options may,
subject to the provisions of subparagraph (f) of this Section 11, be exercised
by the estate of such person or by a person who acquired the right to exercise
such Options by bequest or inheritance or by reason of the death of such person
at any time within one (1) year after such death.
(f) An Option may not be exercised pursuant to this Section 11 except to
the extent that the holder was entitled to exercise the Option at the time of
termination of employment, termination of Directorship, or death, and in any
event may not be exercised after the expiration of the Option.
(g) For purposes of this Section 11, the employment relationship of an
employee of the Company or of a subsidiary corporation of the Company will be
treated as continuing intact while he is on military or sick leave or other
bona fide leave of absence (such as temporary employment by the Government) if
such leave does not exceed ninety (90) days, or, if longer, so long as his
right to reemployment is guaranteed either by status or by contract.
12. Exercise of Options.
(a) Unless otherwise provided in the Stock Option Agreement, any Option
granted under the Plan shall be exercisable in whole at any time, or in part
from time to time, prior to expiration. The Committee, in its absolute
discretion, may provide in any Stock Option Agreement that the exercise of any
Option granted under the Plan shall be subject (i) to such condition or
conditions as it may impose, including but not limited to, a condition that
the holder thereof remain in the employ or service of the Company or a
subsidiary corporation of the Company for such period or periods of time from
the date of grant of the Option, as the Committee, in its absolute discretion,
shall determine; and (ii) to such limitations as it may impose, including, but
not limited to, a limitation that the aggregate fair market value of the
Common Stock with respect to which Incentive Stock Options are exercisable for
the first time by any employee during any calendar year (under all plans of
the Company and its parent and subsidiary corporations) shall not exceed One
Hundred Thousand Dollars ($100,000). In addition, in the event that under any
Stock Option Agreement the aggregate fair market value of the Common Stock
with respect to which Incentive Stock Options are exercisable for the first
time by any employee during any calendar year (under all plans of the Company
and its parent and subsidiary corporations) exceeds One Hundred Thousand
Dollars ($100,000), the Committee may, when shares are transferred upon
exercise of such Options, designate those shares which shall be treated as
transferred upon exercise of an Incentive Stock Option and those shares which
shall be treated as transferred upon exercise of a Nonstatutory Stock Option.
6
<PAGE>
(b) An Option granted under the Plan shall be exercised by the delivery by
the holder thereof to the Company at its principal office (attention of the
Secretary) of written notice of the number of shares with respect to which the
Option is being exercised. Such notice shall be accompanied by payment of the
full option price of such shares, and payment of such option price shall be
made by the holder's delivery of his check payable to the order of the Company;
provided, however, that notwithstanding the foregoing provisions of this
Section 12 or any other terms, provisions or conditions of the Plan, at the
written request of the optionee and upon approval by the Board of Directors or
the Committee, shares acquired pursuant to the exercise of any Option may be
paid for in full at the time of exercise by the surrender of shares of Common
Stock of the Company held by or for the account of the optionee at the time of
exercise to the extent permitted by subsection (c)(5) of Section 422 of the
Code and, with respect to any person who is subject to the reporting
requirements of Section 16(a) of the Exchange Act, to the extent permitted by
Section 16(b) of the Exchange Act and the Rules of the Securities and Exchange
Commission, without liability to the Company. In such case, the fair market
value of the surrendered shares shall be determined by the Committee as of the
date of exercise in the same manner as such value is determined upon the grant
of an Incentive Stock Option.
13. Adjustment Upon Change in Capitalization.
(a) In the event that the outstanding Common Stock is hereafter
changed by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, stock dividends or the
like, an appropriate adjustment shall be made by the Committee in the aggregate
number of shares available under the Plan and in the number of shares and
option price per share subject to outstanding Options. If the Company shall be
reorganized, consolidated or merged with another corporation, or if all of
substantially all of the assets of the Company shall be sold or exchanged, the
holder of an Option shall, at the time of issuance of the stock under such a
corporate event, be entitled to receive upon the exercise of his Option the
same number and kind of shares of stock or the same amount of property, cash
or securities as he would have been entitled to receive upon the happening of
such corporate event as if he had been, immediately prior to such event, the
holder of the number of shares covered by his Option; provided, however, that
in such event the Committee shall have the discretionary power to take any
action necessary or appropriate to prevent any Incentive Stock Option granted
hereunder from being disqualified as an "incentive stock option" under the
then existing provisions of the Code or any law amendatory thereof or
supplemental thereto.
(b) Any adjustment in the number of shares shall apply proportionately to
only the unexercised portion of the Option granted hereunder. If fractions of a
share would result from any such adjustment, the adjustment shall be revised to
the next lower whole number of shares.
