<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
Fashion Dynamics Corp.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Fashion Dynamics Corp.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11:
(1) Title of each class of securities to which transaction applies:
N/A
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
N/A
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
N/A
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
------------------------------------------------------------------------
(5) Total fee paid:
N/A
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
N/A
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
N/A
------------------------------------------------------------------------
(3) Filing Party:
N/A
------------------------------------------------------------------------
(4) Date Filed:
N/A
------------------------------------------------------------------------
-2-
<PAGE>
Vancouver, British Columbia
February 19, 2000
Dear Shareholders:
You are cordially invited to attend the Fashion Dynamics Corp. Annual
Meeting of Shareholders to be held on Tuesday, February 29, 2000 at 10:00 a.m.
(Pacific daylight time) at the offices of Preston Gates & Ellis LLP, 701 Fifth
Avenue, Suite 5000, Seattle, Washington 98104. Directions to Preston Gates &
Ellis LLP are available upon request by calling 206/623-7580.
The matters to be acted upon are described in the accompanying Notice
of Annual Meeting and Proxy Statement.
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND, IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED. PLEASE SIGN, DATE, AND MAIL THE
ENCLOSED PROXY CARD AS SOON AS POSSIBLE IN THE ENCLOSED POSTAGE PREPAID ENVELOPE
IN ORDER TO ENSURE THAT YOUR VOTE IS COUNTED. IF YOU ATTEND THE MEETING, YOU
WILL, OF COURSE, HAVE THE RIGHT TO VOTE YOUR SHARES IN PERSON.
Very truly yours,
/s/ Yiu Joe Cheung
PRESIDENT
<PAGE>
FASHION DYNAMICS CORP.
Suite 2000
1177 West Hastings Street
Vancouver, BC V6E 2K3
Canada
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 29, 2000
NOTICE DATE: FEBRUARY 19, 2000
To the Shareholders:
The Annual Meeting of the Shareholders of Fashion Dynamics Corp., a
Nevada corporation, will be held at the offices of Preston Gates & Ellis LLP,
701 Fifth Avenue, Suite 5000, Seattle, Washington 98104, on Tuesday, February
29, 2000, at 10:00 a.m. (Pacific daylight time) for the following purposes:
1. To amend the Company's Articles of Incorporation to change the name of
the Company to "eMagin Corporation."
2. To elect Yiu Joe Cheung as sole director of the Company.
3. To approve the adoption, by the Company's Board of Directors, of the
Company's 2000 Stock Option Plan.
Only shareholders of record at the close of business on February 19,
2000 will be entitled to notice of, and to vote at, the Annual Meeting and any
adjournments thereof.
The Company's Proxy Statement is submitted herewith.
By Order of the Board of Directors
/s/ Yiu Joe Cheung
SECRETARY
Vancouver, British Columbia
February 19, 2000
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, YOU ARE URGED TO DATE AND SIGN
THE ENCLOSED PROXY CARD AND RETURN IT AS PROMPTLY AS POSSIBLE IN THE ENCLOSED
STAMPED AND ADDRESSED ENVELOPE IN ORDER THAT THE PRESENCE OF A QUORUM MAY BE
ASSURED. THE GIVING OF SUCH PROXY DOES NOT AFFECT YOUR RIGHT TO REVOKE IT LATER
OR VOTE YOUR SHARES IN PERSON IN THE EVENT THAT YOU SHOULD ATTEND THE MEETING.
<PAGE>
FASHION DYNAMICS CORP.
Suite 2000
1177 West Hastings Street
Vancouver, BC V6E 2K3
Canada
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
FEBRUARY 29, 2000
This Proxy Statement is furnished by the Board of Directors of
Fashion Dynamics Corp., a Nevada corporation (the "Company"), to the holders
of Common Stock, $0.001 par value per share, of the Company (the "Common
Stock") in connection with the solicitation of proxies by the Board of
Directors for use at the Annual Meeting of Shareholders of the Company (the
"Annual Meeting"), to be held at 10:00 a.m. (Pacific daylight time) on
Tuesday, February 29, 2000, at the offices of Preston Gates & Ellis LLP, 701
Fifth Avenue, Suite 5000, Seattle, Washington 98104, and at any adjournment
thereof. Directions to Preston Gates & Ellis LLP are available upon request
by calling 206/623-7580.
A proxy delivered pursuant to this solicitation is revocable at the
option of the person giving the same at any time before it is exercised. A
proxy may be revoked, prior to its exercise, by another instrument or
transmission revoking the proxy or a properly created proxy bearing a later
date is filed with or transmitted to the Secretary of the Company or another
person or persons appointed by the Company to count the votes of shareholders
and determine the validity of proxies and ballots. Attendance at the Annual
Meeting, in and of itself, will not constitute a revocation of a proxy.
Unless previously revoked, the shares represented by the enclosed proxy will
be voted in accordance with the shareholder's directions if the proxy is duly
executed and returned prior to the Annual Meeting.
The presence in person or by proxy of holders of record of fifty-one
percent (51%) in amount of the entire issued and outstanding capital stock of
the Company is required to constitute a quorum for the transaction of business
at the Annual Meeting. Under the Bylaws of the Company, except for the
election of directors, if a quorum is present at the Annual Meeting, any act
submitted for approval is approved by the vote of the holders of a majority of
the capital stock of the Company represented in person or by proxy at such
meeting. Under Nevada law, directors must be elected by a plurality of the
votes cast at the Annual Meeting.
This Proxy Statement and the enclosed proxy card are first being
mailed to shareholders on or about February 19, 2000.
The expense of preparing, printing, and mailing this Proxy Statement
and the proxies solicited hereby will be borne by the Company. In addition to
the use of the mails, proxies may be solicited by directors, officers, and
other employees of the Company, without additional remuneration, in person,
or by telephone, telegraph or facsimile transmission. Where appropriate, the
Company will request brokerage firms, banks, nominees, custodians, and
fiduciaries to forward proxy materials to the beneficial owners of shares of
Common Stock as of the record date and will provide reimbursement for the
cost of forwarding the proxy materials in accordance with customary practice.
Your cooperation in promptly signing and returning the enclosed proxy card
will help to avoid additional expense.
At January 31, 2000, the Company had outstanding 20,156,400 shares
of Common Stock, and there were no shares of any other class of stock
outstanding. Each share of Common Stock entitles the holder thereof to one
vote. Only shareholders of record at the close of business on February 19,
2000, will be entitled to notice of, and to vote at, the Annual Meeting.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists, as of January 31, 2000, the security
ownership of (i) all persons known by the Company to own beneficially 5% or more
of Common Stock; (ii) all executive officers; and (iii) each director of the
Company.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Title of Class Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Owner
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock Verus International Ltd. 10,994,400 restricted 54.5%
Lauriston House Suite 101 shares
Lower Collymore Rock St.
Michael, Barbados
- -------------------------------------------------------------------------------------------------------------------
Common Stock Yiu Joe Cheung, 0 Shares 0.0%
President/Secretary/
Treasurer/Director
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
CHANGE IN CONTROL
Since the beginning of the Company's last fiscal year, control of the
Company has passed to Verus International Ltd. Verus International Ltd.
purchased a majority of the outstanding voting securities of the Company in
private transactions.
AMENDMENT OF ARTICLES OF INCORPORATION
The shareholders are asked to approve an amendment to the Articles of
Incorporation to change the name of the Company to eMagin Corporation.
VOTE REQUIRED. The amendment to the Articles of Incorporation to
change the name of the Company to eMagin Corporation must be approved by the
vote of the holders of a majority of the capital stock of the Company
represented in person or by proxy at the Annual Meeting. THE BOARD OF
DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
ELECTION OF DIRECTOR
The shareholders of the Company are asked to elect Yiu Joe Cheung as
sole director of the Company.
VOTE REQUIRED. The election of Yiu Joe Cheung as sole director of the
Company must be approved by a plurality of the votes cast at the Annual
Meeting. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
ADOPTION OF STOCK OPTION PLAN
The shareholders are asked to approve adoption of the Company's 2000
Stock Option Plan (the "2000 Stock Option Plan"), attached hereto as EXHIBIT A.
A general description of some of the basic features of the 2000 Stock Option
Plan is presented below. The following discussion is a summary only and
reference is made to the full text of the 2000 Stock Option Plan. To the extent
of any inconsistency between the description below and the 2000 Stock Option
Plan, the terms of the 2000 Stock Option Plan will govern.
