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. )
|x| Filed by the Registrant
|_| Filed by Party other than the Registrant
|_| Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use of the
Commission Only (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
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(Name of Registrant as Specified in Its Charter)
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(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:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| 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:
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(2) Form, Schedule or Registration Statement no.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
INTERNATIONAL DISPENSING CORPORATION
1111 Benfield Boulevard, Suite 230
Millersville, Maryland 21108
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON FEBRUARY 1, 2001
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 offices of the Company's counsel, Wolf, Block, Schorr and
Solis-Cohen LLP, 250 Park Avenue, New York, New York 10177 on Thursday, February
1, 2001 at 10:00 A.M., local time, for the following purposes:
(1) To elect one Class 2 director to serve for a three-year term;
(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 850,000 to 2,500,000; and
(3) 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 December 21,
2000 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: January 4, 2001 By Order of the Board of Directors,
Frank Carillo
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.
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<PAGE>
INTERNATIONAL DISPENSING CORPORATION
1111 Benfield Boulevard, Suite 230
Millersville, Maryland 21108
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
February 1, 2001
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
February 1, 2001, 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
one Class 2 director to serve for a three-year term and (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 850,000 to 2,500,000.
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 nominee for Class 2 director named
herein, FOR ratification and approval of the amendment to the 1998 Option 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 January 4, 2001 to all stockholders of record at the close of business on
December 21, 2000.
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.
2
<PAGE>
VOTING SECURITIES OF THE COMPANY
AND PRINCIPAL HOLDERS THEREOF
The securities of the Company entitled to be voted at the Meeting are the
Common Stock, Series A Redeemable Convertible Preferred Stock ("Series A
Stock"), Series B Redeemable Convertible Preferred Stock ("Series B Stock") and
Series C Redeemable Convertible Preferred Stock ("Series C Stock" and together
with the Series A Stock and the Series B Stock, the "Preferred Stock"). At the
close of business on December 14, 2000, there were 9,728,396, 560, 440, and 400
shares of Common Stock, Series A Stock, Series B Stock and Series C Stock,
respectively, entitled to be voted at the Meeting. Each stockholder of record of
Common Stock is entitled to one vote for each share held on all matters to come
before the Meeting. Each holder of Series A Stock, Series B Stock and Series C
Stock is entitled to vote for each share held a number of votes equal to the
number of whole and fractional shares of Common Stock into which such share is
convertible. As of December 14, 2000, the number of shares of Common Stock into
which a share of Series A Stock, Series B Stock and Series C Stock were
convertible is 9,090.9, 5,417.3 and 6,666.7 shares, respectively. There are no
cumulative voting rights. Only stockholders of record at the close of business
on December 21, 2000 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 sum of the outstanding shares
of Common Stock plus the shares of Common Stock issuable upon conversion of the
outstanding shares of Preferred 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
1998 Option Plan and will not be counted in determining the number of shares
necessary for ratification of amendment to the 1998 Option Plan.
The following table sets forth certain information known to the Company
regarding beneficial ownership of shares of the Common Stock as of December 14,
2000 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.
3
<PAGE>
Name and Address of Beneficial Owner Number of Shares Percent of Class (1)
------------------------------------ ---------------- --------------------
Gregory Abbott 4,606,065(2) 34.8%
1200 Kessler Drive
Aspen, CO 81611
Louis A. Simpson 3,531,142(3) 27.3%
5951 La Sendita
P.O. Box 1943
Rancho Santa Fe, California 92067
George Kriste 2,359,047(4) 20.0%
20643 Seabord Road
Malibu, California 90265
George Abbott 2,289,642(5) 19.2%
1285 South Ocean Boulevard
Palm Beach, Florida 33480
Reed Slatkin 1,757,142(6) 15.3%
890 North Kellogg Avenue
Santa Barbara, California 93111
Gary Allanson 1,095,409(7) 10.2%
1111 Benfield Boulevard, Suite 230
Millersville, Maryland 21108
Jon Silverman 66,667(8) 6.8%
6 International Drive, Suite 160
Rye Brook, New York 10573
Frank Carillo 21,667(9) *
570 Grand Avenue
Englewood, New Jersey 07631
All directors and executive 8,082,188(10) 49.5%
officers as a group (4 persons)
-------------------------------
* Less than 1%.
(1) 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.
