<PAGE> 1
As filed with the Securities and Exchange Commission on February 19, 1999
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 1999 STOCK PURCHASE 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)........ 500,000 shares(2) (3) $1,343,750 (3) $374
================================================================================================================
</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. In addition, pursuant to Rule
416(c) under the Securities Act of 1933, this registration also covers an
indeterminate amount of interests to be offered or sold pursuant to the
Wells-Gardner Electronics Corporation 1999 Stock Purchase Plan (the
"Plan").
(2) Represents shares issuable upon exercise of outstanding options under the
Plan.
(3) The amounts are based upon the average of the high and low sales price of
the Common Stock as reported on the American Stock Exchange on February 11,
1999 of $2.6875 with respect to the exercise of options for 500,000 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 1999 Stock
Purchase 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, June 30, 1998 and September 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 1999 Stock Purchase Plan
(the "Plan").
4.2 Form of Stock Purchase 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 LLP with respect to the Company's financial
statements.
24 Power of Attorney (included on the signature page of this
Registration Statement).
99 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
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to 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 19th day of
February, 1999.
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, George Toma 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 February 19, 1999.
SIGNATURE TITLE
- ------------------------------- -----------------------------
Chairman of the Board, President and Chief
/s/ ANTHONY SPIER Executive Officer (Principal Executive
- ------------------------------- Officer) and a Director
Anthony Spier
Chief Financial Officer and Treasurer
/s/ GEORGE B. TOMA (Principal Financial and Accounting
- ------------------------------- Officer)
George B. Toma
Executive Vice President, General Manager
/s/ RANDALL S. WELLS 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
II-4
<PAGE> 7
SIGNATURE TITLE
- ----------------------------------- ---------------------------------
/s/ MARSHALL BURMAN Director
- -----------------------------------
Marshall Burman
Director
- -----------------------------------
Jerry Kalov
II-5
<PAGE> 8
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBITS DESCRIPTION PAGE NO.
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<S> <C> <C>
4.1 Wells-Gardner Electronics Corporation 1999 Stock Purchase Plan (the "Plan"). 9
4.2 Form of Stock Option Agreement for the Plan. 32
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). 38
23.1 Consent of KPMG LLP with respect to the Company's financial
statements. 40
24 Power of Attorney (included on the signature page of this
Registration Statement). __
99 Description of Capital Stock. 41
</TABLE>
II-6
<PAGE> 1
EXHIBIT 4.1
WELLS-GARDNER ELECTRONICS CORPORATION
1999 STOCK PURCHASE PLAN
(ADOPTED EFFECTIVE JANUARY 1, 1999)
<PAGE> 2
WELLS-GARDNER ELECTRONICS CORPORATION
1999 STOCK PURCHASE PLAN
(ADOPTED EFFECTIVE JANUARY 1, 1999)
TABLE OF CONTENTS
PAGE
ARTICLE I ESTABLISHMENT AND PURPOSE.........................................1
1.1 Purpose................................................................1
ARTICLE II DEFINITIONS.......................................................1
2.1 Account................................................................1
2.2 Agreement or Option Agreement..........................................1
2.3 Board of Directors or Board............................................1
2.4 Code or Internal Revenue Code..........................................1
2.5 Committee..............................................................2
2.6 Common Stock...........................................................2
2.7 Company................................................................2
2.8 Continuous Service.....................................................2
2.9 Contribution Rate......................................................2
2.10 Disability............................................................2
2.11 Eligible Employee.....................................................2
2.12 ERISA.................................................................3
2.13 Exercise Date.........................................................3
2.14 Exchange Act..........................................................3
2.15 Fair Market Value.....................................................3
2.16 Grant Date............................................................3
2.17 Option................................................................3
2.18 Option Period.........................................................3
2.19 Option Price..........................................................3
2.20 Participant...........................................................3
2.21 Plan..................................................................4
2.22 Plan Year.............................................................4
2.23 Representative........................................................4
2.24 Retirement............................................................4
2.25 Securities Act........................................................4
2.26 Subsidiary............................................................4
2.27 Termination of Employment.............................................4
<PAGE> 3
ARTICLE III ADMINISTRATION..................................................5
3.1 Committee Structure and Authority......................................5
ARTICLE IV STOCK PROVISIONS..................................................7
4.1 Number of Shares Subject to the Plan...................................7
4.2 Release of Shares......................................................7
4.3 Restrictions on Shares.................................................7
4.4 Stockholder Rights.....................................................8
4.5 Stock Valuation........................................................8
4.6 Custodian..............................................................8
ARTICLE V ELIGIBILITY; OPTION PROVISIONS....................................9
5.1 Eligibility............................................................9
5.2 Grant of Options.......................................................9
5.3 Option Period..........................................................9
5.4 Option Price...........................................................9
5.5 Contribution Rate.....................................................10
5.6 Purchase of Shares....................................................10
5.7 Cancellation of Options...............................................11
5.8 Terminated Employees..................................................11
5.9 Deceased Employees....................................................11
5.10 Disabled or Retired Employees........................................11
5.11 Limitations..........................................................11
5.12 Nonassignability.....................................................12
ARTICLE VI GENERAL PROVISIONS APPLICABLE TO THE PLAN........................12
6.1 Termination of Plan...................................................12
6.2 Investment Representation.............................................12
6.3 Effect of Certain Changes.............................................13
6.4 Withholding...........................................................16
6.5 No Company Obligation.................................................16
6.6 Committee Discretion..................................................16
<PAGE> 4
ARTICLE VII MISCELLANEOUS....................................................17
7.1 Indemnification of the Board and Committee............................17
7.2 Mitigation of Excise Tax..............................................17
7.3 Interpretation........................................................17
7.4 Governing Law.........................................................18
7.5 Limitations on Liability..............................................18
7.6 Validity..............................................................18
7.7 Assignment............................................................18
7.8 Captions..............................................................18
7.9 Amendments............................................................18
7.10 Entire Agreement.....................................................18
7.11 Rights with Respect to Continuance of Employment.....................18
7.12 Options for Shares in Substitution for Stock Options
Granted by Other Corporations.......................................19
7.13 Procedure for Adoption...............................................19
7.14 Procedure for Withdrawal.............................................19
7.15 Expenses.............................................................19
<PAGE> 5
WELLS-GARDNER ELECTRONICS CORPORATION
1999 STOCK PURCHASE PLAN
(ADOPTED EFFECTIVE JANUARY 1, 1999)
ARTICLE I
ESTABLISHMENT AND PURPOSE
1.1 Purpose. The Wells-Gardner Electronics Corporation 1999 Stock Purchase
Plan (the "Plan") is hereby established effective January 1, 1999 by
Wells-Gardner Electronics Corporation. The adoption of the Plan is expressly
conditioned upon the Plan's approval by the security holders of Wells-Gardner
Electronics Corporation within twelve (12) months after the date the Plan is
adopted. The purpose of the Plan is to promote the overall financial objectives
of the Company and its stockholders by motivating participants in the Plan to
achieve long-term growth in stockholder equity in the Company. The Plan is
intended as an "employee stock purchase plan" within the meaning of Section 423
of the Code, and Options granted hereunder are intended to constitute options
granted under such a plan, and the Plan document and all actions taken in
connection with the Plan shall be constructed consistently with such intent.
ARTICLE II
DEFINITIONS
The following sections of this Article II provide basic definitions of
terms used throughout the Plan, and whenever used therein in the capitalized
form, except as otherwise expressly provided, the terms shall be deemed to have
the following meanings:
2.1 "Account" shall mean the bookkeeping account established on behalf of
a Participant to which shall be credited all contributions paid for the purpose
of purchasing Common Stock under the Plan, and to which shall be charged all
purchases of Common Stock pursuant to the Plan. The Company shall have custody
of such Account.