SUMMARY OF 2000 STOCK OPTION PLAN
The 2000 Stock Option Plan provides for the grant of incentive stock
options to employees and nonqualified stock options to employees, members of the
Board of Directors or other governing body, independent consultants or advisors.
The Company has reserved 3,106,000 shares of its Common Stock for issuance
pursuant to the 2000 Stock Option Plan. The 2000 Stock Option Plan will not
extend beyond a date ten years from the date of its adoption by the Board of
Directors, provided that any stock options to purchase shares duly granted prior
to such date are exercisable pursuant to its terms, the terms of the 2000 Stock
Option Plan or earlier termination of the stock option.
When an option is granted under the 2000 Stock Option Plan, the
Board of Directors or a committee thereof, acting as administrator of the
2000 Stock Option Plan, at its discretion, specifies the option price, the
expiration dates and other material conditions upon which the options may be
exercised, and the number of shares of Common Stock
6
<PAGE>
which may be purchased upon exercise of the option. The exercise price of
incentive stock options granted under the 2000 Stock Option Plan must be at
least 110% of the fair market value of the underlying shares on the date of
the grant of the option, if it is granted to a person who owns stock
possessing more than 10% of the total combined voting power of all classes of
capital stock of the Company ("10% Shareholder"), and at least 100% of the
fair market value of such shares on the date of grant of the option, if it is
granted to any other eligible person. The option cannot be exercisable more
than five years from the date of grant in the case of incentive stock options
granted to a 10% Shareholder and ten years from the date of grant in case of
any other incentive stock option. Unless otherwise specified in the
applicable option agreement, an option will vest over a four-year period
according to the following schedule: 25% after one year of continuous
employment or service with the Company from the date the option is granted
and an additional 25% after each one year period of continuous service or
employment completed thereafter.
An option becomes and remains exercisable to the extent provided in
the option agreement evidencing such option and in the 2000 Stock Option
Plan. Unless the option agreement provides otherwise, options granted under
the 2000 Stock Option Plan which have vested, may be exercised within ninety
days of the termination of the optionee's relationship with the Company,
unless such relationship ceases for "cause" as defined in any employment or
consulting agreement between the Company and optionee or, if there shall be
no such employment or consulting agreement, for Cause as defined in the 2000
Stock Option Plan, Disability (as defined in the 2000 Stock Option Plan) or
death, and unless the option terminates or expires sooner. In case of
termination for "cause" as defined in any employment or consulting agreement
between the Company and optionee or for Cause as defined in the 2000 Stock
Option Plan, the option automatically terminates. In case of termination for
Disability or death, the option is exercisable for a period of one year
following such termination, but not later than the end of the term of the
option. In the event of certain Change of Control Events (as defined in the
2000 Stock Option Plan) or dissolution of the Company, vesting of an option
may accelerate to allow the optionee to conditionally purchase optioned
shares. Vesting will not accelerate with respect to an option, however, if:
(1) in the opinion of the Company's outside accountants, it would render
unavailable "pooling of interest" accounting for a Change of Control Event
that would otherwise qualify for such accounting treatment; (2) the option is
either to be assumed by the successor or purchasing corporation or parent
thereof or to be replaced with a comparable award, as determined by the
Company's Board of Directors, for the purchase of shares of the capital stock
of the successor corporation in connection with the Change of Control Event;
or (3) the option is to be replaced with a cash incentive program of the
successor corporation that preserves the spread existing at the time of the
Change of Control Event and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option.
Under present law, an optionee will not realize any taxable income
on the date a nonqualified stock option is granted to the optionee pursuant
to the 2000 Stock Option Plan. Upon exercise of the nonqualified stock
option, however, the optionee will realize, in the year of exercise, ordinary
income to the extent of the difference between the option price and the fair
market value of the Company's Common Stock on the date of exercise. Upon the
sale of the shares, any resulting gain or loss will be treated as capital
gain or loss. The Company will be entitled to a tax deduction in its fiscal
year in which nonqualified stock options are exercised, equal to the amount
of compensation required to be included as ordinary income by those optionees
exercising such options.
Incentive stock options granted pursuant to the 2000 Stock Option
Plan are intended to qualify for favorable tax treatment to the optionee
under Code Section 422. Under Code Section 422, an employee realizes no
taxable income when the incentive stock option is granted. If the employee
has been an employee of the Company or any subsidiary at all times from the
date of grant until three months before the date of exercise, the employee
will realize no taxable income when the option is exercised. If the employee
does not dispose of shares acquired upon exercise for a period of two years
from the granting of the incentive stock option and one year after receipt of
the shares, the employee may sell the shares and report any gain as capital
gain. The Company will not be entitled to a tax deduction in connection with
either the grant or exercise of an incentive stock option. If the employee
should dispose of the shares prior to the expiration of the two-year or
one-year periods described above, the employee will be deemed to have
received compensation taxable as ordinary income in the year of the early
sale in an amount equal to the lesser of (i) the difference between the fair
market value of the Company's Common Stock on the date of exercise and the
option price of the shares, or (ii) the difference between the sale price of
the shares and the option price of shares. In the event of such an early
sale, the Company will be entitled to a tax deduction equal to the amount
recognized by the employee as ordinary income. The foregoing discussion
ignores the impact of the alternative minimum tax, which may particularly be
applicable to the year in which an incentive stock option is exercised.
VOTE REQUIRED. In order to approve the adoption of the 2000 Stock
Option Plan, the number of votes cast by the shareholders in favor of the
action must exceed the number of votes cast in opposition to the action. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
FASHION DYNAMICS CORP.
By Order of the Board of Directors
/s/ Yiu Joe Cheung
SECRETARY
Vancouver, British Columbia
February 19, 2000
7
<PAGE>
EXHIBIT A
EMAGIN CORPORATION
2000 STOCK OPTION PLAN
ADOPTED: __________________, 2000
1. INTRODUCTIONS AND DEFINITIONS
1.1 THE PLAN
This 2000 Stock Option Plan (hereinafter, this "Plan") establishes the
right of and procedures for eMagin Corporation (the "Company") to grant stock
options to its employees, consultants and/or directors. This Plan provides for
the granting of two types of options, namely (1) Incentive Stock Options, as
defined and governed by Section 422 of the Internal Revenue Code of 1986, as
amended, and (2) Nonqualified Stock Options. This Plan sets forth provisions
applicable to both types of options, to Incentive Stock Options only and to
Nonqualified Stock Options only.
1.2 DEFINITIONS
Capitalized terms used in this Plan shall have the following meanings:
"ACT" means the Securities Act of 1933, as from time to time amended,
or any replacement act or legislation.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means dishonesty, fraud, misconduct, unauthorized use or
disclosure of confidential information or trade secrets, any act of disloyalty
to the Company or any current or future subsidiary of the Company, or conviction
or confession of a crime punishable by law (except minor violations), in each
case as determined by the Board, whose determination shall be conclusive and
binding.
"CHANGE OF CONTROL EVENT" means a merger, consolidation, or sale of
assets, as the case may be and as described in Subsections (1) and (2) of
Section 2.5(a).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means a committee appointed by the Board, pursuant to
Section 2.3 hereof, to administer the provisions of this Plan and in the absence
of any such committee, references to the Committee shall mean the Board.
"COMPANY" means eMagin Corporation.
"CONSULTANT" means any person engaged by the Company or any current or
future subsidiary of the Company to perform services as a non-employee service
provider, advisor or consultant pursuant to the terms of a written plan or
contract. "Consultants" is the plural of Consultant.
"DIRECTOR" means a member of the Board. "Directors" is the plural of
Director.
"EMPLOYEE" means, for purposes of this Plan, persons continuously
employed by the Company or by any current or future subsidiary of the Company on
a regular basis, whether full-time or part-time, at any time during the duration
hereof. "Employees" is the plural of Employee.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as from time
to time amended, or any replacement act or legislation.
9
<PAGE>
"FAIR MARKET VALUE" of the Company's common stock shall be
determined by the Board or (a) if the common stock is listed on the Nasdaq
National Market, the average of the high and low per share sales prices for
the common stock as reported by the Nasdaq National Market for a single
trading day or (b) if the common stock is listed on the New York Stock
Exchange or the American Stock Exchange, the average of the high and low per
share sales prices for the common stock as such price is officially quoted in
the composite tape of transactions on such exchange for a single trading day.
