SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
CommissionOnly (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
INTERNATIONAL DISPENSING CORPORATION
--------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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:
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<PAGE>
INTERNATIONAL DISPENSING CORPORATION
2500 Westchester Avenue
Purchase, New York 10577
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 18, 1999
To the Stockholders:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Stockholders of
International Dispensing Corporation, a Delaware corporation (the "Company"),
will be held at The Hidden Falls Clubhouse, Hidden Pond Road, Rye Brook, New
York 10573 on June 18, 1999 at 10:00 A.M., New York time, for the following
purposes:
(1) To elect two Class 1 directors to serve for three-year terms;
(2) To ratify and approve an amendment to the Company's 1998 Stock
Option Plan to increase the number of shares of the Company's common stock
reserved for issuance under the plan from 650,000 to 850,000;
(3) To ratify and approve amendments to the Company's Director
Option Plan to increase the number of shares of the Company's common stock
reserved for issuance under the plan from 250,000 to 450,000 and to increase to
20,000 per year the number of shares of the Company's common stock subject to
options automatically granted under the plan to each non-employee director; and
(4) To consider and transact such other business as may properly
come before the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 30,
1999 as the record date for the determination of stockholders entitled to notice
of and to vote at the Annual Meeting and at any adjournments thereof.
A proxy statement and proxy are enclosed.
PLEASE READ THE ENCLOSED PROXY STATEMENT CAREFULLY.
Dated: May 12, 1999
By Order of the Board of Directors,
Jeffrey D. Lewenthal
Secretary
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN AND
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. THE BOARD OF DIRECTORS
URGES YOU TO DATE, SIGN AND RETURN AS SOON AS POSSIBLE THE ENCLOSED PROXY CARD
IN THE SELF-ADDRESSED ENVELOPE PROVIDED, WHICH REQUIRES NO POSTAGE IF MAILED IN
THE UNITED STATES. YOU MAY REVOKE THE PROXY AT ANY TIME PRIOR TO ITS EXERCISE.
IF YOU ATTEND THE ANNUAL MEETING, YOU MAY WITHDRAW YOUR PROXY AND VOTE YOUR
SHARES IN PERSON.
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
2500 Westchester Avenue
Purchase, New York 10577
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 18, 1999
This Proxy Statement is furnished in connection with the solicitation
by the Board of Directors of INTERNATIONAL DISPENSING CORPORATION, a Delaware
corporation (the "Company"), of proxies in the form enclosed for use at the
Annual Meeting of Stockholders of the Company (the "Meeting") to be held on June
18, 1999, and at any adjournments thereof, at the time and place set forth in
the accompanying Notice of Annual Meeting of Stockholders.
The Meeting is being held to consider and vote upon (i) the election of
two Class 1 directors to serve for three-year terms, (ii) to ratify and approve
an amendment to the Company's 1998 Stock Option Plan (the "1998 Option Plan") to
increase the shares of the Company's common stock ("Common Stock") reserved for
issuance under the 1998 Option Plan from 650,000 to 850,000, and (iii) to ratify
and approve amendments to the Company's Director Option Plan (the "Director
Plan" and together with the 1998 Option Plan, the "Plans") to increase the
number of the shares of the Common Stock reserved for issuance under the
Director Plan from 250,000 to 450,000 and to increase to 20,000 per year the
number of shares of the Common Stock subject to options automatically granted to
each non-employee director.
Your proxy, if properly executed, will be voted as you direct and may
be revoked by you by written notice received by the Secretary of the Company at
any time before it is voted. Unless contrary instructions are indicated on the
proxy, it is expected that all shares of Common Stock represented by valid
proxies received pursuant to this solicitation (and not revoked before they are
voted) will be voted FOR the election of the two nominees for Class 1 director
named herein, FOR ratification and approval of the amendment to the 1998 Option
Plan and FOR ratification and approval of the amendments to the Director Plan,
and in the discretion of the proxies named on the proxy card with respect to any
other matters properly brought before the Meeting and any adjournments thereof.
This Proxy Statement and the accompanying form of proxy are being mailed on or
about May 12, 1999 to all stockholders of record at the close of business on
April 30,1999.
The presence, in person or by proxy, of the holders of record of a
majority of the outstanding shares of Common Stock is necessary to constitute a
quorum at the Meeting.
This Proxy Statement should be read carefully.
<PAGE>
VOTING SECURITIES OF THE COMPANY
AND PRINCIPAL HOLDERS THEREOF
The Common Stock is the only security of the Company entitled to be
voted at the Meeting. At the close of business on April 30, 1999, there were
9,566,668 shares of Common Stock entitled to be voted at the Meeting. Each
stockholder of record is entitled to one vote for each share held on all matters
to come before the Meeting. There are no cumulative voting rights. Only
stockholders of record at the close of business on April 30, 1999 are entitled
to notice of, and to vote at, the Meeting.
All proposals described in this Proxy Statement which are being
submitted to stockholders for a vote at the Meeting were duly adopted and
approved by the Board of Directors.
The holders of record of a majority of the outstanding shares of Common
Stock must be present in person or by proxy in order to establish a quorum for
conducting business at the Meeting. Under Delaware law, shares as to which a
stockholder abstains or withholds from voting and shares as to which a broker
indicates that it does not have discretionary authority to vote ("broker
non-votes") will be treated as present at the Meeting for the purposes of
determining a quorum. Proxies marked "Withhold Authority" with respect to the
election of one or more directors will not be counted in determining whether a
plurality of the shares of Common Stock voted at the Meeting in the election
have been voted in favor of the nominee for director. Proxies marked "Abstain"
with respect to other matters will have the effect of a vote against the matter
in question. Shares represented by broker non-votes will have the effect of a
vote against approval of the amendment to the Company's Certificate of
Incorporation and will not be counted in determining the number of shares
necessary for ratification of the Plans.
The following table sets forth certain information known to the Company
regarding beneficial ownership of shares of the Common Stock as of April 30,
1999, for (i) each person or group that is known by the Company to be a
beneficial owner of more than 5% of the outstanding shares of Common Stock, (ii)
each director or nominee for director of the Company, and (iii) all directors
and officers of the Company as a group. Except as otherwise indicated, the
Company believes that such beneficial owners, based on information furnished by
such owners, have sole investment and voting power with respect to such shares,
subject to community property laws, where applicable.
Percent of
Name and Address of Beneficial Owner (1) Number of Shares Class (2)
- ---------------------------------------- ---------------- ----------
Reseal International Corporation 1,203,731 12.6%
599 Lexington Avenue
New York, New York 10022
Gary Allanson 300,000(3) 3.0%
- --------------------------------
(footnotes on next page)
2
<PAGE>
Jon Silverman 633,333(4) 6.6%
c/o International Dispensing Corporation
2500 Westchester Avenue, Suite 317
Purchase, New York 10577
Gregory Abbott 1,102,260(5) 11.5%
1200 Kessler Drive
Aspen, CO 81611
George Kriste 293,333(6) 3.1%
Jay M. Rosen 6,000(7) *
Claude K. Lee 5,000(8) *
All directors and executive 2,356,593(9) 23.7%
officers as a group (7 persons)
- -----------------------------
* Less than 1%
(1) Address provided for beneficial owners of more than 5% of the Common
Stock.
(2) For purposes of computing the percentage of outstanding shares of
Common Stock held by each person or group of persons named above, any
security which such person or persons have or have the right to acquire
within 60 days is deemed to be outstanding but is not deemed to be
outstanding for the purpose of computing the percentage ownership of
any other person.
(3) Represents shares of Common Stock issuable upon exercise of currently
exercisable options (options which are exercisable as of April 30, 1999
or which will become exercisable within 60 days thereafter). Does not
include 100,000 shares of Common Stock issuable upon exercise of
options which will not become exercisable within 60 days of the date
hereof.
(4) Includes 33,333 shares of Common Stock issuable upon exercise of
currently exercisable options. Does not include 66,667 shares of Common
Stock issuable upon exercise of options which will not become
exercisable within the next 60 days.
(5) Includes 13,333 shares of Common Stock issuable upon exercise of
currently exercisable options. Does not include 26,667 shares of Common
Stock issuable upon exercise of options which will not become
exercisable within the next 60 days.
(Footnotes continued on next page)
3
<PAGE>
(6) Includes 13,333 shares of Common Stock issuable upon exercise of
currently exercisable options. Does not include 26,667 shares of Common
Stock issuable upon exercise of options which will not become
exercisable within the next 60 days.
(7) Includes 5,000 shares of Common Stock issuable upon exercise of options
which will become exercisable on July 9, 1999.
(8) Represents 5,000 shares of Common Stock issuable upon exercise of
options which will become exercisable on July 9, 1999.
(9) Includes in the aggregate 386,665 shares of common stock of the Company
issuable upon exercise of currently exercisable options held by the
directors and executive officers of the Company. Does not include
253,334 shares of common stock of the Company issuable upon exercise of
options which will not become exercisable within the next 60 days.