2.2 "Agreement" or "Option Agreement" means, individually or collectively,
any enrollment and withholding agreement entered into pursuant to the Plan. An
Agreement shall be the right of the Company to withhold from payroll amounts to
be applied to purchase Common Stock.
2.3 "Board of Directors" or "Board" means the Board of Directors of the
Company.
2.4 "Code" or "Internal Revenue Code" means the Internal Revenue Code
of 1986, as amended, and any subsequent Internal Revenue Code. If there is a
subsequent Internal Revenue Code, any references herein to Internal Revenue Code
sections shall be deemed to refer to comparable sections of any subsequent
Internal Revenue Code.
<PAGE> 6
2.5 "Committee" means the person or persons appointed by the Board of
Directors to administer the Plan, as further described in the Plan.
2.6 "Common Stock" means the shares of the Common Stock of the
Company, $1.00 par value per share, whether presently or hereafter issued, and
any other stock or security resulting from adjustment thereof as described in
Section 6.3.
2.7 "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.
2.8 "Continuous Service" shall mean, subject to modification by the
Committee, an Eligible Employee's number of full years and completed months of
continuous employment with the Company or a Subsidiary from his last hiring date
to his date of Termination of Employment for any reason. The Committee may
provide rules from time to time regarding the calculation of Continuous Service
and the method for crediting such service.
2.9 "Contribution Rate" means the rate determined under Section 5.5
2.10 "Disability" means a mental or physical illness that entitles the
Participant to receive benefits under the long-term disability plan of the
Company or a Subsidiary, or if the Participant is not covered by such plan, a
mental or physical illness that renders a Participant permanently and totally
incapable of performing his duties as an employee of the Company or a
Subsidiary. Notwithstanding the foregoing, a Disability shall not qualify under
this Plan if it is the result of (a) a willfully self-inflicted injury or
willfully self-induced sickness; or (b) an injury or disease contracted,
suffered, or incurred, while participating in a 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.
2.11 "Eligible Employee" means each employee of the Company or a
Subsidiary (if the Subsidiary has adopted the Plan) on a Grant Date except that
the Committee in its sole discretion may exclude:
(a) any employee who has accrued less than a minimum period of
Continuous Service established by the Committee (but not to exceed 2 years).
(b) any employee whose customary employment is 20 hours or less per
week;
(c) any employee whose customary employment is for not more than 5
months in any calendar year;
(d) any employee who would directly or indirectly own or hold
(applying the rules of Section 424(d) of the Code to determine stock ownership)
immediately following the grant of an Option hereunder an aggregate of five
percent (5%) or more of the total combined voting
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<PAGE> 7
power or value of all outstanding shares of all classes of stock of the Company
or any Subsidiary; and
(e) any employee who is a highly compensated employee of the Company
or Subsidiary within the meaning of Section 414(q) of the Code.
Any period of service described in the preceding sentence may be decreased in
the discretion of the Committee.
2.12 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
2.13 "Exercise Date" means such one or more dates determined by the
Committee on which the accumulated value of the Account shall be applied to
purchase Common Stock. The Committee may accelerate an Exercise Date in order to
satisfy the employment period requirement of Section 423(a)(2).
2.14 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
2.15 "Fair Market Value" means the value determined on the basis of the
good faith determination of the Committee pursuant to the applicable method
described in Section 4.5 and as adjusted, averaged or otherwise modified by the
Committee.
2.16 "Grant Date" means the date or dates established by the Committee
on which one or more Options are granted pursuant to the Plan. The Committee may
determine for any Plan Year that there shall be no Grant Date, in which case no
Options shall be granted for that Plan Year. The terms and conditions of any
Option granted on a particular Grant Date shall be independent of and have no
effect on the terms and conditions of any Option granted on another Grant Date.
2.17 "Option" means the right to purchase Common Stock pursuant to the
Plan and any Agreement.
2.18 "Option Period" means the period beginning on the Grant Date and
expiring on the Exercise Date as determined by the Committee, subject to the
limitations of Section 5.3.
2.19 "Option Price" means the price at which the Company's Common Stock
granted as of a specific Grant Date may be purchased under an Option. The price
shall be subject to the limitation set forth in Section 5.4.
2.20 "Participant" means an Eligible Employee who satisfies the
eligibility conditions of the Plan and to whom an Option has been granted by the
Committee under the Plan, and in the event a Representative is appointed for a
Participant, then the term "Participant" shall mean such appointed
Representative, or successor Representative(s) appointed, as the case may be,
provided that "Termination of Employment" shall mean the Termination of
Employment of the Participant.
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<PAGE> 8
2.21 "Plan" means the Wells-Gardner Electronics Corporation 1999 Stock
Purchase Plan, as herein set forth and as may be amended from time to time.
2.22 "Plan Year" means, for the first Plan Year, the period starting on
January 1, 1999, and ending on December 31, 1999; and for all subsequent Plan
Years, the twelve (12) consecutive month period starting on January 1 and ending
on the following December 31. The Committee may at any time in its discretion
designate another period as the Plan Year.
2.23 "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 his 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's estate; or (c) the person or entity which is the beneficiary of
the Participant upon or following the Participant's death. A Participant may
file a written designation of his Representative with the Committee. Such
designation of his Representative may be changed by the Participant at any time
by written notice given in accordance with rules and procedures established by
the Committee.
2.24 "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 a Subsidiary, if the Participant is covered by such plan, and if
the Participant is not covered by such a plan, then age 65, or age 55 with the
accrual of 10 years of service.
2.25 "Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated pursuant thereto.
2.26 "Subsidiary" means any company, as currently defined in Section
424(f) of the Code. Unless otherwise indicated the term "Company" shall
hereinafter be deemed to include all Subsidiaries of the Company which have
adopted the Plan.
2.27 "Termination of Employment" means the latest date on which a
person ceases, for whatever reason, to be an employee of the Company. For
determining whether and when a Participant has incurred a Termination of
Employment for cause, "cause" shall mean any act or omission which permits the
Company to terminate the employment agreement or arrangement between the
Participant and the Company for cause as defined in such agreement or
arrangement, or in the event there is no such employment agreement or
arrangement or the agreement or arrangement does not define the term "cause,"
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; (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.
