SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10
General Form for Registration of Securities
Pursuant to Section 12(b) or (g) of the
Securities Exchange Act of 1934
ALYDAAR SOFTWARE CORPORATION
(Name of Registrant as specified in its charter)
North Carolina 87-0399301
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2101 Rexford Road, Suite 250 West Charlotte, NC 28211
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 704/365-2324
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of exchange on which
to be so registered each class is to be registered
None None
Securities to be registered under Section 12(g) of the Act:
Common Stock, par value $0.001 per share
(Title of Class)
Page 1 of 17 sequentially numbered pages
Exhibit Index on Page 16
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ITEM 1 - BUSINESS.
Alydaar Software Corporation (the "Company"), a publicly held North
Carolina corporation, was formed in 1982 as a Utah corporation named Enertronix
Corporation. In 1992, the Company changed its name to Alydaar Software
Corporation. The corporate domicile was changed from Utah to North Carolina in
1994.
Development of SmartCodeTM
The Company's business involves the use of proprietary software to provide
software reengineering services specializing in computer language translation
and migration. The proprietary software that the Company has developed provides
integrity of translated data across any computer platform or media. The process
is based upon a highly flexible artificial intelligence language known as
SmartCode. SmartCode is based upon a philosophy of automating the software
reengineering process as much as possible.
Since 1994, the Company's main business has been the development of
SmartCode as a powerful technology to address several issues: implementing style
manuals; maintaining performance; restructuring and consolidating code;
relieving system dependencies; building screens interfaces; adopting new
technologies; creating documentation; and testing. SmartCode is computer
language and platform independent, with the capability of understanding the
various dialects of all computer languages, including conversions of
multi-dialect languages such as PL/1, COBOL, FORTRAN, and PASCAL.
Initially, SmartCode was marketed as a product for the language translation
process.
Language Translation Services
The process was successful enough that the Company has been picked over
better known competitors to perform software language translation services. In
1995, the Company's clients included First Boston, Ryder Trucks through KPMG
Peat Marwick and Citation Corporation (software developer for the wet laboratory
research industry). Marketing for the translation services was accomplished
through industry publications and direct contact by the Company to prospective
clients.
Year 2000 Problem
Realizing that the full potential of SmartCode lay in utilizing the
software for other more complex tasks, the Company, in February, 1995 made a
decision to utilize the basic framework of SmartCode to develop a proprietary
detection and solution process to address the "Year 2000 Problem" ("Y2K"). The
problem is the use of two digits for year references within software programs;
most software programs assume the first two digits of the year to be 19 and the
year 2000 would be read as 1900. If not corrected, the two-digit year field will
result in improper calculations, and in many cases, programs will not work
properly or may cease to run at all. The Gartner Group, a highly regarded
technology consulting firm, estimates that correcting
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the problem will cost $300 to $600 billion globally. The standard method of
estimating the market is to determine the number of lines of code (LOC) that
companies have that could be impacted and multiplying a cost per line to it.
Estimates of the cost per line of code range from $.50 to $1.50. Costs will
likely increase significantly as the Year 2000 approaches.
The Company's Y2K goal was to provide a fully automated, artificial
intelligence-based solution, that would not interfere with the day-to-day
operations of its clients' processes. With the exception of systems analysis,
all reengineering is performed at the Company's facilities. Additionally,
through strategic relationships, the Company provides complete reengineering
solutions and tools to its clients. The Company's software reengineering and
migration services that address Y2K are its YEAR 2000 ASSESSMENT and YEAR 2000
SMARTCODE services.
The YEAR 2000 ASSESSMENT provides assessment of the scope, parameters, and
limitations relating to the client's project. The scope determines the computer
language, the JCL or system scripts, the type of software application and the
interfaces used by the client. The parameters determine the desired style,
format and documentation, exogenous standards compliance or compatibility,
statement of work provisions, client involvement in work effort, quality
controls, verification, validation and testing. Limitations determine the
delivery schedule; site, security or access restrictions; software style and
format reservations; documentation and synchronization. Once the assessment is
completed the Company will apply its SmartCode process to the project.
The YEAR 2000 SMARTCODE services detect and correct problems and validate
the changes in the client's software. Detection involves identification of
two-digit representation data elements; exogenous, system, and legacy data
elements; simulated and induced year 2000 behaviors; all "Magic Number"
instances; and all multiple-use data elements. Correction involves the selection
and implementation of two-digit resolution strategies; the fix of "Magic Number"
problems; the fix of imbedded/encrypted date problems; the fix of multiple-use
of data element interactions; and the implementation of value-added
requirements. Validation involves the internal and external compatibility of the
corrected code within the client's workplace; customer acceptance testing; and
quality verification and validation testing.
The Company believes that no other reengineering provider today is capable
of evaluating systems using artificial intelligence and an automated process to
deliver a complete Y2K detection and solution process to its clients. The
Company believes it has the following competitive advantages: the technology is
computer language and platform independent; the technology is flexible and
adaptable; the process is non-intrusive to customers; and the Company offers
competitive prices and delivery schedules and produces documentation. The unique
competitive advantages will contribute to the Company's ability to meet client's
pricing requirements at various levels, and still attain profitability on
proposed projects.
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Marketplace for Y2K Solutions
Organizations have been slow to mobilize their resources towards correcting
this problem for some of the following reasons: businesses' priority
requirements that must be met in the next 12 to 18 months; the Y2K problem is
beyond their current planning window; large companies' reluctance to admit that
a problem requiring such substantial expenditures exists; the attitude of many
is not to fix it until it breaks; and lack of awareness of the impending
problem. Most companies do not know how to approach this problem and are just
now beginning to assess and address the Y2K problem. As time passes, this issue
will become critical for computer dependent companies, as well as all
governments in the world.
While companies of all sizes will be impacted by the Y2K problem, the
Company has a target market of companies with 10 million or more LOC. The
Company believes that, through its automated process, it can be most cost
effective with very high volume contracts.
During 1995 and 1996, the Company successfully completed pilot tests of its
Y2K process for several large companies, some of which have more than 20 million
LOC. The Company is establishing itself as a widely recognized and accepted Y2K
detection and solution provider, capitalizing upon the full potential of its
technology and maintaining a leadership position in systems integration
engineering.
The Company has entered into contracts to provide its Y2K services to
several clients as of this filing; however, most of those contracts do not
include an obligation on the part of the client to use the Company's services
exclusively. In addition, where such contracts do call for exclusive services
of the Company, it is up to the client to define each statement of work and
time table of the work to be performed. Revenues were insignificant for 1996
due primarily to budget constraints which existed within the Company's
customers' approved 1996 budgets. As previously noted, most companies did not
seriously consider the Y2K problem before the end of 1995 or early in 1996 and
most 1996 budgets would have been approved by the end of third quarter, 1995.
Although significant revenue can be expected from a single client, the Company
is continuously marketing and negotiating with additional client prospects to
secure a long-term relationship and revenue stream.
The Company has entered into strategic alliances with technology firms in
England, Taiwan, Belgium, Sweden, Norway, Switzerland, and several firms in the
United States, including employee-owned Science Applications International
Corporation (S.A.I.C.). See Sales and Marketing below for a discussion of the
formation of Alydaar Software Europe, plc(ASE). S.A.I.C. has $2.3 billion in
revenues and 23,000 employees worldwide. S.A.I.C. gave the Company a $20 million
contract award in December, 1996, and has given two task orders totaling $9
million under that award to be completed during the next 18 to 26 months. The
Company is currently performing services under both task orders.
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Sales and Marketing
The sales process takes approximately one to six months. As time
progresses, it is anticipated that the sales process will be reduced to weeks
and days. Once the client is contacted and the basic due diligence is performed,
the next step is to perform a pilot test of a fixed number of lines of code.
When the pilot is delivered back to the client and is reviewed for accuracy, a
determination is made as to the quality of the work. Then negotiations are
commenced as to the price and delivery schedule. The Company plans to utilize
its internal sales force to concentrate on large volume clients; that is,
clients with 10 million LOC or more. Geographically, the business is currently
concentrated in the Northeast, however, the Company intends to position
additional sales people in Los Angeles, Dallas and Orlando and has opened a
sales office in Chicago in February, 1997.
The Company is marketing its services internationally through strategic
alliances and a 45%-owned joint venture doing business as Alydaar Software
Europe, plc.(ASE) with headquarters in London, England. The joint venture
agreement was signed in December,1996, and as of March 15,1997, has ten
employees and has raised 500,000 pounds sterling capital to fund its operations.
The Company has been awarded an $8 million contract from ASE for work commencing
in May, 1997, subject to acceptance by the client of a pilot project to be
delivered in April, 1997.
Further marketing will be accomplished through participation in trade shows
and events. Also, full-page advertisements have been placed in trade magazines
such as "Datamation". A public relations firm has been retained to present the
Company in trade press and to bring awareness to the general public on the
Company's presence. Robert Gruder is a recognized speaker on the Y2K subject.
Pricing Policy
The independent consulting company, The Gartner Group, has estimated in
media interviews and at conference presentations that industry pricing will
approximate $1.10 per line of code. The Company's pricing policy will be
negotiated on a contract-by-contract basis.
Governmental Regulations
The Company is not aware of any governmental regulations that affect its
business activities. Other than the expenses related to standard public company
reporting, licensing and business permitting, the Company incurs no costs
related to Governmental regulations.
Research and Development
The Company continues to further enhance its automated process and the
artificial intelligence programming. The Company presently has approximately 70
people dedicated to research and development that will improve delivery time and
processing capabilities. Another focus in research and development is the ways
in which the Company can further capitalize on its know-how and core technology
by addressing other
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applications related to SmartCode. Developing system solutions for other
integration problems will give the Company additional products to help retain
clients after the Y2K work is done.
Employees
The Company began 1996 with 10 employees. There are currently a total of
225 employees and contractors. The Company used a national recruiting and
outsourcing firm to recruit staff and contractors to significantly ramp up its
work force from September, 1996, through January, 1997, to position the Company
to successfully capture major contracts. The arrangement with the recruiter is
that the Company can convert contractors to employee status after six months
with no further liability to the recruiting firm. The need for such explosive
growth in employees is based upon the Company's assessment of the probability of
successful awards of contracts currently under negotiation.
ITEM 2 - FINANCIAL INFORMATION
Selected Financial Information
The information required by Item 301 of Regulation S-K has been omitted
because the operating results for 1993 and 1992 were insignificant, since the
Company had only 2-5 employees focused on research and development during those
periods. The results for 1994, 1995 and 1996 are discussed below.
Management's Discussion and Analysis of Financial Condition and Results of
Operations and Future Plan of Operations.
The Company has been essentially a research and development company over
the last three years. As previously indicated, the Company abandoned its
marketing of language translation services in 1994 and diverted all resources to
research and development of SmartCode to position the Company to offer an
automated solution to the Y2K Problem. The Company began work on language
translation projects in 1994 producing $160,000 in revenues and completed the
projects during 1995 producing $229,000 in revenues. The Company incurred losses
of $305,000 in 1994 and $580,000 in 1995. During the fourth quarter of 1995, the
Company began working with a very large insurance company using their pilot
projects to help the Company de-bug SmartCode and improve its abilities to offer
an automated process to solve the Y2K Problem. In February, 1996, the insurer
gave the Company a pilot project and stated that upon successful completion the
Company would be awarded a $5 million contract with an estimated start date of
April 1996 and completion date by June 30, 1996. The Company's outside counsel
began negotiating an agreement and the negotiations were protracted over a
two-month period of time. In April, 1996, the insurer went through a major
re-organization resulting in the appointment of a new Chief Information Officer
who decided to put Y2K on hold and resulted in the Company's loss of the
contract. The Company worked with another large insurer over the next seven
months, using the insurer as a Beta site and to further improve its SmartCode
software and Y2K process.