(2) Includes 3,457,142 shares of Common Stock issuable upon conversion of
Preferred Stock (including 90 shares of Series C Stock which may be
acquired upon exercise of currently exercisable warrants) and 60,000
shares of Common Stock issuable upon exercise of currently exercisable
options. Does not include 40,000 shares of Common Stock subject to options
which will not become exercisable within 60 days of the date hereof.
4
<PAGE>
(3) Includes 3,207,142 shares of Common Stock issuable upon conversion of
Preferred Stock (including 90 shares of Series C Stock which may be
acquired upon exercise of currently exercisable warrants).
(4) Includes 2,019,047 shares of Common Stock issuable upon conversion of
Preferred Stock (including 40 shares of Series C Stock which may be
acquired upon exercise of currently exercisable warrants) and 60,000
shares of Common Stock issuable upon exercise of currently exercisable
options. Does not include 40,000 shares of Common Stock subject to options
which will not become exercisable within 60 days of the date hereof.
(5) Includes 2,207,142 shares of Common Stock issuable upon conversion of
Preferred Stock (including 90 shares of Series C Stock which may be
acquired upon exercise of currently exercisable warrants).
(6) Includes 1,757,142 shares of Common Stock issuable upon conversion of
Preferred Stock (including 90 shares of Series C Stock which may be
acquired upon exercise of currently exercisable warrants).
(7) Includes 720,000 shares of Common Stock issuable upon exercise of
currently exercisable options, 290,909 shares of Common Stock issuable
upon conversion of Preferred Stock, 25,000 shares of Common Stock owned
jointly with Mr. Allanson's wife, 37,000 shares of Common Stock owned in
an IRA account for Mr. Allanson's benefit and 22,500 shares of Common
Stock owned in an IRA account for the benefit of Mr. Allanson's wife. Does
not include an aggregate of 1,180,000 shares of Common Stock subject to
options which are not currently exercisable.
(8) Includes 66,667 shares of Common Stock issuable upon exercise of options.
(9) Includes 10,000 shares of Common Stock owned of record by Mr. Carillo's
wife. Also includes 1,667 shares of Common Stock issuable upon exercise of
currently exercisable options. Does not include 3,333 shares of Common
Stock subject to options which will not become exercisable within 60 days
of the date hereof.
(10) Includes an aggregate of 5,767,098 shares of Common Stock issuable upon
conversion of Preferred Stock and an aggregate of 841,667 shares of Common
Stock issuable upon exercise of currently exercisable stock options.
5
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors has nominated George Kriste (who is currently a
director) for election as a Class 2 director for a three-year term of office to
expire at the 2003 Annual Meeting of Stockholders or until his successor is duly
elected and qualified. No Class 1 or Class 3 directors shall be elected at the
meeting.
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 George Kriste unless authority to do so
is withheld. Management believes that Mr. Kriste will be available and able to
serve as a director. 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.
The following information is furnished as of December 14, 2000 with
respect to the nominee for election as a Class 2 director and each incumbent
director whose term will continue after the Meeting:
Nominee for Class 2 Director
Year first
elected or
Current position and office with the appointed as
Company and principal occupation a director or
during the past five years; other officer of
Name and age directorships the Company
-------------------------------------------------------------------------------
George Kriste Director of the Company since 1995; 1995
(52) Chairman and Chief Executive Officer
of New Century Media, a radio
station owner, since January 1992.
6
<PAGE>
Incumbent Directors and Executive Officers
Class 1 Directors
Year first
elected or
Current position and office with the appointed as
Company and principal occupation a director or
during the past five years; other officer of
Name and age directorships the Company
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Gary Allanson (1) President and Chief Executive Officer 1999
(47) of the 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.
Frank Carillo Secretary of the Company since 2000
(45) February 2000; President of
Executive Communications Group,
Inc., a management communications
consulting firm, for more than five
years.
Class 3 Director
Year first
elected or
Current position and office with the appointed as
Company and principal occupation a director or
during the past five years; other officer of
Name and age directorships the Company
-------------------------------------------------------------------------------
Gregory B. Abbott (2) Director of the Company since 1995; 1995
(50) Private investor and writer for more
than five years.
-----------------------------
(1) Term will end at the year 2002 Annual Meeting of Stockholders.
(2) Term will end at the year 2001 Annual Meeting of Stockholders.