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<PAGE> 9
ARTICLE III
ADMINISTRATION
3.1 Committee Structure and Authority. The Plan shall be administered
by the Committee. The Committee shall be comprised of two or more disinterested
members of the Board of Directors selected by the Board. A majority of the
Committee shall constitute a quorum at any meeting thereof (including telephone
conference) and the acts of a majority of the members present, or acts
unanimously approved in writing by the entire Committee without a meeting, shall
be the acts of the Committee. A person shall be considered disinterested for
this purpose only if, at the time he exercises discretion in administering the
Plan, he is a "disinterested person" within the meaning of Rule 16b-3 under the
Exchange Act. 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
President of the Company or 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 the provisions of this
Plan, the Committee shall have full and final authority in its discretion to:
(a) determine from time to time whether a person is an
Eligible Employee as of any Grant Date;
(b) determine the Option Price;
(c) determine the number of shares of Common Stock available
as of any Grant Date or subject to each Option;
(d) determine any Grant Date, Exercise Date and Option
Period, and provide for all aspects of payroll deduction, suspension or
withdrawal;
(e) determine, subject to the Plan, the time or times and the
manner when each Option shall be exercisable and the duration of the
Option Period;
(f) provide for the acceleration of the right to exercise an
Option (or portion thereof);
(g) prescribe additional terms, conditions and restrictions
in the Agreement and to provide for the forms of Agreement to be
utilized in connection with this Plan;
(h) determine whether a Participant has incurred a
Disability;
(i) determine what securities laws requirements are
applicable to the Plan, Options, and the issuance of shares of Common
Stock hereunder and request of a Participant that appropriate action be
taken;
-5-
<PAGE> 10
(j) cancel, with the consent of the holder or as otherwise
provided in the Plan or an Agreement, outstanding Options;
(k) require as a condition of the exercise of an Option 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 Subsidiary
to obtain a deduction and as may be otherwise required by law;
(l) determine whether and for what reason an individual has
incurred a Termination of Employment or an authorized leave of absence;
(m) treat all or any portion of any period during which a
Participant is on an approved leave of absence as a period of
employment for purposes of accrual of his rights under an Option;
(n) 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;
(o) determine the restrictions or limitations on the transfer
of Common Stock;
(p) determine whether an Option is to be adjusted, modified
or purchased, or become fully exercisable, under Section 6.3 of the
Plan or the terms of an Agreement;
(q) adopt, amend and rescind such rules and regulations as,
in its opinion, may be advisable in the administration of this Plan;
(r) appoint and compensate agents, counsel, auditors or other
specialists to aid it in the discharge of its duties;
(s) correct any defect or supply any omission or reconcile
any inconsistency in the Plan or in any Agreement relating to an
Option, in such manner and to the extent the Committee shall determine
in order to carry out the purposes of the Plan; and
(t) construe and interpret this Plan, any Agreement, and take
all other actions, and make all other determinations and take all other
actions deemed necessary or advisable for the administration of this
Plan.
In the absence of the appointment of a Committee, the two or more
members of the Board who have served the longest period of time as members of
the Board and who are disinterested persons within the meaning of Rule 16b-3 of
the Exchange Act shall be the Committee. No member of the Committee, while
serving as such, shall be eligible to receive any Option hereunder, although
membership on the Committee shall not affect or impair any such member's rights
under any Option granted to him at a time when he was not a member of
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the Committee. A member of the Committee shall not exercise any discretion
respecting himself under the Plan.
ARTICLE IV
STOCK PROVISIONS
4.1 Number of Shares Subject to the Plan. The stock subject to the
Options granted under this Plan shall be the Company's Common Stock. Unless
otherwise amended by the Board and approved by the stockholders of the Company
to the extent required by law, a maximum number of 500,000 shares of Common
Stock of the Company (or such number as may result following any adjustment
pursuant to Section 6.3) shall be reserved and available for Options granted
under the Plan. The shares issued with respect to Options under the Plan may be
authorized and unissued shares, or shares issued and reacquired by the Company.
4.2 Release of Shares. If any shares of Common Stock available for
subscription are unsubscribed, or if any Option granted hereunder shall be
canceled, forfeited, expire or terminate for any reason without having been
exercised or realized in full, any shares of Common Stock subject to
subscription or subject to such Option shall again be available and may
thereafter be granted or otherwise applied under this Plan.
4.3 Restrictions on Shares. Shares of Common Stock issued upon exercise
of an Option 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 the Agreement. The Company shall not be
required to issue or deliver any certificates for shares of Common Stock prior
to (1) the listing of such shares on any stock exchange (or other public market)
on which the Common Stock may then be listed (or regularly traded), (2) the
completion of any registration or qualification of such shares under federal or
state law, or any ruling or regulation of any governmental body which the
Committee, in its sole discretion, determines to be necessary or advisable, and
(3) the tendering to the Company of such documents and/or payments as the
Committee may deem necessary, including documents the Committee deems necessary
to satisfy any applicable withholding obligation in order for the Company or
another entity to obtain a deduction on its federal, state or local tax return
with respect to the exercise of an Option. 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
Company has no obligation to register shares of Common Stock issued pursuant to
the Plan. 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 Option until, after
proper exercise of the Option or other action required, such shares shall have
been recorded on the Company's official stockholder records as having been
issued or transferred. 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 in Section 6.3.
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4.5 Stock Valuation. If and when the value of Common Stock shall be
required to be determined, it shall be determined in accordance with the
following provisions by the Committee, as applicable:
(a) if the Common Stock is listed on a national securities exchange
or quoted on the American Stock Exchange ("Amex"), the closing price of
the Common Stock on the relevant date, as reported on the composite
tape or by Amex, as the case may be;
(b) if the Common Stock is not listed on a national securities
exchange or quoted on Amex, but is 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 the most recent preceding day for which
such quotations are reported by Amex; and
(c) if, on the relevant date, the Common Stock is not publicly
traded or reported as described in (i) or (ii), on the basis of the
good faith determination of the Committee.
4.6 Custodian. Shares of Common Stock purchased pursuant to the Plan
may be delivered to and held in the custody of such investment or financial firm
as shall be appointed by the Committee. The custodian may hold in nominee or
street name certificates for shares purchased pursuant to the Plan, and may
commingle shares in its custody pursuant to the Plan in a single account without
identification as to individual Participants. By appropriate instructions to the
custodian on forms to be provided for the purpose, a Participant may from time
to time obtain (a) transfer into the Participant's own name or into the name of
the Participant and another individual as joint tenants with the right of
survivorship of all or part of the whole shares held by the custodian for the
Participant's account and delivery of such shares to the Participant; (b)
transfer of all or part of the whole shares held for the Participant's account
by the custodian to a regular individual brokerage account in the Participant's
own name or in the name of the Participant and another individual as joint
tenants with the right of survivorship, either with the firm then acting as
custodian or with another firm, or (c) sale of all or part of the whole shares
held by the custodian for the Participant's account at the market price at the
time the order is executed and remittance of the net proceeds of the sale to the
Participant. Upon termination of participation in the Plan, and upon receipt of
instructions from the Participant, the shares held by the custodian for the
account of the Participant will be transferred and delivered to the Participant
in accordance with (a) above, transferred to a brokerage account in accordance
with (b), or sold in accordance with (c), above.
ARTICLE V
ELIGIBILITY; OPTION PROVISIONS
5.1 Eligibility. Except as herein provided, the persons who shall be
eligible to participate in the Plan as of any Grant Date shall be those persons
(and only those persons) who are Eligible Employees of the Company (including a
Subsidiary that has adopted the Plan) on a Grant Date.
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5.2 Grant of Options. The Committee shall have authority to grant
Options under the Plan at any time or from time to time to all Eligible
Employees as of a Grant Date. (To the extent an Option is granted to any
Eligible Employee of an entity on a relevant date, all Eligible Employees of the
entity shall be granted an Option to the extent required by law.) An Option
shall entitle the Participant to receive shares of Common Stock at the
conclusion of the Option Period, subject to the Participant's satisfaction in
full of any conditions, restrictions or limitations imposed in accordance with
the Plan or an Agreement, including without limitation, payment of the Option
Price. 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 this Plan and to such other terms and conditions as the Committee
may deem appropriate. The grant and exercise of Options hereunder shall be
subject to all applicable federal, state and local laws, rules and regulations
and to such approvals by any governmental or regulatory agency as may be
required. As of any Grant Date, each Eligible Employee shall be granted Options
with the same rights and privileges as any other Eligible Employee on that Grant
Date, except the amount of the Common Stock which may be purchased by any
Participant under any Option may bear a uniform relationship to the total
compensation, or the basic or regular rate of compensation, (as determined by
the Committee) of all Eligible Employees on that Grant Date, and the Option may
establish a maximum amount of Common Stock which may be purchased.