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The Company added positions in research and processing as required during
the course of the year through September. Based upon the results of its
marketing efforts and contract negotiations with clients of its business
partners, the Company entered into an agreement with a large international
computer programmer outsourcing firm to recruit and bring to the Company
approximately 150 software engineers during the fourth quarter. The Company
signed lease agreements to increase its square footage from 18,000 square feet
to 37,000 square feet over the course of the fourth quarter. The Company spent
approximately $1,135,000 during the fourth quarter for furniture, fixtures,
computer hardware and software. The contract labor force cost the Company
approximately $2 million during the fourth quarter. The agreement with the
outsourcer provides the Company the opportunity to convert any of the personnel
provided by the outsourcer after a six-month period of time to an employee of
the Company with no additional liability to the outsourcer.
The Company incurred the substantial cost to position itself to be a viable
candidate to be successful in bidding for contracts of $5 million or more. The
Company had to incur the substantial cost of ramping-up the organization before
actual work was started on revenue producing projects due to the substantial
training time requirement and the need for substantial resources to be
continually devoted to additional research and development. As of the end of the
year, approximately seventy people were involved in research and development. In
early December,1996, the Company was awarded a $20 million contract from
S.A.I.C., one of its strategic alliance partners. The Company had already
started work on a $6 million task order issued under the contract in November,
1996, and in February, 1997, began work on a second task order for $3 million.
The expected start dates for other client's projects for late fourth quarter,
1996 or first quarter, 1997 have been moved forward by the client to late first
quarter and early second quarter, 1997.
The Company's total operating expenses, excluding depreciation, rose to
approximately $4.8 million in 1996 from $780,000 in 1995. Approximately $3.7
million of 1996 total expenses were incurred in the fourth quarter, 1996. Of the
fourth quarter amount, approximately $2 million was paid or accrued for contract
labor and $700,000 was paid or accrued for payroll cost. As previously
indicated, the Company began work on two projects at the end of 1996 resulting
in receivables of $188,000 at the end of the year. This was the only revenue
reported for 1996 as the cost for the Y2K problem for the Company's other
clients was either not in their 1996 budget or the problem was not within the
1996 planning horizon for those companies.
The Company began work on nine projects or pilots during the first quarter
of 1997. Based upon those projects and other commitments, the Company expects to
record a loss in the $2-$3 million range for the first quarter, 1997, an
operating profit in second quarter, 1997, a strongly profitable third quarter,
1997 and year-to-date, and an improvement in the fourth quarter profitability as
compared to the third quarter profit. Revenues are expected to grow from
$500,000 in first quarter to in excess of $10 million for fourth quarter. The
Company's forecast is that recorded revenue will exceed
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expenses beginning in April, 1997.
Liquidity and Capital Resources
The Company reflected approximately $2.2 million in accounts payable and
accrued expenses at the end of 1996 and $567,000 in cash and accounts
receivable. Approximately $1.7 million of accounts payable was due to one vendor
for contract labor supplied from the last week of October and for all of
November and December. The vendor does not consider amounts delinquent until
sixty days after billed, and therefore only approximately $25,000 of the
year-end balance was considered to be delinquent. As of the end of the first
quarter, 1997 the total current and delinquent amounts due to that vendor had
been paid.
As noted, the Company had approximately $1.6 million more in accounts
payable and accrued expenses than cash and accounts receivable at December 31,
1996. The Company raised approximately $8.7 million during the first quarter
through the sale of restricted stock and the exercise of warrants. The Company
believes that the cash on hand at the end of 1996 plus the cash collected on
receivables during the first quarter, 1997 and the capital raised during the
first quarter 1997 is sufficient to pay for obligations incurred through March
31, 1997, and to be incurred through May 31, 1997. The Company's projections
reflect a positive cash flow for June, 1997, and each month thereafter. The
Company financed 1996 operations through the sale of restricted stock, proceeds
from exercise of warrants, and loans from its majority stockholder and Chief
Executive Officer.
The forward looking information reflected above is based upon only those
commitments which are known as of March 31, 1997, and do not incorporate the
expected substantial additional revenue to be derived by the Company during the
course of 1997. The Company has a significant amount of excess capacity beyond
the revenue included in the forecast with its existing cost structure.
Therefore, additional revenue can be generated with insignificant increase in
cost, since labor is the primary cost factor involved in the Company's
operations.
ITEM 3 - DESCRIPTION OF PROPERTY.
The Company operates from leased facilities in Charlotte, North Carolina,
with a total of approximately 37,000 square feet. The Company has signed a lease
agreement to occupy an additional 22,000 square feet on May 1, 1997. Research
and development, and processing activities are centralized to allow closer
control over service, response time, and security of the technology. If the
volume of business increases beyond present capacity, the Company has the option
of expanding within its current location or elsewhere in the area. The Company
intends to maintain its central processing activities at the headquarters
location as long as the space needs are met. Research and Development and other
segments of the process may be relocated or contracted out in various locations
of the country.
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ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of February 28, 1997 by (i) each
director and executive officer, (ii) all directors and executive officers as a
group and (iii) each person known by the Company to be the beneficial owner of
more than 5% of the Company's Common Stock. Except as otherwise indicated, all
such persons have both sole voting and investment power over the shares shown as
beneficially owned by them.
TITLE OF CLASS: Common Stock
NAME AND ADDRESS AMOUNT AND NATURE PERCENT OF
OF BENEFICIAL OF BENEFICIAL OWNER CLASS
OWNER
Robert F. Gruder 7,231,400 53.2%
Chairman of the
Board and President
2101 Rexford Road
Ste. 250 West
Charlotte, NC 28211
All officers and 7,676,400(1) 55.0%
directors as a
Group (5)
Rodney Schoemann 1,150,000(2) 9.6%
2401 Jay Street
New Orleans, LA 70122
(1) Included are presently exercisable options to purchase 360,000 shares
of common stock, at prices ranging from $1.18 per share to $10.00 per share.
(2) Included are presently exercisable warrants to purchase 725,000 shares
of common stock, with an exercise price of $1.50 for the first 425,000 shares
and $2.00 for the remaining 300,000 shares.
ITEM 5 - DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth information with respect to each executive
officer and director of the Company.
DIRECTORS AND
EXECUTIVE OFFICERS AGE POSITION
Robert F. Gruder 39 Chief Executive Officer,
President and Chairman of
the Board of Directors
V. Hollis Scott 51 Chief Financial Officer,
Secretary and Director
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Frank G. Milligan 57 Chief Operating Officer
Thomas J. Dudchik 37 Senior Vice President,
Director
J. Alex McMillan 65 Director
Robert F. Gruder serves as President, CEO and Chairman of the Company,
positions held since 1989. Mr. Gruder is a graduate of American University in
Washington, DC with degrees in physics and finance. Mr. Gruder was president of
GEM Technologies, Inc., when the company was liquidated under Chapter 7 of the
federal Bankruptcy Act in April, 1992. The Company had attempted to develop and
market an Ada computer language compiler beginning in late 1989, but was
ultimately unsuccessful in obtaining adequate financing to complete the business
plan.
V. Hollis Scott serves as Chief Financial Officer, Secretary and a
Director. Mr. Scott was previously Senior Vice President, Treasurer of The Cato
Corporation, a publicly held 600-store ladies apparel retailer, $500 million in
sales, based in Charlotte, North Carolina. He was with Cato from November, 1988
through January, 1996, when he joined the Company. Mr. Scott is a graduate of
the University of Virginia and a CPA.
Frank G. Milligan joined the Company as Chief Operating Officer in
December, 1996. Mr. Milligan was previously a senior manager with IBM. He had
various management responsibilities in development, systems integration, and
business area management during his thirty year career with IBM. Mr. Milligan is
a graduate of the University of Tennessee with undergraduate and graduate
degrees in electrical engineering.
Thomas J. Dudchik serves as Senior Vice President, responsible for all
national and international marketing as well as state and federal government
sales activities. Mr. Dudchik previously served as Deputy Chief of Staff for
Connecticut Governor Lowell P. Weicker, Jr., from January, 1993 through January,
1995. As part of his responsibilities, Mr. Dudchik administered the state's $10
billion budget with 26 major state agencies and 50,000 employees. From February,
1991 through December, 1992, Mr. Dudchik served as Deputy Commissioner of the
Connecticut Department of Environmental Protection, where he was responsible for
the Department's $90 million budget and 1,200 employees. From February, 1995
through March, 1996, when he joined the Company, Mr. Dudchik had an advertising
and sales promotion consulting business. Mr. Dudchik has a BA degree in
political science from Trinity College (Hartford, CT).
J. Alex McMillan, Director, is president of The McMillan Group, merchant
bankers and consultants. Mr. McMillan served in the U.S. House of
Representatives representing North Carolina from 1985-94. He served on Energy
and Commerce, Budget, Joint Economic, Banking, and Small Business Committees.
From 1976-83, Mr. McMillan was President and CEO of Harris Teeter Supermarkets,
a multi-billion dollar revenue regional chain owned by Ruddick Corporation. He
served as CFO of Ruddick Corporation from 1969-
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76. Mr. McMillan serves on the Board of Directors of Interstate/Johnson Lane,
Inc., Infosystems of N.C., Inc., The Concord Coalition and the Civil War
Trust. Mr. McMillan holds an MBA from Darden School, University of Virginia
and an undergraduate degree from the University of North Carolina.
Employee directors receive no additional compensation for service as a
director.
Outside directors are given a stock option award upon appointment to the
Board exercisable at the fair market price on the date of grant, beginning one
year from the date of grant up to ten years from the date of grant.
ITEM 6 - EXECUTIVE COMPENSATION.
The following table sets forth the annual long-term compensation for
services in all capacities to the Company for the periods ended
December 31, 1996, 1995 and 1994, of the Company's Chief Executive Officer.
No other executive officer of the Company received in excess of $100,000 during
any of those three years.
ANNUAL COMPENSATION
NAME AND PRINCIPAL FISCAL OTHER ANNUAL
POSITION YEAR SALARY BONUS COMPENSATION
Robert H. Gruder 1996 $60,000 - -
Chief Executive Officer 1995 $60,000 - -
1994 $60,000 - -
On September 13, 1994, the Company instituted its Omnibus Stock Plan(the
"Plan") which was approved and adopted by the Board of Directors and
stockholders of the Company. The Plan provides for the issuance of options
("Options") to certain officers and employees of the Company ("Eligible
Participants"). The Plan is administered solely by the Company's Compensation
Committee ("Administrator"). The Administrator has sole discretion and
authority, consistent with the provisions of the Plan, to select the Eligible
Participants to whom Options will be granted under the Plan, the number of
shares which will be covered by each Option and the form and terms of the
agreements to be used to represent the Options. As of this date, all employees
are eligible to receive options and 14 employees presently have options
outstanding to purchase a total of 390,000 shares which expire at various
periods from December, 2005 to February, 2007, for prices ranging from $1.18 to
$10.00 per share.
REPORT OF BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Company presently has no standing compensation committee; a committee
will be established in 1997 with the external Board members serving on the
committee. Officers' annual compensation, including that of the CEO, has been
set well below market, tying long-term compensation opportunity to increasing
value in the stock options which have been and will be granted, through
long-term performance for shareholders.
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Officers and all employees have the opportunity to earn bonuses based upon
achievement of personal and Company goals.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
For 1996 and as of this filing, there were no Relationships or Related
Transactions. Any future affiliated transactions would be made or entered into
for bona fide business purposes on terms that are no less favorable to the
Company than those that can be obtained from unaffiliated third parties; and all
ongoing and future affiliated transactions and any forgiveness of affiliated
loans must be approved by a majority of the independent, disinterested members
of the Company's Board of Directors.
ITEM 8 - LEGAL PROCEEDINGS.
As of the date of this filing, the following are lawsuits which have been
filed against the Company:
There are two legal proceedings pending, both of which relate to a former
affiliate of the Company, Gem Technologies, Inc., a Connecticut corporation
("GEM"). On June 21, 1996, in the Superior Court of the Judicial District of
Fairfield at Bridgeport, Connecticut 20 purported noteholders or shareholders of
GEM filed a complaint against Robert F. Gruder, Thomas J. Dudchik, GEM, and the
Company alleging that the defendants fraudulently induced the plaintiffs into
entering a note purchase agreement with GEM and fraudulently transferred the
property of GEM to the Company. The plaintiffs have sought actual damages,
punitive damages, attorney fees and injunctive relief relating to the property
allegedly transferred to the Company. In July, 1996, in the Superior Court of
the Judicial District of Meriden, Connecticut, a purported shareholder of GEM
filed a complaint against Robert Gruder, the Company, and GEM. The complaint
alleges a breach of contract and fraudulent misrepresentation in that the
plaintiff purportedly was to receive shares of common stock of the Company in
exchange for his investment in GEM, but has purportedly not received any shares.