If there is no such reported price for the common stock for the date in
question pursuant to items (a) or (b), then such price on the last preceding
date for which such price exists shall be determinative of the Fair Market
Value.
"INCENTIVE STOCK OPTION" means an option issued by the Company to
purchase shares of stock of the Company that meets the definition of
"incentive stock option" contained in Section 422 of the Internal Revenue
Code of 1986, as amended, and that is issued by the Company to be an
Incentive Stock Option. "Incentive Stock Options" is the plural of Incentive
Stock Option.
"NONQUALIFIED STOCK OPTION" means an option issued by the Company to
purchase shares of stock of the Company that is not an Incentive Stock
Option. "Nonqualified Stock Options" is the plural of Nonqualified Stock
Option.
"OPTION GAIN" means the gain represented by the Fair Market Value on
the date of exercise over the exercise price, multiplied by the number of
Shares purchased by Optionee, without regard to any subsequent decrease or
increase in Fair Market Value.
"OPTIONED SHARES" means Shares subject to a Stock Option.
"OPTIONEE" means the recipient of a Stock Option pursuant to a Stock
Option Agreement. "Optionees" is the plural of Optionee.
"PLAN" means this eMagin Corporation 2000 Stock Option Plan, which
also may be referred to as the "eMagin Corporation Stock Option Plan."
"PLAN GUIDELINES" shall mean the guidelines, rules, policies,
regulations, forms of notice and forms of agreements and instruments, if any,
adopted and amended by the Board from time to time with respect to this Plan
pursuant to Section 2.3.
"SHARES" shall mean the Shares of the Company reserved for issuance
under this Plan as further defined in Section 2.2.
"STOCK OPTION" means an agreement entered into by the Company
granting the recipient the right to purchase shares of stock of the Company,
at certain times and under certain conditions, subject to certain obligations
and responsibilities as defined in this Plan and in the written Stock Option
Agreement, whether an Incentive Stock Option or a Nonqualified Stock Option.
"Stock Options" is the plural of Stock Option.
"STOCK OPTION AGREEMENT" means the written contract by which a Stock
Option is granted by the Company to an Optionee. "Stock Option Agreements" is
the plural of Stock Option Agreement.
"SUCCESSOR CORPORATION" has the meaning set forth under Section
2.5(b).
2. GENERAL PROVISIONS APPLICABLE TO BOTH NONQUALIFIED STOCK
OPTIONS AND INCENTIVE STOCK OPTIONS GRANTED BY THE COMPANY.
2.1 OBJECTIVES OF THIS PLAN
The purpose of this Plan is to encourage ownership of common stock
of the Company by Employees and to provide a means of granting Stock Options
to Consultants and Directors. This Plan is intended to provide an incentive
to Employees for maximum effort in the successful operation of the Company
and is expected to benefit the shareholders by enabling the Company to
attract and retain personnel of the best available talent through the
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<PAGE>
opportunity to share in the increased value of the Company's shares to which
such personnel have contributed. The benefits of this Plan are not a
substitute for compensation otherwise payable to Employees pursuant to the
terms of their employment.
2.2 STOCK RESERVED FOR THIS PLAN
Subject to the provisions of Section 2.10, the number of shares
reserved for issuance upon the exercise of Stock Options granted under this
Plan shall be 3,106,000 shares of the $0.001 par value common stock of the
Company (the "Shares"), which Shares shall be reserved from the Company's
authorized and unissued shares. Shares subject to any Stock Option under this
Plan which are not exercised in full or Shares as to which the right to
purchase is forfeited through default or otherwise, shall remain available
for other Stock Options under this Plan. The aggregate number of Shares
subject to Stock Options under this Plan or reserved for issuance by the
Board shall not exceed the number approved by the shareholders at the time of
adoption hereof unless such increase is approved by the Company's
shareholders. Such approval shall be by the affirmative vote of shareholders
holding a majority of the issued and outstanding shares of common stock of
the Company entitled to vote at a meeting called to approve said increase.
2.3 ADMINISTRATION OF THIS PLAN
(a) This Plan shall be administered by the Board, provided that
at all times during which the Company is subject to the periodic reporting
requirements of the Exchange Act each member of the Board who participates in
administration must be a "Non-Employee Director" as that term is defined in
Rule 16b-3 of the Exchange Act.
(b) The Board may appoint a Board committee (the "Committee")
to administer this Plan in the name of the Board. The Board or the Committee
so appointed shall have full power and authority to administer and interpret
this Plan and to adopt, from time to time, such guidelines, rules, policies,
regulations, forms of notice and forms of agreements and instruments for the
administration of this Plan (collectively, "Plan Guidelines") as the Board or
such Committee, as the case may be, deems necessary or advisable. Such powers
include, but are not limited to (subject to the specific limitations
described herein), authority to determine the Employees, Consultants and
Directors to be granted Stock Options under this Plan, to determine the size,
type and applicable terms and conditions of grants to be made to such
Employees, Consultants and Directors, to determine a time when Stock Options
will be granted and to authorize grants to eligible Employees, Consultants
and Directors.
(c) The Board's interpretations of this Plan and all Stock
Option Agreements, including the definitions of terms used herein and in
Stock Option Agreements, and all actions taken and determinations made by the
Board concerning any matter arising under or with respect to this Plan or any
Stock Options granted pursuant to this Plan, shall be final, binding and
conclusive on all interested parties, including the Company, its shareholders
and all former, present and future Employees, Consultants and Directors of
the Company. So long as the Company is not subject to the reporting
requirements of the Exchange Act, the Board may delegate some or all of its
power and authority hereunder to the duly elected officers of the Company,
such delegation to be subject to such terms and conditions as the Board in
its discretion shall determine. Such delegation of authority may be contained
in the Plan Guidelines. The Board may, as to questions of accounting, rely
conclusively upon any determinations made by independent public accountants
of the Company.
2.4 ELIGIBILITY; FACTS TO BE CONSIDERED IN GRANTING
STOCK OPTIONS
The Board shall have the authority to determine the persons eligible
to receive a Stock Option, the time or times at which the Optioned Shares may
be purchased and whether all of the Stock Options may be exercised at one
time or in increments.
2.5 RIGHTS OF OPTIONEE IN EVENT OF MERGER,
CONSOLIDATION, SALE OF ASSETS OR DISSOLUTION
(a) Except as provided in Section 2.5(b) hereof, and
notwithstanding anything in this Plan to the contrary, the Optionee may
conditionally purchase the full amount of Optioned Shares for which Stock
Options have
11
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been granted to the Optionee and for which the Stock Options have not been
exercised under the following conditions:
(1) The Optionee may conditionally purchase any or all
Optioned Shares during the period commencing ten (10) days and ending five
(5) days prior to the scheduled effective date of a merger or consolidation
(as such effective date may be delayed from time to time) wherein the Company
is not to be the surviving corporation and the shareholders of the
corporation immediately prior to the merger or consolidation are not to own a
majority of the capital stock of the surviving corporation immediately after
the merger or consolidation, provided such merger or consolidation is not
between or among the Company and other corporations related to or affiliated
with the Company;
(2) The Optionee may conditionally purchase any or all
Optioned Shares during the period commencing ten (10) days and ending five
(5) days prior to the scheduled closing date of a sale of all or
substantially all of the assets of the Company (as such closing date may be
delayed from time to time); and
(3) The Optionee may conditionally purchase any or all
Optioned Shares during the period commencing the date the shareholders of the
Company approve the dissolution of the Company and ending five (5) days prior
to the date of filing its Articles of Dissolution.
If the merger, consolidation, sale of assets (collectively, a "Change of
Control Event"), or dissolution, as the case may be and as described in
Subsections (1) through (3) of this Section 2.5(a), once commenced, is
canceled or revoked, the conditional purchase of Shares for which the option
to purchase would not have otherwise been exercisable at the time of said
cancellation or revocation, but for the operation of this Section 2.5, shall
be rescinded. With respect to all other Shares conditionally purchased, the
Optionee may rescind such purchase at Optionee's discretion. If the Change of
Control Event does occur or Articles of Dissolution are filed, as the case
may be and as described in Subsections (1) through (3) of this Section
2.5(a), and the Optionee has not conditionally purchased all Optioned Shares,
all unexercised Stock Options that have not been assumed pursuant to Section
2.5(b) shall terminate on the effective, closing, or filing date, as the case
may be.