ELECTION OF DIRECTORS
The two persons listed below will be nominees for election as Class 1
directors for the terms of office indicated below, to serve until their
respective successors are duly elected and qualified. No Class 2 or Class 3
directors shall be elected at the meeting.
At a meeting held on April 13, 1999, the Board of Directors approved an
increase in the size of the Board of Directors from five to no more than seven
and determined that two persons shall be elected as Class 1 directors at the
meeting, in order to bring the size of the Board of Directors to six. One of the
nominees for election as a Class 1 director is currently a director of the
Company. Directors shall be elected by the affirmative vote of a plurality of
the votes cast at the Meeting. If the enclosed proxy is executed properly and
returned, it is intended that the persons named in the proxy will vote the
shares represented FOR the election of the directors nominated unless authority
to do so is withheld. Management believes that all nominees will be available
and able to serve as directors. If, for any reason, which management does not
expect, any of these persons shall not be available or able to serve, the
proxies may exercise discretionary authority to vote for and substitute such
nominees as may be designated by the Board of Directors. Each director elected
at the Meeting is expected to serve a three-year term beginning on the date of
election.
The following information is furnished as of April 30, 1999 with
respect to each nominee for election as Class 1 director, the incumbent
directors whose term will continue after the Meeting and the executive officers
of the Company:
4
<PAGE>
NOMINEES FOR CLASS 1 DIRECTORS
Year first
elected or
Current position and office with the appointed as
Company and principal occupation during a director of
Name and age the past five years; other directorships the Company
- --------------------------------------------------------------------------------
Gary Allanson President and Chief Executive Officer of the N/A
(46) Company since March 1999; director of
national sales, Arnott's Biscuit, Ltd.,
Australia from 1997 to 1998; director of
bakery sales, Mid-Atlantic Division,
Pepperidge Farm, Inc. from 1996 to 1997;
holder of various management positions
with Delmaria Engineering from 1992 to
1996.
Claude K. Lee Chairman of the Board of The Power Group, a 1998
(66) privately held company he founded in 1968.
The Power Group is engaged in contract
packaging.
INCUMBENT DIRECTORS AND EXECUTIVE OFFICERS
Year first
elected or
appointed as
Current position and office with the a director or
Company and principal occupation during officer of
Name and age the past five years; other directorships the Company
- --------------------------------------------------------------------------------
Class 2 Directors
George Kriste(1) Director of the Company since 1995; Chairman 1995
(52) and Chief Executive Officer of New Century
Media, a radio station owner, since
January 1992.
- -----------------------------
(footnotes on next page)
5
<PAGE>
Year first
elected or
Current position and office with the appointed as
Company and principal occupation during a director of
Name and age the past five years; other directorships the Company
- --------------------------------------------------------------------------------
Jay M. Rosen(1) Director of the Company since 1998; 1998
(61) Independent consultant since January 1998;
Vice President, General Counsel and
Secretary of Celcore, Inc., a privately
held company engaged in telecommunications
from January 1997 to December 1997; Vice
President and Associate General Counsel of
GTE Corporation for more than five years
prior thereto.
Class 3 Directors
Jon D. Silverman(2) Chairman, President, Chief Executive Officer 1996
(58) and a Director of the Company since
November 1996; principal of Tilis
Products, a privately owned specialized
international business consulting, mergers
and acquisitions firm in the food,
beverage and consumer products and
services industries, since 1982.
Gregory B. Abbott(2) Director of the Company since 1995; 1995
(49) Private investor and writer for more than five
years.
Non-Director Executive
Officers
Jeffrey Lewenthal Executive Vice President of Business N/A
(55) Development and Chief Financial Officer of the
Company since March 1997 and Secretary and
Treasurer of the Company since June 1997.
From March 1996 to March 1997, Mr.
Lewenthal acted as Vice President/Regional
Director for Westar Linen Services, Inc.;
from 1995 to 1996, he acted as General
Manager, Western Region, for Brink's
Incorporated. From 1993 to 1995, he acted
as Region Chief Operating Officer for
Loomis Armored, Inc.
- -----------------------------
(1) Term will end at the year 2000 Annual Meeting of Stockholders.
(2) Term will end at the year 2001 Annual Meeting of Stockholders.
6
<PAGE>
MEETINGS OF BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors met three times during the fiscal year ended
December 31, 1998 ("Fiscal 1998"). All incumbent directors who were members of
the Board during Fiscal 1998 attended all directors' meetings personally or by
conference telephone, except that Claude Lee did not attend the meeting held on
October 8, 1998. The Company does not have any audit or nominating committee of
the Board of Directors or committee performing similar functions.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than 10% of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Reporting persons
are required by Commission regulations to furnish the Company with copies of all
Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company, no persons failed to file, on a timely
basis, reports required by Section 16(a) of the Exchange Act for any
transactions occurring during Fiscal 1998.
7
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth for the three (3) fiscal years ended
December 31, 1998, information concerning the compensation paid or accrued to
the Chief Executive Officer of the Company and the one other person serving as
an executive officer of the Company whose salary and bonus for fiscal 1998
exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------------------- --------------------------------------------
Name and Principal Fiscal Salary Bonus Other Annual Restricted Securities All Other
Position year ($) ($) Compensation Stock Underlying Compensation
($)(1) Award($) Options (#) ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Jon Silverman ............. 1998 $180,000 - - - 100,000 $4,430(2)
Chairman, CEO and ......... 1997 $187,500 - - - -- $4,000(2)
President ................. 1996 $144,000 - - - -- --
Jeffrey D. Lewenthal ...... 1998 $144,000 - - - 50,000 --
Chief Financial ........... 1997 $ 96,000(3) - - - -- --
Officer, Executive ........ 1996 -- - - - -- --
Vice President of
Business
Development,
Treasurer and
Secretary
<FN>
- -----------------------------
(1) The aggregate amount of perquisites and other personal benefits paid to
each of Mr. Silverman and Mr. Lewenthal did not exceed the lesser of
(i) 10% of such officer's total annual salary and bonus for any given
fiscal year and (ii) $50,000. Thus, such amounts are not reflected in
the table.
(2) Represents the premiums paid on a $1,000,000 term life insurance policy
as to which Mr. Silverman may designate the beneficiary.
(3) Jeffrey D. Lewenthal's employment with the Company began on March 1997.
The figure represents the compensation Mr. Lewenthal received from the
Company for the period of his employment with the Company in 1997.
</FN>
</TABLE>
8
<PAGE>
OPTION GRANTS IN FISCAL YEAR ENDED DECEMBER 31, 1998
The following table sets forth certain information concerning options
granted during the fiscal year ended December 31, 1998 pursuant to the 1998
Option Plan to the executive officers listed in the Summary Compensation Table.
<TABLE>
<CAPTION>
Number of Percent Of Total Exercise Expiration
Securities Options Granted to Or Base Date
Underlying Options Employees In Fiscal Price
Name Granted (#) Year ($/Sh)
- -------------------------- ------------------ ------------------- -------- ----------
<S> <C> <C> <C> <C>
Jon Silverman ............ 100,000(1) 64.5% $1.595 4/2/2008
Jeffrey Lewenthal ........ 50,000(2) 32.3% $1.595 4/2/2008
<FN>
- -----------------------------
(1) The terms of grant of such options provided that options to purchase
33,333 shares of Common Stock would become exercisable on April 2,
1999, options to purchase an additional 33,333 shares of Common Stock
would become exercisable on April 2, 2000 and options to purchase the
remaining 33,334 shares of Common Stock would become exercisable on
April 2, 2001. Pursuant to the amendment dated March 15, 1999 to Mr.
Silverman's employment agreement with the Company, the vesting schedule
and the length of time such options may be exercised upon termination
of Mr. Silverman's employment with the Company were changed. See
"Employment and Non-Compete Agreements" below.
(2) Of these options, options to purchase 16,666 shares of Common Stock
became exercisable on April 2, 1999, options to purchase an additional
16,666 shares of Common Stock will become exercisable on April 2, 2000
and options to purchase the remaining 16,667 shares of Common Stock
will become exercisable on April 2, 2001.
</FN>
</TABLE>
AGGREGATED OPTION EXERCISES IN FISCAL YEAR ENDED DECEMBER 31, 1998 AND FISCAL
YEAR END OPTION VALUES
None of the executive officers listed in the Summary Compensation Table
exercised any option during the fiscal year ended December 31, 1998. The
following table sets forth certain information with respect to options to
purchase Common Stock held by the foregoing executive officers on December 31,
1998.
Number of Securities Underlying Value of Unexercised In-The-
Unexercised Options on 12/31/98 Money Options on 12/31/98
Name (#) Exercisable/Unexercisable ($) Exercisable/Unexercisable
- ---------- ------------------------------- -----------------------------
Jon Silverman 0/100,000 0/0
Jeffrey Lewenthal 0/50,000 0/0
9
<PAGE>
EMPLOYMENT AND NON-COMPETE AGREEMENTS
The Company has entered into an employment agreement with Jon
Silverman, dated as of January 17, 1997, which expires on December 31, 1999 (the
"Silverman Employment Agreement"). Pursuant to such agreement, Mr. Silverman
receives a base salary of $180,000. In addition, if Mr. Silverman is insurable,
the Company is obligated to pay the premium on a $1,000,000 term life insurance
policy, to which Mr. Silverman will designate the beneficiary. Under the
agreement, Mr. Silverman also is entitled to customary benefits and perquisites.
