<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 21, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
WELLS-GARDNER ELECTRONICS
CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
ILLINOIS 36-1944630
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION
OF INCORPORATION OR ORGANIZATION) NUMBER)
2701 NORTH KILDARE AVENUE, CHICAGO, ILLINOIS 60639, (773) 252-8220
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
WELLS-GARDNER ELECTRONICS CORPORATION 1998 INCENTIVE STOCK PLAN
(FULL TITLE OF PLAN)
ANTHONY SPIER
2701 NORTH KILDARE AVENUE, CHICAGO, ILLINOIS 60639, (773) 252-8220
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
COPIES TO:
DAVID J. KAUFMAN, ESQ.
KATTEN MUCHIN & ZAVIS
525 W. MONROE, SUITE 1600
CHICAGO, IL 60661-3693
FAX NUMBER: (312) 902-1061
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $1.00 par value (2)........ 600,000 shares(2) (3) $2,764,140 (3) $954
===================================================================================================================
</TABLE>
- ------------------
(1) Includes an indeterminate number of shares of Wells-Gardner Electronics
Corporation Common Stock that may be issuable by reason of stock splits,
stock dividends or similar transactions.
(2) Represents shares issuable upon exercise of outstanding options under the
Wells-Gardner Electronics Corporation 1998 Incentive Stock Plan
(the "Plan").
(3) The amounts are based upon the exercise of options for 252,500 shares at
the price of $4.625 per share and the average of the high and low sales
price of the Common Stock as reported on the American Stock Exchange on
August 14, 1998 of $4.59375 with respect to the exercise of options for
347,500 shares and are used solely for purposes of calculating the
registration fee pursuant to Rule 457 under the Securities Act of 1933.
================================================================================
<PAGE> 2
EXPLANATORY STATEMENT
The information called for in Part I of Form S-8 is currently included
in the prospectus for the Wells-Gardner Electronics Corporation 1998 Incentive
Stock Plan (the "Plan") and is not being filed with or included in this Form
S-8 in accordance with the rules and regulations of the Securities and Exchange
Commission (the "Commission").
I-1
<PAGE> 3
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents have been filed by the Company with the
Commission under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and are incorporated in this Registration Statement by reference:
1. The Company's annual report on Form 10-K for the fiscal year
ended December 31, 1997;
2. The Company's Quarterly Reports on Form 10-Q for the quarters
ending March 31, 1998 and June 30, 1998;
3. The Company Report of Form 8-K dated June 16, 1998, as amended
on August 5, 1998.
In addition, all documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, subsequent to the date hereof
and prior to the filing of a post-effective amendment indicating that all
securities offered pursuant to this Registration Statement have been sold or
deregistering all such securities then remaining unsold, shall be deemed to be
incorporated by reference herein and to be part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Certain provisions of the Illinois Business Corporation Act provide
that the Registrant may indemnify the directors and officers of the Registrant
and affiliated companies against liabilities and expenses incurred by reason of
the fact that such persons were serving in such capacities, subject to certain
limitations and conditions set forth in the statute. Article X of the By-Laws
of the Registrant provides that the Registrant shall indemnify its directors
and officers to the fullest extent permitted by Illinois law.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
4.1 Wells-Gardner Electronics Corporation 1998 Incentive Stock
Plan (the "Plan").
4.2 Form of Incentive Stock Option Agreement for the Plan.
II-1
<PAGE> 4
4.3 Articles of Incorporation of the Company, as amended, filed as
Exhibit 3.1 of the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, and incorporated herein by
reference.
4.4 By-Laws of the Company, as amended, filed as Exhibit 3.2 of
the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, and incorporated herein by reference.
5 Opinion of counsel as to legality of shares of Common Stock
being offered (including consent).
23.1 Consent of KPMG Peat Marwick LLP with respect to the Company's
financial statements.
24 Power of Attorney (included on the signature page of this
Registration Statement).
99.1 Description of Capital Stock.
ITEM 9. UNDERTAKINGS.
1. The Company hereby undertakes:
(a) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually, or in the aggregate, represent
a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement;
provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed with or
furnished to the Commission by the Company pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference
in the Registration Statement.
(b) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
II-2
<PAGE> 5
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
2. The Company hereby undertakes that, for the purpose of determining
any liability under the Securities Act of 1933, each filing of the Company's
annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference in the Registration Statement shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the Company
of expenses incurred or paid by a director, officer or controlling person of
the Company in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Company will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
II-3
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Company certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Chicago, State of Illinois, on this 21st day of
August, 1998.
WELLS-GARDNER ELECTRONICS CORPORATION
By: /S/ ANTHONY SPIER
-----------------------------
Anthony Spier
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Anthony Spier and Randall S. Wells, and each of them, his true and
lawful attorneys-in-fact and agents, with full power of substitution, to sign
on his behalf, individually and in each capacity stated below, all amendments
and post-effective amendments to this Registration Statement on Form S-8
(including registration statements filed pursuant to Rule 462(b) under the
Securities Act of 1933, and all amendments thereto) and to file the same, with
all exhibits thereto and any other documents in connection therewith, with the
Securities and Exchange Commission under the Securities Act of 1933, granting
unto said attorneys-in-fact and agents full power and authority to do and
perform each and every act and thing requisite and necessary to be done in and
about the premises, as fully and to all intents and purposes as each might or
could do in person, hereby ratifying and confirming each act that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on August 21, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ----------------------------- -----------------------------------------------------
<S> <C>
/S/ ANTHONY SPIER Chairman of the Board, President and Chief Executive
- ----------------------------- Officer (Principal Executive Officer) and a Director
Anthony Spier
/S/ GEORGE B. TOMA Chief Financial Officer, Controller and Treasurer
- ------------------------------ (Principal Financial and Accounting Officer)
George B. Toma
/S/ RANDALL S. WELLS Executive Vice President, General Manager and a
- ------------------------------ Director
Randall S. Wells
/S/ JAMES J. ROBERTS, JR. Director
- ------------------------------
James J. Roberts, Jr.
/S/ ERNEST R. WISH Director
- ------------------------------
Ernest R. Wish
/S/ JOHN R. BLOUIN Director
- ------------------------------
John R. Blouin
/S/ IRA J. KAUFMAN Director
- ------------------------------
Ira J. Kaufman
/S/ FRANK R. MARTIN Director
- ------------------------------
Frank R. Martin
</TABLE>
II-4
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBITS DESCRIPTION PAGE NO.
- --------- ------------------------------------------------------------------------------------- -----------
<S> <C> <C>
4.1 Wells-Gardner Electronics Corporation 1998 Stock Incentive Plan (the "Plan"). 8
4.2 Form of Incentive Stock Option Agreement for the Plan. 43
5 Opinion of counsel as to legality of shares of Common Stock being offered (including
consent). 48
23.1 Consent of KPMG Peat Marwick LLP with respect to the Company's financial statements. 51
24 Power of Attorney (included on the signature page of this Registration Statement). -
99.1 Description of Capital Stock 53
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</TABLE>
<PAGE> 1
EXHIBIT 4.1
WELLS-GARDNER ELECTRONICS CORPORATION
1998
INCENTIVE STOCK PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
ESTABLISHMENT.......................................................................P-1
1.1 Purpose..................................................................P-1
ARTICLE II
DEFINITIONS.........................................................................P-1
2.1 "Affiliate"..............................................................P-1
2.2 "Agreement" .............................................................P-1
2.3 "Award"..................................................................P-1
2.4 "Beneficiary"............................................................P-1
2.5 "Board of Directors" or "Board"..........................................P-2
2.6 "Cash Incentive Award"...................................................P-2
2.7 "Cause"..................................................................P-2
2.8 "Change in Control" and "Change in Control Price"........................P-2
2.9 "Code" or "Internal Revenue Code"........................................P-2
2.10 "Commission".............................................................P-2
2.11 "Committee"..............................................................P-2
2.12 "Common Stock"...........................................................P-2
2.13 "Company"................................................................P-2
2.14 "Covered Employee".......................................................P-3
2.15 "Deferred Stock".........................................................P-3
2.16 "Disability" or "Permanent Disability", unless other provided in an
Agreement,...............................................................P-3
2.17 "Effective Date".........................................................P-3
2.18 "Exchange Act"...........................................................P-3
2.19 "Fair Market Value"......................................................P-3
2.20 "Grant Date".............................................................P-3
2.21 "Incentive Stock Option".................................................P-4
2.22 "NASDAQ".................................................................P-4
2.23 "Non-Qualified Stock Option".............................................P-4
2.24 "Option Period"..........................................................P-4
2.25 "Option Price"...........................................................P-4
2.26 "Other Stock Based Awards"...............................................P-4
2.27 "Participant"............................................................P-4
2.28 "Performance Award"......................................................P-4
2.29 "Plan"...................................................................P-4
2.30 "Representative".........................................................P-4
</TABLE>
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<TABLE>
<S> <C>
2.31 "Restricted Stock".......................................................P-4
2.32 "Retirement".............................................................P-5
2.33 "Rule 16b-3" and "Rule 16a-1(c)(3)"......................................P-5
2.34 "Securities Act".........................................................P-5
2.35 "Stock Appreciation Right"...............................................P-5
2.36 "Stock Option" or "Option"...............................................P-5
2.37 "Termination of Employment"..............................................P-5
2.38 "Transfer"...............................................................P-5
ARTICLE III
ADMINISTRATION
....................................................................................P-5
3.1 Committee Structure and Authority........................................P-5
ARTICLE IV
STOCK SUBJECT TO PLAN...............................................................P-8
4.1 Number of Shares.........................................................P-8
4.2 Release of Shares........................................................P-8
4.3 Restrictions on Shares...................................................P-8
4.4 Stockholder Rights.......................................................P-8
4.5 Best Efforts To Register.................................................P-9
4.6 Anti-Dilution............................................................P-9
ARTICLE V
ELIGIBILITY.........................................................................P-9
5.1 Eligibility..............................................................P-9
ARTICLE VI
STOCK OPTIONS......................................................................P-10
6.1 General.................................................................P-10
6.2 Grant and Exercise......................................................P-10
6.3 Terms and Conditions....................................................P-10
6.4 Termination by Reason of Death..........................................P-12
6.5 Termination by Reason of Disability.....................................P-12
6.6 Other Termination.......................................................P-12
ARTICLE VII
STOCK APPRECIATION RIGHTS..........................................................P-13
7.1 General.................................................................P-13
7.2 Grant...................................................................P-13
7.3 Terms and Conditions....................................................P-13
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
ARTICLE VIII
RESTRICTED STOCK...................................................................P-15
8.1 General.................................................................P-15
8.2 Awards and Certificates.................................................P-15
8.3 Terms and Conditions....................................................P-15
ARTICLE IX
DEFERRED STOCK.....................................................................P-16
9.1 General.................................................................P-16
9.2 Terms and Conditions....................................................P-16
ARTICLE X
OTHER AWARDS.......................................................................P-17
10.1 Bonus Stock and Awards In Lieu of Obligations...........................P-17
10.2 Other Stock-Based Awards................................................P-18
10.3 Performance Awards......................................................P-18
ARTICLE XI
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN.............................P-21
