SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definititive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
Transnational Financial Network, Inc.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Acts Rules 14a-(6)(i)(1) and
0-11.
1. Title of each class of securities to which transaction applies.
1. Aggregate number of securities to which transaction applied:
1. Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
1. Proposed maximum aggregate value of transaction:
1. Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-12(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, of the Form or Schedule and the date of its filing.
<PAGE>
1) Amount Previously Paid.
---------------------
1) Form, Schedule or Registration Statement No.:
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1) Filing Party:
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1) Date Filed:
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<PAGE>
Transnational Financial Network, Inc.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 11, 2000
To the Stockholders of Transnational Financial Corporation:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Transnational Financial Corporation (the "Company"), a California corporation,
will be held on Thursday, May 11, 2000, beginning at 12:00 p.m., San Francisco
time, at 401 Taraval Street, San Francisco, CA 94116 for the following purposes:
1. To elect seven directors to serve until the next Annual Meeting of
Stockholders of the Company or until their respective successors
are elected and qualified;
2. To ratify the Company's 2000 Stock Incentive Plan; and;
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed April 18, 2000 as the record date for the
determination of the stockholders entitled to notice of, and to vote at, this
meeting. The list of stockholders entitled to vote will be available for
examination by any stockholder at the Company's executive offices at 401 Taraval
Street, San Francisco, CA 94116 for ten days prior to May 11, 2000.
You are cordially invited to attend the meeting in person, if possible. If
you do not expect to be present in person, please sign and date the enclosed
proxy and return it in the enclosed envelope, which requires no postage if
mailed in the United States. The proxy must be signed by all registered holders
exactly as the stock is registered. It will assist us in preparing for the
meeting if you will return your signed proxies promptly regardless of whether
you expect to attend in person or have many or few shares.
BY ORDER OF THE BOARD OF DIRECTORS
San Francisco, CA
April 20, 2000
--------------------------------------------
IMPORTANT
As a stockholder, you are urged to complete and mail the proxy promptly
whether or not you plan to attend this Annual Meeting of Stockholders in
person. It is important that your shares be voted.
---------------------------------------------
<PAGE>
TRANSNATIONAL FINANCIAL NETWORK, INC.
401 Taraval Street, San Francisco, CA 94116
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 11, 2000
This Proxy Statement is furnished to stockholders of Transnational
Financial Network, Inc., a California corporation (the "Company"), in connection
with the solicitation by order of the Board of Directors of the Company of
proxies to be voted at the Annual Meeting of Stockholders of the Company to be
held on May 11, 2000, and is being mailed with proxies to such stockholders on
or about April 20, 2000. Proxies in the form enclosed, properly executed by
stockholders and returned to the Company, which are not revoked, will be voted
at the meeting. The proxy may be revoked at any time before it is voted.
The 1999 Annual Report of the Company covering the fiscal year ended
December 31, 1999, is being mailed herewith to stockholders. It does not form
any part of the material for the solicitation of proxies.
Outstanding Capital Stock
The record date for stockholders entitled to notice of and to vote at the
Annual Meeting of Stockholders was the close business on April 18, 2000. At the
close of business on that date the Company had issued, outstanding and entitled
to vote at the meeting 4,279,310 shares of Common Stock (the "Common Stock").
Quorum And Voting
The presence, in person or by proxy, of the holders of a majority of the
total combined voting power of the outstanding capital stock of the Company is
necessary to constitute a quorum at the Annual Meeting of Stockholders. In
deciding all questions, a holder of Common Stock shall be entitled to one vote,
in person or by proxy, for each share in the stockholder's name on the record
date. At the record date, the total number of votes which could be cast by all
holders of capital stock of the Company was 4,217,310.
Action to Be Taken at The Meeting
The accompanying proxy, unless the stockholder specifies otherwise
therein, will be voted (i) FOR the election as directors of the Company of
persons named under the caption "Election of Directors"; (ii) FOR the
ratification of the Company's 2000 Stock Inventive Plan; and (iii) in the
discretion of the proxy holders on any other matters that may properly come
before the meeting or any adjournment thereof.
In order to be elected a director, a nominee must receive a plurality of
the votes cast at the meeting for the election of directors. To ratify the 2000
Stock Inventive Plan requires the approval of the majority of all the shares
outstanding. (see "Quorum and Voting").
When the giver of the proxy has appropriately specified how the proxy is
to be voted, it will be voted accordingly. Your attention is directed to the
accompanying proxy which provides a method for stockholders to withhold
authority to vote for one or more nominees for director and to vote against or
to abstain from voting on the other matters offered for approval. If any other
matter or business is brought before the meeting, a vote may be cast pursuant to
the accompanying proxy in accordance with the judgment of the person or persons
voting the share subject to the proxy, but management does not know of any such
other matter or business.
Should any nominee named herein for the office of director become unable
or unwilling to accept nomination or election, the person or persons acting
under the proxy will vote for the election in his place of such other person, if
any, as management may recommend; however, management has no reason to believe
that any of the nominees will be unable or unwilling to serve if elected. Each
nominee has expressed to management his intention that, if elected, he will
serve the entire term for which his election is sought.
Committees of the Board of Directors and Compensation
The Company's Board of Directors has established an Audit Committee and a
Compensation Committee whose members are Ms. Whitley, Mr. Shuey and Mr. Rotzang.
The Audit Committee met once during 1999. The duties of the audit Committee are
to recommend to the entire Board of Directors the selection of independent
certified public accountants to perform an audit of the financial statements of
the Company, to review the activities and report of the independent certified
public accountants, and to report the results of such review to the entire Board
of Directors. The audit Committee also monitors the internal controls of the
Company. The duties of the Compensation Committee are to provide a general
review of the Company's Compensation and benefit plans to ensure that they meet
corporate objectives and to administer or oversee the Company's Stock Option
Plan and other benefit plans. In addition, the Compensation Committee reviews
the compensation of officers of the Company and the recommendations of the Chief
Executive Officer on (i) compensation of all employees of the Company and (ii)
adopting and changing major Company compensation policies and practices. Except
with respect to the administration of the Stock Option Plan, the Compensation
Committee will report its recommendations to the entire Board of Directors for
approval.
The following sets forth certain information regarding compensation of
directors paid for services in 1999 and those appointed to serve as directors
other than named executive officers:
<TABLE>
<CAPTION>
Number of
Annual Consulting Securities
Retainer Meeting Fees/Other Number of Underlying
Name Fees Fees Fees Shares Options(1)
<S> <C> <C> <C> <C>
Hilary Whitley $14,500 $228,050 0 60,000(2)
Robert A. Shuey $12,000 0 0 60,000(2)
Robert A. Forrester $12,000 $62,647 0 60,000(2)
</TABLE>
(1) Excludes 15,000 shares options automatically granted effective March 1,
2000 to each director pursuant to the 2000 Stock Incentive Plan.
(2) The exercise price of all such options is $7.50. Of the 60,000 shares
of Common Stock indicated for each of Ms. Whitley and Messrs. Shuey and
Forrester, 40,000 are exercisable upon a change of control in the
Company.
Non-employee directors of the Company receive $1,000 per month for each
month the director served. The director also receives $500 per meeting attended
and related travel expenses.
In 1999 the Company's Board of Directors met seven times. Mr. Shuey
attended five of those meetings.
Election of Directors
Directors of California corporations are to be elected at the meeting
to hold office until the next Annual Meeting of Stockholders or until their
respective successors are elected and qualified. It is intended that the shares,
subject to the proxies solicited hereby, will be voted for the following
nominees, whose age and position with the Company is indicated in the table, for
director, unless otherwise specified on the proxy:
Name Age Position
Joseph Kristul 52 Chief Executive Officer
and Treasurer,
Director
Maria Kristul 52 President, Director
William A. Russell 47 Vice President,
Director
Robert A. Shuey 44 Director
Robert A. Forrester 54 Director
Alex Rotzang 55 Director
J. Peter Gaskins 51 Director
Joseph Kristul founded the Company in 1985, has been a director and
officer since that time and has been responsible for the Company's overall
management since the Company's inception, emphasizing mortgage loan pricing,
funding, administration and sales. Beginning in 1995 Mr. Kristul created the
Company's wholesale division, developing the Company's base of brokers, which
deliver loan product, and implementing systems and controls on the quality of
the product delivered by brokers.
Maria Kristul founded the Company in 1985, has been a director and officer
since 1991, and has been responsible for the Company's retail division since the
Company's inception. As well as personally originating approximately 60%, in
1998, of the retail division's production, Ms. Kristul oversees the retail
division's day to day operations including training and managing that divisions
sales and loan processing staff and its quality assurance.
Joseph and Maria Kristul are husband and wife.
William A. Russell became a Vice President and Director of the Company
following the company's acquisition of LRS, Inc., a wholesale and retail
mortgage banking company that Mr. Russell founded with others in January of
1996, becoming LRS, Inc.'s president at its formation. The Company acquired LRS,
Inc. on July 29, 2000. Mr. Russell had formed R+ Financial, a mortgage banking
firm in July 1992 which he served as president until participating in the
formation of LRS, Inc. in January 1996. Robert A. Shuey, III, has been a
director of the Company since August 1998. Mr. Shuey is Chief Executive Officer
of EuroMed, Inc., the parent company of Redstone Securities, Inc. From August
1997 to December 1998 he acted as Managing Director of Capital Markets for Tejas
Securities Group, Inc. From September 1996 to July 1997, he acted as Managing
Director Corporate Finance for National Securities Corporation; from April 1995
to August 1996, he acted as Managing Director Corporate Finance for LaJolla
Securities Corporation; from January 1993 to March 1995 he acted as Managing
Director Corporate Finance for Dillon-Gage Securities, Inc. Mr. Shuey is a
member of the Board of Directors of EuroMed, Inc., AutoBond Corporation,
Westower, Inc. and Bioshield Technologies, Inc.
Robert A. Forrester became a director of the Company in March, 1999. Mr.
Forrester is an attorney and has practiced in his own firm since April 1989. Mr.
Forrester is a member of the State Bars of Texas and California.
Alex Rotzang became a director in August, 1999. He is Chairman of NoreX
Pertroleum Limited, an international oil and gas company based in Cyprs and
Calgary, Canada. Mr. Rotzang formed NoreX Petroleum Limited in 1994 and has 23
years experience in the oil and gas industry.
J. Peter Gaskins became a director of the Company in January 2000. He has
over 25 years experience in capital management and investment banking and is
presently a strategic and financial consultant to private and small publicly
held companies. He provides private investment banking and consulting services
through Clarion Associates, Inc., a firm he founded in 1991. Recently he has
consulted with several e-commerce companies by assisting in the developing
marketing, operational and financial strategies, including management
compensation plans. He has also developed strategic planning for manufacturing
and capital management companies as they merge or reorganize. Prior to 1991 he
was Chief Executive Officer and President of NatWest Securities USA, the United
States institutional stock brokerage business for National Westminster,
Britain's largest commercial bank. Mr. Gaskins is an honors graduate in
statistics from Harvard College and received a Masters in Business
Administration from Harvard University.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON
STOCK OF THE COMPANY IS REQUIRED TO ELECT A DIRECTOR. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" EACH OF THE INDIVIDUALS NAMED ABOVE. ALL PROXIES
SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS ON THE FORM OF PROXY. WHERE NO SPECIFICATION IS MADE, PROXIES
WILL BE VOTED "FOR" EACH OF THE ABOVE NOMINEES FOR DIRECTOR.
Ratification of 2000 Stock Incentive Plan
On February 29, 2000, effective March 1, 2000, the Company's Board of
Directors adopted the 2000 Stock Incentive Plan for the grant to employees,
officers, directors and consultants to the Company, parent or subsidiary of the
Company of up to 750,000 shares of the Company's Common Stock, subject to
adjustment in the event of any subdivision, combination or reclassification of
shares. Beginning with calendar year 2001, the number of shares authorized under
the plan shall automatically increase by an amount equal to 4% of the total
number of shares of Common Stock outstanding on the last trading day of December
of the immediately preceding calendar year. However, in no event shall any such
annual increase exceed 400,000 shares. No one person may receive options for
more than 150,000 shares in the aggregate per year.
There are five programs under the 2000 Stock Incentive Plan under which
(i) eligible persons may be granted options to purchase Common Stock for
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended, and employees and others may be granted
non-qualified options; (ii) eligible employees may have a portion of their base
salary invested in special option grants; (iii) eligible persons may be issued
shares of Common Stock directly, either through immediate purchase of shares or
as a bonus; (iv) non-employee directors shall receive option grants upon
adoption of the plan or upon becoming a director and at designated intervals
over the period of continued board service; and (v) non-employee board members
may have their annual retainer fee otherwise payable in cash applied to a
special option grant.
The Discretionary Option Grant Program provides for the grant of incentive
stock options to employees within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended. Employees, non employee members of the Board
of Directors, Consultants and other independent advisors who provide services to
the Company may also participate in the Discretionary Option Grant Program
although such grants would not be incentive stock options. The exercise price of
any option will not be less than the fair market value of the shares at the time
the option is granted. The options granted are exercisable at the times or upon
the events determined by the Plan Administrator set forth in the grant, but no
option is exercisable more than ten years from the date of the grant. The
options are non-transferrable except by will or by laws of descent and
distribution. Upon merger or consolidation of the Company or the sale, transfer
or other disposition of all or substantially all of the Company's assets in
complete liquidation or distribution of the Company, options granted under the
Discretionary Option Grant Program become fully exercisable.