(b) The Optionee shall have no right to purchase shares
conditionally in the event of a Change of Control Event if:
(1) in the opinion of the Company's outside
accountants, it would render unavailable "pooling of interest" accounting for
a Change of Control Event that would otherwise qualify for such accounting
treatment; or
(2) such Stock Option is, in connection with the
Change of Control Event, either to be assumed by the successor or purchasing
corporation or parent thereof (the "Successor Corporation") or to be replaced
with a comparable award for the purchase of shares of the capital stock of
the Successor Corporation; or
(3) such Stock Option is to be replaced with a cash
incentive program of the Successor Corporation that preserves the spread
existing at the time of the Change of Control Event and provides for
subsequent payout in accordance with the same vesting schedule applicable to
such Stock Option.
The determination of Stock Option comparability shall be made by the Board,
and its determination shall be conclusive and binding.
(c) If the Company shall be the surviving corporation in any
merger or consolidation or is a party to a merger or consolidation which does
not otherwise qualify as a Change of Control Event, any Stock Option granted
hereunder shall pertain and apply to the securities to which a holder of the
number of Shares of common stock subject to the Stock Option would have been
entitled.
(d) The grant of Options will in no way affect the Company's
right to adjust, reclassify, reorganize, or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
12
<PAGE>
(e) Nothing herein shall allow the Optionee to purchase
Optioned Shares, the options for which have expired.
2.6 STOCK OPTION AGREEMENTS; TERMS AND EXPIRATION OF
STOCK OPTIONS
Each Stock Option granted under this Plan shall be pursuant to a
written Stock Option Agreement in a form substantially similar to the form
attached as ANNEX A, which shall designate whether the Stock Option is an
Incentive Stock Option or Nonqualified Stock Option, shall be subject to such
amendment or modification from time to time as the Board shall deem necessary
or appropriate to comply with or take advantage of applicable laws or
regulations and shall contain or be subject to provisions as to the following
effect, together with such other provisions as the Board shall from time to
time approve:
(a) that, subject to the provisions of Section 2.6(b) below,
the Stock Option, as to the whole or any part thereof, may be exercised only
by the Optionee or Optionee's personal representative;
(b) except as may be otherwise permitted pursuant to Section
2.13(c) or Section 3.3, that neither the whole nor any part of the Stock
Option shall be transferable by the Optionee or by operation of law other
than by will of, or by the laws of descent and distribution applicable to, a
deceased Optionee and that the Stock Option and any and all rights granted to
the Optionee thereunder and not theretofore effectively and completely
exercised shall automatically terminate and expire upon any sale, transfer,
or hypothecation or any attempted sale, transfer, or hypothecation of such
rights or upon the bankruptcy or insolvency of the Optionee or Optionee's
estate;
(c) that subject to the foregoing provisions, a Stock Option
may be exercised at different times for portions of the total number of
Shares for which the right to purchase shall have vested provided that such
portions are in multiples of ten (10) shares if the Optionee holds vested
Stock Options for ninety-nine (99) or fewer Shares and otherwise in multiples
of one hundred (100) Shares;
(d) that no Optionee shall have the right to receive any
dividend on or to vote or exercise any right in respect to any Shares unless
and until the certificates for such Shares have been issued to such Optionee;
(e) that the Stock Option shall expire with respect to vested
Shares at the earliest of the following:
(1) The date specified in the Stock Option Agreement;
(2) With respect to any Employee, ninety (90) days
after voluntary or involuntary termination of Optionee's employment for any
reason other than termination as described in Paragraphs (5) or (6) below;
(3) With respect to any Consultant, ninety (90) days
after the earlier of (i) the date either the Company or Optionee notifies the
other that the Company or the Optionee, as the case may be, is terminating
the consultant relationship or (ii) the end of a period of one hundred twenty
(120) days during which the Consultant has not performed any service for the
Company, unless in either case, such termination is pursuant to events
described in Paragraphs (5) or (6) below;
(4) With respect to a Director, ninety (90) days after
resignation or removal from the Board of the Company or other cessation of
service as a director other than cessation of service as described in
Paragraphs (5) or (6) below;
(5) Immediately upon the discharge of Optionee
(removal from the Board, in the case of a Director) for "cause" as defined in
any employment or consulting agreement between the Company and Optionee or,
if there shall be no such employment or consulting agreement, for Cause as
defined herein;
(6) Twelve (12) months after Optionee's death or
disability; or
13
<PAGE>
(7) In the event of a Change of Control Event, or the
filing of Articles of Dissolution, as the case may be and as described in
Subsections (1) through (3) of Section 2.5(a), on the date specified in
Section 2.5(a). However, if the Change of Control Event does not occur or if
Articles of Dissolution are not filed, as the case may be and as described in
Subsections (1) through (3) of Section 2.5(a), all Stock Options which are
terminated pursuant to this Subsection (e)(7) shall be reinstated as if no
action with respect to any of said events had been contemplated or taken by
any party thereto and all Optionees shall be returned to their respective
positions on the date of termination;
(f) that, to the extent a Stock Option Agreement provides for
the vesting of the right to purchase in increments, such vesting shall cease
as of the date of the Optionee's death, disability, or, in the case of any
Employee, voluntary or involuntary termination of Optionee's employment with
the Company for any reason or, in the case of any Consultant, (i) the date
either the Company or Optionee notifies the other that the Company or the
Optionee, as the case may be, is terminating the consultant relationship or
(ii) the end of a period of one hundred twenty (120) days during which the
Consultant has not performed any service for the Company or, in the case of a
Director, upon his resignation or removal from the Board of the Company or
other cessation of his services as a director;
(g) that the time at which or the installments in which the
Stock Option shall become exercisable, is as set forth in the Stock Option
Agreement; provided that if not so set forth in the Stock Option Agreement,
the Stock Option will become exercisable according to the following schedule,
which may be waived or modified by the Board at any time:
<TABLE>
<CAPTION>
Period of Optionee's Continuous Employment or Service
With the Company or Its Subsidiaries From the Date Option Percent of Total Option
Is Granted That Is Exercisable
- ----------------------------------------------------------- -----------------------------
<S> <C>
After 1 year 25%
After 2 years 50%
After 3 years 75%
After 4 years 100%
</TABLE>
(h) that the terms of the Stock Option Agreement shall be a
contract between the Company and the Optionee and the specific terms of any
Stock Option Agreement shall govern over the more general terms hereof; and
(i) with respect to Employees, subject to the Plan Guidelines,
the Stock Option Agreement shall not be affected by any changes of duties or
position so long as the Optionee shall continue to be an Employee, subject to
the terms hereof.
2.7 RULE 16B-3 COMPLIANCE
(a) Unless an Optionee could otherwise exercise a Stock Option
or dispose of Shares delivered upon exercise of a Stock Option granted under
the Plan without incurring liability under Section 16(b) of the Exchange Act,
at least six months shall elapse from the date of acquisition of the Stock
Option to the date of disposition of its underlying Shares.
(b) It is the intent of the Company that this Plan comply in
all respects with applicable provisions of Rule 16b-3 or Rule 15a-1(c)(3)
under the Exchange Act in connection with any grant of Stock Options to or
other transaction by an Optionee who is subject to Section 16 of the Exchange
Act (except for transactions exempted under alternative Exchange Act Rules or
acknowledged in writing to be non-exempt by such Optionee). Accordingly, if
any provision of this Plan or any Stock Option Agreement relating to a Stock
Option does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the
applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such
Optionee shall avoid liability under Section 16(b).
14
<PAGE>
2.8 NOTICE OF INTENT TO EXERCISE STOCK OPTION
The Optionee (or other person or persons, if any, entitled
hereunder) desiring to exercise a Stock Option as to all or part of the
Shares covered thereby shall in writing notify the Company at its principal
office, specifying the number of Optioned Shares to be purchased and, if
required by the Company, representing in form satisfactory to the Company
that the Shares are being purchased for investment and not with a view to
resale or distribution. The Company from time to time may issue or specify to
Optionees a written form for use in connection with any such exercise. With
respect to any Shares conditionally purchased pursuant to Section 2.5(a)
above and for which such purchase has not been voluntarily or otherwise
rescinded pursuant to Section 2.5(a), the Optionee shall be deemed to have
given to the Company the notice of exercise required by this Section 2.8 as
of ten (10) days prior to the closing or effective date of the Change of
Control Event or the filing of Articles of Dissolution, as the case may be
and as described in Subsections (1) through (3) of Section 2.5(a).