11.1 Limited Transfer During Offering........................................P-21
11.2 Committee Discretion....................................................P-21
11.3 No Company Obligation...................................................P-21
ARTICLE XII
CHANGE IN CONTROL PROVISIONS.......................................................P-22
12.1 Impact of Event.........................................................P-22
12.2 Definition of Change in Control.........................................P-23
12.3 Change in Control Price.................................................P-23
ARTICLE XIII
MISCELLANEOUS......................................................................P-23
13.1 Amendments and Termination..............................................P-23
13.2 Stand-Alone, Additional, Tandem, and Substitute Awards..................P-24
13.3 Form and Timing of Payment Under Awards; Deferrals......................P-24
13.4 Status of Awards Under Code Section 162(m)..............................P-25
13.5 Unfunded Status of Plan; Limits on Transferability......................P-25
13.6 General Provisions......................................................P-25
13.7 Mitigation of Excise Tax................................................P-26
13.8 Rights with Respect to Continuance of Employment........................P-27
13.9 Awards in Substitution for Awards Granted by Other Corporations.........P-27
13.10 Procedure for Adoption..................................................P-27
</TABLE>
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<PAGE> 5
<TABLE>
<S> <C>
13.11 Procedure for Withdrawal................................................P-27
13.12 Delay...................................................................P-28
13.13 Headings................................................................P-28
13.14 Severability............................................................P-28
13.15 Successors and Assigns..................................................P-28
13.16 Entire Agreement........................................................P-28
</TABLE>
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<PAGE> 6
WELLS-GARDNER ELECTRONICS CORPORATION
1998 INCENTIVE STOCK PLAN
ARTICLE I
ESTABLISHMENT
1.1 Purpose.
The Wells-Gardner Electronics Corporation 1998 Incentive Stock Plan
("Plan") is hereby adopted by Wells-Gardner Electronics Corporation
("Company"). The purpose of the Plan is to promote the overall financial
objectives of the Company and its stockholders by motivating those persons
selected to participate in the Plan to achieve long-term growth in stockholder
value and by retaining the association of those individuals who are
instrumental in achieving this growth. It is intended that compensation awarded
under the Plan qualifies for tax deductibility under Section 162(m) of the Code
to the extent deemed appropriate by the Committee (as defined herein) and
shareholder approval of the Plan will be sought.
ARTICLE II
DEFINITIONS
For purposes of the Plan, the following terms are defined as set forth
below:
2.1 "Affiliate" means any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated association or other
entity (other than the Company) that directly, or indirectly through one or
more intermediaries, controls, is controlled by, or is under common control
with, the Company including, without limitation, any member of an affiliated
group of which the Company is a common parent corporation as provided in
Section 1504 of the Code.
2.2 "Agreement" or "Award Agreement" means, individually or
collectively, any agreement entered into pursuant to the Plan pursuant to which
an Award is granted to a Participant.
2.3 "Award" means any Option, Stock Appreciation Right, Restricted
Stock, Deferred Stock, Common Stock, Other Stock-Based Award, Performance Award
or Cash Incentive Award, together with any other right or interest granted to a
Participant under the Plan.
2.4 "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted hereunder. If, upon
a Participant's death, there is no designated Beneficiary or surviving
designated Beneficiary, then the term Beneficiary means the person, persons,
trust or trusts entitled by will or the laws of descent and distribution to
receive such benefits.
P-1
<PAGE> 7
2.5 "Board of Directors" or "Board" means the Board of Directors
of the Company.
2.6 "Cash Incentive Award" means a conditional right granted to a
Participant under Section 10.4(c) hereof to receive a cash payment, unless
otherwise determined by the Committee, after the end of a specified period.
2.7 "Cause" shall mean, for purposes of whether and when a Participant
has incurred a Termination of Employment for Cause, any act or omission which
permits the Company to terminate the written agreement or arrangement between
the Participant and the Company or an Affiliate for "cause" as defined in such
agreement or arrangement, or in the event there is no such agreement or
arrangement or the agreement or arrangement does not define the term "cause" or
a substantially equivalent term, then Cause shall mean (a) any act or omission
which the Company believes is of a criminal nature, and the result of which the
Company believes is detrimental to the interests of the Company or an
Affiliate; (b) the material breach of a fiduciary duty owing to the Company,
including without limitation, fraud and embezzlement or (c) conduct or the
omission of conduct on the part of the Participant which constitutes a material
breach of any statutory or common-law duty of loyalty to the Company or its
Affiliate.
2.8 "Change in Control" and "Change in Control Price" have the
meanings set forth in Sections 12.2 and 12.3, respectively.
2.9 "Code" or "Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended, Treasury Regulations (including proposed regulations)
thereunder and any subsequent Internal Revenue Code.
2.10 "Commission" means the Securities and Exchange Commission or
any successor agency.
2.11 "Committee" means the Incentive Stock Option Committee of the
Board designated by the Board from among its members to administer the Plan and
composed of two or more non-employee members of the Board named in an Appendix
to the Plan; provided, however, that with respect to options granted at the
time the Company is publicly held, insofar as a Committee is responsible for
granting Options to Participants hereunder, it shall consist solely of two or
more directors, each of whom is a "Non-Employee Director" within the meaning of
Rule 16b-3 and each of whom is also an "outside director" under Section 162(m)
of the Code.
2.12 "Common Stock" means the shares of the Company's Common Stock,
$1.00 par value, whether presently or hereafter issued, and any other stock or
security resulting from adjustment thereof as described hereinafter or the
common stock of any successor to the Company which is designated for the
purposes of the Plan.
2.13 "Company" means Wells-Gardner Electronics Corporation and
includes any successor or assignee corporation or corporations into which the
Company may be merged, changed or consolidated; any corporation for whose
securities the securities of the Company shall be exchanged; and any assignee
of or successor to substantially all of the assets of the Company.
P-2
<PAGE> 8
2.14 "Covered Employee" means a Participant who is a "covered
employee" within the meaning of Section 162(m) of the Code.
2.15 "Deferred Stock" means a right, granted to a Participant under
Section 9.1 hereof, to receive Common Stock, cash or a combination thereof at
the end of a specified deferral period.
2.16 "Disability" or "Permanent Disability", unless other provided in
an Agreement, means a mental or physical illness that entitles the Participant
to receive benefits under the long-term disability plan of the Company or an
Affiliate, or if the Participant is not covered by such a plan or the
Participant is not an employee of the Company or an Affiliate, a mental or
physical illness that renders a Participant totally and permanently incapable
of performing the Participant's duties for the Company or an Affiliate.
Notwithstanding the foregoing, a Disability shall not qualify under this Plan
if it is the result of (i) a willfully self-inflicted injury or willfully
self-induced sickness; or (ii) an injury or disease contracted, suffered, or
incurred while participating in a felony criminal offense. The determination of
Disability shall be made by the Committee. The determination of Disability for
purposes of this Plan shall not be construed to be an admission of disability
for any other purpose.
2.17 "Effective Date" means April 28, 1998.
2.18 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2.19 "Fair Market Value" means the value determined on the basis of
the good faith determination of the Committee, without regard to whether the
Common Stock is restricted or represents a minority interest, pursuant to the
applicable method described below:
(a) if the Common Stock is listed on a national securities
exchange or quoted on NASDAQ, the closing price of the Common Stock on
the relevant date (or, if such date is not a business day or a day on
which quotations are reported, then on the immediately preceding date
on which quotations were reported), as reported by the principal
national exchange on which such shares are traded (in the case of an
exchange) or by NASDAQ, as the case may be;
(b) if the Common Stock is not listed on a national
securities exchange or quoted on NASDAQ, but is actively traded in the
over-the-counter market, the average of the closing bid and asked
prices for the Common Stock on the relevant date (or, if such date is
not a business day or a day on which quotations are reported, then on
the immediately preceding date on which quotations were reported), or
the most recent preceding date for which such quotations are reported;
and
(c) if, on the relevant date, the Common Stock is not
publicly traded or reported as described in (a) or (b), the value
determined in good faith by the Committee.
2.20 "Grant Date" means the date as of which an Agreement is entered
into pursuant to the Plan.
P-3
<PAGE> 9
2.21 "Incentive Stock Option" means any Stock Option intended to be
and designated as an "incentive stock option" within the meaning of Section 422
of the Code.
2.22 "NASDAQ" means The NASDAQ Stock Market, including the NASDAQ
National Market.
2.23 "Non-Qualified Stock Option" means an Option to purchase Common
Stock in the Company granted under the Plan, the taxation of which is pursuant
to Section 83 of the Code.
2.24 "Option Period" means the period during which an Option shall be
exercisable in accordance with the related Agreement and Article VI.
2.25 "Option Price" means the price at which the Common Stock may be
purchased under an Option as provided in Section 6.3(b).
2.26 "Other Stock Based Awards" means Awards granted to a Participant
under Section 10.3 hereof.
2.27 "Participant" means a person who satisfies the eligibility
conditions of Article V and with whom an Agreement has been entered into under
the Plan, and in the event a Representative is appointed for a Participant or
another person becomes a Representative, then the term "Participant" shall mean
such Representative. The term shall also include a trust for the benefit of the
Participant, the Participant's parents, spouse or descendants, or a custodian
under a uniform gifts to minors act or similar statute for the benefit of the
Participant's descendants, to the extent permitted by the Committee and not
inconsistent with Rule 16b-3. Notwithstanding the foregoing, the term
"Termination of Employment" shall mean the Termination of Employment of the
person to whom the Award was originally granted.
2.28 "Performance Award" means a right, granted to a Participant under
Section 10.4 hereof, to receive Awards based upon performance criteria
specified by the Committee.
2.29 "Plan" means this Wells-Gardner Electronics Corporation 1998
Incentive Stock Plan, as herein set forth and as may be amended from time to
time.
2.30 "Representative" means (a) the person or entity acting as the
executor or administrator of a Participant's estate pursuant to the last will
and testament of a Participant or pursuant to the laws of the jurisdiction in
which the Participant had the Participant's primary residence at the date of
the Participant's death; (b) the person or entity acting as the guardian or
temporary guardian of a Participant; (c) the person or entity which is the
Beneficiary of the Participant upon or following the Participant's death; or
(d) any person to whom an Option has been permissibly transferred; provided
that only one of the foregoing shall be the Representative at any point in time
as determined under applicable law and recognized by the Committee.
2.31 "Restricted Stock" means Common Stock granted to a Participant
under Section 8.1 hereof, that is subject to certain restrictions and to a risk
of forfeiture or repurchase by the Company.
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2.32 "Retirement" means the Participant's Termination of Employment
after attaining either the normal retirement age or the early retirement age as
defined in the principal (as determined by the Committee) tax-qualified plan of
the Company or an Affiliate, if the Participant is covered by such a plan, or
if the Participant is not covered by such a plan, then age 65, or age 55 with
the accrual of 10 years of service.
2.33 "Rule 16b-3" and "Rule 16a-1(c)(3)" mean Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Commission under Section 16 of the Exchange
Act.
2.34 "Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
2.35 "Stock Appreciation Right" means a right granted under Article
VII.
2.36 "Stock Option" or "Option" means a right, granted to a
Participant under Section 6.1 hereof, to purchase Common Stock at a specified
price during specified time periods.
2.37 "Termination of Employment" means the occurrence of any act or
event that actually or effectively causes or results in the person's ceasing,
for whatever reason, to be an officer, independent contractor, director or
employee of the Company or of any Affiliate, or to be an officer, independent
contractor, director or employee of any entity that provides services to the
Company or an Affiliate, including, without limitation, death, Disability,
dismissal, severance at the election of the Participant, Retirement, or
severance as a result of the discontinuance, liquidation, sale or transfer by
the Company or its Affiliates of all businesses owned or operated by the
Company or its Affiliates. With respect to any person who is not an employee
with respect to the Company, the Agreement shall establish what act or event
shall constitute a Termination of Employment for purposes of the Plan. A
transfer of employment from the Company to an Affiliate, or from an Affiliate
to the Company, will not be a Termination of Employment, unless expressly
determined by the Committee. A Termination of Employment shall occur for an
employee who is employed by an Affiliate of the company if the Affiliate shall
cease to be an Affiliate and the Participant shall not immediately thereafter
become an employee of the Company or an Affiliate.