The Salary Investment Options Grant Program provides for the grant of an
option to certain executives in which the executive agrees to reduce his or her
salary by an amount not less than $10,000 nor more than $50,000. The option is
for a number shares determined by dividing 150% of the amount of the reduced
salary by the fair market value per share of Common Stock on the date of the
option grant. The exercise price is one-third of the fair market value per share
of Common Stock on the date of the grant. The options are non-transferable
except by will or by laws of descent and distribution. Upon merger or
consolidation of the Company or the sale, transfer or other disposition of all
or substantially all of the Company's assets in complete liquidation or
distribution of the Company, options granted under the Salary Investment Options
Grant Program become fully exercisable.
Pursuant to the Stock Issuance Program, the Plan Administrator may grant
the issuance of stock directly to certain executives of the Company,
non-employee members of the Board of Directors and consultants and other
independent advisors that provide services to the Company. The Plan
Administrator has the discretion to determine whether grants may vest in one or
more installments or upon attainment of specific performance objectives except
to the extent that the Company assigns to a successor corporation or is
otherwise imposed. Upon merger or consolidation of the Company or the sale,
transfer or other disposition of all or substantially all of the Company's
assets in complete liquidation or distribution of the Company, options granted
under the Stock Issuance Program become fully exercisable.
The Automatic Option Grant Program provides that each non-employee
director on March 1, 2000, or upon a director's initial appointment as a
director subsequent to March 1, 2000, shall receive an option for 15,000 shares
at a price equal to the closing price on March 1, 2000, or, if appointed
subsequent to March 1, 2000, the date of the director's initial appointment to
serve as a director. On March 1, 2000 the closing price of the Company's Common
Stock was $1.125. The term of such option is ten years, provided, however that
an option holder must exercise any option within 12 months upon ceasing to be a
director. Although all of the shares may be purchased upon the date of the
grant, the Company may repurchase such shares. However, the Company's right to
repurchase the shares ceases with respect to 3,000 shares every six months
following the date of the original grant of the option. Furthermore, provided
one has been a director for six months prior to the Annual Meeting of
Shareholders, a non-employee director automatically receives an option for 5,000
shares of stock with an exercise price equal to the closing price of the
Company's Common Stock on the date of the annual Meeting of Shareholders. Such
shares automatically vest subject to the Company's right to repurchase the
shares. This right of repurchase ceases six months after the annual Meeting of
Stockholders with respect to 2,500 shares and ceases twelve months after the
Annual Meeting of Stockholders with respect to all of such 5,000 shares. Upon
merger or consolidation of the Company or the sale, transfer or other
disposition of all or substantially all of the Company's assets in complete
liquidation or distribution of the Company, options granted under the Automatic
Option Grant Program become fully exercisable and any right of the Company or
successor to repurchase ceases.
The Director Fee Option Grant Program is similar to the Salary Investment
Option Grant Program in that non-employee director may elect to have all or a
portion of the annual retainer fee that is otherwise payable in cash. The option
is for a number shares determined by dividing 150% of the amount of the reduced
fee by fair market value per share of Common Stock on the date of the option
grant. The exercise price shall be one-third of the fair market value per share
of Common Stock on the date of the grant. Upon merger or consolidation of the
Company or the sale, transfer or other disposition of all or substantially all
of the Company's assets in complete liquidation or distribution of the Company,
options granted under the Discretionary Option Grant Program become fully
exercisable.
Simultaneously with the adoption of the 2000 Stock Incentive Plan, the
Company's Board of Directors terminated further grants under the 1998 Stock
Option Plan. At December 31, 1999, there were options for 335,000 shares
outstanding under that plan at an average exercise price of $7.50. There have
been no grants under the 2000 Stock Incentive Plan other than the automatic
grant of a total of 75,000 options to five non-employee directors at an exercise
price of $1.25 on the effective date of the plan, March 1, 2000. This grant
includes grants of 15,000 shares each to Messrs. Shuey, Forrester, Rotzang and
Gaskins. Options for 5,000 shares each will be granted to three outside
directors, Messrs. Shuey, Rotzang and Forrester, effective on the close of
business on May 11, 2000, assuming each's election as a director at the
Company's Annual Meeting of Stockholders. One non-employee director who is
nominated is not eligible for the grant because the director has not served six
months as required in the 2000 Stock Incentive Plan.
Administration of the Automatic Option Grant and Director Fee Option Grant
Programs are self-executing and there is no Plan Administrator with respect to
those programs. Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all eligible persons other than certain
executives may, at the Board's discretion, be vested in a Primary Committee or a
Secondary Committee, or the Board of Directors may retain the power to
administer those programs with respect to all persons. The Board of Directors
may, however, establish a Primary Committee that shall have sole and exclusive
authority to administer the Discretionary Option Grant and Stock Issuance
Programs with respect to certain executives. Any discretionary option grants or
stock issuances for members of the Primary Committee shall be made by a
disinterested majority of the Board of Directors. Messrs. Rotzang and Gaskins
presently serve as members of the Primary Committee.
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF COMMON
STOCK OF THE COMPANY IS REQUIRED TO RATIFY THE 2000 STOCK INCENTIVE PLAN. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE 2000 STOCK
INCENTIVE PLAN. ALL PROXIES SOLICITED BY THE BOARD OF DIRECTORS WILL BE VOTED IN
ACCORDANCE WITH THE SPECIFICATIONS ON THE FORM OF PROXY. WHERE NO SPECIFICATION
IS MADE, PROXIES WILL BE VOTED "FOR" THE RATIFICATION OF THE 2000 STOCK
INCENTIVE PLAN.
Changes in Registrant's Certifying Accountant.
On April 13, 2000, Deloitte & Touche LLP (the "Accountant") informed the
Company that the Accountant was resigning as the Company's independent auditors.
Deloitte & Touche has submitted a letter to the Securities & Exchange Commission
to the effect that it has no material disagreements with the statements made in
this Item 4, confirming that the Accountant had no disagreements with management
of the Company related to matters that are material to the Company's 1999
financial statements.
Management represents as follows:
(a) There have been no disputes between management and the
auditors and the auditors' reports contained no adverse opinion or
disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope, or accounting principles.
(b) The Company's Board of Directors has not, as of the date
hereof, reviewed the resignation of the Accountant.
(c) During the registrant's two most recent fiscal years and
any subsequent interim period there were no disagreements with the
Accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure. The
registrant has authorized the Accountant to respond fully to the
inquiries of the successor accountant, which as of the date hereof has
not been appointed.
(d) The Accountant expressed no disagreement or difference of
opinion regarding any "reportable" event as that term is defined in
Item 304(a)(1)(iv) of Regulation S-K, including but not limited to:
(i) the Accountant has not advised the registrant
that the internal controls necessary for the registrant to
develop reliable financial statements do not exist;
(ii) the Accountant has not advised the registrant
that information has come to the Accountant's attention that
has led it to no longer be able to rely on management's
representations, or that has made it unwilling to be
associated with the financial statements prepared by
management;
(iii) the Accountant has not advised the registrant
of the need to expand significantly the scope of its audit, or
notified the registrant that information has come to the
Accountant's attention that if further investigated may (A)
materially impact the fairness or reliability of either: a
previously issued audit report or the underlying financial
statements, or the financial statements issued or to be issued
covering the fiscal period(s) subsequent to the date of the
most recent financial statements covered by an audit report
(including information that may prevent it from rendering an
unqualified audit report on those financial statements), or
(B) cause it to be unwilling to rely on management's
representations or be associated with the registrant's
financial statements, and due to the Accountant's resignation
(due to audit scope limitations or otherwise) or dismissal, or
for any other reason, the Accountant did not so expand the
scope of its audit or conduct such further investigation;
(iv) the Accountant has not advised the registrant
that information has come to the Accountant's attention that
it has concluded materially impacts the fairness or
reliability of either (A) a previously issued audit report or
the underlying financial statements, or (B) the financial
statements issued or to be issued covering the fiscal
period(s) subsequent to the date of the most recent financial
statements covered by an audit report (including information
that, unless resolved to the Accountant's satisfaction, would
prevent it from rendering an unqualified audit report on those
financial statements), and due to the Accountant's
resignation, or for any other reason, the issue has not been
resolved to the Accountant's satisfaction prior to its
resignation.
Because the Company was informed of the resignation of Deloitte & Touche
on April 13, 2000, the Company's Board of Directors has not as of the date of
this proxy statement selected a successor firm. The Company has invited a
representative of Deloitte & Touche to attend the Company's Annual Meeting of
Stockholders. The representative will have the opportunity make a statement if
they desire to do so, and the Company has asked the representative to be
available to respond to appropriate questions.
Executive Officers and Compensation
The following table sets forth certain information regarding the Company's
executive officers.
Name Age Position
Joseph Kristul 52 Chief Executive Officer
and Treasurer, Director
Maria Kristul 52 President, Director
William A. Russell 47 Vice President, Director
Beth De George 48 Executive Vice President
Teresita Dee 57 Controller
Beth De George joined the Company in November 1999 where she directs and
coordinates the day-to-day operating activities of the Company, including
customer service, credit policy, regulatory compliance, quality control, finance
and accounting, secondary marketing, and technology. In June 1997 she joined
Elliot Ames, Inc., a retail mortgage banking company. At Elliot Ames, Inc. she
was Executive Vice President and participated in the successful sale of that
entity. For three years prior to joining Elliot Ames, Inc. she owned and
operated her own mortgage banking company which was successfully sold to a
community bank. Ms. De George has over 20 years experience in all aspects of
residential mortgage banking, including sales, operations, finance, secondary
marketing, credit, training and technology.
Teresita Dee joined the Company in May 1999. From June 1998 until she
joined the Company, she performed accounting consulting services. From July 1997
to March 1998, Ms. Dee was Executive Vice President and Chief Financial Officer
for Mission National Bank, a publicly held commercial bank based in San
Francisco. Ms. Dee joined that bank in December 1993 and served as interim Chief
Executive Officer and as a Vice President prior to her promotion in July 1997.
Biographical information regarding the Company's executive officers that
are also directors are set forth under the caption "Election of Directors" on
page __.
The following table sets forth certain information concerning the
compensation of the chief executive officer of the Company and the other
executive officers of the Company whose total annual salary and bonus exceeded
$100,000, for the fiscal years ended December 31, 1999, 1998, and 1997.
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Annual Compensation All Other
Principal Position Fiscal Year Salary Bonus Compensation
<S> <C> <C> <C> <C>
Joseph Kristul (1) 1999 $250,000 0 0
Chief Executive Officer 1998 $166,667 $57,661 $389,605
1997 $12,000 - $256,536
Maria Kristul (1) 1999 $300,000 $47,516 0
President 1998 $296,887 - $389,605
1997 $12,000 - $256,537
- ----------------
</TABLE>
(1) All Other Compensation represent distributions made to Joseph and Maria
Kristul in connection with the Company's status as an S corporation.
Section 16(a) Beneficial Ownership Reporting Compliance.
In May 1999, Ms Dee was named the Corporation's Controller and in November
1999 Ms. DeGeorge was named Executive Vice President. Each's Form 3 to be filed
in March 2000. In July 1999, Mr. Rotzang was named a director of the Company and
his Form 3 is anticipated to be filed in April 2000. On February 5, March 3 and
March 25, 1999, Mr. Kristul purchased 8,100, 2,000 and 2,000 shares,
respectively at a respective price of $6.125, $5.00 and $5.125. Shares purchased
were reported in May 1999.
Certain Relationships and Related Transactions
Joseph and Maria Kristul each personally guaranteed the Company's
warehouse lines of credit with Warehouse Lending Corporation of America and PNC
Mortgage Bank, National Association. After the close of the Company's public
offering in June, 1998, the Company entered into a new warehouse line of credit
with Guaranty Federal Savings Bank, F.S.B. Thereafter the Company did not renew
the previous agreements, and the Kristuls no longer guaranty any of the
Company's indebtedness.
In 1997 and 1996, certain of the Company's certificates of deposit were
pledged to Wells Fargo Bank, N.A., for the personal indebtedness of Joseph and
Maria Kristul. In March 1998, Wells Fargo released this security interest.
In March 1998, the Company entered into a subordinated debt agreement with
InSouth Bank under which all of the Company's stock at the time, or 2,468,750
shares, was pledged to secure the indebtedness of $1,000,000. Upon completion of
the Company's public offering the subordinated debt was repaid and the Kristul's
pledge and personal guarantees released.
The Company has agreed to indemnify Joseph and Maria Kristul for taxes
owing by the Company for which Joseph and Maria Kristul are obligated upon the
termination of the Company's status as an S corporation.