The Silverman Employment Agreement may be terminated by the Company
sooner than December 31, 1999 in the case of his "disability" or "for cause" (as
such terms are defined in the agreement). If Mr. Silverman's employment is
terminated for any reason he shall receive his basic salary through the
effective date of termination. If his employment is terminated due to his
disability or without cause by the Company or if Mr. Silverman leaves the employ
of the Company for "good reason" (defined in the agreement to include, among
other things, a change in control of the Company or the removal of Mr. Silverman
from his position as the Chairman of the Board, President and Chief Executive
Officer), then Mr. Silverman shall also be entitled to receive in cash within 10
days after such termination an amount equal to the greater of (i) one year's
basic salary at the highest rate paid to him during the term of his employment
under the agreement or (ii) the basic salary that would have been paid to him
had the term of employment ended on December 31, 1999 calculated at the highest
rate paid to him during the term of his employment under the agreement.
On March 15, 1999 the Company and Mr. Silverman entered into an
agreement to amend the Silverman Employment Agreement (the "Silverman
Amendment"). Pursuant to the Silverman Amendment, Mr. Silverman will continue to
serve as the Chairman of the Company, but ceased being the President and Chief
Executive Officer of the Company, effective on the date of the Silverman
Amendment. The Silverman Amendment also provides that of the options to purchase
shares of Common Stock previously granted to Mr. Silverman, options to purchase
an aggregate of 33,333 shares shall become exercisable on April 2, 1999 and
options to purchase an aggregate of 33,334 of such shares shall become
exercisable on December 30, 1999; provided in each case that Mr. Silverman is
still employed by the Company. If they become exercisable, the foregoing options
may be exercised until December 31, 2004 whether or not the employment of Mr.
Silverman by the Company has terminated. Options to purchase the remaining
33,333 shares (of the options to purchase 100,000 shares previously granted to
Mr. Silverman) shall become null and void and may not be exercised at any time
after the termination of Mr. Silverman's employment with the Company. As a
result of the foregoing changes in the terms of the options previously granted
to Mr. Silverman, all of such options shall be non-qualified stock options
rather than incentive stock options.
The Company and Gary Allanson have entered into an employment
agreement, dated as of March 15, 1999, which expires on March 14, 2001 (the
"Allanson Employment Agreement"). The term of the Allanson Employment Agreement
may be extended for one or two years upon written notice given by the Company to
Mr. Allanson prior to June 14, 2000. Pursuant to the Allanson Employment
Agreement, Mr. Allanson serves as the President and Chief Executive Officer of
the Company and receives an annual salary of $240,000. In addition, if Mr.
Allanson is insurable, the Company is obligated to pay the premium on a
$1,000,000 term life insurance policy, to which Mr. Allanson will designate the
beneficiary. Under the Allanson Employment Agreement, Mr. Allanson is also
entitled to customary benefits and perquisites.
10
<PAGE>
Under the Allanson Employment Agreement, if Mr. Allanson's employment
is terminated for disability, for cause or upon his death, Mr. Allanson or his
estate will receive his base salary and other benefits through the date of
termination. If Mr. Allanson voluntarily terminates his employment with the
Company for "good reason" (defined in the Allanson Employment Agreement to
include, among other things, a change in control of the Company or the removal
of Mr. Allanson from his position as the President and Chief Executive Officer),
Mr. Allanson is entitled to receive his base salary and other benefits through
the 180th day after the date of termination. If Mr. Allanson's employment is
terminated by the Company without cause, the Company is obligated to pay Mr.
Allanson his base salary and provide Mr. Allanson and Mr. Allanson's family with
hospital, major medical and dental insurance equivalent to the insurance
provided on the date of termination, through the end of the term of the Allanson
Employment Agreement then in effect on the date of termination.
COMPENSATION OF DIRECTORS
The Director Plan provides that a non-employee director who is not an
incumbent director will be granted an option to purchase 5,000 shares of Common
Stock on the date such person first becomes a director. After such initial
grant, such person will be automatically granted an option to purchase an
additional 5,000 shares of Common Stock on the date of such person's reelection
as a director, if by such date the person shall have served as a director for at
least six months. Pursuant to the Director Plan, Claude Lee and Jay Rosen were
each granted an option to purchase 5,000 shares of common stock of the Company
at an exercise price of $1.595 per share, when they were elected as directors of
the Company on July 9, 1998.
In addition to the foregoing, non-employee directors of the Company are
reimbursed for reasonable travel and lodging expenses incurred in attending
meetings of the Board of Directors and any committees on which they may serve.
Directors do not presently receive any fees for attendance or participation at
Board or committee meetings.
PROPOSALS TO APPROVE AMENDMENTS TO THE
1998 OPTION PLAN AND THE DIRECTOR PLAN
1998 OPTION PLAN
On April 13, 1999, the Board of Directors adopted, subject to
stockholder approval at the Meeting, a resolution to amend Section 3 of the 1998
Option Plan to increase from 650,000 to 850,000 the aggregate number of shares
of Common Stock which may be issued upon exercise of all options under the 1998
Option Plan.
The 1998 Option Plan is designed to provide long-term incentive
benefits by the grant of stock options to key employees and other persons (other
than non-employee directors) who perform services for or on behalf of the
Company. An aggregate of 650,000 shares are currently reserved for issuance upon
exercise of options which may be granted under the 1998 Option Plan. Currently
there are four persons that are eligible to receive options under the 1998
Option Plan, all of whom are Company employees.
11
<PAGE>
The 1998 Option Plan authorizes the issuance of incentive stock options
("ISOs"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and stock options that do not qualify under that Code
section ("NSOs").
The 1998 Option Plan is administered by the Board of Directors or by
one or more committees composed solely of two or more non-employee directors
within the meaning of Rule 16b-3 promulgated under the Securities Exchange Act
of 1934, as amended (the "Committee"). The Board of Directors or the Committee
has authority to administer and interpret the provisions of the 1998 Plan; to
determine when and to whom options will be granted; whether such options will be
ISOs or NSOs, and to prescribe the terms and conditions of the options
(including the number of shares of Common Stock subject to each option, the
exercise price of the option, the number of installments, if any, in which the
option may be exercised and the duration of the option), subject to the
provisions of the 1998 Option Plan.
Options granted under the 1998 Option Plan are not transferable other
than by will or the laws of descent and distribution. In the case of an ISO, the
exercise price of each option shall not be less than 100% of the fair market
value of the underlying Common Stock on the date the ISO is granted.
If the holder of an ISO ceases to be employed by the Company for any
reason other than such person's death or permanent disability, the ISO will
immediately become void upon such termination; provided, however, that the
option may be exercised within three months after the date the holder ceases to
be employed, but only to the extent the option was exercisable on the date of
such cessation of employment. Special provisions relating to the termination of
the option apply in the case of death or permanent disability of the holder of
an ISO. Termination of employment with the Company by the holder of an NSO
(including as a result of death or permanent disability) will have the effect
specified in the individual option agreement as determined by the Board of
Directors or the Committee.
The purchase price for options granted under the 1998 Option Plan must
be paid in full by any one or a combination of the following methods: (i) in
cash or by certified or cashier's check payable to the order of the Company,
(ii) by cancellation of indebtedness, (iii) through the delivery of other shares
of Common Stock having an aggregate fair market value equal to the total
exercise price of the option being exercised, (iv) with the approval of the
Board of Directors or the Committee, by a promissory note made by the optionee
in favor of the Company upon the terms and conditions to be determined by the
Board of Directors or the Committee and secured by the shares issuable upon
exercise of such option, (v) through any combination of the foregoing, or (vi)
in such other manner as the Board of Directors or the Committee may specify in
order to facilitate the exercise of options by the holders thereof.
The Board of Directors is authorized to suspend, terminate or amend the
1998 Option Plan at any time, provided that, without the consent of the
optionee, no amendment, suspension or termination shall be made that would
impair any rights or obligations of the optionee under any option theretofore
granted under the 1998 Option Plan. If stockholder approval is required pursuant
to Rule 16b-3 or any other rule or regulation under the Exchange Act, no
amendment shall be effective unless approved by the stockholders of the Company
if such amendment shall (i) increase the maximum number of shares which may be
acquired pursuant to options under 1998 Option Plan, (ii) change the minimum
exercise price of any option which may be granted, (iii) increase the maximum
term of any option which may
12
<PAGE>
be granted or (iv) change the designation of persons eligible to receive options
under the 1998 Option Plan.