The plaintiff has sought monetary damages, punitive damages, interest and
attorneys' fees. The Company believes that the lawsuits are without merit and
intends to vigorously defend the allegations made in these complaints.
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ITEM 9 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS.
The Company's Common Stock is publicly traded over-the-counter as a
"bulletin board" stock under the symbol ALYD. As of the date of this filing
there are nine "market makers" of the Company's Common Stock.
1995 PRICE PER SHARE HIGH (DATE) LOW (DATE)
Quarter 1 1 7/8 (01/13) 7/8 (03/21)
Quarter 2 1 7/8 (06/09) 13/32 (05/09)
Quarter 3 2 1/2 (08/14) 7/8 (07/05)
Quarter 4 2 1/4 (12/29) 1 1/8 (11/16)
1996 PRICE PER SHARE HIGH (DATE) LOW (DATE)
Quarter 1 14 3/8 (03/14) 1 3/16 (01/04)
Quarter 2 32 3/4 (04/18) 10 1/4 (06/19)
Quarter 3 20 3/8 (09/03) 10 1/4 (08/02)
Quarter 4 16 1/2 (10/01) 10 3/8 (12/11)
There were approximately 240 shareholders of record for the Company's
Common Stock. There have been no dividends declared in the last two fiscal
years.
ITEM 10 - RECENT SALES OF UNREGISTERED SECURITIES.
The following table sets forth the sale of the Company's Common Stock,
unregistered and exempted under the Securities Act of 1933.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
DATE # SHARES CONSIDERATION UNDERWRITER'S CLASS OF EXEMPTION
COMMON STOCK DISCOUNT PURCHASER CLAIMED
January 1994 50,000 $20,000 Options SEC.4.(2)
February 1994 100,000 $50,000 Options SEC.4.(2)
June 1994 1,500,000 $300,000 Accredited Investor SEC.4.(2)
*$450,000 SEC.4.(2)
(900,000) *$(450,000) SEC.4.(2)
June 1995 225,000 $100,000 Accredited Investor SEC.4.(2)
August 1995 50,000 $25,000 Accredited Investor SEC.4.(2)
September 1995 200,000 $100,000 Accredited Investor SEC.4.(2)
October 1995 25,000 $25,000 Accredited Investor SEC.4.(2)
November 1995 154,760 $103,180 Accredited Investor SEC.4.(2)
February 1996 88,750 $100,000 Accredited Investor SEC.4.(2)
February 1996 20,000 $40,000 Options SEC.4.(2)
March 1996 67,250 $261,500 Accredited Investor SEC.4.(2)
March 1996 10,000 $11,900 Options SEC.4.(2)
</TABLE>
<TABLE>
<CAPTION>
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<S> <C> <C> <C> <C> <C>
DATE # SHARES CONSIDERATION UNDERWRITER'S CLASS OF EXEMPTION
COMMON STOCK DISCOUNT PURCHASER CLAIMED
March 1996 400,000 $1,200,000 $48,000 Offshore REG.S
Transaction
Non-US Person
July 1996 150,000 $1,050,000 10,000 Offshore REG.S
Warrants @ Transaction
$11.25 per Non-US Person
share (FMV)
exercisable
for 3 years
August 1996 25,000 -0- Offshore REG.S
Penalty for not Transaction
meeting filing Non-US Person
deadline
October 1996 1,000,000 $850,000 Accredited Investor REG.D
+Cancellation 1.5
million warrants &
Demand Registration
Rights
December 1996 370,000 $65,000 Accredited Investor SEC.4.(2)
+ Note for $490,000 (warrant exercises)
December 1996 109,909 Warrants for 20,091 Accredited Investor SEC.4.(2)
shares valued at FMV (warrant exercises)
of $227,500
December 1996 155,000 $1,085,000 $43,400 Offshore REG.S
Transaction
Non-US Person
</TABLE>
*Notes Receivable were issued for this amount and in 1995 the investor forfeited
under the notes and the shares were returned to the Company from escrow.
ITEM 11 - DESCRIPTION OF SECURITIES.
The following statements with respect to the Company's securities are not
complete and are qualified in all respects by the provisions of the Company's
Articles of Incorporation, as amended, and Bylaws. The authorized capital stock
of the Company consists of 20,000,000 shares of Common Stock $.001 par value. As
of March 15, 1997, 13,598,282 shares of Common Stock were outstanding.
Holders of Common Stock are entitled to one vote per share and to receive
dividends when and as declared by the Board of Directors and share ratably in
the assets of the Company legally available for
14
<PAGE>
distribution in the event of the liquidation, dissolution or winding up of
the Company, after the payment of all debts and other liabilities of the
Company and any liquidation preference on any shares of Common Stock. The
stockholders have no conversion, preemptive or other subscription rights.
Shares of authorized and unissued Common Stock are issuable by the Board of
Directors without any further stockholder approval.
ITEM 12 - INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company intends to indemnify its officers, directors, employees and
agents to the full extent permitted by North Carolina law. A majority vote of
the directors, approval of the stockholders or a court approval is required to
effectuate indemnification. The Company anticipates entering into
indemnification agreements (the "Indemnification Agreement") with its directors
and officers providing such indemnity. The Indemnification Agreements will
constitute binding agreements between Company and each of the other parties
thereto, and thus will prevent the Company from modifying its indemnification
policy in a way that is adverse to any person who is a party to an
Indemnification Agreement.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
ITEM 13 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Appendix A
ITEM 14 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
On June 3, 1996, the Company engaged Holtz Rubenstein & Co., LLP to act as
its independent certified public accountant and to audit the Company's financial
statements for 1995. Michael J. Racaneillo, CPA, the Company's independent
certified public accountant who was previously engaged as the principal
accountant to audit the Company's financial statements, resigned on May 31,
1996. There were no disagreements with the Company's former accountant on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure.
No financial statement for either of the past two years contained a
qualified or modified opinion. The decisions to change accountants were
recommended by the Board of Directors. There have been no disagreements during
the two most recent calendar years with the former accountants. The former
accountants have made no statements indicating that they could not rely on
internal controls or management's representations. Also, no information has come
to their attention that materially limits the fairness or reliability of
previously issued audit reports or underlying financial statements.
15
<PAGE>
ITEM 15 - FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
SEE INDEX OF APPENDIX A
(b) Exhibit Index
Exhibit Description
3.1(A) ARTICLES OF INCORPORATION OF DAAR, INC.
3.1(B) ARTICLES OF MERGER OF ALYDAAR
SOFTWARE CORPORATION INTO DAAR, INC.
3.1(C) PLAN OF MERGER
3.1 AMENDED AND RESTATED BYLAWS OF ALYDAAR
SOFTWARE CORPORATION
10.1 OMNIBUS STOCK OPTION PLAN
SIGNATURES
Pursuant to the requirements of Sections 12 of the securities Exchange Act
of 1934, the Registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated: March 31, 1997
ALYDAAR SOFTWARE CORPORATION
By: V. HOLLIS SCOTT
Name: V. Hollis Scott
Title: Chief Financial Officer
16
<PAGE>
APPENDIX A
ALYDAAR SOFTWARE CORPORATION
FINANCIAL STATEMENTS
Pages
Indeependent Auditors 1
Balance Sheets as of December 31, 1996 2
and 1995
Statement of Operations for Years Ended 3
December 31, 1996, 1995 and 1994
Statement of Stockholders' (Deficiency) Equity 4
for Years Ended December 31, 1996, 1995 and 1994
Statements of Cash Flows for Years Ended 5
December 31, 1996 and December 31, 1995
Notes to Financial Statements 6-9
17
<PAGE>
EXHIBIT INDEX
Exhibit Description Sequential Page
3.1(a) Articles of Incorporation of
Daar, Inc.
3.1(b) Articles of Merger of Alydaar
Software Corporation into
Daar, Inc.
3.1(c) Plan of Merger
3.2 Amended and Restated Bylaws of
Alydaar Software Corporation
<PAGE>
ARTICLES OF INCORPORATION EXHIBIT 3.1(A)
OF
DAAR, INC.
The undersigned adopts these Articles of Incorporation for the purpose of
forming a business corporation under and by virtue of the laws of the State of
North Carolina.
1. The name of the corporation shall be Daar, Inc.
2. The corporation shall have authority to issue Twenty Million
(20,000,000) shares of Common Stock, each share having a par value of $.001.
3. The street and mailing address and county of the initial registered
office of the corporation in North Carolina are 100 North Tryon Street, Floor
47, Charlotte, Mecklenburg County, North Carolina 28202-4003; and the name of
the initial registered agent at such address is Dumont Clarke, IV.
4. The name and address of the incorporator are:
Name Address
R. Michael Childs 100 North Tryon Street
Floor 47
Charlotte, N.C. 28202-4003
5. A director of the corporation shall not be personally liable for
monetary damages for breach of any duty as a director except and only to the
extent applicable law restricts the effectiveness of this provision. Any repeal
or modification of this article shall be prospective only and shall not diminish
the rights or expand the personal liability of a director of the corporation
with respect to any act or omission occurring prior to the time of such repeal
or modification.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation this the 13th day of January, 1993.
/s/ R. Michael Childs
R. Michael Childs
Incorporator
<PAGE>
ARTICLES OF MERGER
EXHIBIT 3.1(B)
OF
ALYDAAR SOFTWARE CORPORATION,
A UTAH CORPORATION
INTO
DAAR, INC.,
A NORTH CAROLINA CORPORATION
DAAR, INC., a corporation organized under the laws of North Carolina (the
"Surviving Corporation"), hereby submits these Articles of Merger for the
purpose of merging ALYDAAR SOFTWARE CORPORATION, a corporation organized under
the laws of Utah (the "Merging Corporation"), into the Surviving Corporation.
1. With respect to each corporation which is a party to the merger:
(a) The Plan of Merger attached hereto and made a part hereof as Exhibit
A was duly approved by the shareholders of the Surviving Corporation on January
18, 1994, as required by the North Carolina Business Corporation Act.
(b) The Plan of Merger attached hereto and made a part hereof as Exhibit
A was duly approved by the shareholders of the Merging Corporation on February
24, 1994, as required by the Utah Business Corporation Act.
2. This merger shall become effective upon filing of these Articles of
Merger with the North Carolina Secretary of State.
Dated: April 7, 1993.
DAAR, INC., a North Carolina
corporation
By:/s/ Robert F. Gruder
Robert F. Gruder, President
<PAGE>
EXHIBIT 3.1(C)
EXHIBIT A
PLAN OF MERGER
A. CORPORATIONS PARTICIPATING IN THE MERGER.
Alydaar Software Corporation, a Utah corporation (the "Merging
Corporation") agrees to merge into Daar, Inc., a North Carolina corporation (the
"Surviving Corporation").
B. NAME OF SURVIVING CORPORATION.
After the merger, the Surviving Corporation will have the name "Alydaar
Software Corporation".
The Surviving Corporation shall continue to be governed by the laws of the
State of North Carolina, the Articles of Incorporation of the Surviving
Corporation shall continue to be the Articles of Incorporation of the Surviving
Corporation, and the registered and principal office of the Surviving
Corporation will be:
6525 Morrison Boulevard, Suite 205
Charlotte, N.C. 28211
County of Mecklenburg
C. MERGER.
Pursuant to the terms and conditions of this Plan of Merger, the Merging
Corporation will merge, effective upon filing Articles of Merger with the
Secretary of State of North Carolina, into the Surviving Corporation. Upon the
merger becoming effective (the "Effective Date"), the corporate existence of the
Surviving Corporation will continue and the corporate existence of the Merging
Corporation shall cease. The title to all real estate and other property owned
by the Merging Corporation will be vested in the Surviving Corporation without
reversion or impairment. The Surviving Corporation will have all liabilities of
the Merging Corporation.