2.9 METHOD OF EXERCISE OF STOCK OPTION
Within ten (10) days after receipt by the Company of the notice
provided in Section 2.8, but not later than the expiration date specified in
Section 2.5(e), the Stock Option shall be exercised as to the number of
Shares specified in the notice by payment by the Optionee to the Company of
the amount specified below in Section 3.2 and Section 4.5, as applicable.
Payment of such purchase price shall be made in cash, or in accordance with
procedures for a "cashless exercise" as the same may have been established
from time to time by the Company and the brokerage firm, if any, designated
by the Company to facilitate exercises of Stock Options and sales of Shares
under this Plan. The Company has no obligation and has made no commitments to
establish a procedure for "cashless exercise". Payment in shares of the
Company's common stock shall be deemed to be the equivalent of payment in
cash at the Fair Market Value of those shares. For purposes of the preceding
sentence, "Fair Market Value" shall be determined by the Board in the same
manner as utilized in determining the Fair Market Value at the time other
Stock Options are granted.
2.10 RECAPITALIZATION
The aggregate number of Shares for which Stock Options may be
granted hereunder, the number of Shares covered by each outstanding Stock
Option and the price per Share thereof in each such Stock Option Agreement
shall be proportionately adjusted for an increase or decrease in the number
of outstanding shares of common stock of the Company resulting from a stock
split or reverse split of shares or any other capital adjustment or the
payment of a stock dividend or other increase or decrease in such shares
effected without receipt of consideration by the Company excluding any
decrease resulting from a redemption of shares by the Company. If the
adjustment would result in a fractional Share the Optionee shall be entitled
to one (1) additional Share, provided that the total number of Shares to be
granted under this Plan shall not be increased above the equivalent number of
Shares initially allocated or later increased by approved amendment to this
Plan. Any adjustment shall be made by the Board whose determination shall be
final, binding and conclusive.
2.11 SUBSTITUTIONS AND ASSUMPTIONS
The Board shall have the right to substitute, replace, or assume
options in connection with mergers, reorganizations, separations, or other
"corporate transactions" as that term is defined in and said substitutions
and assumptions are permitted by Section 425 of the Code and the regulations
promulgated thereunder. The number of Shares reserved pursuant to Section 2.2
may be increased by the corresponding number of options assumed and, in the
case of a substitution, by the net increase in the number of Shares subject
to options before and after the substitution.
2.12 TERMINAL DATE OF PLAN
This Plan shall not extend beyond a date ten (10) years from the
date of adoption hereof by the Board, provided that any Stock Option to
purchase shares duly granted hereunder prior to such date shall be
exercisable pursuant to its terms and the terms hereof until expiration or
earlier termination of such Stock Option.
15
<PAGE>
2.13 GRANTING OF STOCK OPTIONS
(a) The granting of any Stock Option pursuant to this Plan
shall be entirely in the discretion of the Board and nothing herein contained
shall be construed to give any person any right to participate under this
Plan or to receive any Stock Option under it.
(b) The granting of a Stock Option pursuant to this Plan shall
not constitute any agreement or an understanding, express or implied on the
part of the Company or a current or future subsidiary to employ or retain the
Optionee for any specified period.
(c) The Board shall have the authority to grant both
transferable Stock Options and nontransferable Stock Options and to amend
outstanding nontransferable Stock Options to provide for transferability.
Each nontransferable Stock Option intended to qualify under Rule 16b-3 or
otherwise shall provide by its terms that it is not transferable otherwise
than by will or the laws of descent and distribution or, except in the case
of Incentive Stock Options, pursuant to a "qualified domestic relations
order" as defined by the Code and is exercisable, during the Optionee's
lifetime, only by the Optionee. Each transferable Stock Option may provide
for such limitations on transferability and exercisability as the Board may
designate at the time the Stock Option is granted or is otherwise amended to
provide for transferability.
2.14 WITHDRAWAL
An Optionee may at any time elect in writing to abandon a Stock
Option with respect to the number of Shares as to which the Stock Option
shall not have been exercised.
2.15 GOVERNMENT REGULATIONS
This Plan and the granting and exercise of any Stock Option
hereunder and the obligations of the Company to sell and deliver Shares under
any such Stock Option shall be subject to all applicable laws, rules and
regulations and to such approvals by any governmental agencies as may be
required.
2.16 PROCEEDS FROM SALE OF STOCK
Proceeds of the purchase of Optioned Shares by an Optionee shall be
used for the general business purposes of the Company.
2.17 SHAREHOLDER APPROVAL
This Plan shall be submitted to the shareholders for their approval
within twelve (12) months from the date hereof. The Company may grant Stock
Options prior to such approval which shall be conditioned upon subsequent
shareholder approval.
2.18 COMPLIANCE WITH SECURITIES LAWS
The Board shall have the right to:
(a) require an Optionee to execute, as a condition of exercise
of a Stock Option, a letter evidencing Optionee's intent to acquire the
Shares for investment and not with a view to the resale or distribution
thereof;
(b) place appropriate legends upon the certificate or
certificates for the Shares; and
(c) take such other acts as it deems necessary in order to
cause the issuance of Optioned Shares to comply with applicable provisions of
state and federal securities laws.
In furtherance of the foregoing and not by way of limitation
thereof, no Stock Option shall be exercisable unless such Stock Option and
the Shares to be issued pursuant thereto shall be registered under
appropriate federal and state securities laws, or shall be exempt therefrom,
in the opinion of the Board upon advice of counsel to the
16
<PAGE>
Company. Each Stock Option Agreement shall contain adequate provisions to
assure that there will be no violation of such laws. This provision shall in
no way obligate the Company to undertake registration of Stock Options or
Shares hereunder. Issue, transfer or delivery of certificates for Shares
pursuant to the exercise of Stock Options may be delayed, at the discretion
of the Board until the Board is satisfied that the applicable requirements of
the federal and state securities laws have been met.
The dollar value and number of Stock Options granted under this Plan
are limited pursuant to Rule 701 promulgated by the Securities and Exchange
Commission, which provides an exemption from the registration requirements
under the Act. Any guidelines adopted pursuant to this Plan shall contain the
current limitations specified in said Rule 701 until the Company is
registered under the Act.
2.19 GOLDEN PARACHUTE TAXES
In the event that any amounts paid or deemed paid to an employee
under this Plan are deemed to constitute "excess parachute payments" as
defined in Section 280G of the Code (taking into account any other payments
made under this Plan and any other compensation paid or deemed paid to an
employee), or if any employee is deemed to receive an "excess parachute
payment" by reason of his or her vesting of Options pursuant to Section 2.5
herein, the amount of such payments or deemed payments shall be reduced (or,
alternatively the provisions of Section 2.5 shall not act to vest options to
such employee), so that no such payments or deemed payments shall constitute
excess parachute payments. The determination of whether a payment or deemed
payment constitutes an excess parachute payment shall be in the sole
discretion of the Plan Administrator.
3. PROVISIONS APPLICABLE SOLELY TO NONQUALIFIED STOCK OPTIONS
In addition to the provisions of Section 2 above, the following
paragraphs shall apply to any Stock Options granted under this Plan which are
not Incentive Stock Options.
3.1 OPTION PRICE
The option, or purchase, price of each Share optioned as a
Nonqualified Stock Option under this Plan shall be determined by the Board
and set forth in the Stock Option Agreement.
3.2 METHOD OF EXERCISE OF STOCK OPTION
The amount to be paid by the Optionee upon exercise of a
Nonqualified Stock Option shall be the exercise price provided for in the
Stock Option Agreement, together with the amount of federal, state and local
income and FICA taxes required to be withheld by the Company. If the Company
has established procedures for a "cashless exercise" pursuant to Section 2.9,
an Optionee may elect to pay Optionee's federal, state, or local income and
FICA withholding tax by having the Company withhold shares of Company common
stock having a value equal to the amount required to be withheld. The value
of the shares to be withheld is deemed to equal the Fair Market Value of the
shares on the day the option is exercised. An election by an Optionee to have
shares withheld for this purpose will be subject to the following
restrictions:
(a) If an Optionee has received multiple Stock Option grants, a
separate election must be made for each grant;
(b) The election must be made prior to the day the Stock Option
is exercised;
(c) The election will be irrevocable;
(d) The election will be subject to the disapproval of the
Board;
(e) If the Optionee is an "officer" of the Company within the
meaning of Section 16 of the Exchange Act ("Section 16") as defined in Rule
16a-1 promulgated by the Securities and Exchange Commission, the election may
not be made within six (6) months following the grant of the Stock Option; and
17
<PAGE>
(f) If the Optionee is an "officer" of the Company within the
meaning of Section 16 as so defined, the election must be made either six (6)
months prior to the day the Stock Option is exercised or during the period
beginning on the third business day following the date of release of the
Company's quarterly or annual summary statement of sales and earnings and
ending on the twelfth (12th) business day following such date.