DIRECTOR PLAN
On April 13, 1999, the Board of Directors also adopted, subject to
stockholder approval, a resolution to (a) amend Section 3 of the Director Plan
to increase from 250,000 to 450,000 the aggregate number of shares of the Common
Stock which may be optioned and sold under said plan and (b) to amend Section
(4)(b)(iii) of the Director Plan to provide that each Non-Employee Director (as
defined below), provided that such director is then serving as director (as such
term is defined in the plan), be automatically granted an option to purchase
20,000 shares of Common Stock on each anniversary of the date such Non-Employee
Director was first elected as a director. Currently, each Non-Employee Director
who qualifies under the Director Plan is automatically granted an option to
purchase 5,000 shares of Common Stock on the date of his reelection as a
director (which would generally occur once every three years) if on such date he
shall have served as a director for at least six months.
250,000 shares of Common Stock are currently reserved for issuance
upon the exercise of options granted under the Director Plan to directors who
are not employees of the Company ("Non-Employee Directors"). The Director Plan
was proposed by the Board of Directors to attract and retain the best available
personnel for service as outside directors.
The Director Plan is administered by a committee comprised of the
Chairman of the Board of Directors and/or by such other person or persons
designated by him (the "Director Plan Committee"). All options granted under the
Director Plan are NSOs and may only be granted to Non-Employee Directors.
The Director Plan provides for automatic and non-discretionary grants
of options ("Non-Discretionary Options") as well as discretionary grants of
additional options to Non-Employee Directors on such terms as shall be
determined by the Director Plan Committee, except that the duration of such
options shall not exceed 10 years from the date of grant. Under the Director
Plan, on April 2, 1998 each of Gregory Abbott and George Kriste were granted
options to purchase 40,000 shares of Common Stock.
The Director Plan provides that each Non-Employee Director, other than
the incumbent directors, shall be granted an option to purchase 5,000 shares of
Common Stock on the date such person first becomes a director. After the initial
grant of options to each Non-Employee Director, such person is automatically
granted an option to purchase an additional 5,000 shares of Common Stock on the
date of his reelection as a director if on such date he shall have served as a
director for at least six months.
The terms of each Non-Discretionary Option granted under the Director
Plan shall be 10 years. The exercise price of such Non-Discretionary Option
shall be 100% of the fair market value (as defined) of a share of Common Stock
on the date of grant. All Non-Discretionary Options granted under the Plan
become exercisable in three annual installments of one-third of the total number
of shares subject to the option commencing on the first anniversary of the date
of grant.
13
<PAGE>
Options granted under the Director Plan are not transferable other than
by will or the laws of descent and distribution. In the event of the death of an
optionee, the optionee's estate or the person who acquired the right to exercise
the option by bequest or inheritance may exercise the option within 12 months
after the optionee's death, but only to the extent the optionee was entitled to
exercise it on the date of his death. In the event an optionee ceases to be a
director as a result of total and permanent disability, the optionee may
exercise his option for a period of 12 months from the date of his termination
as a director, but only to the extent he was entitled to exercise the option as
of the date of termination. If an optionee ceases to be a director other than by
reason of his death or total and permanent disability, the optionee may exercise
his option for a period of three months after his termination, but only to the
extent he was entitled to exercise the option as of the date of termination.
The Board of Directors may at any time amend, alter, suspend or
discontinue the Director Plan, but without the consent of the optionee, no
amendment, alteration, suspension or discontinuation shall be made which would
impair the rights of an optionee under any grant theretofore made.
FEDERAL INCOME TAX CONSEQUENCES
Options granted under the 1998 Option Plan that qualify as ISOs under
Section 422 of the Code will be treated as follows:
No tax consequences will result to the optionee or the Company from the
grant of an ISO to, or the exercise of an ISO by, the optionee. Instead, the
optionee will recognize gain or loss when he sells or disposes of the shares
transferred to him upon exercise of the option. For the purposes of determining
such gain or loss, the optionee's basis in such shares will be his option price.
If the date of sale or disposition of such shares is at least two years after
the date of the grant of the ISO and at least one year after the transfer of the
shares to him upon exercise of the option, the optionee will be entitled to
long-term capital gain treatment upon the sale or disposition.
The Company generally will not be allowed a deduction with respect to
an ISO. However, if an optionee fails to meet the foregoing holding period
requirements, any gain recognized by the optionee upon sale or disposition of
the shares transferred to him upon exercise of an ISO will be treated in the
year of such sale or disposition as ordinary income, rather than capital gain,
to the extent of the excess, if any, of the fair market value of the shares at
the time of exercise (or, if less, in certain cases the amount realized on such
sale or disposition) over their option price, and in that case the Company will
be allowed a corresponding deduction.
The amount, if any, by which the fair market value of the shares
transferred to the optionee upon the exercise of an ISO exceeds the option price
will constitute an "item of adjustment" that increases the optionee's
"alternative minimum taxable income"subject, in certain circumstances, to the
"alternative minimum tax." Such item of adjustment will also increase the
optionee's basis in his stock for purposes of the alternative minimum tax.
Options granted under the 1998 Option Plan and the Director Plan which
are NSOs will be treated as follows:
There are no federal income tax consequences to an optionee or to the
Company upon the grant of an NSO under either plan. Except as described below,
upon exercise of an NSO, the optionee will
14
<PAGE>
be treated as having received ordinary income in an amount equal to the excess
of the fair market value of the Common Stock over the exercise price.
The ordinary income recognized by an optionee with respect to the
exercise of an option is subject to both wage withholding and employment taxes.
The Company will generally be entitled to a deduction for federal income tax
purposes of an amount equal to the ordinary income taxable to the optionee upon
exercise, provided that applicable income tax withholding requirements are
satisfied.
An optionee's tax basis in the Common Stock received on exercise of
such option is equal to the amount of any cash paid on exercise plus the amount
of ordinary income recognized as a result of the receipt of such shares. The
holding period for such Common Stock generally begins on the date of exercise
or, in the case of an officer, director or beneficial owner of more than 10% of
any class of equity securities of the Company, on the earlier of (i) six months
after acquisition, or (ii) the earliest date on which such person may sell such
shares of Common Stock at a profit without being subject to suit under Section
16(b) of the Exchange Act (unless the optionee elects to be taxed as of the date
of exercise).
If an optionee exercises an option by delivering Common Stock held by
the optionee, the optionee will recognize ordinary income (and the Company will
be entitled to an equivalent tax deduction) to the extent that the value of
Common Stock received exceeds the exercise price under the option; however,
based upon rulings issued by the Internal Revenue Service, in general, no gain
or loss should be recognized upon the transfer of such previously acquired
Common Stock to the Company upon exercise of the option. Provided the optionee
receives a separate identifiable stock certificate therefor, the optionee's tax
basis in that number of shares of Common Stock received on such exercise which
is equal to the number of shares exchanged therefor will be equal to his tax
basis in the shares of Common Stock surrendered. Common Stock received by the
optionee in excess of the number of previously acquired shares of Common Stock
surrendered upon exercise of the option will have a tax basis equal to the
amount of ordinary income recognized in connection with such exercise. The
holding period for such additional shares will commence on the date ordinary
income is recognized.
On the disposition of Common Stock received upon exercise of an option,
the difference between the amount realized and the tax basis of the Common Stock
will be a long-term or short-term capital gain or loss, depending on whether the
optionee held the Common Stock for the requisite holding period.
15
<PAGE>
NEW PLAN BENEFITS
The following table sets forth the benefits or amounts that have been
received or allocated to each of the following under the 1998 Option Plan and
the Director Plan. Additional benefits or amounts that may be received by or
allocated to potential participants in the 1998 Option Plan and the Director
Plan are not determinable.
Shares of
Name and Position Dollar Value (1) Common Stock
- ----------------- ---------------- ------------
Gary Allanson (2) $0 400,000(3)
President and CEO
Jon D. Silverman (2) $0 100,000(4)
Chairman of the Board
Jeffrey Lewenthal $0 50,000(5)
Executive Vice President
Executive Group $0 550,000(6)
Non-Executive Director Group $0 90,000(7)
Non-Executive Officer
Employee Group $0 5,000(8)
Other Person
$0 50,000(9)
- --------------------------
(1) The Dollar Value with respect to options is computed based on a
comparison of the average bid and asked price of the Common Stock on
April 26, 1999 ($.408) and the exercise price for the options, which
exercise price is $1.595 per share for all of the options granted in
1998, and $0.655 for options granted to Mr.Allanson in 1999.
(2) Gary Allanson became President and CEO of the Company on March 15,
1999, on which date Jon Silverman ceased being President and CEO of the
Company.
(3) Represents shares of Common Stock issuable upon exercise of options
granted by the Company to Mr. Allanson on March 15, 1999, under the
1998 Option Plan. Mr. Allanson is a nominee for election as a director.
(4) Represents shares of Common Stock issuable upon exercise of options
granted to Mr. Silverman on April 2, 1999, under the 1998 Option Plan.
(footnotes continued on next page)
16
<PAGE>
(5) Represents shares of Common Stock issuable upon exercise of options
granted to Mr. Lewenthal on April 2, 1999, under the 1998 Option Plan.
(6) Includes (i) 400,000 shares of Common Stock issuable upon exercise of
option granted to Mr. Allanson on March 15, 1999, (ii) 100,000 shares
of Common Stock issuable upon exercise of options granted to Mr.