14. Further Conditions of Exercise.
(a) Unless prior to the exercise of the Option the shares issuable upon
such exercise have been registered with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), the
notice of exercise shall be accompanied by a representation or agreement of the
individual exercising the Option to the Company to the effect that such shares
are being acquired for investment and not with a view to the resale of
distribution thereof or such other documentation as may be required by the
Company unless in the opinion of counsel to the Company such representation,
agreement or documentation is not necessary to comply with the Securities Act.
7
<PAGE>
(b) The Company shall not be obligated to deliver any Common Stock until
it has been listed on each securities exchange on which the Common Stock may
then be listed or until there has been qualification under or compliance with
such state or federal laws, rules or regulations as the Company may deem
applicable. The Company shall use reasonable efforts to obtain such listing,
qualifications and compliance.
15. Effectiveness of the Plan. The Plan was originally adopted and
approved by the unanimous written consent of the Board of Directors and
stockholders on February 22, 1996.
16. Termination, Modification and Amendment.
(a) The Plan (but not Options previously granted under the Plan)
shall terminate on February 22, 2006, which is within ten (10) years from the
date of its adoption by the Board of Directors, or sooner as hereinafter
provided, and no Option shall be granted after termination of the Plan.
(b) The Plan may from time to time be terminated, modified or amended by
the affirmative vote of the holders of a majority of the outstanding shares of
capital stock of the Company present in person or by proxy at a meeting of
stockholders of the Company convened for such purpose; provided, however, that
Section 6 of the Plan may not be amended more than once every six (6) months,
other than to comply with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.
(c) The Board of Directors may at any time, on or before the termination
date referred to in Section 16(a) hereof, terminate the Plan, or from time to
time make such modifications or amendments to the Plan as it may deem
advisable; provided, however, that the Board of Directors shall not, without
approval by the affirmative vote of the holders of a majority of the
outstanding shares of capital stock of the Company present in person or by
proxy at a meeting of stockholders of the Company convened for such purpose,
increase (except as provided by Section 13 hereof) the maximum number of shares
as to which Incentive Stock Options may be granted, or change the designation
of the employees or class of employees eligible to receive Options or make any
other change which would prevent any Incentive Stock Option granted hereunder
which is intended to be an "incentive stock option" from disqualifying as such
under the then existing provisions of the Code or any law amendatory thereof or
supplemental thereto.
(d) No termination, modification or amendment of the Plan, may without the
consent of the individual to whom an Option shall have been previously granted,
adversely affect the rights conferred by such Option.
17. Not a Contract of Employment. Nothing contained in the Plan or in any
Stock Option Agreement executed pursuant hereto shall be deemed to confer upon
any individual to whom an Option is or may be granted hereunder any right to
remain in the employ or service of the Company or a subsidiary corporation of
the Company.
8
<PAGE>
18. Use of Proceeds. The proceeds from the sale of shares pursuant
to Options granted under the Plan shall constitute general funds of the
Company.
19. Indemnification of Board of Directors or Committee. In addition to
such other rights of indemnification as they may have, the members of the Board
of Directors or the Committee, as the case may be, shall be indemnified by the
Company to the extent permitted under applicable law against all costs and
expenses reasonably incurred by them in connection with any action, suit or
proceeding to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any rights
granted thereunder and against all amounts paid by them in settlement thereof
or paid by them in satisfaction of a judgment of any such action, suit or
proceeding, except a judgment based upon a finding of bad faith. Upon the
institution of any such action, suit or proceeding, the member or members of
the Board of Directors or the Committee, as the case may be, shall notify the
Company in writing, giving the Company an opportunity at its own cost to defend
the same before such member or members undertake to defend the same on their
own behalf.
20. Definitions. For purposes of the Plan, the terms "parent
corporation" and "subsidiary corporation" shall have the same meanings a
set forth in Sections 425(e) and 425(f) of the Code, respectively, and the
masculine shall include the feminine and the neuter as the context
requires.
21. Governing Law. The Plan shall be governed by, and all questions
arising hereunder shall be determined in accordance with, the law of the
State of New York.
9
<PAGE>
EXHIBIT 10.15
1997 STOCK OPTION PLAN
NETLIVE COMMUNICATIONS, INC.
1. PURPOSE; DEFINITIONS.
The purpose of the NetLive Communications, Inc. 1997 Stock Option Plan
(the "Plan") is to enable NetLive Communications, 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, 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) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any successor thereto.
(e) "Commission" means the Securities and Exchange Commission or
any successor thereto.
(f) "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.