D. CONVERSION AND EXCHANGE OF SHARES.
Upon the Effective Date, all of the outstanding shares of the Merging
Corporation shall be cancelled. Each holder of a certificate or certificates
representing shares of the Merging Corporation shall surrender the same for
cancellation to the transfer agent of the Merging Corporation and Surviving
Corporation, First Union National Bank of North Carolina. After the Effective
Date, each certificate representing shares of the Merging Corporation shall be
deemed to represent, and shall be exchanged for, an equal number of shares of
the Surviving Corporation. Upon the effective date of the merger, the
outstanding shares of the Surviving Corporation shall be cancelled.
<PAGE>
E. DISSENTERS' RIGHTS.
The Surviving Corporation agrees to pay to any dissenting shareholders of
the Merging Corporation who may be entitled to vote and who properly dissents
from the merger, under the laws of Utah, the fair value of his or her shares.
G. ABANDONMENT.
At any time prior to the merger becoming effective, the board of directors
of the Surviving Corporation may, in its discretion, abandon the merger.
<PAGE>
ARTICLE OF MERGER
OF
ALYDAAR SOFTWARE CORPORATION,
a Utah Corporation
INTO
DAAR, INC.
a North Carolina Corporation
Pursuant to Section 16-10a-1105 of the Utah Code Annotated, as amended, the
undersigned, as the Surviving Corporation in a merger, hereby submits the
following information:
1. The name of the Surviving Corporation, which pursuant to the attached
Plan of Merger will be changed to Alydaar Software Corporation, is Daar, Inc.
2. Attached hereto and made a part hereof as Exhibit A is a copy of the
Plan of Merger.
3. With respect to each corporation which is a party to the merger:
(a) The name of the Merging Corporation is Alydaar Software Corporation.
The Plan of Merger was duly approved by the shareholders of the Merging
Corporation as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Number of Number of Votes Number
Voting Outstanding Votes Entitled Represented at of Undisputed
Group Shares to be Cast the Meeting Shares Voted
For Against
Common 8,825,000 8,82500 7,713,930 7,710,630 3,300
</TABLE>
(b) The name of the Surviving Corporation, which pursuant to the attached
Plan of Merger will be changed to Alydaar Software Corporation, is Daar, Inc.
The Plan of Merger was duly approved by the shareholders of the Surviving
Corporation as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Number of Number of Number of Votes Number
Voting Outstanding Votes Entitled Represented at of Undisputed
Group Shares to be Cast the Meeting Shares Voted
For Against
Common 1 1 1 1 -0-
</TABLE>
<PAGE>
Date: April 7, 1994 DAAR, INC., a North Carolina Corporation
By:/s/ Robert F. Gruder
Robert F. Gruder, President
<PAGE>
EXHIBIT A
PLAN OF MERGER
A. CORPORATIONS PARTICIPATING IN THE MERGER.
Alydaar Software Corporation, a Utah corporation (the "Merging
Corporation") agrees to merge into Daar, Inc., a North Carolina corporation (the
"Surviving Corporation").
B. NAME OF SURVIVING CORPORATION.
After the merger, the Surviving Corporation will have the name "Alydaar
Software Corporation".
The Surviving Corporation shall continue to be governed by the laws of the
State of North Carolina, the Articles of Incorporation of the Surviving
Corporation shall continue to be the Articles of Incorporation of the Surviving
Corporation, and the registered and principal office of the Surviving
Corporation will be:
6525 Morrison Boulevard, Suite 205
Charlotte, N.C. 28211
County of Mecklenburg
C. MERGER.
Pursuant to the terms and conditions of this Plan of Merger, the Merging
Corporation will merge, effective upon filing Articles of Merger with the
Secretary of State of North Carolina, into the Surviving Corporation. Upon the
merger becoming effective (the "Effective Date"), the corporate existence of the
Surviving Corporation will continue and the corporate existence of the Merging
Corporation shall cease. The title to all real estate and other property owned
by the Merging Corporation will be vested in the Surviving Corporation without
reversion or impairment. The Surviving Corporation will have all liabilities of
the Merging Corporation.
D. CONVERSION AND EXCHANGE OF SHARES.
Upon the Effective Date, all of the outstanding shares of the Merging
Corporation shall be cancelled. Each holder of a certificate or certificates
representing shares of the Merging Corporation shall surrender the same for
cancellation to the transfer agent of the Merging Corporation and Surviving
Corporation, First Union National Bank of North Carolina. After the Effective
Date, each certificate representing shares of the Merging Corporation shall be
deemed to represent, and shall be exchanged for, an equal number of shares of
the Surviving Corporation. Upon the effective date of the merger, the
outstanding shares of the Surviving Corporation shall be cancelled.
<PAGE>
E. DISSENTERS' RIGHTS.
The Surviving Corporation agrees to pay to any dissenting shareholders of
the Merging Corporation who may be entitled to vote and who properly dissents
from the merger, under the laws of Utah, the fair value of his or her shares.
G. ABANDONMENT.
At any time prior to the merger becoming effective, the board of directors
of the Surviving Corporation may, in its discretion, abandon the merger.
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
ALYDAAR SOFTWARE CORPORATION
Effective as of May 12, 1994
<PAGE>
INDEX OF AMENDED AND RESTATED BYLAWS
OF
ALYDAAR SOFTWARE CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office
Section 2. Registered Office
Section 3. Other Offices
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting
Section 2. Substitute Annual Meeting
Section 3. Special Meetings
Section 4. Place of Meeting
Section 5. Notice of Meeting
Section 6. Waiver of Notice
Section 7. Closing of Transfer Books or Fixing of
Record Date
Section 8. Voting Lists
Section 9. Voting Groups
Section 10. Quorum
Section 11. Proxies
Section 12. Voting of Shares
Section 13. Votes Required
Section 14. Action of Shareholders Without Meeting
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers
Section 2. Number, Tenure and Qualifications
Section 3. Vacancies
Section 4. Removal
Section 5. Compensation
Section 6. Chairman of the Board
ARTICLE IV
MEETING OF DIRECTORS
Section 1. Regular Meetings
Section 2. Special Meetings
<PAGE>
Section 3. Notice
Section 4. Waiver of Notice
Section 5. Quorum
Section 6. Manner of Acting
Section 7. Presumption of Assent
Section 8. Action by Directors Without Meeting
Section 9. Meetings by Conference Telephone
ARTICLE V
COMMITTEES OF THE BOARD
Section 1. Executive Committee
Section 2. Other Committees
Section 3. Vacancy
Section 4. Removal
Section 5. Minutes
Section 6. Responsibility of Directors
ARTICLE VI
OFFICERS
Section 1. Officers of the Corporation
Section 2. Appointment and Term
Section 3. Compensation of Officers
Section 4. Removal of Officers
Section 5. Bonds
Section 6. President
Section 7. Vice Presidents
Section 8. Secretary
Section 9. Assistant Secretaries
Section 10. Treasurer
Section 11. Assistant Treasurers
ARTICLE VII
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts
Section 2. Loans
Section 3. Checks and Drafts
Section 4. Deposits
ARTICLE VIII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares
Section 2. Transfer of Shares
<PAGE>
Section 3. Lost Certificates
Section 4. Holder of Record
ARTICLE IX
GENERAL PROVISIONS
Section 1. Distributions
Section 2. Seal
Section 3. Fiscal Year
Section 4. Pronouns
Section 5. Amendments
ARTICLE X
INDEMNIFICATION
Section 1. Coverage
Section 2. Payment
Section 3. Evaluation
Section 4. Consideration
Section 5. Definitions
<PAGE>
AMENDED AND RESTATED EXHIBIT 3.2
BYLAWS
OF
ALYDAAR SOFTWARE CORPORATION
ARTICLE I
OFFICES
Section 1. Principal Office. The principal office of the corporation shall
be located in Madisonville, Louisiana or at such other place as the Board of
Directors shall determine.
Section 2. Registered Office. The registered office of the corporation
required by law to be maintained in the State of North Carolina may be, but need
not be, identical to the principal office. The address of the registeree office
may be changed from time to time by the Board of Directors or any authorized
officer of the corporation.
Section 3. Other Offices. The corporation may, from time to time, have
offices at such places, either within or without the State of North Carolina, as
the Board of Directors may designate or as the business of the corporation may
require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders shall be
held on the second Tuesday in the month of January in each year, beginning with
the year 1995, at the hour of ten o'clock a.m. or such other time on such day
designated in the notice of meeting, for the purpose of electing directors and
for the transaction of such other business as may come before the meeting. If
the day fixed for the annual meeting shall be a legal holiday in the State of
North Carolina, such meeting shall be held on the next succeeding business day.
Section 2. Substitute Annual Meeting. If the annual meeting shall not be
held on the day designated by these Bylaws for the annual meeting of
shareholders, or at any adjournment thereof, then a substitute annual meeting
may be called in accordance with Section 3 of this Article and the meeting so
called may be designated and treated for all purposes as the annual meeting.
1
<PAGE>
Section 3. Special Meetings. Special meetings of the shareholders may be
called by the President or by the Board of Directors.
Section 4. Place of Meeting. The Board of Directors may designate any
place, either within or without the State of North Carolina, as the place of
meeting for any annual meeting or for any special meeting called by the Board of
Directors. A waiver of notice signed by all shareholders entitled to vote at a
meeting may designate any place, either within or without the State of North
Carolina, as the place for the holder of such meeting. If no designation is
made, or if a special meeting be otherwise called, the place of meeting shall be
the principal office of the corporation.
Section 5. Notice of Meeting. Written or printed notice stating the time
and place of the meeting and, in case of a special meeting, the purpose or
purposes for which the meeting is sixty (60), or in case of a special meeting
called at the request of the shareholders, not more than thirty (30), days
before the date of the meeting, either personally or by mail, by or at the
direction of the President, the Secretary, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
record of shareholders of the corporation, with postage thereon prepaid. In
addition to the foregoing, notice of a substitute annual meeting shall state
that the annual meeting was not held on the day designated by these Bylaws and
that such substitute annual meeting is being held in lieu of and is designated
as such annual meeting.
IF a meeting of shareholders is adjourned to a different date, time or
place, notice need not be given of the new date, time or place if the new date,
time or place is announced at the meeting before adjournment. If a new record
date for the adjourned meeting is fixed, however, notice of the adjourned
meeting must be given to persons who are shareholders as of the new record date.
Section 6. Waiver of Notice.
(a) A shareholder may waive any notice required by law, the Articles of
Incorporation, or these Bylaws before or after the date and time stated in
the notice. The waiver must be in writing, be signed by the shareholder
entitled to the notice, and be delivered to the corporation for inclusion
in the minutes or filing with the corporate records.
(b) A shareholder's attendance at a meeting:
2
<PAGE>
(1) waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects
to holding the meeting or transacting business at the meeting; and
(2) waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder objects to considering the
matter before it is voted upon.
Section 7. Closing of Transfer Books and Fixing of Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or shareholders entitled to
receive payment of any dividend, or in order to make a determination of
shareholders for any other proper purpose, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not to
exceed, in any case, seventy (70) days. If the stock transfer books shall be
closed for the purpose of determining shareholders entitled to notice of or to
vote at a meeting of shareholders, such books shall be closed for at least ten
(10) days immediately preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may fix
in advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than seventy days and, in the case of a
meeting of shareholders, not less than ten (10) full days prior to the date on
which the particular action, requiring such determination of shareholders, is to
be taken.
If the stock transfer books are not closed and no record date is fixed for
the determination of shareholders entitled to notice of or to vote at a meeting
of shareholders, or shareholders entitled to receive payment of a dividend, the
date on which notice of the meeting is mailed or the date on which the
resolution of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section, such determination shall
apply to any adjournment thereof except where the determination has been made
through the closing of the stock transfer books and the stated period of closing
has expired, and except where the Board of Directors fixes a new record date,
which it must do if the meeting is adjourned to a date more than 120 days after
the date fixed for the original meeting.