3.3 ASSIGNMENT
The Company may allow limited assignment rights for the gifting by
Optionee of rights hereunder to vested Nonqualified Stock Options, on terms
to be determined by the Board from time to time.
4. PROVISIONS APPLICABLE SOLELY TO INCENTIVE STOCK OPTIONS
In addition to the provisions of Section 2 above, the following
paragraphs shall apply to any Stock Options granted under this Plan which are
Incentive Stock Options.
4.1 CONFORMANCE WITH INTERNAL REVENUE CODE
Stock Options granted under this Plan which are "Incentive Stock
Options" shall conform to, be governed by and be interpreted in accordance
with Section 422 of the Code and any regulations promulgated thereunder and
amendments to the Code and Regulations. Only Employees may be granted
Incentive Stock Options hereunder--Consultants and non-employee Directors may
not receive Incentive Stock Options hereunder.
4.2 OPTION PRICE
The option, or purchase, price of each Share optioned as an
Incentive Stock Option under this Plan shall be determined by the Board at
the time of the action for the granting of the Stock Option and set forth in
the Stock Option Agreement, but shall not, in any event, be less than the
Fair Market Value of the Company's common stock on the date of grant.
4.3 LIMITATION ON AMOUNT OF INCENTIVE STOCK OPTION
The aggregate Fair Market Value of the Optioned Shares, as
determined on the date of grant, vesting in any one calendar year with
respect to which an Employee has the right to purchase (under this Plan or
any other plan of the Company which authorizes Incentive Stock Options) shall
not exceed $100,000; and to the extent any Stock Option purporting to be an
Incentive Stock Option grants an Employee the right to purchase Optioned
Shares with an aggregate Fair Market Value vesting in any one calendar year
in excess of $100,000, as so determined (under this Plan or any other plan of
the Company which authorizes Incentive Stock Options), shall be deemed a
Nonqualified Stock Option for such excess amount.
4.4 LIMITATION ON GRANTS TO SUBSTANTIAL SHAREHOLDERS
It is the Company's intent that it will not grant Incentive Stock
Options to any Employee who, immediately prior to the grant of a Stock Option
hereunder, owns stock in the Company representing more than ten percent (10%)
of the voting power of all classes of stock of the Company, unless the per
share option price specified by the Board for the Incentive Stock Options
granted such an Employee is at least one hundred ten percent (110%) of the
Fair Market Value of the Company's stock on the date of grant and such Stock
Option, by its terms, is not exercisable after the expiration of five (5)
years from the date such Stock Option is granted. Any Stock Option that by
its terms purports to be an Incentive Stock Option that is issued to an
Employee who owns stock in the Company representing more than ten percent
(10%) of the voting power of all classes of stock of the Company that does
not have an exercise price of at least one hundred ten percent (110%) of the
Fair Market Value of the Company's stock on the date of grant or that is, by
its terms, exercisable after the expiration of five (5) years from the date
such Stock Option is granted, shall be deemed a Nonqualified Stock Option.
18
<PAGE>
4.5 METHOD OF EXERCISE OF STOCK OPTION
The amount to be paid by the Optionee upon exercise of an Incentive
Stock Option shall be the purchase price per share provided for in the Stock
Option Agreement.
5. TERMINATION AND AMENDMENT
This Plan, the Plan Guidelines and all rules and regulations adopted
in respect hereof may be terminated, suspended, or amended at any time by a
majority vote of the Board, provided that no such action shall adversely
affect any material rights of Optionees granted under this Plan prior to such
action without the consent of such Optionees and provided further that to the
extent required for compliance with Section 422 of the Code or any applicable
law or regulation, shareholder approval will be required for any amendment
that will (a) increase the total number of shares as to which Options may be
granted under the Plan, (b) modify the class of persons eligible to receive
Options, or (c) otherwise require shareholder approval under any applicable
law or regulation. The Board may amend the terms and conditions of
outstanding Stock Options, provided, however, that (i) no such amendment
would be materially adverse to the holders of such Stock Options without
their consent, (ii) no such amendment shall extend the period for exercise of
a Stock Option, and (iii) the amended terms of a Stock Option would be
permitted under this Plan. Any change or adjustment to an outstanding
Incentive Stock Option shall not, without the consent of the Optionee, be
made in a manner so as to constitute a "modification" that would cause such
Incentive Stock Option to fail to continue to qualify as an Incentive Stock
Option.
6. FOREIGN EMPLOYEES
Without amending this Plan, the Board may grant Stock Options to
eligible Employees who are foreign nationals on such terms and conditions
different from those specified in this Plan as may in the judgment of the
Board be necessary or desirable to foster and promote achievement of the
purposes of this Plan, and, in furtherance of such purposes the Board may
make such modifications, amendments, procedures, subplans, and the like as
may be necessary or advisable to comply with the provisions of the laws in
other countries in which the Company operates or has Employees.
7. REGISTRATION, LISTING AND QUALIFICATION OF SHARES
Each Stock Option shall be subject to the requirement that if at any
time the Board shall determine that the registration, listing, or
qualification of the Shares covered thereby upon any securities exchange or
under any foreign, federal, state, or local law, or the consent or approval
of any governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, the granting of such Stock Option or the purchase
of shares thereunder, no such Stock Option may be exercised unless and until
such registration, listing, qualification, consent, or approval shall have
been effected or obtained free of any condition not acceptable to the Board.
Any person exercising a Stock Option shall make such representations and
agreements and furnish such information as the Board may request to assure
compliance with the foregoing or any other applicable legal requirements.
8. NO RIGHTS TO STOCK OPTIONS OR EMPLOYMENT; NO RESTRICTIONS
No Employee or other person shall have any claim or right to be
granted a Stock Option under this Plan. Having received a Stock Option under
this Plan shall not give an Employee or other person any right to receive any
other grant or Stock Option under this Plan. An Optionee shall have no rights
to or interest in any Stock Option except as set forth herein. Neither this
Plan nor any action taken hereunder shall be construed as giving any Employee
any right to be retained in the employ of the Company or any Consultant or
Director any right to be retained or engaged by the Company, or otherwise in
any way affect any right and power of the Company to terminate the employment
or engagement of any Employee, Consultant or Director at any time with or
without assigning a reason therefor. Nothing in this Plan shall restrict the
Company's rights to adopt other option plans pertaining to any or all of the
Employees, Consultants or Directors covered under this Plan or other
Employees, Consultants or Directors not covered under this Plan.
Each Stock Option granted hereunder may be affected, with regard to
both vesting schedule and termination, by leaves of absence, a reduction in the
number of hours worked, partial disability and other changes in
19
<PAGE>
Optionee's Employee, Consultant or Director status, as the case may be. The
Company's policies in such matters shall be contained in the Plan Guidelines
adopted by the Board. The Plan Guidelines and the guidelines, rules, policies
and regulations contained therein may be amended at any time and from time to
time by the Board or the Committee, in its sole discretion and with or
without notice. Optionee's rights hereunder or under any Stock Option granted
hereunder at any time shall be governed by the Plan Guidelines in effect at
the time of any change in Optionee's employment status as contemplated above.
9. COSTS AND EXPENSES
Except as provided herein with respect to the payment of taxes, all
costs and expenses of administering this Plan shall be borne by the Company
and shall not be charged to any grant or any Optionee receiving a grant.
10. PLAN UNFUNDED
This Plan shall be unfunded. Except for the Board's reservation of a
sufficient number of authorized shares to the extent required by law to meet
the requirements of this Plan, the Company shall not be required to establish
any special or separate fund or to make any other segregation of assets to
assure payment of any grant under this Plan.
11. GOVERNING LAW
This Plan shall be governed by and construed in accordance with the
laws of the State of Washington (without regard to the legislative or
judicial conflict of laws rules of any state), except to the extent
superseded by federal law.