2.38 "Transfer" means any sale, gift, assignment, distribution,
conveyance, pledge, hypothecation, encumbrance or other transfer of title,
whether by operation of law or otherwise.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan shall be administered
by a committee (the "Committee") of the Board of Directors composed of no fewer
than two directors
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designated by the Board of Directors. For purposes of this Plan, including the
definition of "Committee" and the requirements thereunder, (a) a "Non-Employee
Director" is determined under the rules and regulations adopted by the
Securities and Exchange Commission under Section 16 of the Exchange Act and (b)
an "outside director" is determined under the Regulations adopted by the
Internal Revenue Service relating to Section 162(m) of the Code. A majority of
the Committee shall constitute a quorum, and the acts of a majority of the
members present at any meeting at which a quorum is present, or acts approved
in writing by all of the members, shall be the acts of the Committee. At any
time the Company is publicly held, this Plan is intended to qualify for
exemption from Section 16(b) of the Exchange Act and to qualify as
performance-based compensation under Section 162(m) of the Code and shall be
interpreted in such a way as to result in such qualification. A member of the
Committee shall not exercise any discretion respecting himself or herself under
the Plan. The Board shall have the authority to remove, replace or fill any
vacancy of any member of the Committee upon notice to the Committee and the
affected member. Any member of the Committee may resign upon notice to the
Board. The Committee may allocate among one or more of its members, or may
delegate to one or more of its agents, such duties and responsibilities as it
determines.
Subject to (i) the terms of the Plan, and (ii) subject to the approval
of the Board (to the extent required to qualify an Option granted hereunder for
exemption under Section 16(b) of the Exchange Act and as "performance-based
compensation" under Section 162(m) of the Code) the Committee shall have the
authority:
(a) to select those persons to whom Awards may be granted
from time to time;
(b) to determine whether and to what extent Awards are to
be granted hereunder;
(c) to determine the number of shares of Common Stock to be
covered by each Award granted hereunder;
(d) to determine the terms and conditions of any Option
granted hereunder (including, but not limited to, the Option Price,
the Option Period, any exercise restriction or limitation and any
exercise acceleration, forfeiture or waiver regarding any Award, any
shares of Common Stock relating thereto, any performance criteria and
the satisfaction of each criteria);
(e) to adjust the terms and conditions, at any time or from
time to time, of any Award, subject to the limitations of Section
13.1;
(f) to determine to what extent and under what circumstances
Common Stock and other amounts payable with respect to an Award shall
be deferred;
(g) to determine under what circumstances an Award may be
settled in cash or Common Stock;
(h) to provide for the forms of Agreements to be utilized
in connection with the Plan;
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(i) to determine whether a Participant has a Disability
or a Retirement;
(j) to determine what securities law requirements are
applicable to the Plan, Awards and the issuance of shares of Common
Stock under the Plan and to require of a Participant that appropriate
action be taken with respect to such requirements;
(k) to cancel, with the consent of the Participant or as
otherwise provided in the Plan or an Agreement, outstanding Awards;
(l) to interpret and make final determinations with respect
to the remaining number of shares of Common Stock available under this
Plan;
(m) to require, as a condition of the exercise of an Award
or the issuance or transfer of a certificate of Common Stock, the
withholding from a Participant of the amount of any Federal, state or
local taxes as may be necessary in order for the Company or any other
employer to obtain a deduction or as may be otherwise required by law;
(n) to determine whether and under what circumstances a
Participant has incurred a Termination of Employment;
(o) to determine whether the Company or any other person has
a right or obligation to purchase Common Stock from a Participant and,
if so, the terms and conditions on which such Common Stock is to be
purchased;
(p) to determine the restrictions or limitations on the
transfer of Common Stock;
(q) to determine whether an Award is to be adjusted,
modified or purchased, or is to become fully exercisable, under the
Plan or the terms of an Agreement;
(r) to determine the permissible methods of Award exercise
and payment, including cashless exercise arrangements;
(s) to adopt, amend and rescind such rules and regulations
as, in its opinion, may be advisable in the administration of the
Plan; and
(t) to appoint and compensate agents, counsel, auditors or
other specialists to aid it in the discharge of its duties.
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any Agreement) and to otherwise
supervise the administration of the Plan. The Committee's policies and
procedures may differ with respect to Awards granted at different times or to
different Participants.
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Any determination made by the Committee pursuant to the provisions of
the Plan shall be made in its sole discretion, and in the case of any
determination relating to an Award, may be made at the time of the grant of the
Award or, unless in contravention of any express term of the Plan or an
Agreement, at any time thereafter. All decisions made by the Committee pursuant
to the provisions of the Plan shall be final and binding on all persons,
including the Company and Participants. No determination shall be subject to de
novo review if challenged in court.
ARTICLE IV
STOCK SUBJECT TO PLAN
4.1 Number of Shares. Subject to the adjustment under Section 4.6, the
total number of shares of Common Stock reserved and available for distribution
pursuant to Awards under the Plan shall be 600,000 shares of Common Stock. Such
shares may consist, in whole or in part, of authorized and unissued shares or
treasury shares.
4.2 Release of Shares. Subject to Section 6.3(f), if any shares of
Common Stock that are subject to any Award cease to be subject to an Award or
are forfeited or repurchased, if any Award otherwise terminates without
issuance of shares of Common Stock being made to the Participant, or if any
shares (whether or not restricted) of Common Stock are received by the Company
in connection with the exercise of an Award, including the satisfaction of tax
withholding, such shares, in the discretion of the Committee, may again be
available for distribution in connection with Awards under the Plan.
4.3 Restrictions on Shares. Shares of Common Stock issued as or in
conjunction with an Award shall be subject to the terms and conditions
specified herein and to such other terms, conditions and restrictions as the
Committee in its discretion may determine or provide in an Agreement. The
Company shall not be required to issue or deliver any certificates for shares
of Common Stock, cash or other property prior to (i) the listing of such shares
on any stock exchange or NASDAQ (or other public market) on which the Common
Stock may then be listed (or regularly traded), (ii) the completion of any
registration or qualification of such shares under Federal or state law, or any
ruling or regulation of any government body which the Committee determines to
be necessary or advisable, and (iii) the satisfaction of any applicable
withholding obligation in order for the Company or an Affiliate to obtain a
deduction with respect to the exercise of an Award. The Company may cause any
certificate for any share of Common Stock to be delivered to be properly marked
with a legend or other notation reflecting the limitations on transfer of such
Common Stock as provided in this Plan or as the Committee may otherwise
require. The Committee may require any person exercising an Award to make such
representations and furnish such information as it may consider appropriate in
connection with the issuance or delivery of the shares of Common Stock in
compliance with applicable law or otherwise. Fractional shares shall not be
delivered, but shall be rounded to the next lower whole number of shares.
4.4 Stockholder Rights. No person shall have any rights of a
stockholder as to shares of Common Stock subject to an Award until, (i) after
proper exercise of the Award, (ii) after such
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other action required pursuant to such Award, or (iii) as otherwise provided
herein or in an Agreement, such shares shall have been recorded on the
Company's official stockholder records as having been issued or transferred.
Upon exercise of the Award or any portion thereof, the Company will have thirty
(30) days in which to issue the shares, and the Participant will not be treated
as a stockholder for any purpose prior to such issuance. No adjustment shall be
made for cash dividends or other rights for which the record date is prior to
the date such shares are recorded as issued or transferred in the Company's
official stockholder records, except as provided herein or in an Agreement.
4.5 Best Efforts To Register. The Company will register under the
Securities Act the Common Stock delivered or deliverable pursuant to Awards on
Commission Form S-8 if available to the Company for this purpose (or any
successor or alternate form that is substantially similar to that form to the
extent available to effect such registration), in accordance with the rules and
regulations governing such forms, as soon after stockholder approval of the
Plan as the Committee, in its sole discretion, shall deem appropriate. The
Company will use its best efforts to cause the registration statement to become
effective and will file such supplements and amendments to the registration
statement as may be necessary to keep the registration statement in effect
until the earliest of (a) one year following the expiration of the Award Period
of the last Award outstanding, (b) the date the Company is no longer a
reporting company under the Exchange Act and (c) the date all Participants have
disposed of all shares delivered pursuant to any Award.
4.6 Anti-Dilution. In the event of any Company stock dividend, stock
split, combination or exchange of shares, recapitalization or other change in
the capital structure of the Company, corporate separation or division of the
Company (including, but not limited to, a split-up, spin-off, split-off or
distribution to Company stockholders other than a normal cash dividend), sale
by the Company of all or a substantial portion of its assets, reorganization,
rights offering, a partial or complete liquidation, or any other corporate
transaction or event involving the Company, then the Committee shall adjust or
substitute, as the case may be, the number of shares of Common Stock available
for Awards under the Plan, the number of shares of Common Stock covered by
outstanding Awards, the exercise price per share of outstanding Awards, and
performance conditions and any other characteristics or terms of the Awards as
the Committee shall deem necessary or appropriate to reflect equitably the
effects of such changes to the Participants; provided, however, that the
Committee may limit any such adjustment so as to maintain the deductibility of
the Awards under Section 162(m) and that any fractional shares resulting from
such adjustment shall be eliminated by rounding to the next lower whole number
of shares.
ARTICLE V
ELIGIBILITY
5.1 Eligibility. The persons eligible to participate in the Plan and
be granted Awards shall be directors, officers, employees, consultants or other
service providers of the Company or any Affiliate, who shall be in a position,
in the opinion of the Committee, to make contributions to the growth,
management, protection and success of the Company and its subsidiaries. Of
those
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persons described in the preceding sentence, the Committee may, from time to
time, select persons to be granted Awards and shall determine the terms and
conditions with respect thereto. The Committee may give consideration to the
person's functions and responsibilities, the person's contributions to the
Company, the value of the individual's service to the Company and other factors
deemed relevant by the Committee.
ARTICLE VI
STOCK OPTIONS
6.1 General. The Committee shall have authority to grant Stock Options
under the Plan at any time or from time to time. Stock Options may be either
Incentive Stock Options or Non-Qualified Stock Options. An Option shall entitle
the Participant to receive shares of Common Stock upon exercise of such Option,
subject to the Participant's satisfaction in full of any conditions,
restrictions or limitations imposed in accordance with the Plan or an Option
Agreement (which may differ from other Agreements), including, without
limitation, payment of the Option Price. During any calendar year, Options to
purchase no more than 100,000 shares (as adjusted pursuant to Sections 4.1 and
4.6) of Common Stock shall be granted to any Participant.
6.2 Grant and Exercise. The grant of a Stock Option shall occur as of
the date the Committee determines. Each Option granted under this Plan shall be
evidenced by an Agreement, in a form approved by the Committee, which shall
embody the terms and conditions of such Option and which shall be subject to
the express terms and conditions set forth in the Plan. Such Agreement shall
become effective upon execution by the Participant. To the extent that any
Stock Option is not designated as an Incentive Stock Option or even if so
designated does not qualify as an Incentive Stock Option, it shall constitute a
Non-Qualified Stock Option. Anything in the Plan to the contrary
notwithstanding, no term of the Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify the Plan under Section
422 of the Code.