3
<PAGE>
Section 8. Voting Groups. After fixing a record date for a meeting, the
President or the Secretary of the corporation shall cause the transfer agent to
prepare an alphabetical list of the names of all its shareholders who are
entitled to notice of a shareholders' meeting. The list shall be arranged by
voting group (and within each voting group by class or series of shares) and
show the address of and number of shares held by each shareholder. The
shareholders' list shall be available for inspection by any shareholder,
beginning two (2) business days after notice of the meeting is given for which
the list was prepared and continuing through the meeting, at the corporation's
principal office or at a place identified in the meeting notice in the city
where the meeting will be held. A shareholder, or his agent or attorney, is
entitled on written demand to inspect and, subject to the requirements of
N.C.Gen. Stat. ss.55-16-02(c), as may be hereafter amended, to copy the list,
during regular business hours and at his expense, during the period it is
available for inspection., The Secretary of the corporation shall cause the
transfer agent to make the shareholders' list available at the meeting, and any
shareholder or his agent or attorney is entitled to inspect the list at any time
during the meeting or any adjournment.
Section 9. Voting Groups. All shares of one or more classes or series that
under the Articles of Incorporation or the North Carolina Business Corporation
Act are entitled to vote and be counted together collectively on a matter at a
meeting of shareholders constitute a voting group. All shares entitled by the
Articles of Incorporation or the North Carolina Business Corporation Act to vote
generally on a matter are for that purpose a single voting group. Classes or
series of shares shall not be entitled to vote separately by voting group unless
expressly authorized by the Articles of Incorporation or specifically required
by law.
Section 10. Quorum. Shares entitled to vote as a separate voting group may
take action on a matter at the meeting only if a quorum of those shares exists.
A majority of the votes entitled to be cast on the matter by the voting group
constitutes a quorum of that voting group for action on that matter.
The shareholders at a meeting at which a quorum is present may continue to
do business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
In the absence of a quorum at the opening of any meeting of shareholders,
such meeting may be adjourned from time to time by a vote of the majority of the
shares voting on the motion to adjourn; and at any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the original meeting.
4
<PAGE>
Section 11. Proxies. Shares may be voted either in person or by one or more
agents authorized by a written proxy executed by the shareholder or by his duly
authorized attorney in fact.
An appointment of a proxy is effective when received by the Secretary or
other officer or agent authorized to tabulate votes. An appointment is valid for
eleven (11) months unless a different period is expressly provided in the
appointment form.
Section 12. Voting of Shares. Each outstanding share entitled to vote shall
be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders.
Except as otherwise provided by law, the Articles of Incorporation or these
Bylaws, if a quorum exists, action on a matter by a voting group is approved if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action.
Shares of its own stock owned by the corporation directly, or indirectly
through a corporation in which it owns, directly or indirectly, a majority of
the shares entitled to vote for directors, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares at a
given time entitled to vote; provided that this provision does not limit the
power of the corporation to vote its own shares held by it in a fiduciary
capacity.
Section 13. Votes Required. The vote of a majority of the shares voted at a
meeting of shareholders, duly held at which a quorum is present, shall be
sufficient to take or authorize action upon any matter which may properly come
before the meeting except as otherwise provided by law, by the Articles of
Incorporation or by these Bylaws. Any provision in these Bylaws prescribing the
vote required for any purpose as permitted by law may not itself be amended by a
vote less than the vote prescribed therein.
Section 14. Action of Shareholders Without Meeting. Any action which may be
taken at a meeting of the shareholders may be taken without a meeting if the
action is taken by all the shareholders entitled to vote on the action. The
action must be evidenced by one or more written consents signed by all the
shareholders before or after such action, describing the action taken and
delivered to the corporation for inclusion in the minutes or filing with the
corporate records. A consent signed under this Section has the effect of a
meeting vote and may be described as such in any document.
5
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section 1. General Powers. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation managed
under the direction of the Board of Directors.
Section 2. Number, Tenure and Qualifications. The number of directors
constituting the Board of Directors shall be not less than three (3) nor more
than nine (9). The number of directors may be prescribed from time to time,
without the minimum and maximum, by the Board of Directors. The initial number
of directors shall be three.
The directors shall be elected at the annual meeting of the shareholders
(except as herein otherwise provided for the filling of vacancies) and each
director shall hold office until his death, resignation, retirement, removal,
disqualification, or his successor is elected and qualified. Those persons who
receive the highest number of votes at a meeting at which a quorum is present
shall be deemed to have been elected.
Directors need not be residents of the State of North Carolina or
shareholders of the corporation.
Section 3. Vacancies. Except as otherwise provided by law or the Articles
of Incorporation, any vacancy occurring in the Board of Directors, including a
vacancy created by an increase in the number of directors within the minimum and
maximum specified in Section 2, may be filled by the affirmative vote of a
majority of the remaining directors even through less than a quorum or by the
sole remaining director.
The term of a director elected to fill a vacancy expires at the next
shareholders' meeting at which directors are elected.
At a special meeting of shareholders the shareholders may elect a director
to fill any vacancy not filled by the directors.
Section 4. Removal. Any director may be removed at any time with or without
cause by a vote of the shareholders holding a majority of the outstanding shares
entitled to vote at an election of directors. If cumulative voting is
authorized, a director may not be removed if the number of votes sufficient to
elect him under cumulative voting is voted against his removal.
A director may not be removed by the shareholders at a meeting unless the
notice of the meeting states that the purpose, or one of the purposes, of the
meeting is removal of the director.
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Section 5. Compensation. The Board of Directors may compensate directors
for their services as such and any provide for the payment of all expenses
incurred by directors in attending meetings of the Board.
Section 6. Chairman of the Board. There may be a Chairman of the Board of
Directors elected by the directors from their number at the annual meeting of
the Board of Directors. The Chairman shall preside at all meetings of the Board
of Directors and perform such other duties as may be directed by the Board.
ARTICLE IV
MEETINGS OF DIRECTORS
Section 1. Regular Meetings. A regular meeting of the Board of Directors
shall be held without other notice than this Bylaw immediately after, and at the
same place as, the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place, either within or without the State
of North Carolina for the holding of additional regular meetings without other
notice than such resolution.
Section 2. Special Meetings. Special meetings of the Board of Directors may
be called by the President or any two directors. The person or persons
authorized to call special meetings of the Board of Directors may fix any place,
either within or without the State of North Carolina, as the place for holding
any special meeting of the Board of Directors called by them.
Section 3. Notice. The person calling the meeting shall give or cause to be
given oral or written notice of special meetings of the Board of Directors to
each director not less than three (3) days before the date of the meeting.
Neither the business transacted at, nor the purposes of, any regular or
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
Section 4. Waiver of Notice.
(a) A director may waive any notice required by law, the Articles of
Incorporation, or these Bylaws before or after the date and time stated in
the notice. Except as provided by subsection (b), the waiver must be in
writing, signed by the director entitled to the notice, and delivered to
the corporation for filing with the minutes or corporate records.
(b) A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning
of the meeting (or promptly upon his arrival) objects to holding the
meeting or transacting
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business at the meeting and does not thereafter vote for or assent to
action taken at the meeting.
Section 5. Quorum. Except as otherwise provided by law, the Articles of
Incorporation or these Bylaws, a quorum of the Board of Directors consists of
(a) a majority of the fixed number of directors if the corporation has a fixed
board size, or (b) a majority of the number of directors prescribed , or if no
number is prescribed, the number in office immediately before the meeting
begins, if the corporation has a variable-range size board.
Section 6. Manner of Acting. If a quorum is present when a vote is taken,
the affirmative act of the majority of the directors present is the act of the
Board of Directors, except as otherwise provided in these Bylaws.
Section 7. Presumption of Assent. A director who is present at a meeting of
the Board of Directors or a committee of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken unless:
(a) He objects at the beginning of the meeting (or promptly upon his
arrival) to holding it or transacting business at the meeting;
(b) His dissent or abstention from the action taken is entered in the
minutes of the meeting; or
(c) He files written notice of his dissent or abstention with the
presiding officer of the meeting before its adjournment or with the
corporation immediately after adjournment of the meeting. The right of
dissent or abstention is not available to a director who votes in favor of
the action taken.
Section 8. Action by Directors Without Meeting. Action required or
permitted by law to e taken at a Board of Directors' meeting may be taken
without a meeting if the action is taken by all members of the Board. The action
must be evidenced by one or more written consents signed by each director before
or after such action, describing the action taken, and included in the minutes
or filed with the corporate records. Action taken under this Section is
effective when the last director signs the consent unless the consent specifies
a different effective date. A consent signed under this Section has the effect
of a meeting vote and may be described as such in any document.
Section 9. Meetings by Conference Telephone. Any one or more directors may
participate in a meeting of the Board or a committee by means of a conference
telephone or similar communications device by which all directors participating
may simultaneously hear each
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other during the meeting, and such participation in a meeting shall be deemed
presence in person at such meeting.
ARTICLE V
COMMITTEES OF THE BOARD
Section 1. Executive Committee. The Board of Directors, by resolution
adopted by a majority of the number of directors fixed by these Bylaws, may
designate two or more directors to constitute an Executive Committee, which
committee, to the extent provided in such resolution, shall have and may
exercise all of the authority of the Board of Directors to the extent permitted
by applicable law.
Section 2. Other Committees. The Board of Directors may create one or more
other committees and appoint members of the Board of Directors to serve on them.
Each committee must have two or more members, who serve at the pleasure of the
Board of Directors. The creation of a committee and appointment of members to it
must be approved by the greater of:
(a) A majority of all the directors in office when the action is taken;
or
(b) The number of directors constituting a quorum under the Articles of
Incorporation or these Bylaws.
Section 3. Vacancy. Any vacancy occurring in any committee shall be filed
by a majority of the number of directors fixed by these Bylaws at a regular or
special meeting of the Board of Directors.
Section 4. Removal. Any member of a committee may be removed at any time
with or without cause by a majority of the number of directors fixed by these
Bylaws.
Section 5. Minutes. Each committee shall keep regular minutes of its
proceedings and report the same to the Board when required.
Section 6. Responsibility of Directors. The designation of a committee and
the delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility or liability imposed
upon it or him by law.
Any resolutions adopted or other action taken by a committee within the
scope of the authority delegated to it by the Board of Directors shall be deemed
for all purposes to be adopted or taken by the Board of Directors.
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If action taken by a committee is not thereafter formally considered by
the Board, a director may dissent from such action by filing his written
objection with the Secretary with reasonable promptness after learning of such
action.
ARTICLE VI
OFFICERS
Section 1. Officers of the Corporation. The officers of the corporation
shall consist of a President, a Secretary, a Treasurer and such Vice Presidents,
Assistant Secretaries, Assistant Treasurers and other officers as the Board of
Directors may from time to time appoint. The same individual may simultaneously
hold more than one office in the corporation, but no individual may act in more
than one capacity where action of two or more officers is required.
Section 2. Appointment and Term. The officers of the corporation shall be
appointed by the Board of Directors and each officer shall hold office until his
death, resignation, retirement, removal, disqualification or his successor shall
have been appointed.
Section 3. Compensation of Officers. The compensation of all officers of
the corporation shall be fixed by the Board of Directors and no officer shall
serve the corporation in any other capacity and receive compensation therefor
unless such additional compensation be authorized by the Board of Directors. The
appointment of an officer does not itself create contract rights.
Section 4. Removal of Officers. The Board of Directors may remove any
officer at any time with or without cause, but such removal shall not itself
affect the officer's contract rights, if any, with the corporation.
Section 5. Bonds. The Board of Directors may by resolution require any
officer, agent, or employee of the corporation to give bond to the corporation,
with sufficient sureties, conditioned upon the faithful performance of the
duties of his respective office or position, and to comply with such other
conditions as may from time to time be required by the Board of Directors.
Section 6. President. The President shall be the principal executive
officer of the corporation and, subject to the control of the Board of
Directors, shall in general supervise and control all of the business and
affairs of the corporation. He shall, when present, preside at all meetings of
the shareholders.
He shall sign any deeds, mortgages, bonds, contracts or other instruments
which the Board of Directors has authorized to be executed, except in cases
where the signing and execution thereof
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shall be expressly delegated by the Board of Directors or by these Bylaws to
some other officer or agent of the corporation, or shall be required by law to
be otherwise signed or executed; and in general shall perform all duties
incident to the office of President and such other duties as may be prescribed
by the Board of Directors from time to time.