In connection with consulting services rendered to the Company in 1998 by
Financial Capital Resources, Inc., an affiliate of Ms. Whitley's, the Company
paid to Financial Capital Resources, Inc. $120,461 and issued 18,750 shares of
Common Stock in connection with services rendered for the Company's initial
public offering. In 1999, the Company paid Financial Capital Resources and Ms.
Whitley a total of $228,050.
Effective December 31, 1997, the Company entered into a promissory note
payable to the Company by Joseph and Maria Kristul which matured March 31, 1998
bearing interest at 6.5% per annum. This note has been repaid as of March 31,
1998.
In 1998 the Company issued to Mr. Forrester 12,500 shares of Common Stock
in connection with services rendered for the Company's initial public offering
and paid Mr. Forrester $121,264 in connection with legal services rendered to
the Company. In 1999 Mr. Forrester was paid $62,647 for legal services rendered
to the Company
CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the
beneficial ownership as of March 15, 2000, of the Common stock by (a) each
person known by the Company to be a beneficial owner of more than 5% of the
outstanding shares of Common Stock and by each Selling Shareholder, (b) each
director of the Company, (c) each Named Executive Officer, and (d) as directors
and executive officers of the Company as a group. Unless otherwise noted, each
beneficial owner named below has sole investment and voting power with respect
to the Common Stock shown below as beneficially owned by him.
<TABLE>
<CAPTION>
Name and Address of Number of Percent Beneficial
Owner Shares Owned Owned
<S> <C> <C>
Kristul Family LLC(1)(2) 2,329,960 53.2%
401 Taraval Street
San Francisco, CA 94116
Joseph Kristul(1)(2) 2,357,060 53.8
401 Taraval Street
San Francisco, CA 94116
Maria Kristul(1)(2)(3) 2,357,060 54.5
401 Taraval Street
San Francisco, CA 94116
Beth De George 7,500 0.2
401 Taraval Street
San Francisco, CA 94116
Teresita Dee(4) 10,000 0.2
401 Taraval Street
San Francisco, CA 94116
Hilary Whitley(5) 73,300 2.1
5445 Mariner Street
Suite 107
Tampa FL 33609
Robert A. Shuey(5) 20,100 0.9
8214 Westchester
Suite 500
Dallas, TX 75225
Robert A. Forrester(5) 32,500 1.2
1215 Executive Drive West
Suite 102
Richardson, TX 75081
William Russell 347,586 7.9
1725 Bascom Ave., Suite 100
Campbell, CA 95008
Teri Saldivar 231,724 5.3
1725 Bascom Ave., Suite 100
Campbell, CA 95008
All Executive Officers and
Directors as a group (11 persons)(3)(4)(5) 3,069,770 72.4%
- -------------------
</TABLE>
(1) Joseph Kristul is a managing member of the Kristul Family LLC and the
beneficial owner of 42.5% of the shares held by the Kristul Family LLC
and is jointly with Maria Kristul the beneficiary of a trust that is a
member owning 15% of the Kristul Family LLC.
(2) Maria Kristul is a managing member of the Kristul Family LLC and the
beneficial owner of 42.5% of the shares held by the Kristul Family LLC
and is jointly with Joseph Kristul the beneficiary of a trust that is a
member owning 15% of the Kristul Family LLC.
(3) Includes 30,000 shares that Mrs. Kristul has the right to acquire for
$7.50 per share pursuant to the Company's 1998 Stock Option Plan.
(4) Includes 10,000 shares Ms. Dee has the right to acquire pursuant to the
Company's 1998 Stock Option Plan.
(5) Includes 20,000 shares of Common Stock Ms. Whitley and Messrs. Shuey,
Eugene Kristul and Forrester each have the right to acquire pursuant to
a non-qualified option. Excludes 15,000 shares granted pursuant to the
Company's 2000 Stock Incentive Plan.
STOCKHOLDER PROPOSALS
Any proposals from stockholders to be presented for consideration for
inclusion in the proxy material in connection with the next Annual Meeting of
Stockholders of the Company scheduled to be held in May of 2000 must be
submitted in accordance with the rules of the Securities and Exchange Commission
and received by the Secretary of the Company at the mailing address set forth
hereinafter no later than the close of business on December 20, 2000.
OTHER MATTERS
The accompanying proxy is being solicited on behalf of the Board of
Directors of the Company. The expense of preparing, printing, and mailing the
form of proxy and the material used in the solicitation thereof will be borne by
the Company. In additional to the use of the mails, proxies may be solicited by
personal interview, telephone, and telegram by directors, officers, and
employees of the Company. Arrangements have been made with brokerage houses and
other custodians, nominees, and fiduciaries for the forwarding of solicitation
material to the beneficial owners of stock held by record by such persons, and
the Company will reimburse them for reasonable out-of-pocket expenses incurred
by them in connection therewith.
All information contained in this Proxy Statement relating to the
occupation, affiliations, and securities holdings of directors and officers of
the Company and their transactions with the Company is based upon information
received from the individual directors and officers.
Your directors and officers desire that all stockholders be represented at
the Annual Meeting of Stockholders. In the event you cannot attend in person,
please date, sign, and return the enclosed proxy in the enclosed, post-paid
envelope at your earliest convenience so that your shares may be voted. The
proxy must be signed by all registered holders exactly as the stock is
registered.
The Company will furnish without charge a copy of its Annual Report of
Form 10-K, including the financial statements and the schedules thereto, for the
fiscal year ended December 31, 1999 filed with the Securities and Exchange
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 to any stockholder upon written request to 401 Taraval Street, San
Francisco, CA 94116. A copy of the exhibits to such report will be furnished to
any stockholder upon written request therefor and payment of a nominal fee.
By Order of the Board of Directors.
Joseph Kristul Chairman of the Board of Directors
San Francisco, California
April 20, 2000
TRANSNATIONAL FINANCIAL NETWORK, INC.
2000 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 2000 Stock Incentive Plan is intended to promote the interests of
Transnational Financial Network, Inc., a California corporation, by
providing eligible persons in the Corporation's service with the
opportunity to acquire a proprietary interest, or otherwise increase
their proprietary interest, in the Corporation as an incentive for them
to remain in such service.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into five separate equity programs:
o The Discretionary Option Grant Program under which
eligible persons may, at the discretion of the Plan
Administrator, be granted options to purchase shares of
Common Stock;
o The Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their
base salary invested each year in special option grants;
o The Stock Issuance Program under which eligible persons
may, at the discretion of the Plan Administrator, be
issued shares of Common Stock directly, either through the
immediate purchase of such shares or as a bonus for
services rendered the Corporation (or any Parent or
Subsidiary);
o The Automatic Option Grant Program under which eligible
non-employee Board members shall automatically receive
option grants at designated intervals over their period of
continued Board service; and
o The Director Fee Option Grant Program under which
non-employee Board members may elect to have all or any
portion of their annual retainer fee otherwise payable in
cash applied to a special stock option grant.
B. The provisions of Articles One and Seven shall apply to all equity
programs under the Plan and shall govern the interests of all persons
under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority
to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to Section 16 Insiders.
Administration of the Discretionary Option Grant and Stock
Issuance Programs with respect to all other persons eligible
to participate in those programs may, at the Board's
discretion, be vested in the Primary Committee or a Secondary
Committee, or the Board may retain the power to administer
those programs with respect to all such persons. However, any
discretionary option grants or stock issuances for members of
the Primary Committee shall be made by a disinterested
majority of the Board.
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be
removed by the Board at any time. The Board may also at any time
terminate the functions of any Secondary Committee and reassume all
powers and authority previously delegated to such committee. Each Plan
Administrator shall, within the scope of its administrative functions
under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it
may deem appropriate for proper administration of the Discretionary
Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the
provisions of those programs and any outstanding options or stock
issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative
functions under the Plan shall be final and binding on all parties who
have an interest in the Discretionary Option Grant and Stock Issuance
Programs under its jurisdiction or any option or stock issuance
thereunder.
C. The Primary Committee shall have the sole and exclusive
authority to determine which Section 16 Insiders and other
highly compensated Employees shall be eligible for
participation in the Salary Investment Option Grant Program
for one or more calendar years. However, all option grants
under the Salary Investment Option Grant Program shall be made
in accordance with the express terms of that program, and the
Primary Committee shall not exercise any discretionary
functions with respect to the option grants made under that
program.
D. Service on the Primary Committee or the Secondary Committee
shall constitute service as a Board member, and members of
each such committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their
service on such committee. No member of the Primary Committee
or the Secondary Committee shall be liable for any act or
omission made in good faith with respect to the Plan or any
option grants or stock issuances under the Plan.
E. Administration of the Automatic Option Grant and Director Fee
Option Grant Programs shall be self-executing in accordance
with the terms of those programs, and no Plan Administrator
shall exercise any discretionary functions with respect to any
option grants or stock issuances made under those programs.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option Grant
and Stock Issuance Programs are as follows:
1. Employees;
2. Non-employee members of the Board or the board of directors of any
Parent or Subsidiary; and
3. Consultants and other independent advisors who provide services to the
Corporation (or any Parent or Subsidiary); PROVIDED, however:
a. That none of the services rendered by such consultants or advisors and
paid for by the issuance of shares under this Plan shall be service
related to any "capital raising" transaction; and
b. That the issuance of such shares as contemplated in this paragraph
IV.A.3. be subject to satisfaction of the Corporation and its counsel
that both the consultant and the services rendered fall within the
guidelines of the Securities & Exchange Commission as set forth in
S.E.C. Release No. 33-7646 and in any future S.E.C. guidelines on this
subject.
B. Only Employees who are Section 16 Insiders or other highly compensated
individuals shall be eligible to participate in the Salary Investment
Option Grant Program.
C. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority to determine,
1. With respect to the option grants under the
Discretionary Option Grant Program, which eligible
persons are to receive such grants, the time or times
when those grants are to be made, the number of
shares to be covered by each such grant, the status
of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times when
each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain
outstanding and
2. With respect to stock issuances under the Stock
Issuance Program, which eligible persons are to
receive such issuances, the time or times when the
issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if
any) applicable to the issued shares and the
consideration for such shares.
D. The Plan Administrator shall have the absolute discretion
either to grant options in accordance with the Discretionary
Option Grant Program or to effect stock issuances in
accordance with the Stock Issuance Program.
E. The individuals who shall be eligible to participate in the Automatic
Option Grant Program shall be limited to:
1. Those individuals who are or first become non-employee Board members on
or after the Plan Effective Date, whether through appointment by the
Board or election by the Corporation's stockholders; and
2. Those individuals who continue to serve as
non-employee Board members at one or more Annual
Stockholders Meetings held after the Plan Effective
Date. A non-employee Board member who has previously
been in the employ of the Corporation (or any Parent
or Subsidiary) shall not be eligible to receive an
option grant under the Automatic Option Grant Program
at the time he or she first becomes a non-employee
Board member, but shall be eligible to receive
periodic option grants under the Automatic Option
Grant Program while he or she continues to serve as a
non-employee Board member.
F. All non-employee Board members shall be eligible to participate in the
Director Fee Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including
shares repurchased by the Corporation on the open market. The
number of shares of Common Stock initially reserved for
issuance over the term of the Plan shall not exceed 750,000
shares. Such reserve shall be approved by the Corporation's
stockholders.
B. The number of shares of Common Stock available for issuance
under the Plan shall automatically increase on the first
trading day of January each calendar year during the term of
the Plan, beginning with calendar year 2001, by an amount
equal to four percent (4%) of the total number of shares of
Common Stock outstanding on the last trading day in December
of the immediately preceding calendar year, but in no event
shall any such annual increase exceed 400,000 shares.
C. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct
stock issuances for more than 150,000 shares of Common Stock
in the aggregate per calendar year.
D. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent:
1. Those options expire or terminate for any reason prior to exercise in
full; or
2. The options are cancelled in accordance with the cancellation-regrant
provisions of Article Two.
Unvested shares issued under the Plan and subsequently
cancelled or repurchased by the Corporation at the original
issue price paid per share, pursuant to the Corporation's
repurchase rights under the Plan shall be added back to the
number of shares of Common Stock reserved for issuance under
the Plan and shall accordingly be available for reissuance
through one or more subsequent option grants or direct stock
issuances under the Plan.
However, should the exercise price of an option under the Plan
be paid with shares of Common Stock or should shares of Common
Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred
in connection with the exercise of an option or the vesting of
a stock issuance under the Plan, then the number of shares of
Common Stock available for issuance under the Plan shall be
reduced by the gross number of shares for which the option is
exercised or which vest under the stock issuance, and not by
the net number of shares of Common Stock issued to the holder
of such option or stock issuance.
Shares of Common Stock underlying one or more stock
appreciation rights exercised under Section V of Article Two,
Section III of Article Three, Section II of Article Five or
Section III of Article Six of the Plan shall NOT be available
for subsequent issuance under the Plan.
E. If any change is made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be
made by the Plan Administrator to:
1. The maximum number and/or class of securities issuable under the Plan;
2. The number and/or class of securities for which any one person may be
granted stock options, separately exercisable stock appreciation rights
and direct stock issuances under the Plan per calendar year;
3. The number and/or class of securities for which grants are subsequently
to be made under the Automatic Option Grant Program to new and
continuing non-employee Board members;
4. The number and/or class of securities and the exercise price per share
in effect under each outstanding option under the Plan; and
5. The maximum number and/or class of securities by
which the share reserve is to increase automatically
each calendar year pursuant to the provisions of
Section V.B of this Article One. Such adjustments to
the outstanding options are to be effected in a
manner which shall preclude the enlargement or
dilution of rights and benefits under such options.