Silverman on April 2, 1998, and (iii) 50,000 shares of Common Stock
issuable upon exercise of options granted to Mr. Lewenthal on April 2,
1998. All of the foregoing options were granted under the 1998 Option
Plan.
(7) Includes (i) 40,000 shares of Common Stock issuable upon exercise of
options granted to George Kriste on April 2, 1998, (ii) 40,000 shares
of Common Stock issuable upon exercise of options granted to Gregory
Abbott on April 2, 1998, (iii) 5,000 shares of Common Stock issuable
upon exercise of options granted to Jay Rosen on July 9, 1998, and (iv)
5,000 shares of Common Stock issuable upon exercise of options granted
to Claude Lee on July 9, 1998. All of the foregoing options were
granted under the Director Plan. Mr. Lee is a nominee for election as a
director.
(8) Represents shares of Common Stock issuable upon exercise of options
granted to a non-executive officer employee on April 2, 1998 under the
1998 Option Plan.
(9) Represents shares of Common Stock issuable upon exercise of options
granted under the 1998 Option Plan to Michael Handler, a consultant to
the Company, on April 2, 1998.
RECOMMENDATION AND REQUISITE VOTE
The Board of Directors believes that the 1998 Option Plan and the
Director Plan has advanced the interests of the Company by providing equity
incentive to motivate and retain key employees and Non-Employee Directors of the
Company and by further aligning the interests of said persons with those of the
Company's stockholders. As of May 12, 1999, 571,667 of the 650,000 shares of
Common Stock reserved under the 1998 Option Plan were subject to outstanding
options granted under the 1998 Option Plan. The Board of Directors believes that
in order for the 1998 Option Plan to continue to effectively achieve its
aforementioned purposes, it is necessary to increase the number of shares of
Common Stock reserved under the 1998 Option Plan.
The Board of Directors further believes that the current number of
shares of Common Stock subject to options automatically granted under the
Director Plan to Non-Employee Directors (5,000 on the date of re-election of
such Non-Employee Directors, which generally would occur once every three years)
does not provide a sufficient economic incentive for the Company to attract and
retain Non-Employee Directors. The Board of Directors believes that increasing
to 20,000 per year the number of shares of Common Stock subject to options
automatically granted under the Director Plan and increasing the frequency of
such automatic grants are appropriate. As of May 12, 1999, 90,000 of the 250,000
shares of Common Stock reserved under the Director Plan were subject to
outstanding options. However, if the number of shares of Common Stock subject to
options automatically granted to Non-Employee Directors is increased to 20,000
per year, then based on the Company having at least four Non-Employee Directors,
the number of shares of Common Stock currently reserved under the Director Plan
available for future grants would last for no more than
17
<PAGE>
two years. The Board of Directors therefore believes that the number of shares
of Common Stock reserved under the Director Plan should be increased to 450,000.
The Board of Directors recommends a vote FOR approval of the amendments
to the 1998 Option Plan and Director Plan. An affirmative vote of the holders of
record of a majority of the outstanding shares of Common Stock present, in
person or by proxy, and entitled to vote at the Meeting, is required to approve
the adoption of the amendments.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1996, Stratton Oakmont, Inc. ("Stratton Oakmont") acted as
the underwriter of the IPO pursuant to an underwriting agreement with the
Company (the "Underwriting Agreement"). On January 29, 1997, the United States
District Court Judge for the Southern District of New York, entered an order
which, inter alia, appointed Harvey R. Miller, Esq. (the "Trustee") to liquidate
the business of Stratton Oakmont pursuant to the Securities Investor Protection
Act of 1970 (the "Liquidation Proceeding"). As part of such Liquidation
Proceeding, the Trustee and the Company entered into a Sale and Assignment
Agreement dated as of November 19, 1997 (the "Sale and Assignment Agreement").
Pursuant to the Sale and Assignment Agreement the Trustee agreed to
sell to the Company or to no more than 10 qualified designees of the Company,
(a) on the closing date an aggregate number of shares of Common Stock of the
Company equal to or greater than 995,705 shares minus (1) 176,778 shares,
retained by another person pursuant to a certain settlement agreement with the
Trustee and (2) 200,000 shares and (b) all of the remaining shares of Common
Stock held by the Trustee on or prior to the first business day that is 180 days
after the closing date. The Trustee also agreed to assign to the Company on the
closing date all of Stratton Oakmont's right, title and interest in, to and
under the Underwriting Agreement, including, without limitation, (i) all of its
right, title and interest in, to and under its option to purchase up to an
aggregate of 83,333 IPO Units for a purchase price of $.001 per underlying IPO
Unit (the "Underwriter's Purchase Option"), (ii) its rights to enforce an
agreement by certain stockholders not to sell Common Stock for a period of two
years after the effective date of the registration statement relating to the IPO
(the "Effective Date"), and (iii) its rights to enforce the agreement by the
Company not to issue new stock (except in connection with dividends or similar
transactions) for a period of two years after the Effective Date. The
Underwriter's Purchase Option was exercisable for a term of twelve months after
the Effective Date. Pursuant to the Sale and Assignment Agreement, Mr. Jon
Silverman, the Chairman of the Company, and Messrs. Gregory Abbott and George
Kriste, each of whom is a director of the Company, purchased from the Trustee
for $0.60 per share, 100,000, 367,927, and 150,000 shares of Common Stock,
respectively. Each of such persons has agreed not to sell the shares he
purchased for a period of two years.
18
<PAGE>
STOCKHOLDER PROPOSALS
Proposals of stockholders for possible consideration at the 2000 Annual
Meeting of Stockholders (expected to be held in May 2000) must be received by
the Secretary of the Company not later than January 10, 2000 to be considered
for inclusion in the proxy statement for that meeting if appropriate for
consideration under applicable securities laws. The proxy for the 2000 Annual
Meeting of Stockholders may confer discretionary authority to the proxy holders
for that meeting with respect to voting on any stockholder proposal received by
the Secretary of the Company after March 28, 2000.
OTHER MATTERS
The Board of Directors does not know of any matters to be brought
before the Meeting. If any other matters not mentioned in this Proxy Statement
are properly brought before the Meeting or any adjournment thereof, the persons
named in the accompanying proxy intend to vote the shares represented by such
proxy in accordance with their best judgment on such matters.
The Company has selected Arthur Andersen LLP to audit the Company's
financial statements for the year ending December 31, 1999. Arthur Andersen LLP
has audited the Company's financial statements for each of the last four fiscal
years of the Company.
A representative of Arthur Andersen LLP is expected to be present at
the Meeting and will have the opportunity to make any desired statement and
respond to appropriate questions.
Expenses incurred in connection with the solicitation of proxies will
be paid by the Company. The proxies are being solicited principally by mail. In
addition, directors, officers and regular employees of the Company may solicit
proxies personally or by telephone, for which they will receive no consideration
other than their regular compensation. The Company will also request brokerage
houses, nominees, custodians and fiduciaries to forward soliciting material to
the beneficial owners of Common Stock and will reimburse such person for their
expenses so incurred.
The Company will provide to any stockholder of record at the close of
business on April 30, 1999, without charge, upon written request to its
Secretary, Jeffrey D. Lewenthal, a copy of the Company's Annual Report on Form
10-KSB for Fiscal 1998.
19
<PAGE>
PROXY
INTERNATIONAL DISPENSING CORPORATION
2500 Westchester Avenue, Suite 317
Purchase, New York 10577
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of International Dispensing Corporation (the
"Company") hereby constitutes and appoints Gary Allanson and Jeffrey D.
Lewenthal, and each of them the true and lawful attorneys, agents and proxies of
the undersigned, each with full power of substitution, to vote, at the meeting,
if only one shall be present and acting at the meeting, then that one, all of
the shares of common stock of the Company that the undersigned would be
entitled, if personally present, to vote at the annual meeting of stockholders
of the Company to be held on June 18, 1999 at 10:00 a.m., local time, at The
Hidden Falls Clubhouse, Hidden Pond Road, Rye Brook, New York 10573, or any
adjournments thereof.
This proxy is continued on the reserve side.
(over)
<PAGE>
Please date, sign and mail
your proxy card back as soon
as possible!
Annual Meeting of Stockholders
INTERNATIONAL DISPENSING CORPORATION
[X]Please mark your votes as in this example.
WITHHOLD Nominees for Director:
AUTHORITY Class 1
FOR the to vote for to serve until the 2002 Annual
nominees the nominees Meeting of Stockholders
listed at listed at Gary Allanson
right at right Claude K. Lee
1. Election of Directors [ ] [ ]
(Instruction: To wihhold
authority to vote for any
individual nominee,
strike the nominee's name
in the list at right.)
2. To ratify and approve an amendment to For Against Abstain
the Company's 1998 Stock Option Plan to [ ] [ ] [ ]
increase the number of shares of the
Company's common stock reserved for
issuance under the plan from 650,000 to
850,000.
3. To ratify and approve amendments to For Against Abstain
the Company's Director Option Plan to [ ] [ ] [ ]
increase the number of shares of the
Company's common stock reserved for
issuance under the plan from 250,000 to
450,000 and to increase to 20,000 per
year the number of shares of the
Company's common stock subject to
options automatically granted under the
plan to each non-employee director.