6.3 Terms and Conditions. Stock Options shall be subject to such terms
and conditions as shall be determined by the Committee, including the
following:
(a) Option Period. The Option Period of each Stock Option
shall be fixed by the Committee; provided that no Stock Option shall
(i) be exercisable less than six (6) months and more than ten (10)
years after the date the Stock Option is granted, or (ii) terminate
more than three (3) months after a Participant's Termination of
Employment for any reason other than death. No Option which is
intended to be an Incentive Stock Option shall be granted more than
ten (10) years from the date the Plan is adopted by the Company or the
date the Plan is approved by the stockholders of the Company,
whichever is earlier.
(b) Option Price. The Option Price per share of the Common
Stock purchasable under an Option shall be determined by the
Committee.
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(c) Exercisability. Subject to Section 12.1, Stock Options
shall be exercisable at such time or times and subject to such terms
and conditions as shall be determined by the Committee. If the
Committee provides that any Stock Option is exercisable only in
installments, the Committee may, to the extent such waiver will not
cause the Option income to fail to be deductible under Section 162
(m), at any time waive such installment exercise provisions, in whole
or in part, and, subject to the foregoing, may at any time accelerate
the exercisability of any Stock Option. The aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock under an
Incentive Stock Option granted to any Participant, when added to the
aggregate fair market value (also determined at the grant date) of the
Common Stock under other Code Section 422 incentive stock options
granted to such Participant by the Company or any of its Affiliates,
shall not exceed $100,000 of exercisable Common Stock in any calendar
year.
(d) Method of Exercise. Subject to the provisions of this
Article VI, a Participant may exercise Stock Options, in whole or in
part, at any time during the Option Period by the Participant's giving
written notice of exercise on a form provided by the Committee (if
available) to the Company specifying the number of shares of Common
Stock subject to the Stock Option to be purchased. Such notice shall
be accompanied by payment in full of the purchase price by cash or
check or such other form of payment as the Company may accept. If
approved by the Committee, payment in full or in part may also be made
(i) by delivering Common Stock already owned by the Participant having
a total Fair Market Value on the date of such delivery equal to the
Option Price; (ii) by the execution and delivery of a note or other
evidence of indebtedness (and any security agreement thereunder)
satisfactory to the Committee and permitted in accordance with Section
6.3(e); (iii) by the delivery of cash or the extension of credit by a
broker-dealer to whom the Participant has submitted a notice of
exercise or otherwise indicated an intent to exercise an Option (in
accordance with Part 220, Chapter II, Title 12 of the Code of Federal
Regulations, so-called "cashless" exercise); (iv) by authorizing the
Company to retain shares of Common Stock which would otherwise be
issuable upon the exercise of the Option having a total Fair Market
Value on the date of delivery equal to the Option Price; or (v) by any
combination of the foregoing. In the case of an Incentive Stock
Option, the right to make a payment in the form of already owned
shares of Common Stock of the same class as the Common Stock subject
to the Stock Option may be authorized only at the time the Stock
Option is granted. No shares of Common Stock shall be issued until
full payment therefor, as determined by the Committee, has been made.
(e) Company Loan or Guarantee. Upon the exercise of any
Option and subject to the pertinent Agreement and the discretion of the
Committee, the Company may at the request of the Participant:
(i) lend to the Participant an amount equal to
such portion of the Option Price as the Committee may
determine; or
(ii) guarantee a loan obtained by the Participant
from a third-party for the purpose of tendering the Option
Price.
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The terms and conditions of any loan or guarantee, including the
term, interest rate and any security interest thereunder and whether
the loan shall be with recourse, shall be determined by the
Committee, except that no extension of credit or guarantee shall
obligate the Company for an amount to exceed the lesser of the
aggregate Fair Market Value per share of the Common Stock on the date
of exercise, less the par value of the shares of Common Stock to be
purchased upon the exercise of the Award, or the amount permitted
under applicable laws or the regulations and rules of the Federal
Reserve Board and any other governmental agency having jurisdiction.
(f) Non-transferability of Options. Except as provided herein
or in an Agreement, no Stock Option or interest therein shall be
transferable by the Participant other than by will or by the laws of
descent and distribution, and all Stock Options shall be exercisable
during the Participant's lifetime only by the Participant. If and to
the extent transferability is permitted by Rule 16b-3 or does not
result in liability to any Participant and except as otherwise
provided by an Agreement, every Option granted hereunder shall be
freely transferable, but only if such transfer is consistent with the
use of Form S-8 (or the Committee's waiver of such condition) and
consistent with an Award's intended status as an Incentive Stock
Option (as applicable).
6.4 Termination by Reason of Death. Unless otherwise provided in an
Agreement or determined by the Committee, if a Participant incurs a Termination
of Employment due to death, or dies within three months of a Termination of
Employment, any unexpired and unexercised Stock Option held by such Participant
shall thereafter be fully exercisable by the appointed Representative, to the
extent the deceased Participant was entitled to do so as of the date of the
Participant's death, for a period of one year following the date of the
Participant's death (or such other period or no period as the Committee may
specify) or until the expiration of the Option Period, whichever period is the
shorter.
6.5 Termination by Reason of Disability. Unless otherwise provided in
an Agreement or determined by the Committee, if a Participant incurs a
Termination of Employment due to a Disability, any unexpired and unexercised
Stock Option held by such Participant shall thereafter be fully exercisable by
the Participant for the period of one year (or such other period or no period
as the Committee may specify) immediately following the date of such
Termination of Employment or until the expiration of the Option Period,
whichever period is shorter, and the Participant's death at any time following
such Termination of Employment due to Disability shall not affect the
foregoing. In the event of Termination of Employment by reason of Disability,
if an Incentive Stock Option is exercised after the expiration of the exercise
periods that apply for purposes of Section 422 of the Code, such Stock Option
will thereafter be treated as a Non-Qualified Stock Option.
6.6 Other Termination. Unless otherwise provided in an Agreement or
determined by the Committee, if a Participant incurs a Termination of
Employment due to Retirement, or the Termination of Employment is involuntary
on the part of the Participant (but is not due to death or Disability or with
Cause), any Stock Option held by such Participant shall thereupon terminate,
except that such Stock Option, to the extent then exercisable, may be exercised
for the lesser of the ninety (90) day period commencing with the date of such
Termination of Employment or until the expiration of the Option Period. Unless
other provided in an Agreement or determined
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by the Committee, if the Participant incurs a Termination of Employment which
is voluntary on the part of the Participant (and is not due to Retirement) the
Option shall terminate 30 days after such Termination. Unless other provided in
an Agreement or determined by the Committee, if the Participant's Termination
of Employment is for Cause, the Option shall terminate immediately. The death
or Disability of a Participant after a Termination of Employment otherwise
provided herein shall not extend the time permitted to exercise an Option.
ARTICLE VII
STOCK APPRECIATION RIGHTS
7.1 General. The Committee shall have authority to grant Stock
Appreciation Rights under the Plan at any time or from time to time. Subject to
the Participant's satisfaction in full of any conditions, restrictions or
limitations imposed in accordance with the Plan or an Agreement, a Stock
Appreciation Right shall entitle the Participant to surrender to the Company
the Stock Appreciation Right and to be paid therefor in shares of Common Stock,
cash or a combination thereof as herein provided, the amount described in
Section 7.3(b).
7.2 Grant. Stock Appreciation Rights may be granted in conjunction
with all or part of any Stock Option granted under the Plan, in which case the
exercise of the Stock Appreciation Right shall require the cancellation of a
corresponding portion of the Stock Option, and the exercise of a Stock Option
shall result in the cancellation of a corresponding portion of the Stock
Appreciation Right. In the case of a Non-Qualified Stock Option, such rights
may be granted either at or after the time of grant of such Stock Option. In
the case of an Incentive Stock Option, such rights may be granted only at the
time of grant of such Stock Option. A Stock Appreciation Right may also be
granted on a stand-alone basis. The grant of a Stock Appreciation Right shall
occur as of the date the Committee determines. Each Stock Appreciation Right
granted under this Plan shall be evidenced by an Agreement, which shall embody
the terms and conditions of such Stock Appreciation Right and which shall be
subject to the terms and conditions set forth in this Plan. During any calendar
year, Stock Appreciation Rights covering no more than 100,000 shares (as
adjusted pursuant to Sections 4.1 and 4.6) of Common Stock shall be granted to
any Participant.
7.3 Terms and Conditions. Stock Appreciation Rights shall be subject
to such terms and conditions as shall be determined by the Committee, including
the following:
(a) Period and Exercise. The term of a Stock Appreciation
Right shall be established by the Committee. A Stock Appreciation
Right which is granted on a stand-alone basis shall be for such
period and shall be exercisable at such times and to the extent
provided in an Agreement. Stock Appreciation Rights shall be
exercised by the Participant's giving written notice of exercise on a
form provided by the Committee (if available) to the Company
specifying the portion of the Stock Appreciation Right to be
exercised.
(b) Amount. With respect to a Stock Appreciation Right,
the Agreement shall specify the value to be used in lieu of the Option
Price per share of Common Stock. The
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aggregate Fair Market Value per share of the Common Stock shall be
determined as of the date of exercise of such Stock Appreciation
Right.
(c) Special Rules. In the case of Stock Appreciation Rights
relating to Stock Options held by Participants who are actually or
potentially subject to Section 16(b) of the Exchange Act:
(i) The Committee may require that such Stock
Appreciation Rights be exercised only in accordance with the
applicable "window period" provisions of Rule 16b-3;
(ii) The Committee may provide that the amount to
be paid upon exercise of such Stock Appreciation Rights
(other than those relating to Incentive Stock Options) during
a Rule 16b-3 "window period" shall be based on the highest
mean sales price of the Common Stock on the principal
exchange on which the Common Stock is traded, NASDAQ or other
relevant market for determining value on any day during such
"window period"; and
(iii) No Stock Appreciation Right shall be
exercisable during the first six months of its term, except
that this limitation shall not apply in the event of death or
Disability of the Participant prior to the expiration of the
six-month period.
(d) Non-transferability of Stock Appreciation Rights. Stock
Appreciation Rights shall be transferable only when and to the extent
that a Stock Option would be transferable under the Plan unless
otherwise provided in an Agreement.
(e) Termination. A Stock Appreciation Right shall terminate
at such time as a Stock Option would terminate under the Plan, unless
otherwise provided in an Agreement.
(f) Effect on Shares Under the Plan. Upon the exercise of a
Stock Appreciation Right, the Stock Option or part thereof to which
such Stock Appreciation Right is related shall be deemed to have been
exercised for the purpose of the limitation set forth in Section 4.1
on the number of shares of Common Stock to be issued under the Plan,
but only to the extent of the number of shares of Common Stock
covered by the Stock Appreciation Right at the time of exercise based
on the value of the Stock Appreciation Right at such time.
(g) Incentive Stock Option. A Stock Appreciation Right
granted in tandem with an Incentive Stock Option shall not be
exercisable unless the Fair Market Value of the Common Stock on the
date of exercise exceeds the Option Price. In no event shall any
amount paid pursuant to the Stock Appreciation Right exceed the
difference between the Fair Market Value on the date of exercise and
the Option Price.
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ARTICLE VIII
RESTRICTED STOCK
8.1 General. The Committee shall have authority to grant Restricted
Stock under the Plan at any time or from time to time. Shares of Restricted
Stock may be awarded either alone or in addition to other Awards granted under
the Plan. The Committee shall determine the persons to whom and the time or
times at which grants of Restricted Stock will be awarded, the number of shares
of Restricted Stock to be awarded to any Participant, the time or times within
which such Awards may be subject to forfeiture and any other terms and
conditions of the Awards. Each Award shall be confirmed by, and be subject to
the terms of, an Agreement. The Committee may condition the grant of Restricted
Stock upon the attainment of specified performance goals by the Participant or
by the Company or an Affiliate (including a division or department of the
Company or an Affiliate) for or within which the Participant is primarily
employed or upon such other factors or criteria as the Committee shall
determine. The provisions of Restricted Stock Awards need not be the same with
respect to any Participant.