The adjustments determined by the Plan Administrator
shall be final, binding and conclusive.
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; PROVIDED, however, that each such
document shall comply with the terms specified below. Each document
evidencing an Incentive Option shall, in addition, be subject to the
provisions of the Plan applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the
Plan Administrator, but shall not be less than one
hundred percent (100%) of the Fair Market Value per
share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the
provisions of Section I of Article Seven and the
documents evidencing the option, be payable in one or
more of the forms specified below:
a. Cash or check made payable to the Corporation;
b. Shares of Common Stock held for the requisite period necessary to avoid
a charge to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date; or
c. To the extent the option is exercised for
vested shares, through a special sale and
remittance procedure pursuant to which the
Optionee shall concurrently provide
irrevocable instructions to:
i. A Corporation-designated brokerage
firm to effect the immediate sale of
the purchased shares and remit to
the Corporation, out of the sale
proceeds available on the settlement
date, sufficient funds to cover the
aggregate exercise price payable for
the purchased shares plus all
applicable Federal, state and local
income and employment taxes required
to be withheld by the Corporation by
reason of such exercise; and
ii. The Corporation to deliver the
certificates for the purchased
shares directly to such brokerage
firm in order to complete the sale.
Except to the extent such sale and
remittance procedure is utilized,
payment of the exercise price for
the purchased shares must be made on
the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS.
Each option shall be exercisable at such time or times, during
such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the
documents evidencing the option. However, no option shall have
a term in excess of ten (10) years measured from the option
grant date.
C. EFFECT OF TERMINATION OF SERVICE.
1. The following provisions shall govern the exercise of any options held
by the Optionee at the time of cessation of Service or death:
a. Any option outstanding at the time of the
Optionee's cessation of Service for any
reason shall remain exercisable for such
period of time thereafter as shall be
determined by the Plan Administrator and set
forth in the documents evidencing the
option, but no such option shall be
exercisable after the expiration of the
option term.
b. Any option held by the Optionee at the time
of death and exercisable in whole or in part
at that time may be subsequently exercised
by the personal representative of the
Optionee's estate or by the person or
persons to whom the option is transferred
pursuant to the Optionee's will or in
accordance with the laws of descent and
distribution or by the Optionee's designated
beneficiary or beneficiaries of that option.
c. Should the Optionee's Service be terminated for Misconduct, then all
outstanding options held by the Optionee shall terminate immediately
and cease to be outstanding.
d. During the applicable post-Service exercise
period, the option may not be exercised in
the aggregate for more than the number of
vested shares for which the option is
exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of
the applicable exercise period or (if
earlier) upon the expiration of the option
term, the option shall terminate and cease
to be outstanding for any vested shares for
which the option has not been exercised.
However, the option shall, immediately upon
the Optionee's cessation of Service,
terminate and cease to be outstanding to the
extent the option is not otherwise at that
time exercisable for vested shares.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time an option
is granted or at any time while the option remains
outstanding, to:
a. Extend the period of time for which the
option is to remain exercisable following
the Optionee's cessation of Service from the
limited exercise period otherwise in effect
for that option to such greater period of
time as the Plan Administrator shall deem
appropriate, but in no event beyond the
expiration of the option term; and/or
b. Permit the option to be exercised, during
the applicable post-Service exercise period,
not only with respect to the number of
vested shares of Common Stock for which such
option is exercisable at the time of the
Optionee's cessation of Service but also
with respect to one or more additional
installments in which the Optionee would
have vested had the Optionee continued in
Service.
D. STOCKHOLDER RIGHTS
The holder of an option shall have no stockholder rights with
respect to the shares subject to the option until such person
shall have exercised the option, paid the exercise price and
become a holder of record of the purchased shares.
E. REPURCHASE RIGHTS
The Plan Administrator shall have the discretion to grant
options which are exercisable for unvested shares of Common
Stock. Should the Optionee cease Service while holding such
unvested shares, the Corporation shall have the right to
repurchase, at the exercise price paid per share, any or all
of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such
repurchase right.
F. LIMITED TRANSFERABILITY OF OPTIONS
During the lifetime of the Optionee, Incentive Options shall
be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws
of descent and distribution following the Optionee's death.
However, a Non-Statutory Option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during
the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned
portion may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may
deem appropriate.
Notwithstanding the foregoing, the Optionee may also designate
one or more persons as the beneficiary or beneficiaries of his
or her outstanding options under this Article Two, and those
options shall, in accordance with such designation,
automatically be transferred to such beneficiary or
beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the
transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred
option, including (without limitation) the limited time period
during which the option may be exercised following the
Optionee's death.
<PAGE>
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Seven shall be applicable to
Incentive Options. Options which are specifically designated as
Non-Statutory Options when issued under the Plan shall NOT be subject
to the terms of this Section II.
A. ELIGIBILITY
Incentive Options may only be granted to Employees.
B. DOLLAR LIMITATION
The aggregate Fair Market Value of the shares of Common Stock
(determined as of the respective date or dates of grant) for
which one or more options granted to any Employee under the
Plan (or any other option plan of the Corporation or any
Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year
shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more
such options which become exercisable for the first time in
the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are
granted.
C. 10% STOCKHOLDER
If any Employee to whom an Incentive Option is granted is a
10% Stockholder, then the exercise price per share shall not
be less than one hundred ten percent (110%) of the Fair Market
Value per share of Common Stock on the option grant date, and
the option term shall not exceed five (5) years measured from
the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding
option shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the
Corporate Transaction, become fully exercisable for the total
number of shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. However, an outstanding
option shall NOT become exercisable on such an accelerated
basis if and to the extent:
1. Such option is, in connection with the Corporate Transaction, to be
assumed by the successor corporation (or parent thereof); or
2. Such option is to be replaced with a cash incentive
program of the successor corporation which preserves
the spread existing at the time of the Corporate
Transaction on any shares for which the option is not
otherwise at that time exercisable and provides for
subsequent payout in accordance with the same
exercise/vesting schedule applicable to those option
shares; or
3. The acceleration of such option is subject to other limitations imposed
by the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights shall automatically
terminate, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event
of any Corporate Transaction, except to the extent:
1. Those repurchase rights are to be assigned to the successor corporation
(or parent thereof) in connection with such Corporate Transaction; or
2. Such accelerated vesting is precluded by other limitations imposed by
the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation (or parent
thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to the Optionee
in consummation of such Corporate Transaction had the option
been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments to reflect such Corporate
Transaction shall also be made to:
1. The exercise price payable per share under each outstanding option,
PROVIDED the aggregate exercise price payable for such securities shall
remain the same;
2. The maximum number and/or class of securities available for issuance
over the remaining term of the Plan; and
3. The maximum number and/or class of securities for which any one person
may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances under the Plan per calendar year; and
4. The maximum number and/or class of securities by which the share
reserve is to increase automatically each calendar year.
E. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary
Option Grant Program so that those options shall, immediately prior to
the effective date of such Corporate Transaction, become fully
exercisable for the total number of shares of Common Stock at the time
subject to those options and may be exercised for any or all of those
shares as fully vested shares of Common Stock, whether or not those
options are to be assumed in the Corporate Transaction. In addition,
the Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the
Discretionary Option Grant Program so that those rights shall not be
assignable in connection with such Corporate Transaction and shall
accordingly terminate upon the consummation of such Corporate
Transaction, and the shares subject to those terminated rights shall
thereupon vest in full.
F. The Plan Administrator shall have full power and authority to
structure one or more outstanding options under the
Discretionary Option Grant Program so that those options shall
become fully exercisable for the total number of shares of
Common Stock at the time subject to those options in the event
the Optionee's Service is subsequently terminated by reason of
an Involuntary Termination within a designated period (not to
exceed eighteen (18) months) following the effective date of
any Corporate Transaction in which those options are assumed
and do not otherwise accelerate. Any options so accelerated
shall remain exercisable for fully vested shares until the
EARLIER of:
1. The expiration of the option term; or
2. The expiration of the one-(1) year period measured from the effective
date of the Involuntary Termination.
In addition, the Plan Administrator may structure one or more
of the Corporation's repurchase rights so that those rights
shall immediately terminate with respect to any shares held by
the Optionee at the time of his or her Involuntary
Termination, and the shares subject to those terminated
repurchase rights shall accordingly vest in full at that time.
G. The Plan Administrator shall have the discretionary authority to
structure one or more outstanding options under the Discretionary
Option Grant Program so that those options shall, immediately prior to
the effect date of a Change in Control, become fully exercisable for
the total number of shares of Common Stock at the time subject to those
options and may be exercised for any or all of those shares as fully
vested shares of Common Stock. In addition, the Plan Administrator
shall have the discretionary authority to structure one or more of the
Corporation's repurchase rights under the Discretionary Option Grant
Program so that those rights shall terminate automatically upon the
consummation of such Change in Control, and the shares subject to those
terminated rights shall thereupon vest in full. Alternatively, the Plan
Administrator may condition the automatic acceleration of one or more
outstanding options under the Discretionary Option Grant Program and
the termination of one or more of the Corporation's outstanding
repurchase rights under such program upon the subsequent termination of
the Optionee's Service by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the
effective date of such Change in Control.
Each option so accelerated shall remain exercisable for fully vested
shares until the EARLIER of:
1. The expiration of the option term; or
2. The expiration of the one-(1) year period measured from the effective
date of Optionee's cessation of Service.
H. The portion of any Incentive Option accelerated in connection
with a Corporate Transaction or Change in Control shall remain
exercisable as an Incentive Option only to the extent the
applicable One Hundred Thousand Dollar ($100,000) limitation
is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be
exercisable as a Non-Statutory Option under the Federal tax
laws.
I. The outstanding options shall in no way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or
any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders,
the cancellation of any or all outstanding options under the
Discretionary Option Grant Program (including outstanding options
incorporated from the Predecessor Plan) and to grant in substitution
new options covering the same or different number of shares of Common
Stock but with an exercise price per share based on the Fair Market
Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to
grant to selected Optionees tandem stock appreciation rights
and/or limited stock appreciation rights.
B. The following terms shall govern the grant and exercise of tandem stock
appreciation rights:
1. One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator
may establish, to elect between the exercise of the
underlying option for shares of Common Stock and the
surrender of that option in exchange for a
distribution from the Corporation in an amount equal
to the excess of:
a. The Fair Market Value (on the option surrender date) of the number of
shares in which the Optionee is at the time vested under the
surrendered option (or surrendered portion thereof) over;
b. The aggregate exercise price payable for such shares.
2. No such option surrender shall be effective unless it
is approved by the Plan Administrator, either at the
time of the actual option surrender or at any earlier
time. If the surrender is so approved, then the
distribution to which the Optionee shall be entitled
may be made in shares of Common Stock valued at Fair
Market Value on the option surrender date, in cash,
or partly in shares and partly in cash, as the Plan
Administrator shall in its sole discretion deem
appropriate.
3. If the surrender of an option is not approved by the
Plan Administrator, then the Optionee shall retain
whatever rights the Optionee had under the
surrendered option (or surrendered portion thereof)
on the option surrender date and may exercise such
rights at any time prior to the LATER of:
a. Five (5) business days after the receipt of the rejection notice; or
b. The last day on which the option is
otherwise exercisable in accordance with the
terms of the documents evidencing such
option, but in no event may such rights be
exercised more than ten (10) years after the
option grant date.
C. The following terms shall govern the grant and exercise of limited
stock appreciation rights:
1. One or more Section 16 Insiders may be granted limited stock
appreciation rights with respect to their outstanding options.
2. Upon the occurrence of a Hostile Take-Over, each
individual holding one or more options with such a
limited stock appreciation right shall have the
unconditional right (exercisable for a thirty
(30)-day period following such Hostile Take-Over) to
surrender each such option to the Corporation. In
return for the surrendered option, the Optionee shall
receive a cash distribution from the Corporation in
an amount equal to the excess of:
a. The Take-Over Price of the shares of Common Stock at the time subject
to such option (whether or not the Optionee is otherwise vested in
those shares) over;
b. The aggregate exercise price payable for those shares. Such cash
distribution shall be paid within five (5) days following the option
surrender date.
3. At the time such limited stock appreciation right is
granted, the Plan Administrator shall pre-approve any
subsequent exercise of that right in accordance with
the terms of this Paragraph C. Accordingly, no
further approval of the Plan Administrator or the
Board shall be required at the time of the actual
option surrender and cash distribution.