5.3 Option Period. Each Agreement shall specify the period for which
the Option thereunder is granted, which shall be determined by the Committee. In
no event shall the Option Period extend beyond the period permitted under
Section 423(b)(7) of the Code.
5.4 Option Price. Subject to the limits stated herein, the Option Price
per share at which shares of Common Stock may be acquired upon exercise of an
Option shall be determined by the Committee. Unless otherwise specified by the
Committee, with respect to any Exercise Date, the Option Price shall not be less
than the lesser of eighty-five percent (85%) of the Fair Market Value of a share
of Common Stock (averaged over such period as the Committee may determine and as
permitted by law) on the applicable Grant Date and eighty-five percent (85%) of
the Fair Market Value of a share of Common Stock (averaged over such period as
the Committee may determine and as permitted by law) on the applicable Exercise
Date. The Committee reserves the right to increase the Option Price by the value
of any accretion to the amounts credited to an Account if the Participant is
credited with such accretion regardless of the method of accounting for such
accretion.
5.5 Contribution Rate. If an Eligible Employee elects to participate,
the Participant shall file an Agreement with the Committee within the time
period designated by the Committee. The Committee may provide that the Agreement
shall specify a dollar amount determined by the Participant to be deducted each
pay period, or the Committee may permit only a specified amount. Such amount
shall be credited to the Account and shall be the Participant's Contribution
Rate. Such deductions shall begin as of the first regularly scheduled payroll
date on or after the later of the Grant Date and the date specified by the
Committee. The Committee may establish minimum and maximum amounts to be
contributed and a date by when such Agreement must be filed with the Committee.
Notwithstanding the foregoing, in no event may more than $2,083 be deducted from
the Participant's compensation (as defined by the Committee) for each Option
Period and the maximum number of shares which can be purchased
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<PAGE> 14
by a Participant during the Option Period shall not exceed such amount divided
by eighty-five percent of the Fair Market Value of a share of Common Stock on
the applicable Grant Date (as determined under Section 5.4). Such contributions
will be held in the general funds of the Company, and no interest shall accrue
on any amounts held under this Plan, unless expressly determined by the
Committee. If payroll deductions are made by a Subsidiary, that corporation will
promptly remit the amount of the deduction to the Company. A Participant's
Contribution Rate, once established, shall remain in effect during the Option
Period unless the Committee decides, in its sole discretion, to allow
Participants to modify their Contribution Rate; provided, however, that
contributions shall be suspended or fully discontinued in order to comply with
Section 401(k) of the Code or for such other reasons as the Committee in its
sole discretion may determine, or if the Participant shall request suspension or
discontinuance. If a Participant requests to suspend payroll deductions, the
Participant may do so at such times and in such manner as the Committee may
permit, and previously deducted amounts shall be retained until the earlier of
the Exercise Date and the date the Participant totally discontinues payroll
deductions and requests a distribution of the Account. A Participant who has
suspended contributions may recommence payroll deductions at such time, if at
all, as determined by the Committee. If a Participant requests to totally
discontinue payroll deductions, the Participant may do so by providing written
notice to the Committee. There shall be paid to the Participant the value of the
Participant's Account as soon as administratively possible and the Participant
shall not receive any shares as of the Exercise Date.
5.6 Purchase of Shares. Subject to Sections 5.7, 5.8, 5.9, 5.10 and
5.11 on each Exercise Date, a Participant who has previously executed an
Agreement with respect to a specific Grant Date and made one or more payments
described in Section 5.5 shall be deemed to have exercised the Option to the
extent of the value of the Account, subject to the $2,083 limit set forth in
Section 5.5 with respect to the Option being exercised, and shall be deemed to
have purchased such number of full shares of Common Stock as equals the value of
the Account, subject to the limits of Sections 423(b)(3) and 423(b)(8) of the
Code and the number of shares available as of the Exercise Date and
proportionably allocable to other Participants for that Grant Date. The number
of shares of Common Stock to be purchased as of any Exercise Date shall be
determined by dividing the Option Price per share of the Common Stock into the
Account value and the value of the shares so purchased shall be charged to the
Account. Certificates of Common Stock purchased hereunder may be held by the
custodian as provided in Section 4.6. Any Common Stock issued to the Participant
who is subject to reporting under Section 16 of the Exchange Act must be held
for six (6) months to the extent required by law to avoid liability under the
Exchange Act. The Committee may amend the Plan or any Agreement or provide in
operation for Participants to dispose of shares of Common Stock received upon
the Exercise Date on or immediately thereafter (which time may include any
period during which the Option is held) to the extent such change would not
result in liability under Section 16 of the Exchange Act. If the total number of
shares to be purchased as of any Exercise Date by all Participants exceeds the
number of shares authorized under this Plan or made available by the Committee
as to any Exercise Date, a pro rata allocation of the available shares will be
made among all Participants authorizing such payroll deductions based on the
amount of their respective payroll deductions through the Exercise Date.
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<PAGE> 15
5.7 Cancellation of Options. Except as otherwise provided in an
Agreement, an Option shall cease to be exercisable and shall be canceled on or
after the expiration of the Option Period.
5.8 Terminated Employees. Except as otherwise provided by the Committee
or in an Agreement, any Participant who incurs a Termination of Employment for
any reason, except death, Disability or Retirement, during the Option Period
shall cease to be a Participant, the Option shall be null and void on the date
of the Termination of Employment without notice to the Participant and the
balance of the Account of the Participant shall be distributed to him as soon as
administratively possible.
5.9 Deceased Employees. If a Participant shall die during an Option
Period while an Eligible Employee, no further contributions by deduction from
regularly scheduled payments on behalf of the deceased Participant shall be
made, except that the Representative may make a single sum payment with respect
to the Option at any time on or before the Exercise Date equal to the amount the
Participant would have contributed as determined by the Committee for the
payroll periods remaining to the Exercise Date. The Representative may at any
time prior to the Exercise Date request a distribution of the Account. If the
Representative does not request a distribution, the balance accumulated in the
deceased Participant's Account shall be used to purchase shares of the Common
Stock on the previously mentioned Exercise Date.
5.10 Disabled or Retired Employees. If a Participant incurs a
Termination of Employment due to Disability, or if a Participant incurs a
Termination of Employment due to Retirement, during an Option Period, no further
contributions by deduction from regularly scheduled payments on behalf of the
disabled or retired Participant shall be made, except that the Participant may
make a single sum payment with respect to the Option at any time on or before
the Exercise Date equal to the amount the Participant would have contributed as
determined by the Committee for the payroll periods remaining to the Exercise
Date. The Participant may at any time prior to the Exercise Date request a
distribution of the Account. If the Participant does not request a distribution
of the Account, the balance accumulated in the disabled or retired Participant's
Account shall be used to purchase shares of the Common Stock on the previously
mentioned Exercise Date.
5.11 Limitations. Notwithstanding any other provision of this Plan, in
no event may a Participant (i) purchase under the Plan during a calendar year
Common Stock having a fair market value (determined at Grant Date) of more than
$25,000 or (ii) receive any rights to purchase stock hereunder if he or she
beneficially owns, immediately after such receipt, five percent (5%) or more of
the total voting power or value of all classes of stock of the Company.