The President shall be the custodian of the corporate records and of the
seal of the corporation and see that the seal of the corporation is affixed to
all documents. The execution of which on behalf of the corporation under its
seal is duly authorized.
Section 7. Vice Presidents. The corporation shall have such Vice Presidents
as the President may appoint. Each Vice President shall perform such other
duties as from time to time shall be assigned to him by the President or Board
of Directors.
Section 8. Secretary. The Secretary shall: (a) attend all meetings of the
shareholders and of the Board of Directors, keep the minutes of such meetings in
one or more books provided for that purpose, and perform like duties for the
standing committees when required; (b) see that all notices are duly given in
accordance with the provisions of these Bylaws or as required by law; (c) have
general charge of the stock transfer books of the corporation, which shall be
maintained by a corporation qualified to act as transfer agent; and (d) in
general perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned to him by the Board of Directors or
by the President, under whose supervision he shall be.
Section 9. Assistant Secretaries. In the absence of the Secretary or in the
event of his death, inability or refusal to act, any Assistant Secretary, unless
otherwise determined by the Board of Directors, shall perform the duties of the
Secretary, and when so acting shall have all the powers of and be subject to all
the restrictions upon the Secretary. They shall perform such other duties as may
be assigned to them by the Secretary, by the President or by the Board of
Directors.
Section 10. Treasurer. The Treasurer shall: (a) have charge and custody of
and be responsible for all funds and securities of the corporation; receive and
give receipts for money due and payable to the corporation from any source
whatsoever, and deposit all such moneys in the name of the corporation in such
depositories as shall be selected in accordance with the provisions of Article
VII, Section 4 of these Bylaws; and (b) in general perform all of the duties
incident to the office of Treasurer, including preparing, or causing to be
prepared, all financial statements required by law, and such other duties as
from time to time may be assigned to him by the President or by the Board of
Directors.
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Section 11. Assistant Treasurers. In the absence of the Treasurers or in
the event of his death, inability or refusal to act, any Assistant Treasurers in
the order of their length of service as Assistant Treasurer, unless otherwise
determined by the Board of Directors, shall perform the duties of the Treasurer,
and when so acting shall have all the powers of and be subject to all the
restrictions upon the Treasurer. They shall perform such other duties as may be
assigned to them by the Treasurer, by the President or by the Board of
Directors.
ARTICLE VII
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name of and on behalf of the corporation, and such authority
may be general or confined to specific instances.
Section 2. Loans. No loans shall be contracted on behalf of the corporation
and no evidences of indebtedness shall be issued in its name unless authorized
by a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
Section 3. Checks and Drafts. All checks, drafts or other orders for the
payment of money, issued in the name of the corporation, shall be signed by such
officer or officers, agent or agents of the corporation and in such manner as
shall from time to time be determined by resolution of the Board of Directors.
Section 4. Deposits. All funds of the corporation not otherwise employed
shall be deposited from time to time to the credit of the corporation in such
depositories as the Board of Directors may select.
ARTICLE VIII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
Section 1. Certificates for Shares. The Board of Directors may authorize
the issuance of some or all of the shares of the corporation's classes or series
without issuing certificates to represent such shares. If shares are represented
by certificates, the certificates shall be in such form as shall be determined
by the Board of Directors. Certificates shall be signed by the President or a
Vice President and by the Secretary or an Assistant Secretary. All certificates
for shares shall be consecutively numbered or otherwise identified. The name and
address of the person to whom the shares represented thereby are issued, with
the number and class of shares and the date of issue, shall be entered
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on the stock transfer books of the corporation. When shares are represented by
certificates, the corporation shall issue and deliver, to each shareholder to
whom such shares have been issued or transferred, certificates representing the
shares owned by him. When shares are not represented by certificates, then
within a reasonable time after the issuance or transfer of such shares, the
corporation shall send the shareholder to whom such shares have been issued or
transferred a written statement of the information required by law to be on
certificates.
Section 2. Transfer of Shares. Transfer of shares of the corporation shall
be made only on the stock transfer books of the corporation by the holder of
record thereof or by his legal representative, who shall furnish proper evidence
of authority to transfer, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary, and, when shares are
represented by certificates, on surrender for cancellation of the certificate
for such shares.
Section 3. Lost Certificates. The Board of Directors or the President may
direct a new certificate to be issued in place of any certificate thereto fore
issued by the corporation claimed to have been lost or destroyed, upon receipt
of an affidavit of such fact from the shareholder. When authorizing such
issuance of a new certificate, the Board of Directors or the President may
require that the shareholder give the corporation a bond in such sum as the
Board or the President may direct as indemnity against any claim that may be
made against the corporation with respect to the certificate claimed to have
been lost or destroyed or may require the shareholder to agree to indemnify the
corporation against any claims that may be made against the corporation with
respect to the certificate claimed to have been lost or destroyed.
Section 4. Holder of Record. The corporation may treat as an absolute owner
of shares the person in whose name the shares stand of record on its books just
as if that person had full competency, capacity and authority to exercise all
rights of ownership irrespective of any knowledge or notice to the contrary or
any description indicating a representative, pledge or other fiduciary relation
or any reference to any other instrument or to the rights of any other person
appearing upon its records or upon the share certificate except that any person
furnishing to the corporation proof of his appointment as a fiduciary shall be
treated as if he were a holder of record of its shares.
ARTICLE IX
GENERAL PROVISIONS
Section 1. Distributions. The Board of Directors may from time to time
authorize, and the corporation may grant,
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distributions and share dividends pursuant to law and subject to the provisions
of its Articles of Incorporation.
Section 2. Seal. The corporate seal of the corporation shall consist of two
concentric circles between which is the name of the corporation and in the
center of which is inscribed SEAL; and such seal, as impressed on the margin
hereof, is hereby adopted as the corporate seal of the corporation.
Section 3. Fiscal Year. The fiscal year of the corporation shall be fixed
by the Board of Directors.
Section 4. Pronouns. Each reference to pronouns herein shall be construed
in the masculine, feminine, neuter, singular or plural, as the context may
require.
Section 5. Amendments. The Board of Directors may amend or repeal the
Bylaws, except to the extent otherwise provided by law, the Articles of
Incorporation or a Bylaw adopted by the shareholders, and except that a Bylaw
adopted, amended or repealed by the shareholders may not be readopted, amended
or repealed by the Board of Directors unless the Articles of Incorporation or a
Bylaw adopted by the shareholders authorizes the Board of Directors to adopt,
amend or repeal that particular Bylaw or the Bylaws generally.
ARTICLE X
INDEMNIFICATION
Section 1. Coverage. Any person who at any time serves or has served as a
director, officer, agent or employee of the corporation, or in such capacity at
the request of the corporation for any other enterprise, or as a trustee or
administrator under an employee benefit plan, shall have a right to be
indemnified by the corporation to the fullest extent permitted by law against
(a) reasonable expenses, including reasonable attorneys' fees, actually incurred
by him in connection with any threatened, pending or completed action, suit or
proceeding (and any appeal thereof), whether civil, criminal, administrative,
investigative or arbitrative, and whether or not brought by or on behalf of the
corporation, seeking to hold him liable by reason of the fact that he is or was
acting in such capacity, and (b) reasonable payments made by him in satisfaction
of any judgment, money decree, fine (including, without limitation, an excise
tax assessed with respect to an employee benefit plan), penalty or settlement
for which he may have become liable in any such action, suit or proceeding.
Section 2. Payment. Expenses incurred by such person shall be paid in
advance of the final disposition of such investigation, action, suit or
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amount unless it shall
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ultimately be determined that he is entitled to be indemnified by the
corporation.
Section 3. Evaluation. The Board of Directors of the corporation shall take
all such action as may be necessary and appropriate to authorize the corporation
to pay the indemnification required by this Article X, including without
limitation, to the extent needed, making a determination that indemnification is
permissible under the circumstances and a good faith evaluation of the manner in
which the claimant for indemnity acted and of the amount of indemnity due him,
and giving notice to and obtaining approval by the shareholders of the
corporation.
Section 4. Consideration. Any person who at any time after the adoption of
this Article X serves or has served in any of the aforesaid capacities for or on
behalf of the corporation shall be deemed to be doing or to have done so in
reliance upon, and as consideration for, the right to indemnification provided
herein. Such right shall inure to the benefit of the legal representatives of
any such person and shall not be exclusive of any other rights to which such
person may be entitled apart from the provision of this Article X. Any repeal or
modification of these indemnification provisions shall not affect any rights or
obligations existing at the time of such repeal or modification.
Section 5. Definitions. For purposes of this Article X, terms defined by
the North Carolina Business Corporation Act and used but not defined herein
shall have the meanings assigned to them by the Act.
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EXHIBIT 10.1
ALYDAAR SOFTWARE CORPORATION
OMNIBUS STOCK PLAN
<PAGE>
ALYDAAR SOFTWARE CORPORATION
OMNIBUS STOCK PLAN
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I - NAME, PURPOSE AND DEFINITIONS
1.1 Name 1
1.2 Purpose 1
1.3 Definitions 1
ARTICLE II - ELIGIBILITY 3
ARTICLE III - AWARDS 3
3.1 General 3
3.2 Stock Options 4
3.3 Stock Appreciation Rights 4
3.4 Restricted Stock 5
3.5 Performance Awards 5
3.6 Other Awards 5
ARTICLE IV - AWARD AGREEMENTS 5
4.1 General 5
4.2 Required Terms 5
4.3 Optional Terms 7
ARTICLE V - SHARES OF STOCK SUBJECT TO THE PLAN 7
5.1 General 7
5.2 Additional Shares 7
5.3 Computation Rules 7
5.4 Shares to be Used 8
<PAGE>
ARTICLE VI - ADMINISTRATION 8
6.1 General 8
6.2 Duties 8
6.3 Powers 8
6.4 Intent to Avoid Insider Trading 9
ARTICLE VII - ADJUSTMENTS UPON CHANGES IN CAPITALIZATION 9
ARTICLE VIII - CHANGES OF CONTROL 9
8.1 General 9
8.2 Definition of Change of Control 10
ARTICLE IX - AMENDMENT AND TERMINATION 11
9.1 Amendment of Plan 11
9.2 Termination of Plan 11
9.3 Effective Date and Procedure for Amendment or Termination 11
ARTICLE X - MISCELLANEOUS 11
10.1 Rights of Employees 11
10.2 Compliance with Law 12
10.3 Unfunded Status 12
10.4 Limits On Liability 12
10.5 Section References 12
ARTICLE XI - EFFECTIVE DATE OF PLAN 13
<PAGE>
ALYDAAR SOFTWARE CORPORATION
OMNIBUS STOCK PLAN
ARTICLE I
NAME, PURPOSE, AND DEFINITIONS
SECTION 1.1. NAME. The Plan shall be known as the "Alydaar Software
Corporation Omnibus Stock Plan" (the "Plan").
SECTION 1.2. PURPOSE. The purpose of the Plan is to benefit the Company,
Subsidiaries, and their shareholders by encouraging and enabling Key Employees
of the Company or Subsidiaries to acquire a financial interest in the Company.
The Plan is intended to aid the Company and Subsidiaries in attracting and
retaining officers and key employees, to stimulate the efforts of those
individuals, and to strengthen their desire to remain in the office or in the
employ of the Company and Subsidiaries.
SECTION 1.3. DEFINITIONS. Whenever used in the Plan, unless the context
clearly indicates otherwise, the following terms shall have the following
meanings:
(a) "AWARD" or "AWARDS" means an award granted pursuant to Article 111.
(b) "AWARD AGREEMENT" means an agreement described in Article IV hereof
entered into between the Company and a Participant, setting forth the terms,
conditions, and limitations applicable to the Award granted to the Participant.