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary
Investment Option Grant Program is to be in effect and to select the
Section 16 Insiders and other highly compensated Employees eligible to
participate in the Salary Investment Option Grant Program for such
calendar year or years. Each selected individual who elects to
participate in the Salary Investment Option Grant Program must, prior
to the start of each calendar year of participation, file with the Plan
Administrator (or its designate) an irrevocable authorization directing
the Corporation to reduce his or her base salary for that calendar year
by an amount not less than Ten Thousand Dollars ($10,000.00) nor more
than Fifty Thousand Dollars ($50,000.00). Each individual who files
such a timely authorization shall automatically be granted an option
under the Salary Investment Grant Program on the first trading day in
January of the calendar year for which the salary reduction is to be in
effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; PROVIDED,
however, that each such document shall comply with the terms specified
below.
A. EXERCISE PRICE
1. The exercise price per share shall be thirty-three
and one-third percent (33-1/3%) of the Fair Market
Value per share of Common Stock on the option grant
date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or
more of the alternative forms authorized under the
Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified
thereunder is utilized, payment of the exercise price
for the purchased shares must be made on the Exercise
Date.
B. NUMBER OF OPTION SHARES.
The number of shares of Common Stock subject to the option
shall be determined pursuant to the following formula (rounded
down to the nearest whole number):
X = A DIVIDED BY (B x 66-2/3%), where
X equals the number of option shares;
A equals the dollar amount of the reduction
in the Optionee's base salary for the
calendar year to be in effect pursuant to
this program; and
B equals the Fair Market Value per share of
Common Stock on the option grant date.
C. EXERCISE AND TERM OF OPTIONS.
The option shall become exercisable in a series of twelve (12)
successive equal monthly installments upon the Optionee's
completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option
shall have a maximum term of ten (10) years measured from the
option grant date.
D. EFFECT OF TERMINATION OF SERVICE.
Should the Optionee cease Service for any reason while holding
one or more options under this Article Three, then each such
option shall remain exercisable, for any or all of the shares
for which the option is exercisable at the time of such
cessation of Service, until the EARLIER of:
1. The expiration of the ten (10)-year option term; or
2. The expiration of the three (3)-year period measured from the date of
such cessation of Service.
Should the Optionee die while holding one or more options
under this Article Three, then each such option may be
exercised, for any or all of the shares for which the option
is exercisable at the time of the Optionee's cessation of
Service (less any shares subsequently purchased by Optionee
prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution or by the
designated beneficiary or beneficiaries of such option. Such
right of exercise shall lapse, and the option shall terminate,
upon the EARLIER of:
1. the expiration of the ten (10)-year option term; or
2. The three (3)-year period measured from the date of the Optionee's
cessation of Service.
However, the option shall, immediately upon the Optionee's
cessation of Service for any reason, terminate and cease to
remain outstanding with respect to any and all shares of
Common Stock for which the option is not otherwise at that
time exercisable.
III. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee remains in
Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate
so that each such option shall, immediately prior to the effective date
of the Corporate Transaction, become fully exercisable for the total
number of shares of Common Stock at the time subject to such option and
may be exercised for any or all of those shares as fully-vested shares
of Common Stock. Each such outstanding option shall terminate
immediately following the Corporate Transaction, except to the extent
assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain
exercisable for the fully-vested shares until the EARLIER of:
1. The expiration of the ten (10)-year option term; or
2. The expiration of the three (3)-year period measured from the date of
the Optionee's cessation of Service.
B. In the event of a Change in Control while the Optionee remains
in Service, each outstanding option held by such Optionee
under this Salary Investment Option Grant Program shall
automatically accelerate so that each such option shall
immediately become fully exercisable for the total number of
shares of Common Stock at the time subject to such option and
may be exercised for any or all of those shares as
fully-vested shares of Common Stock. The option shall remain
so exercisable until the EARLIEST to occur of:
1. The expiration of the ten (10)-year option term;
2. The expiration of the three (3)-year period measured from the date of
the Optionee's cessation of Service;
3. The termination of the option in connection with a Corporate
Transaction; or
4. The surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the
Corporation each outstanding option granted him or her under
the Salary Investment Option Grant Program. The Optionee shall
in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of:
1. The Take-Over Price of the shares of Common Stock at the time subject
to the surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over
2. The aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation. The
Primary Committee shall, at the time the option with such
limited stock appreciation right is granted under the Salary
Investment Option Grant Program, pre-approve any subsequent
exercise of that right in accordance with the terms of this
Paragraph C. Accordingly, no further approval of the Primary
Committee or the Board shall be required at the time of the
actual option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to the Optionee
in consummation of such Corporate Transaction had the option
been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the
exercise price payable per share under each outstanding
option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
E. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital
or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any partof its business
or assets.
IV. REMAINING TERMS
The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below. Shares of
Common Stock may also be issued under the Stock Issuance Program
pursuant to share right awards which entitle the recipients to receive
those shares upon the attainment of designated performance goals.
A. PURCHASE OR GRANT PRICE.
1. The purchase or grant price per share shall be fixed
by the Plan Administrator, but shall not be less than
one hundred percent (100%) of the Fair Market Value
per share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article
Seven, shares of Common Stock may be issued under the
Stock Issuance Program for any of the following items
of consideration which the Plan Administrator may
deem appropriate in each individual instance:
a. Cash or check made payable to the Corporation;
b. Past services rendered to the Corporation (including any Parent or
Subsidiary); or
c. Future services to the Corporation (including any Parent or
Subsidiary), including the attainment of designated performance
goals.
B. VESTING PROVISIONS.
1. Shares of Common Stock issued under the Stock
Issuance Program may, in the discretion of the Plan
Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over
the Participant's period of Service or upon
attainment of specified performance objectives. The
elements of the vesting schedule applicable to any
unvested shares of Common Stock issued under the
Stock Issuance Program shall be determined by the
Plan Administrator and incorporated into the Stock
Issuance Agreement. Shares of Common Stock may also
be issued under the Stock Issuance Program pursuant
to share right awards which entitle the recipients to
receive those shares upon the attainment of
designated performance goals.
2. Any new, substituted or additional securities or
other property (including money paid other than as a
regular cash dividend) which the Participant may have
the right to receive with respect to the
Participant's unvested shares of Common Stock by
reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding
Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to:
a. The same vesting requirements applicable to the Participant's unvested
shares of Common Stock; and
b. Such escrow arrangements as the Plan Administrator shall deem
appropriate.
3. The Participant shall have full stockholder rights
with respect to any shares of Common Stock issued to
the Participant under the Stock Issuance Program,
whether or not the Participant's interest in those
shares is vested. Accordingly, the Participant shall
have the right to vote such shares and to receive any
regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding one or
more unvested shares of Common Stock issued under the Stock Issuance
Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those
shares shall be immediately surrendered to the Corporation for
cancellation, and the Participant shall have no further stockholder
rights with respect to those shares. To the extent the surrendered
shares were previously issued to the Participant for consideration paid
in cash or cash equivalent (including the Participant's purchase-money
indebtedness), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the
unpaid principal balance of any outstanding purchase-money note of the
Participant attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive
the surrender and cancellation of one or more
unvested shares of Common Stock which would otherwise
occur upon the cessation of the Participant's Service
or the non-attainment of the performance objectives
applicable to those shares. Such waiver shall result
in the immediate vesting of the Participant's
interest in the shares of Common Stock as to which
the waiver applies. Such waiver may be effected at
any time, whether before or after the Participant's
cessation of Service or the attainment or
non-attainment of the applicable performance
objectives.
6. Outstanding share right awards under the Stock
Issuance Program shall automatically terminate, and
no shares of Common Stock shall actually be issued in
satisfaction of those awards, if the performance
goals established for such awards are not attained.
The Plan Administrator, however, shall have the
discretionary authority to issue shares of Common
Stock under one or more outstanding share right
awards as to which the designated performance goals
have not been attained.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under
the Stock Issuance Program shall terminate automatically, and
all the shares of Common Stock subject to those terminated
rights shall immediately vest in full, in the event of any
Corporate Transaction, except to the extent:
1. Those repurchase rights are to be assigned to the successor corporation
(or parent thereof) in connection with such Corporate Transaction; or
2. Such accelerated vesting is precluded by other limitations imposed in
the Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority
to structure one or more of the Corporation's repurchase
rights under the Stock Issuance Program so that those rights
shall automatically terminate in whole or in part, and the
shares of Common Stock subject to those terminated rights
shall immediately vest, in the event the Participant's Service
should subsequently terminate by reason of an Involuntary
Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of any Corporate
Transaction in which those repurchase rights are assigned to
the successor corporation (or parent thereof).
C. The Plan Administrator shall also have the discretionary
authority to structure one or more of the Corporation's
repurchase rights under the Stock Issuance Program so that
those rights shall automatically terminate in whole or in
part, and the shares of Common Stock subject to those
terminated rights shall immediately vest, in the event the
Participant's Service should subsequently terminate by reason
of an Involuntary Termination within a designated period (not
to exceed eighteen (18) months) following the effective date
of any Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with
restrictive legends on the certificates evidencing those unvested
shares.
<PAGE>
ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. GRANT DATES. Option grants shall be made on the dates specified below:
1. Each individual who is currently or is first elected
or appointed as a non-employee Board member at any
time on or after the Plan Effective Date shall
automatically be granted, on the Plan Effective Date
or the date of such initial election or appointment,
a Non-Statutory Option to purchase 15,000 shares of
Common Stock, provided that individual has not
previously been in the employ of the Corporation or
any Parent or Subsidiary.
2. On the date of each Annual Stockholders Meeting held after the Plan
Effective Date, each individual who is to continue to serve as an
Eligible Director, whether or not that individual is standing for
re-election to the Board at that particular Annual Meeting, shall
automatically be granted a Non-Statutory Option to purchase 5,000
shares of Common Stock, provided such individual has served as a
non-employee Board member for at least six (6) months. There shall be
no limit on the number of such 5,000 share option grants any one
Eligible Director may receive over his or her period of Board service,
and non-employee Board members who have previously been in the employ
of the Corporation (or any Parent or Subsidiary) or who have otherwise
received one or more stock option grants from the Corporation prior to
the Plan Effective Date shall be eligible to receive one or more such
annual option grants over their period of continued Board service.
B. EXERCISE PRICE.
1. The exercise price per share shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of
the alternative forms authorized under the
Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified
thereunder is utilized, payment of the exercise price
for the purchased shares must be made on the Exercise
Date.
C. OPTION TERM.
Each option shall have a term of ten (10) years measured from
the option grant date.
D. EXERCISE AND VESTING OF OPTIONS.
Each option shall be immediately exercisable for any or all of
the option shares. However, any shares purchased under the
option shall be subject to repurchase by the Corporation, at
the exercise price paid per share, upon the Optionee's
cessation of Board service prior to vesting in those shares.
Each initial 15,000 share grant shall vest, and the
Corporation's repurchase right shall lapse, in a series of six
(6) successive equal semi-annual installments upon the
Optionee's completion of each six (6)-month period of service
as a Board member over the thirty-six (36)-month period
measured from the option grant date. Each annual 5,000 share
automatic option shall vest, and the Corporation's repurchase
right shall lapse, in two (2) successive equal semi-annual
installments upon the Optionee's completion of each six
(6)-month period of Board service measured from the option
grant date.
E. LIMITED TRANSFERABILITY OF OPTIONS.
Each option under this Article Five may, in connection with
the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned
portion may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may
deem appropriate. The Optionee may also designate one or more
persons as the beneficiary or beneficiaries of his or her
outstanding options under this Article Three, and those
options shall, in accordance with such designation,
automatically be transferred to such beneficiary or
beneficiaries upon the Optionee's death while holding those
options. Such beneficiary or beneficiaries shall take the
transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred
option, including (without limitation) the limited time period
during which the option may be exercised following the
Optionee's death.
F. TERMINATION OF BOARD SERVICE.
The following provisions shall govern the exercise of any
options held by the Optionee at the time the Optionee ceases
to serve as a Board member:
1. The Optionee (or, in the event of Optionee's death,
the personal representative of the Optionee's estate
or the person or persons to whom the option is
transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution
or by the designated beneficiary or beneficiaries of
such option) shall have a twelve (12)-month period
following the date of such cessation of Board service
in which to exercise each such option.
2. During the twelve (12) -month exercise periods, the
option may not be exercised in the aggregate for more
than the number of vested shares of Common Stock for
which the option is exercisable at the time of the
Optionee's cessation of Board service.
3. Should the Optionee cease to serve as a Board member
by reason of death or Permanent Disability, then all
shares at the time subject to the option shall
immediately vest so that such option may, during the
twelve (12)-month exercise period following such
cessation of Board service, be exercised for all or
any portion of those shares as fully-vested shares of
Common Stock.
4. In no event shall the option remain exercisable after
the expiration of the option term. Upon the
expiration of the twelve (12)-month exercise period
or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be
outstanding for any vested shares for which the
option has not been exercised. However, the option
shall, immediately upon the Optionee's cessation of
Board service for any reason other than death or
Permanent Disability, terminate and cease to be
outstanding to the extent the option is not otherwise
at that time exercisable for vested shares.
II. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of
Common Stock at the time subject to each outstanding option
but not otherwise vested shall automatically vest in full so
that each such option shall, immediately prior to the
effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time
subject to such option and may be exercised for all or any
portion of those shares as fully-vested shares of Common
Stock. Immediately following the consummation of the Corporate
Transaction, each automatic option grant shall terminate and
cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not
otherwise vested shall automatically vest in full so that each
such option shall, immediately prior to the effective date of
the Change in Control, become fully exercisable for all of the
shares of Common Stock at the time subject to such option and
maybe exercised for all or any portion of those shares as
fully-vested shares of Common Stock. Each such option shall
remain exercisable for such fully vested option shares until
the expiration or sooner termination of the option term or the
surrender of the option in connection with a Hostile
Take-Over.
C. All outstanding repurchase rights shall automatically
terminate, and the shares of Common Stock subject to those
terminated rights shall immediately vest in full, in the event
of any Corporate Transaction or Change in Control.
D. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30) day period in which to surrender to the
Corporation each of his or her outstanding automatic option
grants. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the
excess of:
1. The Take-Over Price of the shares of Common Stock at the time subject
to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over;
2. The aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation.
Stockholder approval of the Plan shall constitute pre-approval
of the grant of each such limited cash-out right and the
subsequent exercise of that right in accordance with the terms
of this Paragraph D. Accordingly, no approval or consent of
the Board or any Plan Administrator shall be required at the
time of the actual option surrender and cash distribution.
E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to the Optionee
in consummation of such Corporate Transaction had the option
been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the
exercise price payable per share under each outstanding
option, PROVIDED the aggregate exercise price payable for such
securities shall remain the same.
The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business
or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option
grants made under the Discretionary Option Grant Program.
ARTICLE SIX
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years for which the Director Fee Option
Grant Program is to be in effect. For each such calendar year the
program is in effect, each non-employee Board member may elect to apply
all or any portion of the annual retainer fee otherwise payable in cash
for his or her service on the Board for that year to the acquisition of
a special option grant under this Director Fee Option Grant Program.
Such election must be filed with the Corporation's Chief Financial
Officer prior to first day of the calendar year for which the annual
retainer fee which is the subject of that election is otherwise
payable. Each non-employee Board member who files such a timely
election shall automatically be granted an option under this Director
Fee Option Grant Program on the first trading day in January in the
calendar year for which the annual retainer fee which is the subject of
that election would otherwise be payable in cash.
II. OPTION TERMS
Each option shall be a Non-Statutory Option governed by the terms and
conditions specified below.
<PAGE>
A. EXERCISE PRICE.
1. The exercise price per share shall be thirty-three
and one-third percent (33-1/3%) of the Fair Market
Value per share of Common Stock on the option grant
date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or
more of the alternative forms authorized under the
Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified
thereunder is utilized, payment of the exercise price
for the purchased shares must be made on the Exercise
Date.
B. NUMBER OF OPTION SHARES.
The number of shares of Common Stock subject to the option
shall be determined pursuant to the following formula (rounded
down to the nearest whole number):
X = A DIVIDED BY (B x 66-2/3%),
where X equals the number of option shares,
A equals the portion of the annual retainer
fee subject to the non-employee Board
member's election, and
B equals the Fair Market Value per share of
Common Stock on the option grant date.
C. EXERCISE AND TERM OF OPTIONS.
The option shall become exercisable in a series of twelve (12)
equal monthly installments upon the Optionee's completion of
each month of Board service over the twelve (12)-month period
measured from the grant date. Each option shall have a maximum
term of ten (10)- years measured from the option grant date.
D. LIMITED TRANSFERABILITY OF OPTIONS
Each option under this Article Six may, in connection with the
Optionee's estate plan, be assigned in whole or in part during
the Optionee's lifetime to one or more members of the
Optionee's immediate family or to a trust established
exclusively for one or more such family members. The assigned
portion may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall
be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may
deem appropriate.
The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options
under this Article Six, and those options shall, in accordance
with such designation, automatically be transferred to such
beneficiary or beneficiaries upon the Optionee's death while
holding those options. Such beneficiary or beneficiaries shall
take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such
transferred option, including (without limitation) the limited
time period during which the option may be exercised following
the Optionee's death.
E. TERMINATION OF BOARD SERVICE.
Should the Optionee cease Board service for any reason (other
than death or Permanent Disability) while holding one or more
options under this Director Fee Option Grant Program, then
each such option shall remain exercisable, for any or all of
the shares for which the option is exercisable at the time of
such cessation of Board service, until the EARLIER of:
1. The expiration of the ten (10)-year option term; or
2. The expiration of the three (3)-year period measured from the date of
such cessation of Board service.
However, each option held by the Optionee under this Director
Fee Option Grant Program at the time of his or her cessation
of Board service shall immediately terminate and cease to
remain outstanding with respect to any and all shares of
Common Stock for which the option is not otherwise at that
time exercisable.
F. DEATH OR PERMANENT DISABILITY
Should the Optionee's service as a Board member cease by
reason of death or Permanent Disability, then each option held
by such Optionee under this Director Fee Option Grant Program
shall immediately become exercisable for all the shares of
Common Stock at the time subject to that option, and the
option may be exercised for any or all of those shares as
fully-vested shares until the EARLIER of:
1. The expiration of the ten(10)-year option term; or
2. The expiration of the three (3)-year period measured from the date of
such cessation of Board service.
Should the Optionee die after cessation of Board service but
while holding one or more options under this Director Fee
Option Grant Program, then each such option may be exercised,
for any or all of the shares for which the option is
exercisable at the time of the Optionee's cessation of Board
service (less any shares subsequently purchased by Optionee
prior to death), by the personal representative of the
Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution or by the
designated beneficiary or beneficiaries of such option.
<PAGE>
Such right of exercise shall lapse, and the option shall
terminate, upon the EARLIER of:
1. The expiration of the ten (10)-year option term; or
2. The three (3)-year period measured from the date of the Optionee's
cessation of Board service.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee remains a
Board member, each outstanding option held by such Optionee under this
Director Fee Option Grant Program shall automatically accelerate so
that each such option shall, immediately prior to the effective date of
the Corporate Transaction, become fully exercisable for the total
number of shares of Common Stock at the time subject to such option and
may be exercised for any or all of those shares as fully-vested shares
of Common Stock. Each such outstanding option shall terminate
immediately following the Corporate Transaction, except to the extent
assumed by the successor corporation (or parent thereof) in such
Corporate Transaction. Any option so assumed and shall remain
exercisable for the fully-vested shares until the EARLIER of:
1. The expiration of the ten (10)-year option term; or
2. The expiration of the three (3)-year period measured from the date of
the Optionee's cessation of Board service.
B. In the event of a Change in Control while the Optionee remains
in Service, each outstanding option held by such Optionee
under this Director Fee Option Grant Program shall
automatically accelerate so that each such option shall
immediately become fully exercisable for the total number of
shares of Common Stock at the time subject to such option and
may be exercised for any or all of those shares as
fully-vested shares of Common Stock.
The option shall remain so exercisable until the EARLIEST to
occur of;
1. The expiration of the ten (10)-year option term;
2. The expiration of the three (3)-year period measured from the date of
the Optionee's cessation of Board service;
3. The termination of the option in connection with a Corporate
Transaction; or
4. The surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the
Corporation each outstanding option granted him or her under
the Director Fee Option Grant Program.
The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the
excess of:
1. The Take-Over Price of the shares of Common Stock at the time subject
to each surrendered option (whether or not the Optionee is otherwise at
the time vested in those shares) over
2. The aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days
following the surrender of the option to the Corporation.
Stockholder approval of the Plan shall constitute pre-approval
of the grant of each such limited cash-out right and the
subsequent exercise of that right in accordance with the terms
of this Paragraph C. Accordingly, no approval or consent of
the Board or any Plan Administrator shall be required at the
time of the actual option surrender and cash distribution.
D. The grant of options under the Director Fee Option Grant
Program shall in no way affect the right of the Corporation to
adjust, reclassify, reorganize or otherwise change its capital
or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business
or assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director Fee
Option Grant Program shall be the same as the terms in effect for
option grants made under the Discretionary Option Grant Program.
ARTICLE SEVEN
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay
the option exercise price under the Discretionary Option Grant Program
or the purchase price of shares issued under the Stock Issuance Program
by delivering a full-recourse, interest bearing promissory note payable
in one or more installments. The terms of any such promissory note
(including the interest rate and the terms of repayment) shall be
established by the Plan Administrator in its sole discretion.
In no event may the maximum credit available to the Optionee or
Participant exceed the sum of:
1. The aggregate option exercise price or purchase price payable for the
purchased shares, plus;
2. Any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in
connection with the option exercise or share purchase.
<PAGE>
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or the issuance or vesting of
such shares under the Plan shall be subject to the
satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or
all holders of Non-Statutory Options or unvested shares of
Common Stock under the Plan (other than the options granted or
the shares issued under the Automatic Option Grant or Director
Fee Option Grant Program) with the right to use shares of
Common Stock in satisfaction of all or part of the Taxes
incurred by such holders in connection with the exercise of
their options or the vesting of their shares.
Such right may be provided to any such holder in either or
both of the following formats:
STOCK WITHHOLDING: The election to have the
Corporation withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a
portion of those shares with an aggregate Fair Market
Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the
holder.
STOCK DELIVERY: The election to deliver to the
Corporation, at the time the Non-Statutory Option is
exercised or the shares vest, one or more shares of
Common Stock previously acquired by such holder
(other than in connection with the option exercise or
share vesting triggering the Taxes) with an aggregate
Fair Market Value equal to the percentage of the
Taxes (not to exceed one hundred percent (100%))
designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately on the Plan Effective Date.
However, the Salary Investment Option Grant Program and the Director
Fee Option Grant Program shall not be implemented until such time as
the Primary Committee may deem appropriate. Options may be granted
under the Discretionary Option Grant at any time on or after the Plan
Effective Date. However, no options granted under the Plan may be
exercised, and no shares shall be issued under the Plan, until the Plan
is approved by the Corporation's stockholders. If such stockholder
approval is not obtained within twelve (12) months after the Plan
Effective Date, then all options previously granted under this Plan
shall terminate and cease to be outstanding, and no further options
shall be granted and no shares shall be issued under the Plan.
B. The Plan shall terminate upon the EARLIEST to occur of:
1. March 1, 2010;
2. The date on which all shares available for issuance under the Plan
shall have been issued as fully-vested shares; or
3. The termination of all outstanding options in connection with a
Corporate Transaction.
Should the Plan terminate on March 1, 2010, then all option
grants and unvested stock issuances outstanding at that time
shall continue to have force and effect in accordance with the
provisions of the documents evidencing such grants or
issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects.
However, no such amendment or modification shall adversely
affect the rights and obligations with respect to stock
options or unvested stock issuances at the time outstanding
under the Plan unless the Optionee or the Participant consents
to such amendment or modification. In addition, certain
amendments may require stockholder approval pursuant to
applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant and Salary Investment
Option Grant Programs and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in
excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued
under those programs shall be held in escrow until there is
obtained stockholder approval of an amendment sufficiently
increasing the number of shares of Common Stock available for
issuance under the Plan. If such stockholder approval is not
obtained within twelve (12) months after the date the first
such excess issuances are made, then:
1. Any unexercised options granted on the basis of such excess shares
shall terminate and cease to be outstanding; and
2. The Corporation shall promptly refund to the
Optionees and the Participants the exercise or
purchase price paid for any excess shares issued
under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate)
for the period the shares were held in escrow, and
such shares shall thereupon be automatically
cancelled and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate
purposes.
<PAGE>
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock
option under the Plan and the issuance of any shares of Common
Stock (1) upon the exercise of any granted option or (2) under
the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits
required by regulatory authorities having jurisdiction over
the Plan, the stock options granted under it and the shares of
Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or
delivered under the Plan unless and until there shall have
been compliance with all applicable requirements of Federal
and state securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the
shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any stock exchange (or the
Nasdaq National, Small Cap, or Bulletin Board Markets, if
applicable) on which Common Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant
any right to continue in Service for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the
Corporation (or any Parent or Subsidiary employing or retaining such
person) or of the Optionee or the Participant, which rights are hereby
expressly reserved by each, to terminate such person's Service at any
time for any reason, with or without cause.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Plan:
A. AUTOMATIC OPTION GRANT PROGRAM shall mean the automatic option grant
program in effect under the Plan.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
1. The acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation), of
beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation's stockholders; or
2. A change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either:
a. Have been Board members continuously since the beginning of such
period; or
b. Have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (a.) who were still in office at the time the Board approved
such election or nomination.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
1. A merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those
securities immediately prior to such transaction; or
2. The sale, transfer or other disposition of all or substantially all of
the Corporation's assets in complete liquidation or dissolution of the
Corporation.
G. CORPORATION shall mean Transnational Financial Network, Inc., a
California corporation, and any corporate successor to all or
substantially all of the assets or voting stock of Transnational
Financial Network, Inc. which shall by appropriate action adopt the
Plan.
H. DIRECTOR FEE OPTION GRANT PROGRAM shall mean the special stock option
grant in effect for non-employee Board members under Article Six of the
Plan.
I. DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary option
grant program in effect under the Plan.
J. ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with
the eligibility provisions of Articles One and Five.
K. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed
and the manner and method of performance.
L. EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
M. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
1. If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock,
as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling
price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
2. If the Common Stock is at the time traded on any of the Nasdaq
National, Small Cap, or Bulletin Board Markets, then the Fair
Market Value shall be the closing selling price per share of
Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on
the applicable market. If there is no closing selling price
for the Common Stock on the date in question, then the Fair
Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
N. HOSTILE TAKE-OVER shall mean the acquisition, directly or indirectly,
by any person or related group of persons (other than the Corporation
or a person that directly or indirectly controls, is controlled by, or
is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept.
O. INCENTIVE OPTION shall mean an option that satisfies the requirements
of Code Section 422.
P. INVOLUNTARY TERMINATION shall mean the termination of the Service of
any individual which occurs by reason of:
<PAGE>
1. Such individual's involuntary dismissal or discharge by the Corporation
for reasons other than Misconduct; or
2. Such individual's voluntary resignation following:
a. A change in his or her position with the Corporation which materially
reduces his or her duties and responsibilities or the level of
management to which he or she reports:
b. A reduction in his or her level of compensation (including base salary,
fringe benefits and target bonus under any corporate-performance based
bonus or incentive programs) by more than fifteen percent (15%); or
c. A relocation of such individual's place of employment by more than
fifty (50) miles, provided and only if such change, reduction or
relocation is effected by the Corporation without the individual's
consent.
Q. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or
disclosure by such person of confidential information or trade secrets
of the Corporation (or any Parent or Subsidiary), or any other
intentional misconduct by such person adversely affecting the business
or affairs of the Corporation (or any Parent or Subsidiary) in a
material manner. The foregoing definition shall not be deemed to be
inclusive of all the acts or omissions which the Corporation (or any
Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of any Optionee, Participant or other person in the Service
of the Corporation (or any Parent or Subsidiary).
R. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
S. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
T. OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant, Salary Investment Option Grant, Automatic
Option Grant or Director Fee Option Grant Program.
U. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided
each corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
V. PARTICIPANT shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.
W. PERMANENTDISABILITY OR PERMANENTLY DISABLED shall mean the inability of
the Optionee or the Participant to engage in any substantial gainful
activity by reason of any medically determinable physical or mental
impairment expected to result in death or to be of continuous duration
of twelve (12) months or more. However, solely for purposes of the
Automatic Option Grant and Director Fee Option Grant Programs,
Permanent Disability or Permanently Disabled shall mean the inability
of the non-employee Board member to perform his or her usual duties as
a Board member by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous
duration of twelve (12) months or more.
<PAGE>
X. PLAN shall mean the Corporation's 2000 Stock Incentive Plan, as set
forth in this document.
Y. PLAN ADMINISTRATOR shall mean the particular entity, whether the
Primary Committee, the Board, or the Secondary Committee, which is
authorized to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to one or more classes of eligible
persons, to the extent such entity is carrying out its administrative
functions under those programs with respect to the persons under its
jurisdiction.
Z. PLAN EFFECTIVE DATE shall mean the date the Plan shall become effective
and shall be March 1, 2000.
AA. PRIMARY COMMITTEE shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to
Section 16 Insiders and to administer the Salary Investment Option
Grant Program solely with respect to the selection of the eligible
individuals who may participate in such program.
BB. SALARY INVESTMENT OPTION GRANT PROGRAM shall mean the salary investment
option grant program in effect under the Plan.
CC. SECONDARY COMMITTEE shall mean a committee of one or more Board members
appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than
Section 16 Insiders.
DD. SECTION 16 INSIDER shall mean an officer or director of the Corporation
subject to the short-swing profit liabilities of Section 16 of the1934
Act.
EE. SERVICE shall mean the performance of services for the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or
independent advisor, except to the extent otherwise specifically
provided in the documents evidencing the option grant or stock
issuance.
FF. STOCK EXCHANGE shall mean either the American Stock Exchange or the New
York Stock Exchange.
GG. STOCK ISSUANCE AGREEMENT shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of
Common Stock under the Stock Issuance Program.
HH. STOCK ISSUANCE PROGRAM shall mean the stock issuance program in effect
under the Plan.
II. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation,
provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
JJ. TAKE-OVER PRICE shall mean the GREATER of (1) the Fair Market Value per
share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (2) the highest
reported price per share of Common Stock paid by the tender offer or in
effecting such Hostile Take-Over. However, if the surrendered option is
an Incentive Option, the Take-Over Price shall not exceed the clause
(1) price per share.
KK. TAXES shall mean the Federal, state and local income and employment tax
liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options
or the vesting of those shares.
LL. 10% STOCKHOLDER shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or
any Parent or Subsidiary).
<PAGE>
TRANSNATIONAL FINANCIAL NETWORK, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to purchase
shares of the Common Stock of Transnational Financial Network, Inc. (the
"Corporation"):
OPTIONEE: _____________________________________________________
GRANT DATE: __________________________________________________
VESTING COMMENCEMENT DATE: _______________________________
EXERCISE PRICE: $ ______________________per share
NUMBER OF OPTION SHARES: _________________________shares
EXPIRATION DATE: ______________________________________________
TYPE OF OPTION:
____________Incentive Stock Option
____________Non-Statutory Stock Option
EXERCISE SCHEDULE: The Option shall become exercisable for twenty-five
percent (25%) of the Option Shares upon Optionee's completion of one
(1) year of Service measured from the Vesting Commencement Date and
shall become exercisable for the balance of the Option Shares in
thirty-six (36) successive equal monthly installments upon Optionee's
completion of each additional month of Service over the thirty-six (36)
month period measured from the first anniversary of the Vesting
Commencement Date. In no event shall the Option become exercisable for
any additional Option Shares after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted subject to and in
accordance with the terms of the Transnational Financial Network, Inc. 2000
Stock Incentive Plan (the "Plan"). Optionee further agrees to be bound by the
terms of the Plan and the terms of the Option as set forth in the Stock Option
Agreement attached hereto as EXHIBIT A. Optionee hereby acknowledges the receipt
of the Corporation's periodic reports for the preceding twelve (12) month period
as filed with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, and attached hereto as EXHIBIT B. A copy of
the Plan is available upon request made to the Corporate Secretary at the
Corporation's principal offices.
EMPLOYMENT AT WILL
Nothing in this Notice or in the attached Stock Option Agreement or in
the Plan shall confer upon Optionee any right to continue in Service
for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which
rights are hereby expressly reserved by each, to terminate Optionee's
Service at any time for any reason, with or without cause.
DEFINITIONS
All capitalized terms in this Notice shall have the meaning assigned to
them in this Notice or in the attached Stock Option Agreement.
DATED: ____________________
TRANSNATIONAL FINANCIAL NETWORK, INC.
By: __________________________
Title: _________________________
------------------------------
OPTIONEE
Address: ______________________________
------------------------------
ATTACHMENTS
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PERIODIC S.E.C. FILINGS
EXHIBIT A
STOCK OPTION AGREEMENT
EXHIBIT B
PLAN SUMMARY AND PERIODIC S.E.C. FILINGS
<PAGE>
TRANSNATIONAL FINANCIAL NETWORK, INC.
STOCK OPTION AGREEMENT
RECITALS:
1. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or of
the board of directors of any Parent or Subsidiary and consultants and
other independent advisors who provide services to the Corporation (or
any Parent or Subsidiary).
2. Optionee is to render valuable services to the Corporation (or a Parent
or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
3. All capitalized terms in this Agreement shall have the meaning assigned
to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION
The Corporation hereby grants to Optionee, as of the Grant Date, an
option to purchase up to the number of Option Shares specified in the
Grant Notice. The Option Shares shall be purchasable from time to time
during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM
This option shall have a maximum term of ten (10) years measured from
the Grant Date and shall accordingly expire at the close of business on
the Expiration Date, unless sooner terminated in accordance with
Paragraph 5 or 6.
3. LIMITED TRANSFERABILITY
a. This option shall be neither transferable nor assignable by
Optionee other than by will or by the laws of descent and
distribution following Optionee's death and may be exercised,
during Optionee's lifetime, only by Optionee. However,
Optionee may designate one or more persons as the beneficiary
or beneficiaries of this option, and this option shall, in
accordance with such designation, automatically be transferred
to such beneficiary or beneficiaries upon the Optionee's death
while holding such option. Such beneficiary or beneficiaries
shall take the transferred option subject to all the terms and
conditions of this Agreement, including (without limitation)
the limited time period during which this option may, pursuant
to Paragraph 5, be exercised following Optionee's death.
b. If this option is designated a Non-Statutory Option in the
Grant Notice, then this option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during
Optionee's lifetime to one or more members of Optionee's
immediate family or to a trust established for the exclusive
benefit of one or more such family members. The assigned
portion shall be exercisable only by the person or persons who
acquire a proprietary interest in the option pursuant to such
assignment. The terms applicable to the assigned portion shall
be the same as those in effect for this option immediately
prior to such assignment.
4. DATES OF EXERCISE
This option shall become exercisable for the Option Shares in one or
more installments as specified in the Grant Notice. As the option
becomes exercisable for such installments, those installments shall
accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the
option term under Paragraph 5 or 6.
5. CESSATION OF SERVICE
The option term specified in Paragraph 2 shall terminate (and this
option shall cease to be outstanding) prior to the Expiration Date
should any of the following provisions become applicable:
a. Should Optionee cease to remain in Service for any reason
(other than death, Permanent Disability or Misconduct) while
holding this option, then Optionee shall have a period of
three (3) months (commencing with the date of such cessation
of Service) during which to exercise this option, but in no
event shall this option be exercisable at any time after the
Expiration Date.
b. Should Optionee die while holding this option, then the
personal representative of Optionee's estate or the person or
persons to whom the option is transferred pursuant to
Optionee's will or in accordance with the laws of inheritance
shall have the right to exercise this option. However, if
Optionee has designated one or more beneficiaries of this
option, then those persons shall have the exclusive right to
exercise this option following Optionee's death. Such right
shall lapse, and this option shall cease to be outstanding,
upon the EARLIER of (i) the expiration of the twelve
(12)-month period measured from the date of Optionee's death,
or (ii) the Expiration Date.
c. Should Optionee cease Service by reason of Permanent
Disability while holding this option, then Optionee shall have
a period of twelve (12) months (commencing with the date of
such cessation of Service) during which to exercise this
option. In no event shall this option be exercisable at any
time after the Expiration Date.
d. During the limited period of post-Service exercisability, this
option may not be exercised in the aggregate for more than the
number of Option Shares for which the option is exercisable at
the time of Optionee's cessation of Service. Upon the
expiration of such limited exercise period or (if earlier)
upon the Expiration Date, this option shall terminate and
cease to be outstanding for any exercisable Option Shares for
which the option has not been exercised. However, this option
shall, immediately upon Optionee's cessation of Service for
any reason, terminate and cease to be outstanding with respect
to any Option Shares for which this option is not otherwise at
that time exercisable.
e. Should Optionee's Service be terminated for Misconduct, then this
option shall terminate immediately and cease to remain outstanding.
6. SPECIAL ACCELERATION OF OPTION
a. This option, to the extent outstanding at the time of a Corporate
Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the
effective date of such Corporate Transaction, become exercisable for
all of the Option Shares at the time subject to this option and may be
exercised for any or all of those Option Shares as fully vested shares
of Common Stock. No such acceleration of this option shall occur,
however, if and to the extent: (i) this option is, in connection with
the Corporate Transaction, to be assumed by the successor corporation
(or parent thereof) or (ii) this option is to be replaced with a cash
incentive program of the successor corporation which preserves the
spread existing at the time of the Corporate Transaction on the Option
Shares for which this option is not otherwise at that time exercisable
(the excess of the Fair Market Value of those Option Shares over the
aggregate Exercise Price payable for such shares) and provides for
subsequent payout in accordance with the same option exercise/vesting
schedule set forth in the Grant Notice.
b. Immediately following the Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent
thereof) in connection with the Corporate Transaction.
c. If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the
number and class of securities which would have been issuable
to Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to
the Exercise Price, PROVIDED the aggregate Exercise Price
shall remain the same.
d. To the extent the option is, in connection with a Corporate
Transaction, to be assumed in accordance with this Paragraph 6, the
Option shall not accelerate upon the occurrence of that Corporate
Transaction, and the Option shall accordingly continue, over Optionee's
period of Service after the Corporate Transaction, to become
exercisable for the Option Shares in one or more installments in
accordance with the provisions of the Option Agreement. However,
immediately upon an Involuntary Termination of Optionee's Service
within eighteen (18) months following such Corporate Transaction, the
assumed Option, to the extent outstanding at the time but not otherwise
fully exercisable, shall automatically accelerate so that the Option
shall become immediately exercisable for all the Option Shares at the
time subject to the Option and may be exercised for any or all of those
Option Shares as fully vested shares.
Further, the extent to which the Option is to be assumed in accordance
with this paragraph 6, the option shall not accelerate upon the
occurrence of a Change in Control, and the Option shall, over
Optionee's period of Service following such Change in Control, continue
to become exercisable for the Option Shares in one or more installments
in accordance with the provisions of the Option Agreement.