5.12 Nonassignability. Neither the Option nor the Account shall be
assigned, transferred (except as herein provided), pledged, or hypothecated in
any way (whether by operation of law or otherwise), other than by will or the
laws of descent and distribution or pursuant to a domestic relations order which
would be a qualified domestic relations order as defined in the Code or ERISA
(if the Plan were described in the relevant Sections) but only to the extent
consistent with Section 423 of the Code. Except as provided herein, the Option
is exercisable during a Participant's lifetime only by the Participant or the
appointed guardian or legal representative of the Participant, and neither the
Option nor the Account shall be subject
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<PAGE> 16
to execution, attachment, or similar process. Any attempted assignment,
transfer, pledge, hypothecation, or other disposition contrary to the provisions
hereof, and the levy of any attachment or similar process upon the Option or the
Account shall be null and void and without effect. The Company shall have the
right to terminate the Option or the Account in the event of any such
assignment, transfer, pledge, hypothecation, other disposition of the Option or
the Account, or levy of attachment or similar process, by notice to that effect
to the person then entitled to exercise the Option; provided, however, that
termination of the Option hereunder shall not prejudice any rights or remedies
which the Company may have under an Agreement or otherwise.
ARTICLE VI
GENERAL PROVISIONS APPLICABLE TO THE PLAN
6.1 Termination of Plan. To the extent required by law, this Plan shall
terminate on the last day of the ten (10) year period commencing with the
effective date or at such earlier time as the Board may determine, and no
Options shall be granted under the Plan after that date. Any Options outstanding
under the Plan at the time of its termination shall remain in effect until they
shall have been exercised, expired or otherwise canceled, settled or terminated
as provided herein or in an Agreement, and such outstanding Options shall not be
affected by such termination of the Plan. The provisions of the Plan in respect
to the full and final authority of the Committee under the Plan, other than the
authority to grant Options, and in respect of a Participant's obligations
respecting shares of Common Stock received pursuant to the exercise of an Option
shall continue notwithstanding the termination of the Plan.
6.2 Investment Representation. In the event the disposition of Common
Stock acquired upon the exercise of any Option is not covered by a then current
registration statement under the Securities Act and is not otherwise exempt from
such registration, the Common Stock so acquired shall be restricted against
transfer to the extent required by the Securities Act or regulations thereunder,
and each Agreement shall contain a requirement that, upon demand by the Company
for such representation, the individual exercising an Option shall state in
writing, as a condition precedent to each exercise of the Option, in whole or in
part, that the Common Stock acquired by such exercise is acquired for investment
purposes only and not for resale or with a view to distribution. The Committee
may set forth in an Agreement such other terms and conditions relating to the
registration or qualification of the Common Stock under federal or state
securities laws as it desires, including, in its discretion, the imposition of
an obligation on the Company to cause the Common Stock issued to a Participant
to be registered under the Securities Act.
6.3 Effect of Certain Changes.
(a) 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 shareholders
other than a normal cash dividend), sale by the Company of all or a
substantial portion
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<PAGE> 17
of its assets (as measured on either a stand-alone or consolidated
basis), reorganization, rights offering, partial or complete
liquidation, or any other corporate transaction or event involving the
Company and having an effect similar to any of the foregoing, then the
Committee may adjust or substitute, as the case may be, the number of
shares of Common Stock available for Options under the Plan, the number
of shares of Common Stock covered by outstanding Options, the exercise
price per share of outstanding Options, and any other characteristics
or terms of the Options as the Committee shall deem necessary or
appropriate to reflect equitably the effects of such changes to the
Participants; provided, however, that any fractional shares resulting
from such adjustment shall be eliminated by rounding to the next lower
whole number of shares with appropriate payment for such fractional
share as shall reasonably be determined by the Committee.
(b) Change in Control. If there is a Change in Control of the
Company (as defined herein) or the Committee reasonably anticipates
that a Change in Control is likely to occur, then (1) the Committee may
cause each Option to be immediately exercisable; (2) the Committee may
provide that any Option exercisable on the date of any such Change in
Control may be purchased by the Company in an amount equal to the
excess, if any, of the aggregate fair market value per share of Common
Stock subject to the Option (or portion thereof) over the aggregate
Option Price of the shares subject to the Option (or portion thereof)
which the Committee determines to purchase; or (3) the Company may
provide for any combination of (1) and (2) above. For purposes of this
Section 6.3(b), the aggregate fair market value per share of Common
Stock subject to the Option that the Committee determines to purchase
shall be determined by the Committee by reference to the cash or fair
market value, determined by the Committee, of the securities, property
or other consideration receivable pursuant to the Change in Control
described in this Section 6.3(b). The aggregate Option Price of the
Common Stock shall be determined by multiplying the number of such
shares by the Option Price. If the event of a Change in Control
described in Section 6(c)(iii), and if the Option is unexercised and
the Committee does not exercise its discretion hereunder to purchase
the Option, then the Option shall be regarded as the right to receive
the securities, property, cash or other consideration receivable by
shareholders of the Company immediately prior to the Change in Control
described in Section 6(c)(iii). The provisions of this Section 6.3(b)
shall be construed consistently with the terms or conditions of any
regulation or ruling respecting the status of Options under Section 423
of the Code and the receipt of cash or other consideration coincident
with the cancellation of such Options, and in order to provide the
Participant the economic benefit of the Option without incurring
liability under Section 16(b) of the Exchange Act.
(c) "Change in Control" shall be deemed to have occurred on
the first to occur of any of the following events:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
twenty-five percent 25% or more of either (A) the then
outstanding shares of common stock of the Company (the
"Outstanding Company
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<PAGE> 18
Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change in
Control of the Company: (1) any acquisition directly from the
Company (excluding an acquisition by virtue of the exercise of
a conversion privilege), (2) any acquisition by the Company,
(3) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (4) any acquisition
by any corporation pursuant to a reorganization, merger or
consolidation, if, following such reorganization, merger or
consolidation, the conditions described in clauses (A), (B)
and (C) of subsection (iii) of this Section are satisfied; or
(ii) Individuals who, as of the effective date of this
Plan, constitute the Board of Directors of the Company (the
"Incumbent Board of the Company") cease for any reason to
constitute at least a majority of the Board of Directors of
the Company; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board of the Company shall be
considered as though such individual were a member of the
Incumbent Board of the Company, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened
election contest (as contemplated by Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board of Directors of the Company;
or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation, (A)
more than seventy-five percent (75%) of, respectively, the
then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation
and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such reorganization,
merger or consolidation in substantially the same proportions
as their ownership, immediately prior to such reorganization,
merger or consolidation, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case
may be, (B) no Person (excluding the Company, any employee
benefit plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger or
consolidation and any Person beneficially owning immediately
prior to such reorganization, merger or consolidation,
directly or indirectly, twenty-five percent (25%) or more of
the Outstanding Company Common Stock or Outstanding Voting
Securities, as the case may be) beneficially owns, directly or
indirectly, twenty-five percent (25%)
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<PAGE> 19
or more of, respectively, the then outstanding shares of
common stock of the corporation resulting from such
reorganization, merger or consolidation or the combined voting
power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of
directors and (C) at least a majority of the members of the
board of directors of the corporation resulting from such
reorganization, merger or consolidation were members of the
Incumbent Board of the Company at the time of the execution of
the initial agreement providing for such reorganization,
merger or consolidation; or
(iv) Approval by the shareholders of the Company of
the sale or other disposition of all or substantially all of
the assets of the Company, other than to a corporation, with
respect to which following such sale or other disposition, (A)
more than seventy-five percent (75%) of, respectively, the
then outstanding shares of common stock of such corporation
and the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such sale or other
disposition in substantially the same proportion as their
ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (B)
no Person (excluding the Company, any employee benefit plan
(or related trust) of the Company or such corporation and any
Person beneficially owning, immediately prior to such sale or
other disposition, directly or indirectly, twenty-five percent
(25%) or more of the Outstanding Company Common Stock or
Outstanding Company Voting Securities, as the case may be)
beneficially owns, directly or indirectly, twenty-five percent
(25%) or more of, respectively, the then outstanding shares of
common stock of such corporation and the combined voting power
of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(3) at least a majority of the members of the board of
directors of such corporation were members of the Incumbent
Board of the Company at the time of the execution of the
initial agreement or action of the Board providing for such
sale or other disposition of assets of the Company.