7
<PAGE>
Meetings of Board of Directors and Committees
The Board of Directors met four times during the fiscal year ended
December 31, 1999 ("Fiscal 1999"). All incumbent directors who were members of
the Board during Fiscal 1999 attended all directors' meetings personally or by
conference telephone, except that Claude Lee, a former director, did not attend
one of the two meetings held during Fiscal 1999 while he was a director. 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 1999.
8
<PAGE>
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth for the three (3) fiscal years ended
December 31, 1999, information concerning the compensation paid or accrued to
the Chief Executive Officer of the Company and the two other persons serving as
an executive officer of the Company during Fiscal 1999 whose salary and bonus
for Fiscal 1999 exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation Long--Term Compensation
------------------------------ -------------------------------------------------
Other Annual Restricted Securities
Name and Principal Fiscal Salary Bonus Compensation Stock Underlying All Other
Position year ($) ($) ($)(1) Award($) Options (#) Compensation($)
------------------ ---- -------- ----- ------------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gary Allanson 1999 $190,000 -- -- -- 400,000 $4,400(2)
Chairman, CEO and President 1998 $ -- -- -- -- -- --
1997 $ -- -- -- -- -- --
Jon Silverman 1999 $105,000 -- -- -- -- --
Chairman, CEO and President(3) 1998 $180,000 -- -- -- -- $4,430(2)
1997 $187,500 -- -- -- -- $4,000(2)
Jeffrey D. Lewenthal
Chief Financial Officer,
Executive Vice President of 1999 $156,500 -- -- -- -- --
Business Development, 1998 $144,000 -- -- -- 50,000 --
Treasurer and Secretary(4) 1997 $96,000 -- -- -- -- --
</TABLE>
---------------------------------
(1) The aggregate amount of perquisites and other personal benefits paid to
each of Mr. Allanson 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 $1,000,000 term life insurance policies as
to which the person may designate the beneficiary.
(3) Mr. Silverman served as CEO and President until March 15, 1999.
(4) Jeffrey D. Lewenthal's employment with the Company began in March 1997 and
terminated in March 2000. The figure for 1997 represents the compensation
Mr. Lewenthal received from the Company for the period of his employment
with the Company in 1997.
9
<PAGE>
Option Grants in Fiscal Year Ended December 31, 1999
The following table sets forth certain information concerning options
granted during Fiscal 1999 pursuant to the 1998 Option Plan to the executive
officers listed in the Summary Compensation Table.
--------------------------------------------------------------------------------
Name Number of Percent Of Total Exercise Expiration
Securities Options Granted to Or Base Date
Underlying Employees In Price
Options Granted (#) Fiscal Year ($/Sh)
--------------------------------------------------------------------------------
Gary Allanson 400,000(1) 100% $.655 (2)
--------------------------------------------------------------------------------
(1) The terms of grant of such options provided that options to purchase
300,000 shares of Common Stock would become exercisable on March 15, 1999
and options to purchase 100,000 shares of Common Stock would become
exercisable on July 1, 2000.
(2) Of these options, options to purchase 300,000 shares of Common Stock
expire on March 14, 2006 and options to purchase 100,000 shares of Common
Stock expire on June 30, 2010.
Aggregated Option Exercises in Fiscal Year Ended December 31, 1999 and Fiscal
Year End Option Values
None of the executive officers listed in the Summary Compensation Table
exercised any option during Fiscal 1999. The following table sets forth certain
information with respect to options to purchase Common Stock held by the
foregoing executive officers on December 31, 1999.
--------------------------------------------------------------------------------
Name Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money Options on
Options on 12/31/99 (#) 12/31/99 ($)
Exercisable/Unexercisable Exercisable/Unexercisable (1)
--------------------------------------------------------------------------------
Gary Allanson 300,000/100,000 $28,500/$9,500
--------------------------------------------------------------------------------
Jon Silverman 66,667/0 0/0
--------------------------------------------------------------------------------
Jeffrey Lewenthal 16,666/33,334 0/0
--------------------------------------------------------------------------------
--------------------
(1) The average of the closing bid and asked prices of the Common Stock on
December 31, 1999 as reported by the National Quotation Bureau, Inc. was
$.75. All options held by Messrs. Silverman and Lewenthal had exercise
prices of $1.595. All of the options held by Mr. Allanson had exercise
prices of $.655.