(c) "BENEFICIARY," with respect to a Participant, means (i) one or more
persons as the Participant may designate as primary or contingent beneficiary in
a writing delivered to the Company or Committee or, (ii), if there is no such
valid designation in effect at the Participant's death, the Participant's spouse
or, (iii) if the Participant is not married at the date of the Participant's
death, the Participant's estate. This definition shall not, however, supersede
or adversely affect, nor shall it be subject to, any definition or designation
of beneficiary which may be included in any Award.
(d) "BOARD" means the Board of Directors of the Company as it may be
comprised from time to time.
(e) "CODE" means the Internal Revenue Code of 1986, as amended from
time to time, or any successor statute, and applicable regulations.
(f) "COMMITTEE" means the committee appointed by the Board from among
its members and shall be comprised of not less than two (2) persons. Unless and
until otherwise appointed, the Committee shall be the Compensation Committee of
the Board or any successor committee with substantially the same
responsibilities if the members of that committee satisfy the requirements of
the following sentence. A member of the Committee must not be an Employee and
<PAGE>
must not have received an Award during the one year period prior to service on
the Committee.
(g) "COMPANY" means Alydaar Software Corporation, A North Carolina
corporation, and any successor corporation.
(g) "DIRECTOR" means any individual who is A member of the Company's
Board.
(h) "DISABILITY" shall mean the inability, in the opinion of the
Company's group health insurance carrier (or claims processor, if applicable),
of a Participant, because of injury or sickness, to work at a reasonable
occupation which is available with the Participant's employer (the Company or a
Subsidiary) or at any gainful occupation for which the Participant is or may
become fitted.
(i) "EMPLOYEE" means any individual who is a salaried employee of the
Company or any Subsidiary, whether or not he is a Director.
6) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
and in effect from time to time, or any successor statute.
(k) "FAIR MARKET VALUE" means, with respect to shares of the Common
Stock, (i) if the Common Stock is traded on the NASDAQ National Market or listed
on a national securities exchange, the mean between the high and low prices per
share reported by the NASDAQ National Market or a national securities exchange,
as the case may be, on the relevant date, or, in the absence of trading on such
date, on the next preceding day on which trading occurs; or (ii) if the Common
Stock is not traded on the NASDAQ National Market or listed on A national
securities exchange, the mean between the bid and asked prices per share last
reported by the National Association of Securities Dealers, Inc. for the
over-the-counter market on the relevant date, or, in the absence of any bid and
asked prices on that date, on the next preceding day for which there are such
quotations; or (iii) if the Common Stock is not traded on the NASDAQ National
market or listed on a national securities exchange, and if quotations for the
Common Stock are not reported by the National Association of Securities Dealers,
Inc., the fair market value as determined by the Committee on the basis of
available prices for the Common Stock or in such manner as the Committee shall
agree.
0) "INSIDER" means any person who is subject to Section 16 of the
Exchange Act.
(m) "PARTICIPANT" means an Employee designated by the Committee to be
eligible for an Award pursuant to this Plan.
(n) "RESTRICTED STOCK" means shares of Stock which have certain
restrictions attached to the ownership thereof, which may be issued under
Section 3.4.
<PAGE>
(o) "RETIREMENT" means termination of employment with the Company or a
Subsidiary for any @n other than death or Disability on or after age 65.
(p) "RULE 16B-3" means Rule 16b-3 promulgated by the Securities and
Exchange Commission as now in force or as such regulation or successor
regulation shall be hereafter amended.
(q) "SECTION 16" means Section 16 of the Exchange Act or any successor
regulation and the rules promulgated thereunder as they may be amended from time
to time.
(r) "STOCK" means shares of the common stock of the Company.
(s) "STOCK APPRECIATION RIGHT" means A right, the value of which is
determined relative to the appreciation in value of shares of Stock, which may
be issued under Section 3.3.
(t) "STOCK OPTION" means a right to purchase shares of Stock granted
pursuant to Section 3.2 and includes Incentive Stock Options and Non-Qualified
Stock Options as defined in Section 3.2(a).
(u) "SUBSIDIARY" means any corporation (other than the Company), in an
unbroken chain of corporations beginning with the Company in which each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50 percent or more of the total combined voting power of all classes
of stock in one of the other corporations in that chain,
ARTICLE II
ELIGIBILITY
Awards may be granted to any Employee who is (or class of Employees who
are) designated as Participants from time to time by the Committee; provided,
however, that no member of the Committee shall be eligible to participate. The
Committee shall determine which Employees shall be Participants, the types of
Awards to be made to Participants, and the terms, conditions, and limitations
applicable to the Awards.
ARTICLE III
AWARDS
SECTION 3.1. GENERAL. Awards may include, but are not limited to, those
described in this Article HI, including its sections. The Committee may grant
Awards singly, in tandem, or in combination with other Awards, as the Committee
may in its sole discretion determine. Subject to the other provisions of this
Plan, Awards also may be granted in combination or in tandem
<PAGE>
with, in replacement of, or as alternatives to, grants or rights under this
Plan and any other employee plan of the Company.
SECTION 3.2. STOCK OPTIONS. A Stock Option is a right to purchase a
specified number of shares of Stock at a specified price during such specified
time as the Committee shall determine, subject to the following:
(a) An option granted may be either of a type that complies with the
requirements of incentive stock options as defined in Section 422 of the Code
('Incentive Stock Option') or of a type that does not comply with such
requirements ("Non-Qualified Option').
(b) 'The exercise price per share of any Incentive Stock Option shall
be no less than the Fair Market Value per share of the Stock subject to the
option on the date such a Stock Option is granted. The exercise price per share
of any Non-Qualified Option, however, may be less than the Fair Market Value per
share of Stock subject to the option on the date such a Stock Option is granted.
(c) A Stock Option may be exercised, in whole or in part, by giving
written notice of exercise to the Company specifying the number of shares of
Stock to be purchased.
(d) The exercise price of the Stock subject to the Stock Option may be
paid in cash or, at the discretion of the Committee, may also be paid by the
tender of shares of Stock already owned by the Participant, or through a
combination of cash and shares of Stock, or through such other means that the
Committee determines are consistent with the Plan's purpose and applicable law.
No fractional shares of Stock will be issued or accepted.
SECTION 3.3. STOCK APPRECIATION RIGHTS. A Stock Appreciation Right is a
right to receive, upon surrender of the right, but without payment, an amount
payable in cash and/or shares of Stock under such terms and conditions as the
Committee shall determine, subject to the following:
(a) A Stock Appreciation Right may be granted in tandem with part or
all of, in addition to, or completely independent of a Stock Option or any other
Award under this Plan. A Stock Appreciation Right issued in tandem with a Stock
Option may be granted at the time of grant of the related Stock Option or at any
time thereafter during the term of the Stock Option.
(b) The amount payable in cash and/or shares of Stock with respect to
each right shall be equal in value to a percent of the amount by which the Fair
Market Value per share of Stock on the exercise date exceeds the exercise price
of the Stock Appreciation Right. The applicable percent shall be established by
the Committee. The
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amount payable in shares of Stock, if any, is determined with reference to the
Fair Market Value on the date of exercise.
(c) Stock Appreciation Rights issued in tandem with Stock Options shall
be exercisable only to the extent that the Stock Options to which they relate
are exercisable. Upon the exercise of the Stock Appreciation Right, the
Participant shall surrender to the Company the underlying Stock Option. Stock
Appreciation Rights issued in tandem with Stock Options shall automatically
terminate upon the exercise of such Stock Options.
SECTION 3.4. RESTRICTED STOCK. Restricted Stock is shares of Stock that are
issued to a Participant and are subject to such terms, conditions, and
restrictions as the Committee deems appropriate, which may include, but are not
limited to, restrictions upon the sale, assignment, transfer, or other
disposition of the Restricted Stock and the requirement of forfeiture of the
Restricted Stock upon termination of employment under certain specified
conditions. The Committee may provide for the lapse of any such term or
condition or waive any term or condition based on such factors or criteria as
the Committee may determine. 'The Participant shall have, with respect to awards
of Restricted Stock, all of the rights of a shareholder of the Company,
including the right to vote the Restricted Stock and the right to receive any
cash or stock dividends on such Stock.
SECTION 3.5 PERFORMANCE AWARDS. Performance Awards may be granted under
this Plan from time to time based on such terms and conditions as the Committee
deems appropriate provided that such Awards shall not be inconsistent with the
terms and purposes of this Plan. Performance Awards are Awards which are
contingent upon the performance of all or a portion of the Company and/or
subsidiaries or which are contingent upon the individual performance of the
Participant. Performance Awards may be in the form of performance units,
performance shares, and such other forms of performance Awards which the
Committee shall determine. The Committee shall determine the performance
measurements and criteria for such performance Awards.
SECTION 3.6 OTHER AWARDS. The Committee may from time to time grant other
Stock and Stock-based Awards under the Plan, including without limitation, those
Awards pursuant to which shares of Stock are or may in the future be acquired,
Awards denominated in Stock units, securities convertible into shares of Stock,
and dividend equivalents. The Committee shall determine the terms and conditions
of such other Stock and Stock-based Awards provided that such Awards shall not
be inconsistent with the terms and purpose of this Plan.
ARTICLE IV
AWARD AGREEMENTS
SECTION 4.1 GENERAL. Each Award under this Plan shall be evidenced by an
Award Agreement setting forth the number of shares of Stock or other security,
Stock Appreciation
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Rights, or units subject to the Award and such other terms and conditions
applicable to the Award as are determined by the Committee.
SECTION 4.2 REQUIRED TERMS. In any event, Award Agreements shall include,
at a minimum, explicitly or by reference, the following terms:
(a) Non-assignability. A provision that the Awards under the Plan shall
not be assigned, pledged, or otherwise transferred except by will or by the laws
of descent and distribution and that, during the lifetime of a Participant, the
Award shall be exercised only by such Participant or by the Participant's
guardian or legal representative.
(b) Termination of Employment. A provision describing the treatment of
an Award in the event of the Retirement, Disability, death, or other termination
of a Participant's employment with the Company, including but not limited to
terms relating to the vesting, time for exercise, forfeiture, or cancellation of
an Award in such circumstances.
(c) Rights of Shareholder. A provision that a Participant shall have no
rights as a shareholder with respect to any securities covered by an Award until
the date the Participant becomes the holder of record. Except as provided in
Section 8 hereof, no adjustment shall be made for dividends or other rights,
unless the Award Agreement specifically requires such adjustment, in which case,
grants of dividend equivalents or similar rights shall not be considered to be a
grant of any other shareholder right.
(d) Withholding. A provision requiring the withholding of applicable
taxes required by law from all amounts paid in satisfaction of an Award. In the
case of an Award paid in cash, the withholding obligation shall be satisfied by
withholding the applicable amount and paying the net amount in cash to the
Participant. In the case of Awards paid in shares of Stock or other securities
of the Company, a Participant may satisfy the withholding obligation by paying
the amount of any taxes in cash or, with the approval of the Committee, shares
of Stock or other securities may be deducted from the payment to satisfy the
obligation in full or in part as long as such withholding of shares does not
violate any applicable laws, rules or regulations of federal, state, or local
authorities. The number of shares to be deducted shall be determined by
reference to the Fair Market Value of such shares of Stock on the applicable
date.
(e) Holding Period. In the case of an Award to an Insider:
(i) of an equity security, a provision stating (or the effect of
which is to require) that such security must be held for at least six
months (or such longer period as the Committee in its discretion
specifies) from the date of acquisition; or
(ii) of a derivative security with a fixed exercise price within
the meaning of Section 16, a provision stating (or the effect of which
is to require) that at least six months (or such longer period as the
Committee in its discretion
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specifies) must elapse from the date of acquisition of the derivative
security to the date of disposition of the derivative security (other
than upon exercise or conversion) or its underlying equity security; or
(iii) of a derivative security without a fixed exercise price
within the meaning of Section 16, a provision stating (or the effect of
which is to require) that at least six months (or such longer period as
the Committee in its discretion specifies) must elapse from the date
upon which such price is fixed to the date of disposition of the
derivative security (other than by exercise or conversion) or its
underlying equity security.