(d) The Committee may, in its discretion, grant to the
Participant, in exchange for the surrender and cancellation of the
Option, a new Option on such terms and conditions as may be determined
by the Committee in accordance with the Plan.
6.4 Withholding. Notwithstanding any other provision hereof, as a
condition of delivery or transfer of shares of Common Stock, the Committee in
its sole discretion may require the Participant to pay to the Company, or the
Committee may at its election withhold from any wages, salary, or stock to be
issued to a Participant pursuant to the exercise of an Option, or other payment
due to the Participant, an amount sufficient to satisfy all present or estimated
future federal, state and local withholding tax requirements related thereto.
The Participant may satisfy any requirement under the Plan or an Agreement with
respect to the
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<PAGE> 20
Company's federal, state or local tax withholding obligation by requesting that
the Committee withhold and not transfer or issue shares of Common Stock with a
Fair Market Value equal to such withholding obligation, otherwise issuable or
transferable to him pursuant to the exercise of that portion of the Option. An
Agreement may provide for shares of Common Stock to be delivered or withheld
having a Fair Market Value in excess of the minimum amount required to be
withheld, but not in excess of the amount determined by applying the
Participant's maximum marginal tax rate. Any right or election of the
Participant under this Section 6.4 shall be subject to the approval of the
Committee and shall be in compliance with Section 16 of the Exchange Act. The
amount of required withholding shall, at the election of the Participant, be at
a specified rate not less than the statutory minimum federal and state
withholding rate and not greater than the maximum federal, state and local
marginal tax rate applicable to the Participant and to the particular option
exercise transaction.
6.5 No Company Obligation. The Company shall have no duty or obligation
to affirmatively disclose to a record or beneficial holder of an Option, and
such holder shall have no right to be advised of, any material information
regarding the Company at any time prior to, upon or in connection with the
exercise of an Option.
6.6 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 Option (including the
repurchase of any unexercised Options 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 VI 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.
ARTICLE VII
MISCELLANEOUS
7.1 Indemnification of the Board and Committee. In addition to such
other rights of indemnification as they may have and to the extent permitted by
law, the Company shall indemnify, defend and hold harmless the Board, the
Committee, the members of the Committee, the officers of the Company, and any
agent or representative selected by the Board or Committee (collectively
"indemnified party") against the reasonable expenses, including, without
limitation, attorneys' fees, actually and necessarily incurred in connection
with the defense of any action, suit or proceeding, or any threat thereof, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any act or omission in connection with the Plan or any Option
granted thereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by legal counsel selected by the Company)
or paid by them in satisfaction of a judgment in any action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such action,
suit or proceeding that such indemnified party is liable for gross negligence or
gross misconduct in the performance of his duties; provided that within sixty
(60) days after institution of any such action, suit or proceeding the
indemnified party may in writing elect to defend the same at its sole expense,
and if such
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<PAGE> 21
election is made, the Company shall have no further liability or obligations to
the indemnified party under this Section. The provisions of this Section 7.1
shall in no way limit any other obligation or arrangements the Company may have
with regard to indemnifying an indemnified party.
7.2 Mitigation of Excise Tax. If any payment or right accruing to a
Participant under this Plan (without the application of this Section 7.2),
either alone or together with other payments or rights accruing to the
Participant from the Company ("Total Payments") would constitute a "parachute
payment" (as defined in Section 280G of the Code and regulations thereunder),
such payment or right shall 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
whether any reduction in the rights or payments under this Plan is to apply
shall be made by the Committee in good faith after consultation with the
Participant, and such determination shall be conclusive and binding on the
Participant. 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 7.2 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.
7.3 Interpretation. Whenever necessary or appropriate in this Plan and
where the context so requires, the singular term and the related pronouns shall
include the plural and the masculine and feminine gender.
7.4 Governing Law. The Plan and any Agreement shall be governed by the
laws of the State of Illinois (other than its laws respecting choice of law).
7.5 Limitations on Liability. No liability whatever shall attach to or
be incurred by any past, present or future stockholders, officers or directors,
merely as such, of the Company under or by reason of any of the terms,
conditions or agreements contained in this Plan, in an Agreement or implied from
either thereof, and any and all liabilities of, and any and all rights and
claims against the Company, or any shareholder, officer or director, merely as
such, whether arising at common law or in equity or created by statute or
constitution or otherwise, pertaining to this Plan or to an Agreement, are
hereby expressly waived and released by every Participant as a part of the
consideration for any benefits provided by the Company under this Plan. A person
who shall claim a right or benefit under this Plan shall be entitled only to
claim against the Company for such benefit.
7.6 Validity. If any provision of this Plan shall for any reason be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision hereof, and this Plan shall be construed as if
such invalid or unenforceable provision were omitted.
7.7 Assignment. This Plan shall inure to the benefit of and be binding
upon the parties hereof and their respective successors and permitted assigns.
-17-
<PAGE> 22
7.8 Captions. The captions and headings to this Plan are for
convenience of reference only and in no way define, limit or describe the scope
or the intent of this Plan or any part hereof, nor in any way affect this Plan
or any part hereof.
7.9 Amendments. The Board of Directors may at any time amend, waive,
discharge or terminate the Plan even with prejudice to a Participant. The Board
or the Committee may amend, waive, discharge, terminate, modify, extend, replace
or renew an outstanding Option Agreement even with prejudice to a Participant;
provided such a change does not cause the Plan to fail to be a plan as described
in Section 423 of the Code.
7.10 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.
7.11 Rights with Respect to Continuance of Employment. Nothing
contained herein or in an Agreement shall be deemed to alter the at-will
employment relationship between the Company or a Subsidiary and a Participant.
Nothing contained herein or in an Agreement shall be construed to constitute a
contract of employment between the Company or a Subsidiary and a Participant.
The Company or, as applicable, the Subsidiary and the Participant each continue
to have the right to terminate the employment relationship at any time for any
reason. The Company or Subsidiary shall have no obligation to retain the
Participant in its employ as a result of this Plan. There shall be no inference
as to the length of employment hereby, and the Company or Subsidiary reserves
the same rights to terminate the Participant's employment as existed prior to
the individual becoming a Participant in this Plan.
7.12 Options for Shares in Substitution for Stock Options Granted by
Other Corporations. Options may be granted under the Plan from time to time in
substitution for stock options or stock appreciation rights held by employees,
directors or service providers of other corporations who are about to become
employees of the Company as the result of a merger or consolidation of the
employing corporation with the Company, or the acquisition by the Company of the
assets of the employing corporation, or the acquisition by the Company 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 Options 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 Options in
substitution for which they are granted.
7.13 Procedure for Adoption. Any Subsidiary of the Company may by
resolution of such Subsidiary'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. The Board shall have the power to make such
designation before or after the Plan is approved by stockholders.
7.14 Procedure for Withdrawal. Any Subsidiary which has adopted the
Plan may, by resolution of the board of directors of such Subsidiary, with the
consent of the Board of Directors and subject to such conditions as may be
imposed by the Board of Directors, terminate
-18-
<PAGE> 23
its adoption of the Plan; provided such termination of adoption does not cause
the Plan to fail to be a plan described in Section 423 of the Code.