10
<PAGE>
Employment and Non-Compete Agreements
The Company and Gary Allanson have entered into an employment agreement,
dated as of March 15, 1999, which expires on March 14, 2002 (the "Allanson
Employment Agreement"). 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.
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
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.
PROPOSAL TO APPROVE AN AMENDMENT TO THE
1998 STOCK OPTION PLAN
General
On September 11, 2000, 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 850,000 to 2,500,000 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 833,333 shares are currently reserved for issuance upon exercise of
options which may be granted under the 1998 Option Plan. Further, subject to the
approval by the stockholders at the Meeting of an increase in the number of
shares of Common Stock which may be issued upon exercise of all options under
the 1998 Option Plan to 2,500,000, the Board of Directors has granted to Gary
Allanson incentive stock options to purchase an additional 1,180,000 shares of
Common Stock (see "New Plan Benefits"). Currently there are two persons that are
eligible
11
<PAGE>
to receive options under the 1998 Option Plan as employees. Consultants to the
Company may also receive grants of options under the 1998 Option Plan.
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 Option 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
12
<PAGE>
which may be acquired pursuant to options under the Plan, (ii) change the
minimum exercise price of any option which may be granted, (iii) increase the
maximum term of any option which may be granted or (iv) change the designation
of persons eligible to receive options under the 1998 Option Plan.
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 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 the 1998 Option Plan. Except as described
below, upon exercise of an NSO, the optionee will 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
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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.
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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.
Additional benefits or amounts that may be received by or allocated to potential
participants in the Plan are not determinable.
Shares of
Name and Position Dollar Value (1) Common Stock
----------------- ---------------- ------------
Gary Allanson (2) $ 454,500 1,900,000
President and CEO
Jon D. Silverman (2) $0 66,667
formerly Chairman of the Board
Executive Group $ 454,500 1,966,667
Non-Executive Director Group $0 0
Non-Executive Officer
Employee Group $0 80,000
Other Persons $0 0
--------------------------
(1) The Dollar Value with respect to options is computed based on a comparison
of the average closing bid and asked price of the Common Stock on December
14, 2000 ($.49) and the exercise price for the options, which exercise
price is $1.595 per share for all of the options granted in 1998, $0.655
for options granted to Mr. Allanson in 1999 and $.187 per share for
options granted in 2000.
(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) Includes 400,000 shares of Common Stock issuable upon exercise of options
granted by the Company to Mr. Allanson on March 15, 1999 and 1,500,000
shares of Common Stock issuable upon exercise of options granted by the
Company to Mr. Allanson on August 18, 2000 under the 1998 Option Plan (of
which the grant of options to purchase 1,180,000 shares is subject to
approval by the stockholders at the Meeting of the amendment to the 1998
Option Plan increasing to 2,500,000 the number of shares which may be
issued upon exercise of all options granted under the 1998 Option Plan).
(4) Represents shares of Common Stock issuable upon exercise of options
granted to Mr. Silverman on April 2, 1998, under the 1998 Option Plan.
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(5) Includes (i) 400,000 and 1,500,000 shares of Common Stock issuable upon
exercise of options granted to Mr. Allanson on March 15, 1999 and August
18, 2000, respectively, and (ii) 66,667 shares of Common Stock issuable
upon exercise of options granted to Mr. Silverman on April 2, 1998.