In their discretion, the proxies are authorized to vote upon such other business
as may properly come before the meeting. This proxy, when properly executed,
will be voted in the manner directed herein by the undersigned stockholder.
If no direction is made, this proxy will be voted FOR Proposals 2 and 3, and FOR
the election of Gary Allanson and Claude K. Lee as the Class 1 Directors. Please
sign exactly as name appears hereon. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign name by authorized person.
Signature(s) DATE:
- --------------------------------- -------------------
NOTE: Please sign as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, adminstrator, trustee or
guardian, please give full title as such.
<PAGE>
AMENDED AND RESTATED
1998 STOCK OPTION PLAN
OF
INTERNATIONAL DISPENSING CORPORATION *
1. PURPOSE
The purpose of this Stock Option Plan (the "Plan") of International
Dispensing Corporation, a Delaware corporation (the "Company"), is to secure for
the Company and its stockholders the benefits arising from stock ownership by
selected key employees of the Company or its subsidiaries, directors,
consultants or other persons ("Participants") as the Board of Directors of the
Company, or a committee thereof constituted for the purpose, may from time to
time determine. The Plan will provide a means whereby (i) such employees
(including employees who are directors) may purchase shares of the Common Stock
of the Company pursuant to options that will qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code") and (ii) such employees, directors, consultants or other person may
purchase shares of the Common Stock of the Company pursuant to "non-qualified
stock options."
2. ADMINISTRATION
2.1 The Plan shall be administered by the Board of Directors of the
Company (the "Board of Directors") or by one or more committees of the Board of
Directors (the "Committee") each composed solely of two or more "Non-Employee
Directors", as that term is defined in Rule 16b-3(b)(3) of the General Rules and
Regulations under the Securities Exchange Act of 1934 (the "Exchange Act"), of
the Company. Any action of the Board of Directors or the Committee with respect
to administration of the Plan shall be taken by a majority vote or written
consent of its members.
2.2 Subject to the provisions of the Plan, the Board of Directors or
the Committee shall have authority (i) to construe and interpret the Plan, (ii)
to define the terms used therein, (iii) to prescribe, amend and rescind rules
and regulations relating to the Plan, (iv) to determine the individuals to whom
and the time or times at which options shall be granted, whether any options
granted will be incentive stock options or non-qualified stock options, the
number of shares to be subject to each option, the exercise price of an option,
the number of installments, if any, in which each option may be exercised, and
the duration of each option, (v) to approve and determine the duration of leaves
of absence which may be granted to Participants without constituting a
- --------
* The original Plan was approved by the Board of Directors of the Company
on April 2, 1998 and ratified by the stockholders of the Company on July 9,
1998. An amendment to the original Plan to increase from 650,000 to 850,000 the
aggregate number of shares of the Company's Common Stock which may be issued
upon exercise of all options under the Plan was approved by the Board of
Directors on , 1999 [and the stockholders on June 18, 1999].
<PAGE>
termination of their employment for the purposes of the Plan, and (vi) to make
all other determinations necessary or advisable for the administration of the
Plan. All determinations and interpretations made by the Board of Directors or
the Committee shall be binding and conclusive on all Participants in the Plan
and their legal representatives and beneficiaries.
3. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Paragraph 14 hereof, the shares
to be issued under the Plan shall consist of the Company's Common Stock. The
aggregate number of shares of common stock, par value $.001 per share of the
Company ("Shares") which may be issued upon exercise of all options under the
Plan shall not exceed 850,000, subject to adjustment as provided in Paragraph
14. If any option granted under the Plan shall expire or terminate for any
reason, without having been exercised in full, the unpurchased shares subject
thereto shall again be available for options to be granted under the Plan.
4. ELIGIBILITY AND PARTICIPATION
4.1 All regular salaried employees of the Company or any subsidiary
corporation (as defined in Section 424(f) of the Code) shall be eligible to
receive incentive stock options and non-qualified stock options. Directors of
the Company or any subsidiary corporation, consultants and other persons who are
not regular salaried employees of the Company or any subsidiary corporation are
not eligible to receive incentive stock options, but are eligible to receive
non-qualified stock options.
4.2 No incentive stock options may be granted to any employee who, at
the time the incentive stock option is granted, owns shares possessing more than
ten percent of the total combined voting power of all classes of stock of the
Company (or of its subsidiary corporations as defined in Section 424(f) of the
Code), unless the exercise price of such incentive stock option is at least one
hundred ten percent of the fair market value of the Common Stock, determined by
fair market value as of the date each respective option is granted in accordance
with Paragraph 7, and such incentive stock option by its terms is not
exercisable after the expiration of five years from the date such incentive
stock option is granted.
4.3 The aggregate fair market value of the Common Stock for which
incentive stock options granted to any one employee under this Plan or any other
incentive stock option plan of the Company which may by their terms first become
exercisable during any calendar year shall not exceed $100,000, determined by
fair market value as of the date each respective option is granted.
4.4 All options granted under the Plan shall be granted within ten
years from April 2, 1998.
2
<PAGE>
5. DURATION OF OPTIONS
Each option and all rights associated therewith shall expire on such
date as the Board of Directors or the Committee may determine, but in no event
later than ten years from the date on which the option is granted, and shall be
subject to earlier termination as provided herein.
6. PRICE AND EXERCISE OF OPTIONS
6.1 Subject to Paragraph 4.2, the purchase price of the Common Stock
covered by each option shall be determined by the Board of Directors or the
Committee, but in the case of an incentive stock option shall not be less than
one hundred percent of the fair market value of such Common Stock on the date
the incentive stock option is granted. The purchase price of the Common Stock
upon exercise of an option shall be paid in full at the time of exercise (i) in
cash or by certified or cashier's check payable to the order of the Company,
(ii) by cancellation of indebtedness owed by the Company to the Participant,
(iii) by delivery of shares of Common Stock of the Company already owned by, and
in the possession of the Participant, (iv) if authorized by the Board of
Directors or the Committee or if specified in the option being exercised, by a
promissory note made by the Participant in favor of the Company, subject to
terms and conditions determined by the Board of Directors or the Committee,
secured by the Common Stock, issuable upon exercise, and in compliance with
applicable law (including, without limitation, state, corporate and federal
requirements), (v) by any combination thereof, or (vi) in such other manner as
the Board of Directors or the Committee may specify in order to facilitate the
exercise of options by the holders thereof. Shares of Common Stock used to
satisfy the exercise price of an option shall be valued at their fair market
value determined in accordance with Paragraph 7 hereof.
6.2 No option granted under this Plan shall be exercisable if such
exercise would involve a violation of any applicable law or regulation
(including without limitation, federal and state securities laws and
regulations). Each option shall be exercisable in such installments during the
period prior to its expiration date as the Board of Directors or Committee shall
determine; provided, however, that unless otherwise determined by the Board of
Directors or Committee, if the Participant shall not in any given installment
period purchase all of the shares which the Participant is entitled to purchase
in such installment period, then such Participant's right to purchase any shares
not purchased in such installment period shall continue until the expiration
date or sooner termination of the Participant's option. No option may be
exercised for a fraction of a share and no partial exercise of any option may be
for less than ten shares.
7. FAIR MARKET VALUE OF COMMON STOCK
The "Fair Market Value of a Share of Common Stock" of the Company
shall be defined and determined as follows:
(a) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the National Market of
the National Association of Securities Dealers, Inc. Automated Quotation
("Nasdaq") System, the Fair Market Value of a Share of Common Stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest
3
<PAGE>
volume of trading in Common Stock) on the date of grant, as reported in The Wall
Street Journal or such other source as the Board deems reliable;
(b) If the Common Stock is quoted on Nasdaq (but not on the National
Market thereof) or regularly quoted by a recognized securities dealer but
selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the Common
Stock on the last market trading day prior to the day of determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable, or;
(c) In the absence of an established market for the Common Stock, the
Fair Market Value thereof shall be determined in good faith by the Board.
8. WITHHOLDING TAX
Upon (i) the disposition of shares of Common Stock acquired pursuant
to the exercise of an incentive stock option granted pursuant to the Plan within
two years of the granting of the incentive stock option or within eighteen
months after exercise of the incentive stock option, or (ii) the exercise of a
non-qualified stock option, the Company shall have the right to require such
employee or other person, and such employee or other person, by accepting the
options granted under the Plan agrees, to pay the Company the amount of any
taxes which the Company may be required to withhold with respect thereto. In the
event of (i) or (ii), then such employee or other person may elect to pay the
amount of any taxes which the Company may be required to withhold by delivering
to the Company shares of the Company's Common Stock having a fair market value
determined in accordance with Paragraph 7 equal to the withholding tax
obligation determined by the Company. Such shares so delivered may be either
shares withheld by the Company upon the exercise of the option or other shares.
Such election shall comply with all applicable laws (including without
limitation, state, corporate and federal requirements).