7.15 Expenses. Expenses of the Plan, including the fees or expenses
incurred by the transfer agent in connection with the transfer of Common Stock
and brokerage fees or expenses incurred in connection with the acquisition of
Common Stock in connection with the Plan or transfer to the Participant, shall
be paid by the Company. Any expense or fee associated with the Common Stock,
including, for example, fees or commissions in connection with the disposition
of shares or the withdrawal of such shares from the custodian, shall be borne by
the Participant.
Executed and effective as of the 1st day of January, 1999.
WELLS-GARDNER ELECTRONICS CORPORATION
/S/ GEORGE B. TOMA
-----------------------------------------
By: George B. Toma
Title: Vice President, Chief Financial
Officer & Treasurer
-19-
<PAGE> 1
EXHIBIT 4.2
WELLS-GARDNER ELECTRONICS CORPORATION
OPTION AGREEMENT
This Option Agreement is made as of _______________, 199__ (the "Grant
Date") between you and Wells-Gardner Electronics Corporation (the "Company")
pursuant to the Wells-Gardner Electronics Corporation 1999 Stock Purchase Plan
as adopted effective January 1, 1999 (the "Plan"). Please read the Prospectus
before reading this Option Agreement and completing the form on page 6. Please
refer to the Plan for the definition of certain terms used in this Option
Agreement. This Option Agreement is subject to all of the terms and conditions
of the Plan, which are controlling. The Option (as defined below) granted
hereunder is awarded pursuant to the Plan and is subject to the approval of the
shareholders of the Company and the ratification and adoption of the Plan by the
Board of Directors.
IF YOU ACCEPT THE OPTION, YOU SHOULD EXECUTE PAGE 6, INDICATING THE
AMOUNT OF YOUR PAYROLL DEDUCTION, AND RETURN IT TO THE COMMITTEE FOR THE STOCK
PURCHASE PLAN, C/O CORPORATE SECRETARY, WELLS-GARDNER ELECTRONICS CORPORATION,
2701 NORTH KILDARE AVENUE, CHICAGO, ILLINOIS 60639. YOU MUST RETURN AN EXECUTED
COPY OF PAGE 6 BY _______________, 1999.
IF YOU DO NOT ACCEPT THE OPTION, YOU SHOULD EXECUTE PAGE 6 WHERE
APPROPRIATE AND RETURN ONE COPY TO THE COMMITTEE FOR THE STOCK PURCHASE PLAN,
C/O CORPORATE SECRETARY, WELLS-GARDNER ELECTRONICS CORPORATION, 2701 NORTH
KILDARE AVENUE, CHICAGO, ILLINOIS 60639. IF PAGE 6 IS NOT RETURNED BY
_______________, 1999, THE COMPANY WILL ASSUME YOU HAVE REJECTED THE OPTION.
1. Option Grant. Subject to the terms and conditions of the Plan and
this Option Agreement, the Company is pleased to grant to you the option (the
"Option") to purchase shares of the Company's Common Stock at an option price
per share that is the lesser of 85% of the Fair Market Value per share on the
Grant Date or 85% of the Fair Market Value per share on the Exercise Date(s) (as
defined in Section 2 below) (the "Option Price"). (The number of shares is
described in Section 3, and depends, in part, on your contribution and the total
contribution of all other Participants.)
2. Exercise Schedule. The Option is exercisable on
_______________________ [SPECIFY THE DATE OR DATES ON WHICH THE OPTION IS
EXERCISABLE WITHIN THE LIMITS SET FORTH BY SECTION 423(B)(7) OF THE INTERNAL
REVENUE CODE FOR THE OPTION PERIOD] (the "Exercise Date(s)") on the terms and
conditions in the Plan and in this Option Agreement. As described in the Plan
and Prospectus, there are certain circumstances under which the Option would no
longer be exercisable and any of your money withheld, as described below, would
be returned to you.
3. Method of Option Exercise. By signing this Option Agreement, you are
authorizing the Company or its Subsidiary for whom you are employed to deduct a
specified amount from each paycheck for each payroll period during the Option
Period. The deductions will begin on or about the date on which the payroll
deduction form on page 6 of this Option
<PAGE> 2
Agreement must be returned to the Committee (as specified above), and will
continue until the earliest of the Exercise Date, the date you suspend
deductions or the date you withdraw from the Plan. The amounts deducted will be
credited to your Account. No interest will accrue on any amounts held in your
Account. All amounts will be held as general funds of the Company. At any time
during the Option Period, you may notify the Company that you want to suspend or
discontinue your contributions. If you suspend your contributions, your
deductions will commence again only at such time and on such conditions as
permitted by the Committee. If you discontinue contributions, you will receive
the value of your Account in cash. Any notice to the Company must be on forms
provided by the Company, and will be effective no earlier than ___ days after
receipt by the Company unless otherwise agreed to by the Committee.
On the Exercise Date, the value of your Account will be applied to
purchase shares of Common Stock. On the Exercise Date, your Account will be
reduced by the Option Price per share, multiplied by the maximum number of
shares that can be purchased on such Exercise Date, subject to certain limits
described in the Plan. If the total number of shares of Common Stock available
for purchase on a particular Exercise Date are not sufficient to satisfy all
Participants' requests, the Committee may reduce the number of shares of Common
Stock to be purchased under this Option Agreement in the proportion that your
payroll deductions bear to the payroll deductions of all Participants entitled
to purchase shares of Common Stock on such Exercise Date. The number of shares
you may purchase during the Option Period shall never exceed an amount equal to
$2,083 divided by 85% of the Fair Market Value of a share of Common Stock on the
Grant Date (rounded to the next lower whole share). The certificate for Common
Stock purchased pursuant to this Option may be held by a custodian.
4. Withholding. You hereby agree that the Company will have the right
to withhold in all relevant payroll periods all federal, state, local and other
taxes as a result of the exercise of the Option or the disposition of shares
pursuant to an Option. If you are not an employee of the Company on an Exercise
Date or the date on which occurs the disposition of shares, you agree to
promptly make available to the Company, upon request, sufficient funds to meet
these withholding requirements. Your shares will not be transferred unless you
have previously made arrangements, satisfactory to the Company, to meet the
withholding requirements.
5. Nontransferability. This Option cannot be assigned, transferred
(except as provided in this Option Agreement or the Plan), pledged or disposed
of in any way (whether by operation of law or otherwise), other than by will or
the laws of descent and distribution. This Option is exercisable during your
lifetime only by you or your appointed guardian or legal representative, and the
Option is not subject to attachment or similar process. Any attempt to assign,
transfer, pledge, or otherwise dispose of this Option contrary to these
provisions will be null and void and without effect. Shares of Common Stock
received upon the exercise of this Option are subject to any limited
restrictions on transfer as are provided in the Plan or this Option Agreement.
6. Plan. Notwithstanding any other provision of this Option Agreement,
the Option is granted pursuant to the Plan, as adopted and in effect on the date
hereof, and is subject to all the terms and conditions of the Plan, as the same
may be amended from time to time. The Board has the right to amend the Plan, and
the Board and the Committee have the right to amend this Option Agreement. The
interpretation and construction by the Committee of the Plan, this Option
Agreement, the Option, and such rules and regulations as may be adopted by
<PAGE> 3
the Committee for the purpose of administering the Plan, shall be final and
binding upon you. Until the Option shall expire, terminate or be exercised in
full, the Company shall, upon written request therefor, send a copy of the Plan,
in its then-current form, to you or any other person or entity then entitled to
exercise the Option.