8.2 Awards and Certificates. Notwithstanding the limitations on
issuance of shares of Common Stock otherwise provided in the Plan, each
Participant receiving an Award of Restricted Stock shall be issued a
certificate in respect of such shares of Restricted Stock. Such certificate
shall be registered in the name of such Participant and shall bear an
appropriate legend referring to the terms, conditions, and restrictions
applicable to such Award as determined by the Committee. The Committee may
require that the certificates evidencing such shares be held in custody by the
Company until the restrictions thereon shall have lapsed and that, as a
condition of any Award of Restricted Stock, the Participant shall have
delivered a stock power, endorsed in blank, relating to the Common Stock
covered by such Award. During any calendar year, no more than 100,000 shares
(as adjusted pursuant to Section 4.1 and 4.6) of Restricted Stock shall be
granted to any Participant.
8.3 Terms and Conditions. Shares of Restricted Stock shall be subject
to the following terms and conditions:
(a) Limitations on Transferability. Except as otherwise
provided in an Agreement or determined by the Committee, during a
period set by the Committee commencing with the date of such Award
(the "Restriction Period"), the Participant shall not be permitted to
sell, assign, transfer, pledge or otherwise encumber any interest in
shares of Restricted Stock.
(b) Rights. Except as provided in Section 8.3(a), the
Participant shall have, with respect to the shares of Restricted
Stock, all of the rights of a stockholder of the Company holding the
class of Common Stock that is the subject of the Restricted Stock,
including, if applicable, the right to vote the shares and the right
to receive any cash dividends. Unless otherwise determined by the
Committee, cash dividends on the class of Common Stock that is the
subject of the Restricted Stock shall be automatically deferred and
reinvested in additional Restricted Stock, and dividends on the class
of Common Stock that is the subject of the Restricted Stock payable
in Common Stock shall
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be paid in the form of Restricted Stock of the same class as the
Common Stock on which such dividend was paid.
(c) Acceleration. Based on service, such factors or criteria
as the Committee may determine, the Committee may provide for the
lapse of restrictions in installments and may accelerate the vesting
of all or any part of any Award and waive the restrictions for all or
any part of such Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination
of Employment during the Restriction Period due to death or
Disability, the restrictions shall lapse and the Participant shall be
fully vested in the Restricted Stock. Except to the extent otherwise
provided in the applicable Agreement and the Plan, upon a
Participant's Termination of Employment for any reason during the
Restriction Period other than death or Disability, all shares of
Restricted Stock still subject to restriction shall be forfeited by
the Participant, except the Committee shall have the discretion to
waive in whole or in part any or all remaining restrictions with
respect to any or all of such Participant's shares of Restricted
Stock.
(e) Delivery. If and when the Restriction Period expires
without a prior forfeiture of the Restricted Stock subject to such
Restriction Period, unlegended certificates for such shares shall be
delivered to the Participant.
(f) Election. A Participant may elect to further defer
receipt of the Restricted Stock for a specified period or until a
specified event, subject in each case to the Committee's approval and
to such terms as are determined by the Committee. Subject to any
exceptions adopted by the Committee, such election must be made one
(1) year prior to completion of the Restriction Period.
ARTICLE IX
DEFERRED STOCK
9.1 General. The Committee shall have authority to grant Deferred
Stock under the Plan at any time or from time to time. Shares of Deferred Stock
may be awarded either alone or in addition to other Awards granted under the
Plan. The Committee shall determine the persons to whom and the time or times
at which Deferred Stock will be awarded, the number of shares of Deferred Stock
to be awarded to any Participant, the duration of the period (the "Deferral
Period") prior to which the Common Stock will be delivered, and the conditions
under which receipt of the Common Stock will be deferred and any other terms
and conditions of the Awards. Each Award shall be confirmed by, and be subject
to the terms of, an Agreement. The Committee may condition the grant of
Deferred Stock upon the attainment of specified performance goals by the
Participant or by the Company or an Affiliate, including a division or
department of the Company or an Affiliate for or within which the Participant
is primarily employed, or upon such other factors or criteria as the Committee
shall determine. The provisions of Deferred Stock Awards need not be the same
with respect to any Participant.
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9.2 Terms and Conditions. Deferred Stock Awards shall be subject to
the following terms and conditions:
(a) Limitations on Transferability. Except as otherwise
provided in an Agreement, Deferred Stock Awards, or any interest
therein, may not be sold, assigned, transferred, pledged or otherwise
encumbered during the Deferral Period. At the expiration of the
Deferral Period (or Elective Deferral Period as defined in Section
9.2(e), where applicable), the Committee may elect to deliver Common
Stock, cash equal to the Fair Market Value of such Common Stock or a
combination of cash and Common Stock to the Participant for the
shares covered by the Deferred Stock Award.
(b) Rights. Unless otherwise determined by the Committee and
the applicable Agreement, cash dividends on the Common Stock that is
the subject of the Deferred Stock Award shall be automatically
deferred and reinvested in additional Deferred Stock, and dividends
on the Common Stock that is the subject of the Deferred Stock Award
payable in Common Stock shall be paid in the form of Deferred Stock
of the same class as the Common Stock on which such dividend was
paid.
(c) Acceleration. Based on such factors or criteria as the
Committee may determine, the Committee may provide for the lapse of
deferral limitations in installments and may accelerate the vesting
of all or any part of any Award and waive the deferral limitations
for all or any part of such Award.
(d) Forfeiture. Unless otherwise provided in an Agreement or
determined by the Committee, if the Participant incurs a Termination
of Employment during the Deferral Period due to death or Disability,
the restrictions shall lapse and the Participant shall be fully
vested in the Deferred Stock. Unless otherwise provided in an
Agreement or determined by the Committee, upon a Participant's
Termination of Employment for any reason during the Deferral Period
other than death or Disability, the rights to the shares still
covered by the Award shall be forfeited by the Participant, except
the Committee shall have the discretion to waive in whole or in part
any or all remaining deferral limitations with respect to any or all
of such Participant's Deferred Stock.
(e) Election. A Participant may elect further to defer
receipt of the Deferred Stock payable under an Award (or an
installment of an Award) for a specified period or until a specified
event (an "Elective Deferral Period"), subject in each case to the
Committee's approval and to such terms as are determined by the
Committee. Subject to any exceptions adopted by the Committee, such
election must be made at least one (1) year prior to completion of
the Deferral Period for the Award (or of the applicable installment
thereof).
ARTICLE X
OTHER AWARDS
10.1 Bonus Stock and Awards In Lieu of Obligations. The Committee is
authorized to grant Common Stock as a bonus, or to grant Common Stock or other
Awards in lieu of
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Company obligations to pay cash or deliver other property under other plans or
compensatory arrangements, provided that, in the case of Participants subject
to Section 16 of the Exchange Act, the amount of such grants remains within the
discretion of the Committee to the extent necessary to ensure that acquisition
of Common Stock or other Awards are exempt from liability under Section 16(b)
of the Exchange Act. Common Stock or Awards granted hereunder shall be subject
to such other terms as shall be determined by the Committee.
10.2 Other Stock-Based Awards. The Committee is authorized, subject
to limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Common Stock, as deemed by the
Committee to be consistent with the purposes of the Plan, including, without
limitation, convertible or exchangeable debt securities, other rights
convertible or exchangeable into Common Stock, purchase rights for Common
Stock, Awards with value and payment contingent upon performance of the Company
or any other factors designated by the Committee, and Awards valued by
reference to the book value of Common Stock or the value of securities of or
the performance of specified subsidiaries. The Committee shall determine the
terms and conditions of such Awards. Common Stock delivered pursuant to an
Award in the nature of a purchase right granted under this Section 10.3 shall
be purchased for such consideration, paid for at such times, by such methods,
and in such forms, including, without limitation, cash, Common Stock, other
Awards, or other property, as the Committee shall determine. Cash awards, as an
element of or supplement to any other Award under the Plan, may also be granted
pursuant to this Section 10.3.
10.3 Performance Awards.
(a) Performance Conditions. The right of a Participant to
exercise or receive a grant or settlement of any Award, and its
timing, may be subject to performance conditions specified by the
Committee. The Committee may use business criteria and other measures
of performance it deems appropriate in establishing any performance
conditions, and may exercise its discretion to reduce or increase the
amounts payable under any Award subject to performance conditions,
except as limited under Sections 10.4(b) and 10.4(c) hereof in the
case of a Performance Award intended to qualify under Code Section
162(m).
(b) Performance Awards Granted to Designated Covered
Employees. If the Committee determines that a Performance Award to be
granted to a person the Committee regards as likely to be a Covered
Employee should qualify as "performance-based compensation" for
purposes of Code Section 162(m), the grant and/or settlement of such
Performance Award shall be contingent upon achievement of
preestablished performance goals and other terms set forth in this
Section 10.4(b).
(i) Performance Goals Generally. The performance
goals for such Performance Awards shall consist of one or
more business criteria and a targeted level or levels of
performance with respect to such criteria, as specified by
the Committee consistent with this Section 10.4(b).
Performance goals shall be objective and shall otherwise meet
the requirements of Code Section 162(m),
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including the requirement that the level or levels of
performance targeted by the Committee result in the
performance goals being "substantially uncertain." The
Committee may determine that more than one performance goal
must be achieved as a condition to settlement of such
Performance Awards. Performance goals may differ for
Performance Awards granted to any one Participant or to
different Participants.
(ii) Business Criteria. One or more of the following
business criteria for the Company, on a consolidated basis,
and/or for specified subsidiaries or business units of the
Company (except with respect to the total stockholder return
and earnings per share criteria), shall be used exclusively
by the Committee in establishing performance goals for such
Performance Awards: (1) total stockholder return; (2) such
total stockholder return as compared to total return (on a
comparable basis) of a publicly available index such as, but
not limited to, the Standard & Poor's 500, the NASDAQ-U.S.
Index; (3) net income; (4) pre-tax earnings; (5) EBITDA
(Earnings Before Interest, Taxes, Depreciation and
Amortization); (6) pre-tax operating earnings after interest
expense and before bonuses, service fees, and extraordinary
or special items; (7) operating margin; (8) earnings per
share; (9) return on equity; (10) return on capital; (11)
return on investment; (12) operating income, excluding the
effect of charges for acquired in- process technology and
before payment of executive bonuses; and (13) working
capital. The foregoing business criteria shall also be
exclusively used in establishing performance goals for Cash
Incentive Awards granted under Section 10.4(c) hereof.
(iii) Performance Period: Timing For Establishing
Performance Goals. Achievement of performance goals in
respect of such Performance Awards shall be measured over
such periods as may be specified by the Committee.
Performance goals shall be established on or before the dates
that are required or permitted for "performance-based
compensation" under Code Section 162(m).
(iv) Settlement of Performance Awards; Other Terms.
Settlement of Performance Awards may be in cash or Common
Stock, or other Awards, or other property, in the discretion
of the Committee. The Committee may, in its discretion,
reduce the amount of a settlement otherwise to be made in
connection with such Performance Awards, but may not exercise
discretion to increase any such amount payable in respect of
a Performance Award subject to this Section 10.4(b). The
Committee shall specify the circumstances in which such
Performance Awards shall be forfeited or paid in the event of
a Termination of Employment or a Change in Control prior to
the end of a performance period or settlement of Performance
Awards, and other terms relating to such Performance Awards.