12. SEVERABILITY
In the event any provision of this Plan or any Stock Option
Agreement is found to be invalid or unenforceable, such provision shall be
deemed reformed to the extent necessary to render it valid and enforceable.
The invalidity or unenforceability of any provision in this Plan or any Stock
Option Agreement shall not in any way affect the validity or enforceability
of any other provision of this Plan or the Stock Option Agreement, as the
case may be and this Plan and the Stock Option Agreement shall be construed
in all respects as if such invalid or unenforceable provision had never been
included.
20
<PAGE>
ANNEX A
Stock Option No. ______
EMAGIN CORPORATION (THE "COMPANY")
STOCK OPTION AGREEMENT FOR PURCHASE OF STOCK
We are pleased to inform you that the Company has granted to you, as
the individual named below (the "Optionee"), this Stock Option. This Stock
Option Agreement is a contract between you and the Company. It grants to you
certain defined rights, at certain times and under certain conditions, to
purchase shares of the Company's common stock, and in exchange you accept
certain obligations and responsibilities, as described below and in the
Company's 2000 Stock Option Plan (the "Plan") and the attached Terms and
Conditions.
FOR VALUABLE CONSIDERATION, the Company does hereby grant to the
Optionee, as of the Date of Option Grant specified below, the right and
option to purchase the number of shares of common stock of the Company
specified below (the "Option Shares") for the Exercise Price Per Share
specified below, and the right to purchase the Option Shares under this Stock
Option Agreement shall accrue and vest according to the Vesting Schedule
specified below:
<TABLE>
<CAPTION>
-----------------------------------------------------------------------
NAME OF OPTIONEE:
-----------------------------------------------------------------------
<S> <C>
TYPE OF OPTION:
-----------------------------------------------------------------------
NUMBER OF OPTION SHARES:
-----------------------------------------------------------------------
EXERCISE PRICE PER SHARE:
-----------------------------------------------------------------------
DATE OF OPTION GRANT:
-----------------------------------------------------------------------
TERM OF OPTION: __ YEARS FROM DATE OF OPTION GRANT
-----------------------------------------------------------------------
VESTING SCHEDULE:
-----------------------------------------------------------------------
</TABLE>
EXECUTED as of the Date of Option Grant.
eMagin Corporation
By
--------------------------------
Its
-------------------------------
BY SIGNING BELOW AND ENTERING INTO THIS STOCK OPTION AGREEMENT,
OPTIONEE AGREES TO THE TERMS HEREOF AND ALL OBLIGATIONS AND
RESPONSIBILITIES AS DESCRIBED IN THE PLAN AND THE ATTACHED TERMS AND
CONDITIONS.
OPTIONEE
, as Optionee
--------------------------
<PAGE>
TERMS AND CONDITIONS OF STOCK OPTION AGREEMENT
STOCK OPTIONS ARE SUBJECT TO THE TERMS HEREOF AND OF THE
COMPANY'S 2000 STOCK OPTION PLAN ("PLAN").
CAPITALIZED TERMS USED IN THIS STOCK OPTION AGREEMENT (THIS "AGREEMENT"),
IF NOT OTHERWISE DEFINED, HAVE THE MEANINGS GIVEN THEM IN THE PLAN.
1. a. Any Option Shares which become purchasable
("vest") but are not purchased on a vesting date or anniversary date, as the
case may be, may be purchased on any subsequent date, provided all options
for the purchase of Option Shares must be exercised within the time periods
specified in Section 2 below.
b. Optionees shall have conditional purchase rights
in the event of any Change of Control Event or liquidation as described in
the Plan.
2. All UNVESTED options shall expire upon any termination of
Optionee's employment with or provision of services to the Company for any
reason, whether voluntary or involuntary, or upon the death or disability of
Optionee, as more fully described in the Plan.
Subject to the terms hereof, all VESTED options (i.e., options for
which the right to purchase has accrued) shall expire at the earliest of the
following:
a. The earlier of the end of the Term of Option
specified on the first page of this Agreement or ten (10) years from the Date
of Option Grant specified on the first page of this Agreement;
b. If Optionee is or becomes an Employee, ninety (90)
days after voluntary or involuntary termination of Optionee's employment
other than termination as described in Paragraphs (e) or (f) below;
c. If Optionee is or becomes a Consultant, ninety
(90) days after the earlier of (i) the date either the Company or Optionee
notifies the other that the Company or the Optionee, as the case may be, is
terminating the consultant relationship or (ii) the end of a period of one
hundred twenty (120) days during which the Consultant has not performed any
service for the Company, unless in either case, such termination is pursuant
to events described in Paragraphs (e) or (f) below;
d. If Optionee is a Director, ninety (90) days after
resignation or removal from the Board of the Company or other cessation of
service as a director other than cessation of service as described in
Paragraphs (e) or (f) below;
e. Upon discharge of Optionee (removal from the
Board, in the case of a Director) for "cause" as defined in any employment or
consulting agreement between the Company and Optionee or, if there shall be
no such employment or consulting agreement, for Cause, as defined in the Plan;
f. Twelve (12) months after Optionee's death or
disability; or
g. In the event of a Change of Control Event or
dissolution as described in the Plan. However, if the Change of Control Event
or dissolution, as the case may be and as described in the Plan, is not
finalized, all options which are terminated pursuant to this Subsection (g)
shall be reinstated as described in the Plan.
Optionee agrees that all vested and unvested options granted
pursuant to this Stock Option shall expire in accordance with the provisions
of this paragraph 2 following involuntary or voluntary termination of
Optionee's employment with, engagement by or services to the Company, as
applicable, for any reason. Optionee hereby waives the right to recover as
damages any vested or unvested stock options which expire according to this
paragraph 2. This waiver shall include, but not be limited to, damages
related to any claims Optionee may have against the Company to which Optionee
may be entitled by virtue of employment with the Company or the termination
of Optionee's employment, such as claims arising under any federal, state or
local law relating to employment rights and/or benefits and any other legal
or equitable grounds.
3. This Stock Option may be exercised at different times for
portions of the total number of Option Shares for which the right to purchase
shall have accrued and vested hereunder, provided that such portions are in
multiples of ten (10) shares if the Optionee holds vested portions for
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ninety-nine (99) or fewer shares and otherwise in multiples of one hundred
(100) shares.
4. This Stock Option shall be adjusted for recapitalizations,
stock splits, stock dividends and the like as described in the Plan.
5. This is not an employment contract and while the benefits,
if any, of this Stock Option may be an incident of the Optionee's employment
with or provision of services to the Company, the terms and conditions of
such employment or provision of services are otherwise wholly independent
hereof.
6. Neither this Stock Option nor any right under this
Agreement is assignable and rights under this Agreement may be exercised only
by the Optionee or a person to whom the rights under this Agreement shall
pass by will or the laws of descent and distribution.
7. The Optionee shall indicate Optionee's intention to
exercise this Stock Option with respect to vested Option Shares by notifying
the Company in writing of such intention in the form of the Notice of
Exercise attached hereto as Exhibit A, indicating the number of Option Shares
Optionee intends to purchase and, within ten (10) days thereafter, paying to
the Company an amount sufficient to cover the total option price of such
Option Shares together with the amount of federal, state and local income and
FICA taxes required to be withheld by the Company, if any, as provided in the
Plan. Payment of the Exercise Price Per Share specified on the first page of
this Agreement shall be made in cash or in accordance with such procedures
for a "cashless exercise" as may be established from time to time by the
Company and the brokerage firm, if any, designated by the Company to
facilitate exercises of Stock Options and sales of Option Shares under the
Plan.
8. If the Optionee, immediately prior to the grant of an
Incentive Stock Option hereunder, owns stock in the Company representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company, the Exercise Price Per Share specified on the first page of this
Agreement for Incentive Stock Options granted hereunder shall be not less
than one hundred ten percent (110%) of the Fair Market Value of the Company's
common stock on the Date of Option Grant specified on the first page of this
Agreement and such Incentive Stock Option shall not be exercisable after the
expiration of five (5) years from said Date of Option Grant and
notwithstanding any pricing or vesting terms hereof which appear at variance
with the foregoing, all pricing and vesting terms hereof shall be deemed
hereby to conform with the foregoing limitations. In lieu of the foregoing,
the Optionee may elect to have a Stock Option that purports to be an
Incentive Stock Option treated as a Non-Qualified Stock Option pursuant to
the original terms of this Agreement.