You hereby acknowledge receipt of a copy of the Plan and the
Prospectus.
7. Requirements of Law. The Company shall not be required to sell or
issue any shares under the Option if the issuance of such shares would
constitute a violation of any provision of any law or regulation of any
governmental authority, any Company policy or any rule or interpretation of the
Plan established by the Committee. Specifically, in connection with the
Securities Act, upon exercise of the Option, unless a registration statement
under the Securities Act is in effect with respect to the shares of Common Stock
covered by the Option, the Company shall not be required to issue such shares
unless the Company has received evidence reasonably satisfactory to it to the
effect that you are acquiring such shares for your own account, and unless the
certificate issued representing the shares of Common Stock bears a legend
determined appropriate by the Committee. At such time as, in the opinion of
counsel for the Company, the legend is no longer required solely for compliance
with applicable securities laws, then the holders of such certificates shall be
entitled to exchange such certificates for certificates representing a like
number of shares but without such legend. The Company shall not be obligated to
deliver any shares of Common Stock upon exercise of the Option until there has
been compliance with any tax withholding requirements, securities exchange
listing or other requirements the Committee deems appropriate or as provided in
this Option Agreement or in the Plan. At the Company's discretion, the
certificate for the Common Stock issued may bear a legend stating that tax
withholding requirements must be met to the Company's reasonable satisfaction
before the shares can be transferred.
8. Changes in Company's Capital Structure. The existence of the Option
will not affect in any way the right or authority of the Company or its
stockholders to make or authorize (a) any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business; (b) any merger or consolidation of the Company's capital structure or
its business; (c) any merger or consolidation of the Company; (d) any issue of
bonds, debentures, preferred or prior preference stock ahead of or affecting the
Common Stock or the rights thereof; (e) the dissolution or liquidation of the
Company; (f) any sale or transfer of all or any part of its assets or business;
or (g) any other corporate act or proceeding, whether of a similar character or
otherwise. In the event of a Change in Control or other corporate restructuring
provided for in the Plan, you shall have such rights, and the Committee shall
take such actions, as are provided for in the Plan.
9. Shareholder Rights. Until the Option shall have been duly exercised
to purchase shares of the Common Stock granted hereunder and such shares have
been officially recorded as issued on the Company's official shareholder
records, no person or entity shall be entitled to vote, receive dividends or be
deemed for any purpose the holder of any such shares, and adjustments for
dividends or otherwise shall be made only if the record date therefor is prior
to the date such shares are recorded.
10. Employment Rights. No provision of this Option Agreement or of the
Option granted hereunder shall give you any right to continue in the employ of
the Company or any
<PAGE> 4
Subsidiary, create any inference as to the length of your employment, affect the
right of the Company or any Subsidiary to terminate your employment, with or
without cause, or give you any right to participate in any employee welfare or
benefit plan or other program (other than the Plan) of the Company or any
Subsidiary.
11. Disclosure Rights. The Company shall have no duty or obligation to
affirmatively disclose to you, and you shall have no right to be advised of, any
material information regarding the Company or a Subsidiary at any time prior to,
upon or in connection with the exercise of an Option or the Company's purchase
of Common Stock in accordance with the terms of this Option Agreement.
12. Notices. Any notice which either party hereto may be required or
permitted to give the other shall be in writing and may be delivered personally
or by mail, postage prepaid, addressed to Committee for the 1999 Stock Purchase
Plan, Corporate Secretary, Wells-Gardner Electronics Corporation, 2701 North
Kildare Avenue, Chicago, Illinois 60639, and to your address as shown on the
Company's payroll records, or to such other address as you, by notice to the
Company, may designate in writing from time to time.
13. Headings. The headings contained in this Option Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Option Agreement.
14. Severability. If any provision of this Option Agreement shall for
any reason be held to be invalid or unenforceable, such invalidity or
unenforceability shall not effect any other provisions hereof, and this Option
Agreement shall be construed as if such invalid or unenforceable provision were
omitted.
15. Successors and Assigns. This Option Agreement shall inure to the
benefit of and be binding upon each successor and assign of the Company. All
obligations imposed upon you, and all rights granted to the Company hereunder,
shall be binding upon you and your heirs, legal representatives and successors.
16. Waiver; Cumulative Rights. The failure or delay of either party to
require performance by the other party of any provision hereof shall not affect
its right to require performance of such provision unless and until such
performance has been waived in writing. Each and every right hereunder is
cumulative and may be exercised in part or in whole from time to time.
17. Other. This Agreement will be governed by the laws of the State of
Illinois (other than its laws respecting choice of law). The Plan and this
Option Agreement constitute the entire agreement between the Company and you
with respect to the Option granted hereunder. This Option Agreement may be
executed in counterparts. You agree to be responsible for any and all tax
consequences to you with respect to your Option.
<PAGE> 5
IN WITNESS WHEREOF, the Company has caused this Option Agreement to be
duly executed by an officer thereof duly authorized, and the Participant has
hereunto set his hand, all as of the day and year first above written.
PARTICIPANT WELLS-GARDNER
ELECTRONICS CORPORATION
Signature: By:
--------------------------- -----------------------------
Title:
-----------------------------
<PAGE> 6
WELLS-GARDNER ELECTRONICS CORPORATION
1999 STOCK PURCHASE PLAN
I. PARTICIPANT INFORMATION
NAME SOCIAL SECURITY #
------------------------ --------------------
EMPLOYMENT DATE / / BIRTH DATE / /
---- ---- ---- ---- ---- -----
PARTICIPATION DATE / / LOCATION CODE
---- ---- ---- -----------------------
II. PAYROLL SAVINGS ELECTION (Check the box next to either "a" or "b".)
a. | | I hereby elect to participate in the Plan and authorize a
payroll deduction of $______________ each pay period from my
pay check. (The amount may not be less than $5.00 per pay
period, nor more than $_________ during the entire Option
Period.)
I realize that any monies contributed into the Wells-Gardner
Electronics Corporation 1999 Stock Purchase Plan will be held
by Wells-Gardner Electronics Corporation without interest and
issued to me in the form of:
- Wells-Gardner Electronics Corporation Stock
certificates purchased on the Exercise Date(s); or
- A check for all monies paid to Wells-Gardner
Electronics Corporation upon termination or per my
request.
b. | | I hereby decline to participate in the Plan.
III. CERTIFICATION
I hereby certify that the information provided above is accurate and
authorize Wells-Gardner Electronics Corporation to deduct from my
earnings the amount stated above.
I HAVE RECEIVED A COPY OF THE PROSPECTUS.
- -------------------------------------------------- ------------------------
Participant's Signature Date
- -------------------------------------------------- ------------------------
's Signature Date
- -----------------------------------
<PAGE> 1
EXHIBIT 5
[Letterhead of Katten Muchin & Zavis]
312-902-5200
February 18, 1999
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 500,000 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 1999
Stock Purchase Plan (the "Plan"). The Plan has been approved by the Board of
Directors of the Company and will be submitted to the Shareholders of the
Company for approval at its next shareholders annual meeting.
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 Articles of Incorporation of the Company, as amended;
3. The Bylaws of the Company, as amended;
4. Resolutions adopted by the Board of Directors of the Company;
5. Form of Stock Option Agreement; and
6. The Plan.
<PAGE> 2
Wells-Gardner Electronics Corporation
February 18, 1999
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
500,000 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 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 LLP
Chicago, Illinois
February 18, 1999
<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 LaSalle National Bank.