(c) Cash Incentive Awards Granted to Designated Covered
Employees. The Committee may grant Cash Incentive Awards to
Participants including those designated by the Committee as likely to
be Covered Employees, which Awards shall represent a conditional
right to receive a payment in cash, unless otherwise determined by
the
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Committee, after the end of a specified calendar year or calendar
quarter or other period specified by the Committee, in accordance
with this Section 10.4(c). With respect to any calendar year, the
maximum Cash Incentive Award payable to any Participant shall not
exceed twenty percent (20%) of the Company's operating income,
excluding the effect of charges for acquired in-process technology
and before payment of executive bonuses, for such year.
(i) Cash Incentive Award. The Cash Incentive Award
for Participants the Committee regards as likely to be
regarded as Covered Employees shall be based on achievement
of a performance goal or goals based on one or more of the
business criteria set forth in Section 10.4(b), and may be
based on such criteria for any other Participant. The
Committee may specify the amount of the individual Cash
Incentive Award as a percentage of any such business
criteria, a percentage thereof in excess of a threshold
amount, or another amount which need not bear a strictly
mathematical relationship to such relationship criteria. The
Committee may establish a Cash Incentive Award pool that
includes Participants the Committee regards likely to be
Covered Employees, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with
Cash Incentive Awards. The amount of the Cash Incentive Award
pool shall be based upon the achievement of a performance
goal or goals based on one or more of the business criteria
set forth in Section 10.4(b) hereof in the given performance
period, as specified by the Committee. The Committee may
specify the amount of the Cash Incentive Award pool as a
percentage of any of such business criteria, a percentage
thereof in excess of a threshold amount, or as another amount
which need not bear a strictly mathematical relationship to
such business criteria.
(ii) Potential Cash Incentive Awards. Not later than
the date required or permitted for "qualified
performance-based compensation" under Code Section 162(m),
the Committee shall determine the Participants who will
potentially receive Cash Incentive Awards for the specified
year, quarter or other period, either as individual Cash
Incentive Awards or out of an Cash Incentive Award pool
established by such date and the amount or method for
determining the amount of the individual Cash Incentive Award
or the amount of such Participant's portion of the Cash
Incentive Award pool or the individual Cash Incentive Award.
(iii) Payout of Cash Incentive Awards. After the end
of the specified year, quarter or other period, as the case
may be, the Committee shall determine the amount, if any, of
potential individual Cash Incentive Award otherwise payable
to a Participant, the Cash Incentive Award pool and the
maximum amount of potential Cash Incentive Award payable to
each Participant in the Cash Incentive Award pool. The
Committee may, in its discretion, determine that the amount
payable to any Participant as a final Cash Incentive Award
shall be increased or reduced from the amount of his or her
potential Cash Incentive Award, including a determination to
make no final Award whatsoever, but may not exercise
discretion to increase any such amount in the case of a Cash
Incentive Award intended to qualify under Code Section
162(m). The Committee shall specify the
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circumstances in which a Cash Incentive Award shall be paid
or forfeited in the event of Termination of Employment by the
Participant or a Change in Control prior to the end of the
period for measuring performance or the payout of such
Cash Incentive Award, and other terms relating to such Cash
Incentive Award in accordance with the Plan. Upon the
completion of the measuring period and the determination of
the right to payment and the amount, the Committee shall
direct the Committee to make payment.
(d) Written Determinations. All determinations by the
Committee as to the establishment of performance goals and the
potential Performance Awards or Cash Incentive Awards related to such
performance goals and as to the achievement of performance goals
relating to such Awards, the amount of any Cash Incentive Award pool
and the amount of final Cash Incentive Awards, shall be made in
writing in the case of any Award intended to qualify under Code
Section 162(m). The Committee may not delegate any responsibility
relating to such Performance Awards or Cash Incentive Awards.
ARTICLE XI
PROVISIONS APPLICABLE TO STOCK ACQUIRED UNDER THE PLAN
11.1 Limited Transfer During Offering. In the event there is an
effective registration statement under the Securities Act pursuant to which
shares of Common Stock shall be offered for sale in an underwritten offering, a
Participant shall not, during the period requested by the underwriters managing
the registered public offering, effect any public sale or distribution of
shares received directly or indirectly pursuant to an exercise of an Award.
11.2 Committee Discretion. The Committee may in its sole discretion
include in any Agreement an obligation that the Company purchase a
Participant's shares of Common Stock received upon the exercise of an Award
(including the purchase of any unexercised Awards which have not expired), or
may obligate a Participant to sell shares of Common Stock to the Company, upon
such terms and conditions as the Committee may determine and set forth in an
Agreement. The provisions of this Article XI shall be construed by the
Committee in its sole discretion, and shall be subject to such other terms and
conditions as the Committee may from time to time determine. Notwithstanding
any provision herein to the contrary, the Company may upon determination by the
Committee assign its right to purchase shares of Common Stock under this
Article XI, whereupon the assignee of such right shall have all the rights,
duties and obligations of the Company with respect to purchase of the shares of
Common Stock.
11.3 No Company Obligation. None of the Company, an Affiliate or the
Committee shall have any duty or obligation to disclose affirmatively to a
record or beneficial holder of Common Stock or an Award, and such holder shall
have no right to be advised of, any material information regarding the Company
or any Affiliate at any time prior to, upon or in connection with receipt or
the exercise of an Award or the Company's purchase of Common Stock or an Award
from such holder in accordance with the terms hereof.
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ARTICLE XII
CHANGE IN CONTROL PROVISIONS
12.1 Impact of Event. Notwithstanding any other provision of the Plan
to the contrary, unless otherwise provided in an Agreement, in the event of a
Change in Control (as defined in Section 12.2):
(a) Any Stock Appreciation Rights and Stock Options
outstanding as of the date such Change in Control and not then
exercisable shall become fully exercisable to the full extent of the
original grant;
(b) The restrictions and deferral limitations applicable to
any Restricted Stock, Deferred Stock or other Award shall lapse, and
such Restricted Stock, Deferred Stock or other Award shall become
free of all restrictions and become fully vested and transferable to
the full extent of the original grant.
(c) The performance goals and other conditions with respect
to any outstanding Performance Award or Cash Incentive Award shall be
deemed to have been satisfied in full, and such Award shall be fully
distributable, if and to the extent provided by the Committee in the
Agreement relating to such Award or otherwise, notwithstanding that
the Award may not be fully deductible to the Company under Section
162(m) of the Code.
(d) Notwithstanding any other provision of the Plan, unless
the Committee shall provide otherwise in an Agreement, a Participant
shall have the right, whether or not the Award is fully exercisable
or may be otherwise realized by the Participant, by giving notice
during the 60-day period from and after a Change in Control to the
Company, to elect to surrender all or part of a stock-based Award to
the Company and to receive cash, within 30 days of such notice, in an
amount equal to the amount by which the "Change in Control Price" (as
defined in Section 12.3) per share of Common Stock on the date of
such election shall exceed the amount which the Participant must pay
to exercise the Award per share of Common Stock under the Award (the
"Spread") multiplied by the number of shares of Common Stock granted
under the Award as to which the right granted under this Section 12.1
shall have been exercised; provided, however, that if the end of such
60-day period from and after a Change in Control is within six months
of the date of grant of the Award held by a Participant (except a
Participant who has died during such six-month period) who is an
officer or director of the Company (within the meaning of Section
16(b) of the Exchange Act), such Award shall be cancelled in exchange
for a payment to the Participant, effective on the day which is six
months and one day after the date of grant of such Award, equal to
the Spread multiplied by the number of shares of Common Stock granted
under the Award, plus interest on such amount at the prime rate as
reported from time to time in The Wall Street Journal, compounded
annually and determined from time to time. With respect to any
Participant who is an officer or director of the Company (within the
meaning of Section 16(b) of the Exchange Act), the 60-day period
shall be extended, if necessary, to include the "window period" of
Rule 16b-3 which first commences on or after the date of the Change
in
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Control, and the Committee shall have sole discretion, if necessary,
to approve the Participant's exercise hereunder and the date on which
the Spread is calculated may be adjusted, if necessary, to a later
date if necessary to avoid liability to such Participant under
Section 16(b).
12.2 Definition of Change in Control. For purposes of this Plan, a
"Change in Control" shall be deemed to have occurred if (a) any corporation,
person or other entity (other than the Company, a majority-owned Affiliate or
any of its subsidiaries, or an employee benefit plan (or related trust)
sponsored or maintained by the Company), including a "group" as defined in
Section 13(d)(3) of the Exchange Act becomes the beneficial owner of stock
representing more than forty-five percent (45%) of the combined voting power of
the Company's then outstanding securities; (b)(i) the stockholders of the
Company approve a definitive agreement to merge or consolidate the Company with
or into another corporation other than a majority-owned Affiliate, or to sell
or otherwise dispose of all or substantially all of the Company's assets, and
(ii) the persons who were the members of the Board of Directors of the Company
prior to such approval do not represent a majority of the directors of the
surviving, resulting or acquiring entity or the parent thereof; (c) the
stockholders of the Company approve a plan of liquidation of the Company; or
(d) within any period of 24 consecutive months, persons who were members of the
Board of Directors of the Company immediately prior to such 24-month period,
together with any persons who were first elected as directors (other than as a
result of any settlement of a proxy or consent solicitation contest or any
action taken to avoid such a contest) during such 24-month period by or upon
the recommendation of persons who were members of the Board of Directors of the
Company immediately prior to such 24-month period and who constituted a
majority of the Board of Directors of the Company at the time of such election,
cease to constitute a majority of the Board.
12.3 Change in Control Price. For purposes of the Plan, "Change in
Control Price" means the higher of (a) the highest reported sales price of a
share of Common Stock in any transaction reported on the principal exchange on
which such shares are listed or on NASDAQ during the 60-day period prior to and
including the date of a Change in Control or (b) if the Change in Control is
the result of a tender or exchange offer, merger, consolidation, liquidation or
sale of all or substantially all of the assets of the Company (in each case a
"Corporate Transaction"), the highest price per share of Common Stock paid in
such Corporate Transaction, except that, in the case of Incentive Stock Options
and Stock Appreciation Rights relating to Incentive Stock Options, such price
shall be based only on the Fair Market Value of the Common Stock on the date
any such Incentive Stock Option or Stock Appreciation Right is exercised. To
the extent that the consideration paid in any such Corporate Transaction
consists all or in part of securities or other non-cash consideration, the
value of such securities or other non-cash consideration shall be determined in
the sole discretion of the Committee.
ARTICLE XIII
MISCELLANEOUS
13.1 Amendments and Termination. The Board may amend, alter or
discontinue the Plan at any time, but no amendment, alteration or
discontinuation shall be made which would
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(a) impair the rights of a Participant under a Stock Option, Stock Appreciation
Right, Restricted Stock Award or Deferred Stock Award theretofore granted
without the Participant's consent, except such an amendment made to cause the
Plan to qualify for the exemption provided by Rule 16b-3 or (b) disqualify the
Plan from the exemption provided by Rule 16b-3. In addition, no such amendment
shall be made without the approval of the Company's stockholders to the extent
such approval is required by law or agreement.
The Committee may amend the Plan at any time provided that (a) no
amendment shall impair the rights of any Participant under any Award
theretofore granted without the Participant's consent, (b) no amendment shall
disqualify the Plan from the exemption provided by Rule 16b-3, and (c) any
amendment shall be subject to the approval or rejection of the Board.