<PAGE>
(g) "Company" means NetLive Communications, Inc., a Delaware
corporation, or any successor corporation.
(h) "Disability" means disability as determined under procedures
established by the Committee for purposes of this Plan.
(i) "Early Retirement" means retirement, with the express consent for
purposes of this 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.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, from time to time, and any successor thereto.
(k) "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.
(l) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422A of
the Code.
(m) "Non-Employee Director" means a director of the Company who is not
otherwise employed by the Company or any Subsidiary or Affiliate, provided,
however, that any person who is employed by the Company or any of its
subsidiaries and is an officer of the Company but does not receive compensation
from the Company for services as an officer shall be deemed a Non-Employee
Director.
(n) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(o) "Normal Retirement" means retirement from active employment with
the Company and any Subsidiary or Affiliate on or after age 65.
(p) "Plan" means this NetLive Communications, Inc. 1997 Stock Option
Plan, as hereinafter amended from time to time.
(q) "Retirement" means Normal Retirement or Early Retirement.
(r) "Stock" means the common stock, par value $.0001 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 as part of a
recapitalization, reorganization or similar transaction;
2
<PAGE>
(s) "Stock Option" or "Option" means any option to purchase shares of
Stock granted pursuant to Section 5 of the Plan.
(t) "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.
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. As long as said Rule 16b-3 requires, as a condition to the officers
and directors obtaining the benefit of such rule, that the Committee be
composed of Non-Employee Directors, each member or alternate member of the
Committee shall not be entitled to any grants under the Plan or under any other
plans of the Corporation or its affiliates, except to the extent that
participation in a plan would not cause such person to cease being a
Non-Employee Director for purposes of said Rule 16b-3.
(b) The Committee shall have full authority to grant Stock Options,
pursuant to the terms of the Plan, to officers and other persons eligible under
Section 4 of the Plan. In particular, the Committee shall have the authority:
(i) to select the officers and other eligible persons to whom
Stock Options may from time to time be granted pursuant to the Plan;
(ii) to determine whether and to what extent Incentive Stock
Options and/or Non-Qualified Stock Options, 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;
3
<PAGE>
(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 or other securities of the
Company under Paragraph 5(b)(x) of the Plan 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;
(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; and
(viii) 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.
4
<PAGE>
3. STOCK SUBJECT TO PLAN.
(a) The total number of shares of Stock reserved and available for
distribution under the Plan shall be six hundred thousand (600,000) shares of
Common Stock. Such shares may consist, in whole or in part, of authorized and
unissued shares or treasury shares. 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) If any shares of Stock that have been optioned cease to be subject
to a Stock Option, 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 number and option
price of shares subject to outstanding Options 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.
4. ELIGIBILITY.
Officers and other key employees, consultants and directors of the
Company and its Subsidiaries and Affiliates 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.
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.
(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.
5
<PAGE>
(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 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.
(B) 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.
(C) Subject to Paragraph 5(b)(iv)(B) 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 9(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 or optionee's legal representative.
(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.
6
<PAGE>
(vii) Termination by Reason of Disability, Retirement or
Resignation. 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, Normal or Early
Retirement or voluntary resignation which is not preceded by delivery of notice
of the optionee's unsatisfactory performance or forthcoming termination for
Cause, as hereafter defined ("Voluntary Resignation"), 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 two
years (or such other period as the Committee may 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 two-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 two years 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, Normal or Early Resignation, or Voluntary Resignation, if
an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422A 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, Normal or
Early Retirement, or Voluntary Resignation, 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
twelve months from the date of such termination or until the expiration of the
stated term of such Stock Option, whichever is shorter. For purposes of this
Plan, "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, dishonesty or gross negligence.
(ix) Incentive Stock Options.
(A) Anything in the Plan to the contrary notwithstanding, no term
of this 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 422A of the Code, or,
without the consent of the optionee(s) affected, to disqualify any Incentive
Stock Option under such Section 422A.
(B) To the extent required for "incentive stock option" status
under Section 422A(b)(7) 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) after 1986 shall not exceed
$100,000. If Section 422A is hereafter amended to delete the requirement now in
Section 422A(b)(7) that the plan text expressly provide for the $100,000
limitation set forth in Section 422A(b)(7), 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.
7
<PAGE>
(C) To the extent permitted under Section 422A 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 422A(b)(7) 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
422A, such excess shall be treated as a Non-Qualified Stock Option; and
(x) Buyout Provisions. The Committee may at any time offer to
buy out for a payment in cash or 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.
6. 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 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 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 7(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.
7. UNFUNDED STATUS OF PLAN.
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.
8
<PAGE>
8. 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.
9. 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.
9
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