9. NONTRANSFERABILITY
An option granted under the Plan shall, by its terms, be
nontransferable by the holder either voluntarily or by operation of law, other
than by will or the laws of descent and distribution and shall be exercisable
during the holder's lifetime only by the holder, regardless of any community
property interest therein of the spouse of the holder, or such spouse's
successors in interest. If the spouse of the holder shall have acquired a
community property interest in an option, the holder, or the holder's permitted
successors in interest, may exercise the option on behalf of the spouse of the
holder or such spouse's successors in interest.
10. HOLDING OF STOCK AFTER EXERCISE OF OPTION
Shares shall not be issued pursuant to the exercise of an option
unless the exercise of such option and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, state securities laws, and the
4
<PAGE>
requirements of any stock exchange yon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
11. TERMINATION OF EMPLOYMENT
If a holder of an incentive stock option ceases to be employed by the
Company or one of its subsidiary corporations (as defined in Section 424(f) of
the Code) for any reason other than the holder's death or permanent disability
(within the meaning of Section 22(e)(3) of the Code), the holder's incentive
stock options shall immediately become void and of no further force or effect;
provided, however, that within three months after the date the holder ceases to
be an employee of the Company or such subsidiary such incentive stock option may
be exercised to the extent exercisable on the date of such cessation of
employment. A leave of absence approved in writing by the Board of Directors or
the Committee shall not be deemed a termination of employment for the purposes
of this Paragraph 11, but no incentive stock option may be exercised during any
such leave of absence, except during the first three months thereof. Termination
of employment or other relationship with the Company by the holder of a
non-qualified stock option will have the effect specified in the individual
option agreement or certificate of grant as determined by the Board of Directors
or the Committee.
12. DEATH OR PERMANENT DISABILITY OF OPTION HOLDER
If the holder of an incentive stock option dies or becomes permanently
disabled while the option holder is employed by the Company or one of its
subsidiary corporations (as defined in Section 424(f) of the Code), the holder's
option shall expire one year after the date of such death or permanent
disability unless by its terms it expires sooner. During such period after
death, such incentive stock option may, to the extent that it remains
unexercised (but exercisable by the holder according to such option's terms)
upon the date of such death, be exercised by the person or persons to whom the
option holder's right under the incentive stock option shall pass by the option
holder's will or by the laws of descent and distribution. The death or permanent
disability of a holder of a non-qualified stock option will have the effect
specified in the individual option agreement or certificate of grant as
determined by the Board of Directors or the Committee.
5
<PAGE>
13. PRIVILEGES OF STOCK OWNERSHIP
No person entitled to exercise any option granted under the Plan shall
have any of the rights or privileges of a stockholder of the Company in respect
of any shares of Common Stock issuable upon exercise of such option until
certificates representing such shares shall have been issued and delivered. No
shares shall be issued and delivered upon exercise of any option unless and
until, in the opinion of counsel for the Company there shall have been full
compliance with any applicable registration requirements of the Act, any
applicable listing requirements of any national securities exchange on which the
Common Stock is then listed, and any other requirements of law or of any
regulatory bodies having jurisdiction over such issuance and delivery.
14. ADJUSTMENTS
14.1 If the outstanding shares of Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company through a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, an appropriate and proportionate adjustment
shall be made in the maximum number and kind of shares as to which options may
be granted under this Plan. A corresponding adjustment changing the number or
kind of shares allocated to unexercised options or portions thereof, which shall
have been granted prior to any such change, shall likewise be made. Any such
adjustment in the outstanding options shall be made without change to the
aggregate purchase price applicable to the unexercised portion of the option but
with a corresponding adjustment in the purchase price for each share covered by
the option.
14.2 Notwithstanding the foregoing, the Board of Directors or the
Committee may provide in writing in connection with such transaction for any or
all of the foregoing alternatives (separately or in combination): (i) for
options therefore granted to become immediately exercisable; (ii) for the
assumption by the successor corporation of the options theretofore granted or
the substitution by such corporation for such options or new stock options
covering the stock of the successor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares and
prices; and (iii) for the continuance of the Plan by such successor corporation
in which event the Plan and the options theretofore granted shall continue in
the manner and under the terms so provided.
14.3 Adjustments under this Paragraph 14 shall be made by the Board of
Directors or Committee, whose determination as to what adjustments shall be
made, and the extent thereof, shall be final, binding and conclusive. No
fractional shares of stock shall be issued under the Plan on any such
adjustment.
15. AMENDMENT AND TERMINATION OF PLAN
15.1 The Board of Directors or the Committee may at any time suspend
or terminate the Plan. The Board of Directors or the Committee may also at any
time amend or revise the terms of the Plan, provided, however, that if
stockholder approval is required pursuant to Rule 16b-3 or another Rule of the
General Rules and Regulations under the Exchange Act, no such amendment or
revision to (i) increase the maximum number of shares which may be acquired
6
<PAGE>
pursuant to options, granted under the Plan, (ii) change the minimum purchase
price set forth in Paragraph 4.2 and 6, (iii) increase the maximum term of
options provided for in Paragraph 5, or (iv) change the designation of persons
eligible to receive options or as provided in Paragraph 4, shall become
effective until such stockholder approval of such amendment or revision is
obtained.
15.2 No amendment, suspension or termination of the Plan shall,
without the consent of the holder, alter or impair any rights or obligations
under any option or theretofore granted under the Plan.
16. EFFECTIVE DATE OF PLAN
16.1 No option may be granted under the Plan unless and until (i) the
options and underlying shares have been registered under the Act and qualified
with the appropriate state regulatory agencies, or (ii) the Company has been
advised by counsel that such options and underlying shares are exempt from such
registration and/or qualification.
16.2 The Plan shall be effective as of April 2, 1998, the date on
which it was approved by the Board. However, notwithstanding any other
provisions contained herein, the Plan and all stock options granted under the
Plan shall be void if the Plan is not approved at the next Annual Meeting of
Stockholders by the holders of a majority of the outstanding voting stock of the
Company (voting as a single class) present, or represented, and entitled to vote
at a meeting of such stockholders duly held in accordance with the Delaware
General Corporation Law. No stock option issued under the Plan shall become
exercisable in whole or in part until the Plan is so approved by stockholders.
17. RESERVATION OF SHARES
The Company, during the term of this Plan, will at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
7
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
AMENDED AND RESTATED
DIRECTOR OPTION PLAN*
1. PURPOSES OF THE PLAN. The purposes of this Director Option Plan are to
attract and retain the best available personnel for service as Outside Directors
(as defined herein) of the Company, to provide additional incentive to the
Outside Directors of the Company to serve as Directors, and to encourage their
continued service on the Board.
All options granted hereunder shall be "nonqualified stock options."
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the Common Stock of the Company.
(d) "Company" means International Dispensing Corporation, a Delaware
corporation.
(e) "Continuous Status as a Director" means the absence of any
interruption or termination of service as a Director.
(f) "Director" means a member of the Board.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, the Fair Market Value of a Share of Common Stock
shall be the closing sales price for such stock (or the closing bid, if no sales
were
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* The original Plan was approved by the Board of Directors of the Company on
April 2, 1998 and ratified by the stockholders on July 9, 1998. Amendments
to the original Plan to (a) increase from 250,000 to 350,000 the maximum
aggregate number of shares of the Company's Common Stock which may be
optioned and sold under the Plan and (b) change the amount of options
automatically granted from time to time to Outside Directors as set forth
in Section 4(b)(iii) were approved by the directors on , 1999 [and
ratified by the stockholders on June 18, 1999].
<PAGE>
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in Common Stock) on the date of grant, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is quoted on Nasdaq (but not on the
National Market thereof) or regularly quoted by a recognized securities dealer
but selling prices are not reported, the Fair Market Value of a Share of Common
Stock shall be the mean between the high bid and low asked prices for the Common
Stock on the last market trading day prior to the day of determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board.
(i) "Option" means a stock option granted pursuant to the Plan.
(j) "Optioned Stock" means the Common Stock subject to an Option.
(k) "Optionee" means an Outside Director who receives an Option.
(l) "Outside Director" means a Non-Employee Director, as defined in
Rule 16b-3 of the General Rules and Regulations under the Exchange Act.
(m) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(n) "Plan" means this Director Option Plan.
(i) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(o) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue Code of
1986.
3. SHARES SUBJECT TO THE PLAN. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 350,000 Shares (the "Pool") of Common Stock. The Shares may be
authorized but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
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<PAGE>
4. ADMINISTRATION OF AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) ADMINISTRATION. The Plan shall be administered by a committee
(the "Committee") comprised of the Chairman of the Board of the Company and/or
by such other person or persons designated by him. Subject to the express
provisions of the Plan, the Committee shall have authority to (i) interpret the
Plan; (ii) prescribe, amend and rescind rules and regulations regulating it;
(iii) except as set forth in Section 4(b), determine the individuals to whom and
the time or times at which Options shall be granted, the number of shares
subject to each of such Options, the duration of such Options and the number of
installments, if any, in which each such Option may be exercised; and (iv) make
all other determinations necessary or advisable for the administration of the
Plan. The Committee's determination on the matters referred to in this Plan
shall be final, conclusive and binding upon all Optionees. No member of the
Committee shall be liable for any action, failure to act, determination or
interpretation made in good faith with respect to the Plan or any transaction
under the Plan. The Committee may act by the vote of a majority of its members
present at a meeting, provided that at least 50% of such Committee members are
in attendance at such meeting, or by unanimous written consent. The Committee
shall keep a record of its proceedings and acts and shall keep or caused to be
kept such books and records as may be necessary in connection with the proper
administration of the Plan.