The Committee may amend the terms of any Award or other Award
theretofore granted, prospectively or retroactively, but no such amendment
shall impair the rights of any Participant without the Participant's consent or
reduce an Option Price, except such an amendment made to cause the Plan or
Award to qualify for the exemption provided by Rule 16b-3.
Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in law and tax and accounting
rules, as well as other developments, and to grant Awards which qualify for
beneficial treatment under such rules without stockholder approval.
Notwithstanding anything in the Plan to the contrary, if any right under this
Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution
of Common Stock having a Fair Market Value equal to the cash otherwise payable
hereunder for the right which caused the transaction to be ineligible for
pooling of interest accounting.
13.2 Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award or any award granted under another plan of the Company,
any Affiliate, or any business entity to be acquired by the Company or an
Affiliate, or any other right of a Participant to receive payment from the
Company or any Affiliate. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award or award, the Committee shall require the surrender
of such other Award or award in consideration for the grant of the new Award.
In addition, Awards may be granted in lieu of cash compensation, including in
lieu of cash amounts payable under other plans of the Company or any Affiliate,
in which the Fair Market Value of Common Stock subject to the Award is
equivalent in value to the cash compensation, or in which the exercise price,
grant price or purchase price of the Award in the nature of a right that may be
exercised is equal to the Fair Market Value of the underlying Common Stock
minus the value of the cash compensation surrendered.
13.3 Form and Timing of Payment Under Awards; Deferrals. Subject to the
terms of the Plan and any applicable Agreement, payments to be made by the
Company or an Affiliate upon the exercise of an Award or settlement of an Award
may be made in such forms as the Committee shall determine, including, without
limitation, cash, Common Stock, other Awards or
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other property, and may be made in a single payment or transfer, in
installments, or on a deferred basis. The settlement of any Award may be
accelerated, and cash paid in lieu of Common Stock in connection with such
settlement, in the discretion of the Committee or upon occurrence of one or
more specified events (in addition to a Change in Control). Installment or
deferred payments may be required by the Committee (subject to Section 13.1 of
the Plan) or permitted at the election of the Participant. Payments may
include, without limitation, provisions for the payment or crediting of
reasonable interest on installment or deferred payments.
13.4 Status of Awards Under Code Section 162(m). It is the intent of
the Company that Awards granted to persons who are Covered Employees within the
meaning of Code Section 162(m) shall constitute "qualified performance-based
compensation" satisfying the requirements of Code Section 162(m). Accordingly,
the provisions of the Plan shall be interpreted in a manner consistent with
Code Section 162(m). If any provision of the Plan or any agreement relating to
such an Award does not comply or is inconsistent with the requirements of Code
Section 162(m), such provision shall be construed or deemed amended to the
extent necessary to conform to such requirements.
13.5 Unfunded Status of Plan; Limits on Transferability. It is intended
that the Plan be an "unfunded" plan for incentive and deferred compensation.
The Committee may authorize the creation of trusts or other arrangements to
meet the obligations created under the Plan to deliver Common Stock or make
payments; provided, however, that, unless the Committee otherwise determines,
the existence of such trusts or other arrangements is consistent with the
"unfunded" status of the Plan. Unless otherwise provided in this Plan or in an
Agreement, no Award shall be subject to the claims of Participant's creditors
and no Award may be transferred, assigned, alienated or encumbered in any way
other than by will or the laws of descent and distribution or to a
Representative upon the death of the Participant.
13.6 General Provisions.
(a) Representation. The Committee may require each person
purchasing or receiving shares pursuant to an Award to represent to
and agree with the Company in writing that such person is acquiring
the shares without a view to the distribution thereof. The
certificates for such shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer.
(b) No Additional Obligation. Nothing contained in the Plan
shall prevent the Company or an Affiliate from adopting other or
additional compensation arrangements for its employees.
(c) Withholding. No later than the date as of which an amount
first becomes includible in the gross income of the Participant for
Federal income tax purposes with respect to any Award, the
Participant shall pay to the Company (or other entity identified by
the Committee), or make arrangements satisfactory to the Company or
other entity identified by the Committee regarding the payment of,
any Federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount required in order for
the Company or an Affiliate to obtain a current deduction. If the
Participant disposes of shares of Common Stock acquired pursuant to
an Incentive Stock Option in
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any transaction considered to be a disqualifying transaction under
the Code, the Participant must give written notice of such transfer
and the Company shall have the right to deduct any taxes required by
law to be withheld from any amounts otherwise payable to the
Participant. Unless otherwise determined by the Committee,
withholding obligations may be settled with Common Stock, including
Common Stock that is part of the Award that gives rise to the
withholding requirement, provided that any applicable requirements
under Section 16 of the Exchange Act are satisfied. The obligations
of the Company under the Plan shall be conditional on such payment or
arrangements, and the Company and its Affiliates shall, to the extent
permitted by law, have the right to deduct any such taxes from any
payment otherwise due to the Participant.
(d) Reinvestment. The reinvestment of dividends in additional
Deferred or Restricted Stock at the time of any dividend payment
shall be permissible only if sufficient shares of Common Stock are
available under the Plan for such reinvestment (taking into account
then outstanding Options and other Awards).
(e) Representation. The Committee shall establish such
procedures as it deems appropriate for a Participant to designate a
Representative to whom any amounts payable in the event of the
Participant's death are to be paid.
(f) Controlling Law. The Plan and all Awards made and actions
taken thereunder shall be governed by and construed in accordance
with the laws of the State of Illinois (other than its law respecting
choice of law). The Plan shall be construed to comply with all
applicable law and to avoid liability to the Company, an Affiliate or
a Participant, including, without limitation, liability under Section
16(b) of the Exchange Act.
(g) Offset. Any amounts owed to the Company or an Affiliate
by the Participant of whatever nature may be offset by the Company
from the value of any shares of Common Stock, cash or other thing of
value under this Plan or an Agreement to be transferred to the
Participant, and no shares of Common Stock, cash or other thing of
value under this Plan or an Agreement shall be transferred unless and
until all disputes between the Company and the Participant have been
fully and finally resolved and the Participant has waived all claims
to such against the Company or an Affiliate.
(h) Fail Safe. With respect to persons subject to Section 16
of the Exchange Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or Rule
16a-1(c)(3), as applicable. To the extent any provision of the Plan
or action by the Committee fails to so comply, it shall be deemed
null and void, to the extent permitted by law and deemed advisable by
the Committee. Moreover, in the event the Plan does not include a
provision required by Rule 16b-3 or Rule 16a-1(c)(3) to be stated
herein, such provision (other than one relating to eligibility
requirements or the price and amount of Awards) shall be deemed to be
incorporated by reference into the Plan with respect to Participants
subject to Section 16.
13.7 Mitigation of Excise Tax. Except as otherwise provided in an
Agreement, if any payment or right accruing to a Participant under this Plan
(without the application of this
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<PAGE> 32
Section 13.7), either alone or together with other payments or rights accruing
to the Participant from the Company or an Affiliate ("Total Payments"), would
constitute a "parachute payment" (as defined in Section 280G of the Code and
regulations thereunder), such payment or right shall, if so elected by the
Participant in his or her sole discretion, be reduced to the largest amount or
greatest right that will result in no portion of the amount payable or right
accruing under the Plan being subject to an excise tax under Section 4999 of
the Code or being disallowed as a deduction under Section 280G of the Code. The
determination of the amount of any potential reduction in the rights or
payments shall be made by the Committee in good faith after consultation with
the Participant and shall be communicated to Participant prior to his or her
making such election. The Participant shall cooperate in good faith with the
Committee in making such determination and providing the necessary information
for this purpose. The foregoing provisions of this Section 13.7 shall apply
with respect to any person only if, after reduction for any applicable Federal
excise tax imposed by Section 4999 of the Code and Federal income tax imposed
by the Code, the Total Payments accruing to such person would be less than the
amount of the Total Payments as reduced, if applicable, under the foregoing
provisions of the Plan and after reduction for only Federal income taxes.
13.8 Rights with Respect to Continuance of Employment. Nothing
contained herein shall be deemed to alter the relationship between the Company
or an Affiliate and a Participant, or the contractual relationship between a
Participant and the Company or an Affiliate if there is a written contract
regarding such relationship. Nothing contained herein shall be construed to
constitute a contract of employment between the Company or an Affiliate and a
Participant. The Company or an Affiliate and each of the Participants continue
to have the right to terminate the employment or service relationship at any
time for any reason, except as provided in a written contract.
13.9 Awards in Substitution for Awards Granted by Other Corporations.
Awards (including cash in respect of fractional shares) may be granted under
the Plan from time to time in substitution for awards held by employees,
directors or service providers of other corporations who are about to become
officers, directors or employees of the Company or an Affiliate as the result
of a merger or consolidation of the employing corporation with the Company or
an Affiliate, or the acquisition by the Company or an Affiliate of the assets
of the employing corporation, or the acquisition by the Company or Affiliate of
the stock of the employing corporation, as the result of which it becomes a
designated employer under the Plan. The terms and conditions of the Awards so
granted may vary from the terms and conditions set forth in this Plan at the
time of such grant as the majority of the members of the Committee may deem
appropriate to conform, in whole or in part, to the provisions of the awards in
substitution for which they are granted.
13.10 Procedure for Adoption. Any Affiliate may by resolution of such
Affiliate's board of directors, with the consent of the Board of Directors and
subject to such conditions as may be imposed by the Board of Directors, adopt
the Plan for the benefit of its employees as of the date specified in the board
resolution.
13.11 Procedure for Withdrawal. Any Affiliate which has adopted the
Plan may, by resolution of the board of directors of such Affiliate, with the
consent of the Board of Directors
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<PAGE> 33
and subject to such conditions as may be imposed by the Board of Directors,
terminate its adoption of the Plan.
13.12 Delay. If at the time a Participant incurs a Termination of
Employment (other than due to Cause) or if at the time of a Change in Control,
the Participant is subject to "short-swing" liability under Section 16 of the
Exchange Act, any time period provided for under the Plan or an Agreement to
the extent necessary to avoid the imposition of liability shall be suspended
and delayed during the period the Participant would be subject to such
liability, but not more than six (6) months and one (1) day and not to exceed
the Option Period, or the period for exercise of a Stock Appreciation Right as
provided in the Agreement, whichever is shorter. The Company shall have the
right to suspend or delay any time period described in the Plan or an Agreement
if the Committee shall determine that the action may constitute a violation of
any law or result in liability under any law to the Company, an Affiliate or a
stockholder of the Company until such time as the action required or permitted
shall not constitute a violation of law or result in liability to the Company,
an Affiliate or a stockholder of the Company. The Committee shall have the
discretion to suspend the application of the provisions of the Plan required
solely to comply with Rule 16b-3 if the Committee shall determine that Rule
16b-3 does not apply to the Plan.
13.13 Headings. The headings contained in this Plan are for reference
purposes only and shall not affect the meaning or interpretation of this Plan.
13.14 Severability. If any provision of this Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not effect any other provision hereby, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
13.15 Successors and Assigns. This Plan shall inure to the benefit of and
be binding upon each successor and assign of the Company. All obligations
imposed upon a Participant, and all rights granted to the Company hereunder,
shall be binding upon the Participant's heirs, legal representatives and
successors.
13.16 Entire Agreement. This Plan and the Agreement constitute the entire
agreement with respect to the subject matter hereof and thereof, provided that
in the event of any inconsistency between the Plan and the Agreement, the terms
and conditions of this Plan shall control.