9. Notwithstanding the foregoing, no Stock Option shall be
exercisable and rights under this Agreement are not enforceable, unless and
until all requirements imposed by or pursuant to Section 2.18 of the Plan are
satisfied.
SECTION 2.18 of THE Plan DESCRIBES CERTAIN IMPORTANT CONDITIONS
RELATING TO FEDERAL AND STATE SECURITIES LAWS THAT MUST BE SATISFIED BEFORE
THIS OPTION CAN BE EXERCISED AND BEFORE THE COMPANY CAN ISSUE ANY OPTION
SHARES TO THE OPTIONEE. AT THE PRESENT TIME THE PLAN IS NOT REGISTERED AND,
ALTHOUGH SHARES MAY BE ISSUED UPON EXERCISE, THE SHARES SO ISSUED ARE NOT
FREELY TRADABLE.
THERE CAN BE NO ASSURANCE THAT THE EXEMPTION(S) ALLOWING ISSUANCE OF
THE SHARES UPON EXERCISE WILL REMAIN AVAILABLE, NOR IS THERE ASSURANCE THAT
ISSUED SHARES WILL BE REGISTERED OR THAT ONCE REGISTERED THE REGISTRATION
WILL BE MAINTAINED. IF THE SHARES ARE NOT REGISTERED OR IF THE REGISTRATION
IS NOT MAINTAINED, THE OPTIONEE WILL NOT BE ABLE TO TRADE SHARES OBTAINED
UPON EXERCISE OF THIS STOCK OPTION UNLESS AN EXEMPTION FROM REGISTRATION IS
AVAILABLE. AT THE PRESENT TIME, EXEMPTIONS FROM REGISTRATION UNDER FEDERAL
AND STATE SECURITIES LAWS ARE VERY LIMITED AND MIGHT BE UNAVAILABLE TO THE
OPTIONEE PRIOR TO THE EXPIRATION OF THIS OPTION. AS A CONSEQUENCE OF THE
FOREGOING, THE OPTIONEE MIGHT NOT HAVE AN OPPORTUNITY TO EXERCISE THIS OPTION
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AND TO RECEIVE OPTION SHARES UPON SUCH EXERCISE AND, IF THE OPTIONEE IS ABLE
TO EXERCISE THIS OPTION AND TO RECEIVE OPTION SHARES UPON SUCH EXERCISE, THE
OPTIONEE MIGHT NOT HAVE THE OPPORTUNITY TO TRADE SUCH OPTION SHARES.
10. NO RIGHTS TO STOCK OPTIONS OR EMPLOYMENT; NO RESTRICTIONS
Neither Optionee nor any other person shall have any claim or right
to be granted a Stock Option under the Plan. Having received a Stock Option
under the Plan shall not give Optionee any right to receive any other grant
or option under the Plan. Optionee shall have no rights to or interest in any
Option except as set forth herein, in the Plan, or in another Option
specifically granted by the Company to Optionee. Neither this Option, the
Plan, nor any action taken hereunder or under the Plan shall be construed as
giving any Employee, Consultant or Director any right to be retained in the
employ of, or be engaged as a Consultant to, or serve as a Director of, the
Company, as the case may be, or otherwise in any way affect any right and
power of the Company to terminate the employment or engagement of any
Employee, Consultant or Director at any time with or without assigning a
reason therefor. Nothing in the Plan restricts the Company's rights to adopt
other option plans pertaining to any or all of the Employees, Consultants or
Directors covered under the Plan or other Employees, Consultants or Directors
not covered under the Plan.
THIS AGREEMENT AND THE STOCK OPTION REPRESENTED HEREBY MAY BE
AFFECTED, WITH REGARD TO BOTH VESTING SCHEDULE AND TERMINATION, BY LEAVES OF
ABSENCE, A REDUCTION IN THE NUMBER OF HOURS WORKED, PARTIAL DISABILITY AND
OTHER CHANGES IN OPTIONEE'S EMPLOYEE, CONSULTANT OR DIRECTOR STATUS, AS THE
CASE MAY BE. THE COMPANY'S POLICIES IN SUCH MATTERS, IF ANY, SHALL BE
CONTAINED IN THE PLAN GUIDELINES ADOPTED BY THE BOARD. THE PLAN GUIDELINES
AND THE RULES, POLICIES AND REGULATIONS CONTAINED THEREIN MAY BE AMENDED AT
ANY TIME AND FROM TIME TO TIME BY THE BOARD OF DIRECTORS OF THE COMPANY, OR
THE COMMITTEE APPOINTED BY SUCH BOARD, IN ITS SOLE DISCRETION AND WITH OR
WITHOUT NOTICE. OPTIONEE'S RIGHTS HEREUNDER OR UNDER THE PLAN AT ANY TIME
SHALL BE GOVERNED BY THE PLAN GUIDELINES IN EFFECT AT THE TIME OF ANY CHANGE
IN OPTIONEE'S STATUS AS CONTEMPLATED ABOVE.
11. The Stock Option represented by this Agreement is granted
pursuant to and is controlled by the Plan and by the Plan Guidelines, if any,
as adopted by the Board and amended from time to time. Optionee, by execution
hereof, acknowledges receipt of the Plan and the Plan Guidelines as they
currently exist and acceptance of the terms and conditions of the Plan, the
Plan Guidelines and of this Agreement.
12. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be modified rather than voided, if
possible, in order to achieve the intent of the parties to this option to the
extent possible. In any event, all other provisions of this Agreement shall
be deemed valid and enforceable to the full extent.
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EXHIBIT A
EMAGIN CORPORATION
NOTICE OF EXERCISE
OF
STOCK OPTION
TO: EMAGIN CORPORATION (the "Company")
The undersigned hereby exercises Stock Option No. _______, granted on
__________, _____, by the Company pursuant to its 2000 Stock Option Plan, to
purchase __________ Shares of Common Stock of the Company at a price of
$________ per Share, for a total purchase price of $________.
THE SHARES ARE BEING ACQUIRED BY THE UNDERSIGNED FOR INVESTMENT
PURPOSES ONLY AND NOT WITH ANY PRESENT INTENTION TO TRANSFER OR DISTRIBUTE THE
SAME.
By this exercise, the undersigned agrees (i) to provide for the payment
by the undersigned to the Company (in the manner designated by the Company) of
the Company's withholding obligation, if any, relating to the exercise of the
foregoing Stock Option and (ii) if this exercise relates to an Incentive Stock
Option, to notify the Company in writing within fifteen (15) days after the date
of any disposition of any of the Shares of Common Stock issued upon exercise of
the foregoing Stock Option that occurs within two (2) years after the date of
grant of such Stock Option or within one (1) year after such Shares of Common
Stock are issued upon exercise of the foregoing Stock Option.
- ----------------------------- --------------------------------
DATE SIGNATURE
--------------------------------
PRINT NAME
<PAGE>
PROXY
FOR ANNUAL MEETING OF THE SHAREHOLDERS
FASHION DYNAMICS CORP.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Yiu Joe Cheung and Peter Lee
(collectively, the "Proxies"), and each of them, with full power of
substitution, as proxies to vote the shares which the undersigned is entitled to
vote at the Annual Meeting of the Company to be held at the offices of Preston
Gates & Ellis LLP, 701 Fifth Avenue, Suite 5000, Seattle, Washington 98104, on
Tuesday, February 29, 2000 at 10:00 a.m. and at any adjournments thereof.
/ / FOR / / AGAINST / / ABSTAIN Proposal to amend the Company's Articles
of Incorporation to change the name of the Company to "eMagin
Corporation"
/ / FOR / / AGAINST / / ABSTAIN Proposal to elect Yiu Joe Cheung as sole
director of the Company.
/ / FOR / / AGAINST / / ABSTAIN Proposal to approve the adoption, by the
Company's Board of Directors, of the Company's 2000 Stock Option Plan.
This proxy when properly signed will be voted and will be voted in the
manner directed herein by the undersigned shareholder. IF NO DIRECTION IS MADE,
THIS PROXY WILL BE VOTED FOR THE PROPOSAL.
------------------------------
Signature
------------------------------
Signature, if held jointly
Dated: , 2000
-------------------
IMPORTANT - PLEASE SIGN AND RETURN PROMPTLY. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
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