(6) Represents shares of Common Stock issuable upon exercise of options
granted to a non-executive officer employee on August 18, 2000 under the
1998 Option Plan.
Recommendation and Requisite Vote
The Board of Directors believes that the 1998 Option Plan has advanced the
interests of the Company by providing equity incentive to motivate and retain
key employees and consultants of the Company and by further aligning all the
interests of said persons with those of the Company's stockholders. As of
December 14, 2000, 833,333 of the 850,000 shares of Common Stock reserved under
the 1998 Option Plan were subject to outstanding options granted under the 1998
Option Plan and an additional 1,180,000 shares of Common Stock were reserved for
issuance upon exercise of outstanding options granted to Gary Allanson, subject
to the approval by the Company's stockholders of the amendment to 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 recommends a vote FOR approval of the amendment to
the Plan. An affirmative vote of the holders of record of a majority of the sum
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
On October 25, 1999 and December 15, 1999 certain persons, including
Gary Allanson, the Chairman and Chief Executive Officer of the Company, and
George Kriste and Gregory Abbott, directors of the Company, purchased from the
Company an aggregate of 560 shares of the Company's Series A Stock for $2,000
per share. The number of shares purchased by each of Messrs. Allanson, Kriste
and Abbott on such dates and the total purchase price paid by such persons are
set forth below:
Total Shares
of Series A Total
Name Stock Purchased Purchase Price
---- --------------- ---------------
Gary Allanson 32 $ 64,000
George Kriste 132 $ 264,000
Gregory Abbott 187 $ 374,000
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On February 22, 2000 certain persons, including Messrs. Kriste and
Abbott, purchased from the Company an aggregate of 440 shares of the Company's
Series B Stock for $2,000 per share. The number of shares of Series B Stock
purchased by each of Messrs. Kriste and Abbott are set forth below:
Total Shares
of Series B Total
Name Stock Purchased Purchase Price
---- --------------- ---------------
George Kriste 50 $100,000
Gregory Abbott 97.5 $195,000
On August 22, 2000 certain persons, including Messrs. Kriste and
Abbott, purchased from the Company an aggregate of 200 shares of the Company's
Series C Stock for $2,000 per share. On December 1, 2000 certain persons,
including Mr. Abbott, purchased an additional 200 shares of Series C Stock for
$2,000 per share. The aggregate number of shares of Series C Stock purchased by
each of Messrs. Kriste and Abbott are set forth below:
Total Shares
of Series B Total
Name Stock Purchased Purchase Price
---- --------------- ---------------
George Kriste 40 $ 80,000
Gregory Abbott 90 $ 180,000
The proceeds of the sale of the Preferred Stock are being used by
the Company for working capital.
The holders of Preferred Stock are entitled to receive cumulative
dividends at the rate of 12% per year. In the discretion of the Company, the
dividends may be paid in cash, in additional shares of Series A Stock, Series B
Stock or Series C Stock, as the case may be, or any combination of the
foregoing.
The holders of Series A Stock may convert the Series A Stock into
Common Stock initially at the rate of one share of Common Stock for each $.22 of
liquidation value of the Series A Stock. The holders of Series B Stock may
convert the Series B Stock into Common Stock initially at the rate of one share
of Common Stock for each $.35 of liquidation value of the Series B Stock. The
holders of Series C Stock may convert the Series C Stock into Common Stock
initially at the rate of one share of Common Stock for each $.30 of liquidation
value of the Series C Stock. The conversion rates of the Preferred Stock are
subject to adjustment in certain circumstances.
The holders of Series A Stock, voting as a separate class, are
entitled to elect one director of the Company. In addition, the holders of
Preferred Stock are entitled to vote on all matters (including elections of
directors) together with the holders of the Common Stock with each share of
Preferred Stock having the number of votes equal to the number of whole and
fractional shares of Common Stock into which such share is then convertible (as
of December 14, 2000, each share of Series A Stock would have 9,090.9 votes,
each share of Series B Stock would have 5,714.3 votes and each share of Series C
Stock would have 6.666.7 votes).
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STOCKHOLDER PROPOSALS
Proposals of stockholders for possible consideration at the 2001 Annual
Meeting of Stockholders (expected to be held in August 2001) must be received by
the Secretary of the Company not later than May 1, 2001 to be considered for
inclusion in the proxy statement for that meeting if appropriate for
consideration under applicable securities laws. The proxy for the 2001 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 May 1, 2001.
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, 2000. Arthur Andersen LLP
has audited the Company's financial statements for each of the last five 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 December 21, 2000, without charge, upon written request to its
President, Gary Allanson, a copy of the Company's Annual Report on Form 10-KSB
for Fiscal 1999.
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APPENDIX A
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.
--------------------------
* 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 April, 13, 1999 and the stockholders on June 18, 1999. An amendment
to the Plan to increase from 850,000 to 2,500,000 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 September 11, 2000 [and
the stockholders on February 1, 2001].
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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
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 2,500,000, 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.
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<PAGE>
4.4 All options granted under the Plan shall be granted within ten
years from April 2, 1998.
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:
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<PAGE>
(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 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.
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<PAGE>
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
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
23
<PAGE>
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.
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.
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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
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.
25