SECTION 4.3 OPTIONAL TERMS. Award Agreements may include the following
terms:
(a) Replacement, Substitution, and Reloading . Any provisions
(i) permitting the surrender of outstanding Awards or securities
held by the Participant in order to exercise or realize rights under
other Awards, under similar or different terms (including the grant of
reload options), or,
(ii) requiring holders of Awards to surrender outstanding Awards as
a condition precedent to the grant of new Awards under the Plan.
(b) Other Terms. Such other terms as are necessary and appropriate to
effect an Award to the Participant including but not limited to the term of the
Award, vesting provisions, deferrals, any requirements for continued employment
with the Company or a Subsidiary, any other restrictions or conditions
(including performance requirements) on the Award and the method by which
restrictions or conditions lapse, the effect on the Award of a Change of Control
as defined in Article VIII, or the price, amount, or value of Awards.
ARTICLE V
SHARES OF STOCK
SUBJECT TO THE PLAN
SECTION 5.1 GENERAL. Subject to the adjustment provisions of Article VU
hereof, the number of shares of Stock for which Awards may be granted under the
Plan shall not exceed three hundred seventy-five thousand (375,000) shares.
SECTION 5.2 ADDITIONAL SHARES. Any unexercised or undistributed portion of
the terminated, expired, exchanged, or forfeited Award or Awards settled in cash
in lieu of shares of Stock shall be available for further Awards in addition to
those available under Section 5.1 hereof.
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SECTION 5.3 COMPUTATION RULES. For the purpose of computing the total
number of shares of Stock granted under the Plan, the following rules shall
apply to Awards payable in shares of Stock or other securities, where
appropriate:
(a) except as provided in subsection (e) hereof, each Stock Option
shall be deemed to be the equivalent of the maximum number of shares that may be
issued upon exercise of the particular Stock Option; except as provided in
subsection (e) hereof, each other Stock-based Award payable in some other
security shall be deemed to be equal to the number of shares to which it
relates;
(c) except as provided in subsection (e) hereof, where the number of
shares available under the Award is variable on the date it is granted, the
number of shares shall be deemed to be the maximum number of shares that could
be received under that particular Award;
(d) where one or more types of Awards (both of which are payable in
shares of Stock or another security) are granted in tandem with each other, such
that the exercise of one type of Award with respect to a number of shares
cancels an equal number of shares of the other, each joint Award shall be deemed
to be the equivalent of the number of shares under the other; and
(e) each share awarded or deemed to be awarded under the preceding
subsections shall be treated as shares of Stock, even if the Award is for a
security other than Stock.
Additional rules for determining the number of shares of Stock granted under the
Plan may be made by the Committee, as it deems necessary or appropriate.
SECTION 5.4 SHARES TO BE USED. The shares of Stock which may be issued
pursuant to an Award under the Plan may be authorized but unissued Stock or
Stock that may be acquired, subsequently or in anticipation of the transaction,
in the open market to satisfy the requirements of the Plan.
ARTICLE VI
ADMINISTRATION
SECTION 6.1 GENERAL. 'The Plan and all Awards pursuant thereto shall be
administered by the Committee so as to permit the Plan to comply with Rule
16b-3. A majority of the members of the Committee shall constitute a quorum. 'Me
vote of a majority of a quorum shall constitute action by the Committee.
SECTION 6.2 DUTIES. The Committee shall have the duty to administer the
Plan, and to determine periodically the Participants in the Plan and the nature,
amount, pricing, timing, and other terms of Awards to be made to such
individuals.
<PAGE>
SECTION 6.3 POWERS. The Committee shall have all powers necessary to enable
it to carry out its duties under the Plan properly, including without limitation
the power to interpret and administer the Plan. All questions of interpretation
with respect to the Plan, the number of shares of Stock or other security, Stock
Appreciation Rights, or units granted, and the terms of any Award Agreements
shall be determined by the Committee, and its determination shall be final and
conclusive upon all parties in interest. in the event of any conflict between an
Award Agreement and the Plan, the terms of the Plan shall govern. In addition,
the Committee may delegate to the officers or employees of the Company the
authority to execute and deliver such instruments and documents, to do all such
acts and things, and to take all such other steps deemed necessary, advisable or
convenient for the effective administration of the Plan in accordance with its
terms and purpose, except that the Committee may not delegate any discretionary
authority with respect to substantive decisions or functions regarding the Plan
or Awards thereunder as those relate to Insiders including but not limited to
decisions regarding the timing, eligibility, pricing, amount or other material
term of such Awards.
SECTION 6.4 INTENT TO AVOID INSIDER TRADING. It is the intent of the
Company that the Plan and Awards hereunder satisfy and be interpreted in a
manner, that, in the case of Participants who are or may be Insiders, satisfies
the applicable requirements of Rule 16b-3, so that such persons will be entitled
to the benefits of Rule 16b-3 or other exemptive rules under Section 16 and will
not be subjected to avoidable liability thereunder. If any provision of the Plan
or of any Award would otherwise frustrate or conflict with the intent expressed
in this Section 6.4, that provision to the extent possible shall be interpreted
and deemed amended so as to avoid such conflict. To the extent of any remaining
irreconcilable conflict with such intent, the provision shall be deemed void as
applicable to insiders.
ARTICLE VII
ADJUSTMENTS UPON CHANGES
IN CAPITALIZATION
In the event of a reorganization, recapitalization, Stock split, Stock
dividend, exchange of Stock, combination of Stock, merger, consolidation or any
other change in corporate structure of the Company affecting the Stock, or in
the event of a sale by the Company of all or a significant part of its assets,
or any distribution to its shareholders other than a normal cash dividend, the
Committee may make appropriate adjustment in the number, kind, price and value
of shares of Stock authorized by this Plan and any adjustments to outstanding
Awards as it determines appropriate so as to prevent dilution or enlargement of
rights.
ARTICLE VIII
CHANGES OF CONTROL
SECTION 8.1 GENERAL. In the event of a Change of Control of the Company, in
addition to any action required or authorized by the terms of an Award
Agreement, the Committee may, in its
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discretion, recommend that the Board of Directors take any of the following
actions as a result of, or in anticipation of, any such event to assure fair
and equitable treatment of the Plan Participants:
(a) accelerate time periods for purposes of vesting in, or realizing
gain from, any outstanding Award made pursuant to the Plan; offer to purchase
any outstanding Award made pursuant to this Plan from the holder for its
equivalent cash value, as determined by the Committee, as of the date of the
Change of Control; or
(c) make adjustments or modifications to outstanding Awards as the
Committee deems appropriate to maintain and protect the rights and interests of
Plan Participants following such Change of Control.
Any such action approved by the Board of Directors shall be conclusive and
binding on the Company, a Subsidiary, and all Plan Participants.
SECTION 8.2 DEFINITION OF CHANGE OF CONTROL. For the purposes of this
Section, a "Change of Control' shall mean the earliest date on which either of
the following events shall occur:
(a) An individual, entity, or group (other than Robert F. Gruder or
Kevin B. Kimberlin or any of their affiliates) shall acquire after the date this
Plan is approved by the Board, otherwise than directly from the Company,
beneficial ownership of 20% or more of the outstanding common stock or voting
power of the Company, provided that no such individual, entity or group shall be
deemed to beneficially own any securities held by:
(i) the Company or any of its subsidiaries; or
(ii) any employee benefit plan of the Company or any of its
subsidiaries,
or
(b) The persons who were directors of the Company on the date 30 days
after the effective date of the Plan (Article XI), together with those who
subsequently became directors of the Company and whose election, or nomination
for election by the Company's shareholders, was approved by the vote of at least
A majority of the directors who were directors on the date 30 days after the
effective date of the Plan (Article XI), or directors whose nomination or
election was approved as provided above (the 'Continuing Directors"), shall
cease to constitute a majority of the Board or of its successor by merger,
consolidation or sale of assets.
However, a majority of the Continuing Directors may approve any event described
in Section 8.2(a) and determine that, for purposes of this Plan, A Change of
Control has not occurred.
<PAGE>
ARTICLE IX
AMENDMENT AND TERMINATION
SECTION 9.1 AMENDMENT OF PLAN. The Company expressly reserves the right, at
any time and from time to time, to amend in whole or in part any of the terms
and provisions of the Plan and any or all Award Agreements under the Plan to the
extent permitted by law for whatever reason(s) the Company may deem appropriate;
provided, however, no amendment may be effective, without the approval of the
shareholders of the Company, if approval of such amendment is required in order
that transactions in Company securities under the Plan be exempt from the
operation of Section 16(b) of the Securities Exchange Act of 1934 and if such
amendment
(a) increases the number of shares of Stock which may be issued under
the Plan, except as provided for in Article VII;
(b)materially modifies the requirements as to eligibility for
participation;
(c) materially increases the benefits accruing to Participants under
the Plan; or
(d) extends the duration beyond the date approved by the shareholders.
SECTION 9.2 TERMINATION OF PLAN. The Company expressly reserves the right,
at any time, to suspend or terminate the Plan and any or all Award Agreements
under the Plan to the extent permitted by law for whatever reason(s) the Company
may deem appropriate, including, without limitation, suspension or termination
as to any participating Subsidiary, Employee, or class of Employees.
SECTION 9.3. EFFECTIVE DATE AND PROCEDURE FOR AMENDMENT OR TERMINATION. Any
amendment to the Plan or termination of the Plan may be retroactive to the
extent not prohibited by applicable law. Any amendment to the Plan or
termination of the Plan shall be made by the Company by resolution of the Board
and shall not require the approval or consent of any Subsidiary, Participant, or
Beneficiary in order to be effective to the extent permitted by law.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 RIGHTS OF EMPLOYEES. Status as an eligible Employee shall not
be construed as a commitment that any Award will be made under the Plan to such
eligible Employee or to eligible Employees generally. Nothing contained in the
Plan (or in any other documents related to this Plan or to any Award) shall
confer upon any Employee or Participant any right to continue in the employ or
other service of the Company or constitute any contract or limit in any way the
right of the Company to change such person's compensation or other benefits or
to terminate the employment of such person with or without cause.
<PAGE>
SECTION 10.2 COMPLIANCE WITH LAW. No certificate for Stock distributable
pursuant to this Plan shall be issued and delivered unless the issuance of such
certificate complies with all applicable legal requirements including, without
limitation, compliance with the provisions of applicable state securities laws,
the Securities Act of 1933, AS amended from time to time or any successor
statute, the Exchange Act and the requirements of the market systems or
exchanges on which the Company's Stock may, at the time, be traded or listed.
SECTION 10.3 UNFUNDED STATUS. 'The Plan shall be unfunded. Neither the
Company nor the Board of Directors shall be required to segregate any assets
that may at any time be represented by Awards made pursuant to the Plan. Neither
the Company, the Committee, nor the Board of Directors shall be deemed to be a
trustee of any amounts to be paid under the Plan.
SECTION 10.4 LIMITS ON LIABILITY. Any liability of the Company to any
Participant with respect to an Award shall be based solely upon contractual
obligations created by the Plan and the Award Agreement. Neither the Company nor
any member of the Board of Directors or the Committee, nor any other person
participating in any determination of any question under the Plan, or in the
interpretation, administration or application of the Plan, shall have any
liability to any party for any actions taken or not taken, in good faith under
the Plan and that do not constitute willful misconduct. To the extent permitted
by applicable law, the Company shall indemnify and hold harmless each member of
the Board of Directors and the Committee from and against any and all liability,
claims, demands, costs, and expenses (including the costs and expenses of
attorneys incurred in connection with the investigation or defense of claims) in
any manner connected with or arising out of any actions or inactions in
connection with the administration of the Plan except for such actions or
inactions which are not in good faith or which constitute willful misconduct.
SECTION 10.5 SECTION REFERENCES. All references in this Plan to sections or
articles shall refer to sections and articles of this Plan unless specifically
noted otherwise.
ARTICLE XI
EFFECTIVE DATE OF PLAN
This Plan shall become effective upon adoption of the Plan by the Board,
provided, however, the effectiveness of this Plan is subject to its approval and
ratification by the shareholders of the Company within one year from the date of
adoption hereof by the Company. 'The Committee shall have authority to grant
Awards hereunder until one day before the ten year anniversary of the date of
adoption of the Plan by the Board, subject to the ability of the Company to
terminate the Plan as provided in Article IX.
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