IN WITNESS WHEREOF, this instrument has been executed by the
undersigned as of the ____ day _____________, 1998.
WELLS-GARDNER ELECTRONICS CORPORATION
By:___________________________
(signature)
Title:
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<PAGE> 34
APPENDIX
The following individuals have been designated by the Board to serve as
the Committee and have accepted such designation:
1. Chairman
2.
3. Secretary
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<PAGE> 1
EXHIBIT 4.2
INCENTIVE STOCK OPTION
THIS INCENTIVE STOCK OPTION, granted this ____ day of _______,
19___, by Wells-Gardner Electronics Corporation, an Illinois corporation
(the "Company"), to ______ (the "Optionee").
WITNESSETH:
WHEREAS, the Board of Directors of the Company is of the
opinion that the interests of the Company will be advanced by encouraging and
enabling those employees of the Company upon whose judgment, initiative and
efforts the Company is largely dependent for the successful conduct of the
business of the Company, to acquire or increase their proprietary interest in
the Company, thus providing them with a more direct stake in its welfare and
assuring a closer identification of their interests with those of the Company;
and
WHEREAS, the Board believes that the acquisition of such an
interest in the Company will stimulate such employees and strengthen their
desire to remain with the Company;
NOW, THEREFORE, in consideration of the premises and of the
services to be performed by the Optionee under paragraph 2 hereunder, the
Company hereby grants this incentive stock option to the Optionee on the terms
hereinafter expressed.
1. Option Grant. The Company hereby grants to the Optionee an option
to purchase a total of _______ shares of Common Stock of the Company at an
option exercise price of $ ______ per share, being not less than 100% of the
Fair Market Value of a share of Common Stock on the date of grant hereof. This
option is intended to qualify as an incentive stock option within the meaning
of Section 422 of the Internal Revenue Code of 1986.
2. Time of Exercise. This option may be exercised (in the manner
provided in paragraph 3 hereof) in whole or in part, and from time to time
after the date hereof, subject to the following limitations:
(a) This option may not be exercised during the first six
months from the date hereof. Thereafter, it may be exercised to a
maximum extent of 25% of the total shares covered by the option after
six months from the date hereof, 50% of the total shares after one
year from the date hereof, 75% of the total shares after two years
from the date hereof, and 100% of the total shares after three years
form the date hereof.
(b) This option may not be exercised:
(i) more than three months after the termination of
the Optionee's employment with the Company for any reason
other than death or a termination by the Company for Cause
(and then only to the extent the Optionee could have
exercised this option on the date of termination); or
<PAGE> 2
(ii) more than one year after the death of the
Optionee if the Optionee dies while in the employ of the
Company (and then only to the extent the Optionee could have
exercised this option on the date of his death); or
(iii) more than 10 years from the date hereof;
whichever shall first occur.
3. Method of Exercise. This option may be exercised only by notice in
writing delivered to the Treasurer of the Company and accompanied by:
(a) The full purchase price of the shares purchased payable
by a certified or cashier's check payable to the order of the Company
and/or certificates of Common Stock of the Company equal in value
(based on their Fair Market Value on the date of surrender) to such
purchase price or the portion thereof so paid; provided, however, that
payment of the exercise price by delivery of shares of Common Stock of
the Company then owned by the Optionee may be made only if such
payment does not result in a charge to earnings for financial
accounting purposes as determined by the Company; and
(b) Such other documents or representations (including
without limitation representations as to the intention of the
Optionee, or the purchaser under paragraph 4 below, to acquire the
shares for investment) as the Company may reasonably request in order
to comply with securities, tax or other laws then applicable to the
exercise of the option.
In the discretion of the Company, payment may also be made by delivering a
properly executed exercise notice to the Company together with a copy of
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds to pay the exercise price. To facilitate the
foregoing, the Company may enter into agreements for coordinated procedures
with one or more brokerage firms.
4. Non-Transferability, Death. This option is not transferable by the
Optionee otherwise than by will or the laws of descent and distribution and is
exercisable during the Optionee's lifetime only by him. If the Optionee dies
while in the employ of the Company, this option may be exercised during the
period described in paragraph 2(b)(iii) (but not later than 10 years from the
date hereof) by his estate or the person to whom the option passes by will or
the laws of descent and distribution, but only to the extent that the Optionee
could have exercised this option on the date of his death.
5. Registration. The Company shall not be required to issue or deliver
any certificate for its Common Stock purchased upon the exercise of this option
prior to the admission of such shares to listing on any stock exchange on which
shares may at that time be listed. In the event of the exercise of this option
with respect to any shares subject hereto, the Company shall make prompt
application for such listing. If at any time during the option period the
Company shall be advised by its counsel that shares deliverable upon exercise
of the option are required to be registered under the Federal Securities Act of
1933, as amended, or that delivery of the shares must be accompanied or
preceded by a prospectus meeting the
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<PAGE> 3
requirements of the Act, the Company will use its best efforts to effect such
registration or provide such prospectus not later than a reasonable time
following each exercise of this option, but delivery of shares by the Company
may be deferred until registration is effected or a prospectus available. The
Optionee shall have no interest in shares covered by the option until
certificates for the shares are listed.
6. Adjustments. In the event that there is any increase in the number
of issued shares of Common Stock of the Company without new consideration to
the Company therefor, by reason of stock dividends, stock split-ups or like
recapitalizations, the number of shares which may thereafter be purchased under
this option shall be increased in the same proportion as said increase in
issued shares of Common Stock. In such event, the per share purchase price
specified in paragraph 1 above shall be reduced so that the total consideration
payable to the Company for the increased number of shares of Common Stock
remaining subject to this option shall not be changed by reason of such
increase in number of shares.
In the case of any sale of assets, merger consolidation, combination
or other corporate reorganization or restructuring of the Company with or into
another corporation which results in the outstanding Common Stock being
converted into or exchanged for different securities, cash or other property,
or any combination thereof (an "Acquisition"), the Optionee shall have the
right thereafter and during the term of this option, to receive upon exercise
thereof the Acquisition Consideration (as defined below) receivable upon the
Acquisition by a holder of the number of shares of Common Stock which might
have been obtained upon exercise of the option or portion thereof, as the case
may be, immediately prior to the Acquisition.
The term "Acquisition Consideration" shall mean the kind and amount of
securities, cash or other property or any combination thereof receivable in
respect of Common Stock, upon consummation of an Acquisition.
If during the term of this option the shares of Common Stock of the
Company shall be combined or be changed into the same or another kind of stock
of the Company or into securities of another corporation, whether through
recapitalization, reorganization, sale, merger, consolidation, etc., the
Company shall cause adequate provision to be made whereby the Optionee shall
thereafter be entitled to receive, upon the due exercise of any then
unexercised portion of this option, the securities which he would have been
entitled to receive for shares of Common Stock acquired through exercise of
such portion of the option (regardless of whether or to what extent the option
would then have been exercisable) immediately prior to the effective date of
such recapitalization, reorganization, sale, merger, consolidation, etc.
7. Subject to Plan. This option is subject to all of the terms and
conditions set forth in the Company's Amended and Restated Incentive Stock Plan
(the "Plan"). Any capitalized terms not defined herein shall be subject to the
definitions set forth in the Plan.
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<PAGE> 4
IN WITNESS WHEREOF, the Company has caused this incentive stock option
to be executed on the date first above written.
WELLS-GARDNER ELECTRONICS CORPORATION
By:
-----------------------------------------
By:
----------------------------
Accepted
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<PAGE> 1
EXHIBIT 5
[Letterhead of Katten Muchin & Zavis]
August 21, 1998
Wells-Gardner Electronics Corporation
2701 North Kildare Avenue
Chicago, Illinois 60639
Ladies and Gentlemen::
We have acted as counsel for Wells-Gardner Electronics Corporation, an
Illinois corporation (the "Company"), in connection with the preparation and
filing of a Registration Statement on Form S-8 (the "Registration Statement")
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Act"). The Registration Statement relates to 600,000 shares of the
Company's Common Stock, $1.00 par value (the "Common Stock"), issuable upon
exercise of awards granted under the Wells-Gardner Electronics Corporation 1998
Incentive Stock Plan (the "Plan"). The Plan has been approved by the Board of
Directors and the Shareholders of the Company.
In connection with this opinion, we have relied as to matters of fact,
without investigation, upon certificates of public officials and others and
upon affidavits, certificates and written statements of directors, officers and
employees of, and the accountants for, the Company. We have also examined
originals or copies, certified or otherwise identified to our satisfaction, of
such instruments, documents and records as we have deemed relevant and
necessary to examine for the purpose of this opinion, including the following:
1. The Registration Statement;
2. The Restated Certificate of Incorporation of the Company, as
amended;
3. The Bylaws of the Company;
4. Resolutions adopted by the Board of Directors of the Company;
and
5. Resolutions adopted by the Shareholders of the Company;
6. Form of Incentive Stock Option Agreement; and
7. The Plan.
<PAGE> 2
Wells-Gardner Electronics Corporation
August 12, 1998
Page 2
In connection with this opinion, we have assumed the accuracy and
completeness of all documents and records that we have reviewed, the
genuineness of all signatures, the authenticity of the documents submitted to
us as originals and the conformity to authentic original documents of all
documents submitted to us as certified, conformed or reproduced copies.
Based upon and subject to the foregoing, we are of the opinion that the
600,000 shares of Common Stock covered by the Registration Statement, when
issued and delivered by the Company in accordance with the provisions of the
Plan, will be validly issued, fully paid and nonassessable shares of Common
Stock.
Our opinion expressed above is limited to the laws of the State of
Illinois, and we do not express any opinion herein concerning any other laws.
This opinion is solely for the information of the addressee hereof and is not
to be quoted in full or in part or otherwise referred to, nor is it to be filed
with any governmental agency or any other person without our prior written
consent. This opinion is given as of the date hereof and we assume no
obligation to advise you of changes that may hereafter be brought to our
attention.
We hereby consent to the use of this opinion for filing as Exhibit 5 to
the Registration Statement. In giving this consent we do not admit that we are
included in the category of persons whose consent is required under Section 7 of
the Act or the related rules and regulations promulgated thereunder.
Very truly yours,
/s/ Katten Muchin & Zavis
---------------------------
KATTEN MUCHIN & ZAVIS
<PAGE> 1
Exhibit 23.1
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Wells-Gardner Electronics Corporation:
We consent to incorporation by reference in this registration statement on Form
S-8 of Wells-Gardner Electronics Corporation of our reports dated January 30,
1998, relating to the balance sheets of Wells-Gardner Electronics Corporation
as of December 31, 1997 and 1996, and the related statements of operations,
shareholders' equity, and cash flows, and the related financial statement
schedule, for each of the years in the three-year period ended December 31,
1997, which reports appear in or are incorporated by reference in the December
31, 1997 annual report on Form 10-K of Wells-Gardner Electronics Corporation.
/s/ KPMG Peat Marwick LLP
Chicago, Illinois
August 21, 1998
<PAGE> 1
EXHIBIT 99.1
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 25,000,000
shares of Common Stock, par value $1.00 per share. Holders of Common Stock are
entitled to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefor. Holders of Common Stock are
entitled to one vote for each share held of record on all matters voted upon by
them and to cumulative voting in the election of directors. Holders of Common
Stock have no preemptive rights and no rights to convert their Common Stock
into any other securities and there are no redemption provisions with respect
to such shares. All outstanding shares of Common Stock are, and the shares of
Common Stock to be sold hereunder, when issued, will be fully paid and
nonassessable. The transfer agent and registrar of the Common Stock is Harris
Trust and Savings Bank.