(b) PROCEDURE FOR GRANTS. The provisions set forth in this Section
4(b) shall not be amended more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act of 1974,
as amended, or the rules thereunder. Except as set forth in Section 4(b)(vi),
all grants of Options to Outside Directors under this Plan shall be automatic
and non-discretionary and shall be made strictly in accordance with the
following provisions:
(i) On the Effective Date (as hereinafter defined) each person
who is an incumbent Outside Director on the Effective Date (each an "Incumbent
Outside Director") shall be granted options to purchase such number of Shares as
shall be specified in a resolution of the Board of Directors of the Company (the
"Incumbent Director Options").
(ii) Each Outside Director other than an Incumbent Outside
Director shall be automatically granted an Option to purchase 5,000 Shares (the
"First Options") on the date such person first becomes a Director, whether
through election by the shareholders of the Company or appointment by the Board
to fill a vacancy.
(iii) After either the Incumbent Director Options or the First
Options have been granted to an Outside Director, then provided that he or she
is then serving as a Director, such Outside Director shall thereafter be
automatically granted an Option to purchase 10,000 Shares (a "Subsequent
Option") on each anniversary of the date such Outside Director was first elected
as a Director.
(iv) The terms of a First Option or Incumbent Director Option
granted hereunder shall be as follows:
(A) the term of the First Option or Incumbent Director
Option shall be ten years.
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<PAGE>
(B) the First Option or Incumbent Director Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Section 8 hereof.
(C) the exercise price per Share shall be 100% of the Fair
Market
Value per Share on the date of grant of the First Option or Incumbent Director
Option.
(D) the First Option or Incumbent Director Option shall
become exercisable in installments cumulatively as to 33 1/3% of the Shares
subject to the First Option or Incumbent Director Option on each anniversary of
its date of grant.
(v) The terms of a Subsequent Option granted hereunder shall be
as follows:
(A) the term of the Subsequent Option shall be ten years.
(B) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as set forth in
Section 8 hereof.
(C) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Subsequent Option.
(D) the Subsequent Option shall become exercisable as to
33 1/3 % of the Shares subject to the Subsequent Option on each anniversary of
its date of grant.
(vi) In addition to the Incumbent Director Options, First
Options and Subsequent Options, the Committee may grant to Outside Directors
additional Options ("Discretionary Options"). The Committee shall determine the
duration (not to exceed ten years from the date on which said Option is granted)
of such Discretionary Option, the exercise price of such Discretionary Option,
and number of installments, if any, in which each Discretionary Option may be
exercised.
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action to increase the number of Shares which may be issued under the Plan or
through cancellation or expiration of Options previously granted hereunder.
5. ELIGIBILITY. Options may be granted only to Outside Directors. Except
as set forth in Section 4(b)(vi), all Options shall be automatically granted in
accordance with the terms set forth in Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
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<PAGE>
6. TERM OF PLAN. The Plan shall be effective as of April 2, 1998 (the
"Effective Date"), the date on which it was approved by the Board. However,
notwithstanding any other provisions contained herein, the Plan and all Options
granted under the Plan shall be void if the Plan is not approved at the next
Annual Meeting of Stockholders by the holders of a majority of the outstanding
voting stock of the Company (voting as a single class) present, or represented,
and entitled to vote at a meeting of such stockholders duly held in accordance
with the Delaware General Corporation Law. No Option issued under the Plan shall
become exercisable in whole or in part until the Plan is so approved by
stockholders.
7. FORM OF CONSIDERATION. The purchase price of the Common Stock upon
exercise of an Option shall be paid in full at the time of exercise (i) in cash
or by certified or cashier's check payable to the order of the Company, (ii) by
cancellation of indebtedness owed by the Company to the Director, (iii) by
delivery of shares of Common Stock already owned by, and in the possession of
the Director, (iv) if authorized by the Board or if specified in the Option
being exercised, by a promissory note made by the Director in favor of the
Company, subject to terms and conditions determined by the Board, secured by the
Common Stock, issuable upon exercise, and in compliance with applicable law
(including, without limitation, state, corporate and federal requirements), (v)
by any combination thereof, or (vi) in such other manner as the Board may
specify in order to facilitate the exercise of Options by the holders thereof.
Shares used to satisfy the exercise price of an Option shall be valued at their
Fair Market Value.
8. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted hereunder shall be exercisable at such times as are set forth in Section
4 hereof.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Sec tion 10 of the
Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
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<PAGE>
(b) RULE 16b-3. Options granted to Outside Directors must comply with
the applicable provisions of Rule 16b-3 promulgated under the Exchange Act or
any successor thereto and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
from Section 16 of the Exchange Act with respect to Plan transactions.
(c) TERMINATION OF CONTINUOUS STATUS AS A DIRECTOR. In the event an
Optionee's Continuous Status as a Director terminates (other than upon the
Optionee's death or total and permanent disability (as defined in Section
22(e)(3) of the Code)), the Optionee may exercise his or her Option, but only
within three months from the date of such termination, and only to the extent
that the Optionee was entitled to exercise it at the date of such termination
(but in no event later than the expiration of its ten year term). To the extent
that the Optionee was not entitled to exercise an Option at the date of such
termination, and to the extent that the Optionee does not exercise such Option
(to the extent otherwise so entitled) within the time specified herein, the
Option shall terminate.
(d) DISABILITY OF OPTIONEE. In the event Optionee's Continuous Status
as a Director terminates as a result of total and permanent disability (as
defined in Section 22(e)(3) of the Code), the Optionee may exercise his or her
Option, but only within twelve months from the date of such ter mination, and
only to the extent that the Optionee was entitled to exercise it at the date of
such termination (but in no event later than the expiration of its ten year
term). To the extent that the Optionee was not entitled to exercise an Option at
the date of termination, or if he or she does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
(e) DEATH OF OPTIONEE. In the event of an Optionee's death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve months
following the date of death, and only to the extent that the Optionee was
entitled to exercise it at the date of death (but in no event later than the
expiration of its ten year term). To the extent that the Optionee was not
entitled to exercise an Option at the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. NON-TRANSFERABILITY OF OPTIONS. An Option granted under the Plan shall,
by its terms, be nontransferable by the holder either voluntarily or by
operation of law, other than by will or the laws of descent and distribution and
shall be exercisable during the holder's lifetime only by the holder, regardless
of any community property interest therein of the spouse of the holder, or such
spouse's successors in interest. If the spouse of the holder shall have acquired
a community property interest in an Option, the holder, or the holder's
permitted successors in interest, may exercise the Option on behalf of the
spouse of the holder or such spouse's successors in interest.
10. ADJUSTMENTS.
(a) If the outstanding shares of Common Stock are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of the Company through a reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or
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<PAGE>
other similar transaction, an appropriate and proportionate adjustment shall be
made in the maximum number and kind of shares as to which Options may be granted
under this Plan. A corresponding adjustment changing the number or kind of
shares allocated to unexercised Options or portions thereof, which shall have
been granted prior to any such change, shall likewise be made. Any such
adjustment in the outstanding Options shall be made without change to the
aggregate purchase price applicable to the unexercised portion of the Option but
with a corresponding adjustment in the purchase price for each Share covered by
the Option.
(b) Notwithstanding the foregoing, the Board may provide in writing
in connection with such transaction for any or all of the foregoing alternatives
(separately or in combination); (i) for Options therefore granted to become
immediately exercisable; (ii) for the assumption by the successor corporation of
the Options theretofore granted or the substitution by such corporation for such
Options or new stock Options covering the stock of the successor corporation, or
a parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices; and (iii) for the continuance of the Plan by such
successor corporation in which event the Plan and the Options theretofore
granted shall continue in the manner and under the terms so provided.
(c) Adjustments under this Paragraph 10 shall be made by the Board,
whose determination as to what adjustments shall be made, and the extent
thereof, shall be final, binding and conclusive. No fractional shares of stock
shall be issued under the Plan on any such adjustment.
11. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. Except as set forth in Section 4, the
Board may at any time amend, alter, suspend, or discontinue the Plan, but no
amendment, alteration, suspension, or discontinuation shall be made which would
impair the rights of any Optionee under any grant theretofore made, without his
or her consent.
(b) EFFECT OF AMENDMENT OR TERMINATION. Any such amendment or
termination of the Plan shall not affect Options already granted except if such
amendment is required for compliance with Rule 16b-3 under the Exchange Act or
any provision under the Code, and such Options shall remain in full force and
effect as if this Plan had not been amended or terminated.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4 hereof. Notice
of the determination shall be given to each Outside Director to whom an Option
is so granted within a reasonable time after the date of such grant.
13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
-7-
<PAGE>
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
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