However, immediately upon an Involuntary Termination of Optionee's
Service within eighteen (18) months following a Change in Control, the
Option, to the extent outstanding at the time but not otherwise fully
exercisable, shall automatically accelerate so that the Option shall
become immediately exercisable for all the Option Shares at the time
subject to the Option and may be exercised for any or all of those
Option Shares as fully vested shares.
The Option as accelerated pursuant to this Addendum shall remain so
exercisable until the EARLIER of (i) the Expiration Date or (ii) the
expiration of the one (1)-year period measured from the date of the
Optionee's Involuntary Termination.
e. For purposes of paragraph 6.d. above and only as used therein, the
following definitions shall be in effect:
i. An INVOLUNTARY TERMINATION shall mean the termination of Optionee's
Service by reason of:
A. Optionee's involuntary dismissal or discharge by the Corporation for
reasons other than Misconduct, or
B. Optionee's voluntary resignation following
1. A change in Optionee's position with the Corporation (or Parent or
Subsidiary employing Optionee) which materially reduces Optionee's
duties and responsibilities or the level of management to which
Optionee reports; or
2. A reduction in Optionee's level of compensation (including base salary,
fringe benefits and target bonus under any corporate performance based
bonus or incentive programs) by more than fifteen percent (15%); or
3. A relocation of Optionee's place of employment by more than fifty (50)
miles, provided and only if such change, reduction or relocation is
effected by the Corporation without Optionee's consent.
(ii) A CHANGE IN CONTROL shall be deemed to occur in the
event of a change in ownership or control of the
Corporation effected through either of the following
transactions:
A. The acquisition, directly or indirectly, by any person or related group
of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with,
the Corporation) of beneficial ownership (within the meaning of Rule
13d-3 of the Securities Exchange Act of 1934, as amended) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders; or
B. A change in the composition of the Board over a period of thirty-six
(36) consecutive months or less such that a majority of the Board
members ceases, by reason of one or more contested elections for Board
membership, to be comprised of individuals who either (1) have been
Board members continuously since the beginning of such period or (2)
have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (1) who were still in office at the time the Board approved such
election or nomination.
f. This Agreement shall not in any way affect the right of the Corporation
to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES
Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made to:
a. The total number and/or class of securities subject to this option; and
b. The Exercise Price in order to reflect such change and thereby preclude
a dilution or enlargement of benefits hereunder.
8. STOCKHOLDER RIGHTS
The holder of this option shall not have any stockholder rights with
respect to the Option Shares until such person shall have exercised the
option, paid the Exercise Price and become a holder of record of the
purchased shares.
9. MANNER OF EXERCISING OPTION
a. In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons
exercising the option) must take the following actions:
i. Execute and deliver to the Corporation a Notice of Exercise for the
Option Shares for which the option is exercised;
ii. Pay the aggregate Exercise Price for the purchased shares in one or
more of the following forms:
A. Cash or check made payable to the Corporation;
B. A promissory note payable to the Corporation, but only to the extent
authorized by the Plan Administrator in accordance with Paragraph 13;
C. Shares of Common Stock held by Optionee (or any other person or persons
exercising the option) for the requisite period necessary to avoid a
charge to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date; or
D. Through a special sale and remittance procedure pursuant to which
Optionee (or any other person or persons exercising the option) shall
concurrently provide irrevocable instructions
1. To a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate
Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise and
2. To the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to
complete the sale. Except to the extent the sale and
remittance procedure is utilized in connection with the option
exercise, payment of the Exercise Price must accompany the
Notice of Exercise delivered to the Corporation in connection
with the option exercise.
3. Furnish to the Corporation appropriate documentation that the
person or persons exercising the option (if other than
Optionee) have the right to exercise this option.
4. Make appropriate arrangements with the Corporation (or Parent
or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and
employment tax withholding requirements applicable to the
option exercise.
b. As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person
or persons exercising this option) a certificate for the
purchased Option Shares, with the appropriate legends affixed
thereto.
c. In no event may this option be exercised for any fractional
shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS
a. The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by
the Corporation and Optionee with all applicable requirements
of law relating thereto and with all applicable regulations of
any stock exchange (or the Nasdaq National, Small Cap or
Bulletin Board Markets, if applicable) on which the Common
Stock may be listed for trading at the time of such exercise
and issuance.
b. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to
be necessary to the lawful issuance and sale of any Common
Stock pursuant to this option shall relieve the Corporation of
any liability with respect to the non-issuance or sale of the
Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts
to obtain all such approvals.
11. SUCCESSORS AND ASSIGNS
Except to the extent otherwise provided in Paragraphs 3 and 6, the
provisions of this Agreement shall inure to the benefit of, and be
binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns, the legal representatives, heirs and
legatees of Optionee's estate and any beneficiaries of this option
designated by Optionee.
12. NOTICES
Any notice required to be given or delivered to the Corporation under
the terms of this Agreement shall be in writing and addressed to the
Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to
Optionee at the address indicated below Optionee's signature line on
the Grant Notice. All notices shall be deemed effective upon personal
delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
13. FINANCING
The Plan Administrator may, in its absolute discretion and without any
obligation to do so, permit Optionee to pay the Exercise Price for the
purchased Option Shares by delivering a full-recourse promissory note
payable to the Corporation. The terms of any such promissory note
(including the interest rate, the requirements for collateral and the
terms of repayment) shall be established by the Plan Administrator in
its sole discretion.
14. CONSTRUCTION
This Agreement and the option evidenced hereby are made and granted
pursuant to the Plan and are in all respects limited by and subject to
the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this
Agreement shall be conclusive and binding on all persons having an
interest in this option.
15. GOVERNING LAW
The interpretation, performance and enforcement of this Agreement shall
be governed by the laws of the State of California without resort to
that State's conflict-of-laws rules.
16. EXCESS SHARES
If the Option Shares covered by this Agreement exceed, as of the Grant
Date, the number of shares of Common Stock which may without
stockholder approval be issued under the Plan, then this option shall
be void with respect to those excess shares, unless stockholder
approval of an amendment sufficiently increasing the number of shares
of Common Stock issuable under the Plan is obtained in accordance with
the provisions of the Plan.
17. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION
In the event this option is designated an Incentive Option in the Grant
Notice, the following terms and conditions shall also apply to the
grant:
a. This option shall cease to qualify for favorable tax treatment
as an Incentive Option if (and to the extent) this option is
exercised for one or more Option Shares:
i. More than three (3) months after the date Optionee ceases to be an
Employee for any reason other than death or Permanent Disability; or
ii. More than twelve (12) months after the date Optionee ceases to be an
Employee by reason of Permanent Disability.
b. No installment under this option shall qualify for favorable tax
treatment as an Incentive Option if (and to the extent) the aggregate
Fair Market Value (determined at the Grant Date) of the Common Stock
for which such installment first becomes exercisable hereunder would,
when added to the aggregate value (determined as of the respective date
or dates of grant) of the Common Stock or other securities for which
this option or any other Incentive Options granted to Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars
($100,000) in the aggregate. Should such One Hundred Thousand Dollar
($100,000) limitation be exceeded in any calendar year, this option
shall nevertheless become exercisable for the excess shares in such
calendar year as a Non-Statutory Option.
c. Should the exercisability of this option be accelerated upon a
Corporate Transaction, then this option shall qualify for favorable tax
treatment as an Incentive Option only to the extent the aggregate Fair
Market Value (determined at the Grant Date) of the Common Stock for
which this option first becomes exercisable in the calendar year in
which the Corporate Transaction occurs does not, when added to the
aggregate value (determined as of the respective date or dates of
grant) of the Common Stock or other securities for which this option or
one or more other Incentive Options granted to Optionee prior to the
Grant Date (whether under the Plan or any other option plan of the
Corporation or any Parent or Subsidiary) first become exercisable
during the same calendar year, exceed One Hundred Thousand Dollars
($100,000) in the aggregate. Should the applicable One Hundred Thousand
Dollar ($100,000) limitation be exceeded in the calendar year of such
Corporate Transaction, the option may nevertheless be exercised for the
excess shares in such calendar year as a Non-Statutory Option.
d. Should Optionee hold, in addition to this option, one or more other
options to purchase Common Stock which become exercisable for the first
time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options
shall be applied on the basis of the order in which such options are
granted.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Transnational Financial Network, Inc. (the "Corporation") that I
elect to purchase _______________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $____________ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's 2000 Stock Incentive Plan on
- ---------------------, -------.
Concurrently with the delivery of this Exercise Notice to the Corporation, I
shall hereby pay to the Corporation the Exercise Price for the Purchased Shares
in accordance with the provisions of my agreement with the Corporation (or other
documents) evidencing the Option and shall deliver whatever additional documents
may be required by such agreement as a condition for exercise. Alternatively, I
may utilize the special broker-dealer sale and remittance procedure specified in
my agreement to effect payment of the Exercise Price.
- ---------------------, --------
Date
------------------------------
Optionee
Address: ______________________
------------------------------
Print name in exact manner it is
to appear on the stock certificate: _______________________________
Address to which certificate is to be
sent, if different from address above: ______________________________
-------------------------------
Social Security Number: _______________________________
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. COMMON STOCK shall mean shares of the Corporation's common stock.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
1. A merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those
securities immediately prior to such transaction; or
2. The sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean Transnational Financial Network, Inc., a
California corporation, and any successor corporation to all or
substantially all of the assets or voting stock of Transnational
Financial Network, Inc. which shall by appropriate action adopt the
Plan.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed
and the manner and method of performance.
H. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per Option Share as
specified in the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
1. If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be deemed equal to
the closing selling price per share of Common Stock on the
date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock,
as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling
price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
2. If the Common Stock is at the time traded on the Nasdaq
National, Small Cap, or Bulletin Board Markets, then the Fair
Market Value shall be deemed equal to the closing selling
price per share of Common Stock on the date in question, as
the price is reported by the National Association of
Securities Dealers on the appropriate Market. If there is no
closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such
quotation exists; or
L. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been
informed of the basic terms of the option evidenced hereby.
N. INCENTIVE OPTION shall mean an option that satisfies the requirements
of Code Section 422.
O. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by Optionee, any unauthorized use or disclosure by
Optionee of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by Optionee adversely affecting the business or affairs of
the Corporation (or any Parent or Subsidiary) in a material manner. The
foregoing definition shall not be deemed to be inclusive of all the
acts or omissions which the Corporation (or any Parent or Subsidiary)
may consider as grounds for the dismissal or discharge of Optionee or
any other individual in the Service of the Corporation (or any Parent
or Subsidiary).
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form
attached hereto as Exhibit I.
R. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option as specified in the Grant Notice.
S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided
each corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
U. PERMANENT DISABILITY shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically
determinable physical or mental impairment which is expected to result
in death or has lasted or can be expected to last for a continuous
period of twelve (12) months or more.
V. PLAN shall mean the Corporation's 2000 Stock Incentive Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its capacity as administrator of the Plan.
X. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an
Employee, a non-employee member of the board of directors or a
consultant or independent advisor.
Y. STOCK EXCHANGE shall mean the American Stock Exchange or the New
YorkStock Exchange.
Z. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation,
provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
<PAGE>
ADDENDUM TO STOCK OPTION AGREEMENT
The following provisions are hereby incorporated into, and are hereby made a
part of, that certain Stock Option Agreement (the "Option Agreement") by and
between Transnational Financial Network, Inc. (the "Corporation")
and_________________________________ ("Optionee") evidencing the stock option
(the "Option") granted this day to Optionee under the terms of the Corporation's
2000 Stock Incentive Plan, and such provisions are effective immediately.
All capitalized terms in this Addendum, to the extent not otherwise defined
herein, shall have the meanings assigned to them in the Option Agreement.
LIMITED STOCK APPRECIATION RIGHT
1. Optionee is hereby granted a limited stock appreciation right
exercisable upon the following terms and conditions:
a. Optionee shall have the unconditional right, exercisable at
any time during the thirty (30)-day period immediately
following a Hostile Take-Over, to surrender the Option to the
Corporation. In return for the surrendered Option, Optionee
shall receive a cash distribution from the Corporation in an
amount equal to the excess of (i) the Take-Over Price of the
shares of Common Stock which are the time subject to the
surrendered option (whether or not the Option is otherwise at
the time exercisable for those shares) over (ii) the aggregate
Exercise Price payable for such shares.
b. To exercise this limited stock appreciation right, Optionee
must, during the applicable thirty (30)-day exercise period,
provide the Corporation with written notice of the option
surrender in which there is specified the number of Option
Shares as to which the Option is being surrendered. Such
notice must be accompanied by the return of Optionee's copy of
the Option Agreement, together with any written amendments to
such Agreement. The cash distribution shall be paid to
Optionee within five (5) business days following such delivery
date.
The exercise of the limited stock appreciation right in
accordance with the terms of this Addendum is hereby
pre-approved by the Plan Administrator in advance of such
exercise, and no further approval of the Plan Administrator or
the Board shall be required at the time of the actual option
surrender and cash distribution. Upon receipt of such cash
distribution, the Option shall be cancelled with respect to
the Option Shares for which the Option has been surrendered,
and Optionee shall cease to have any further right to acquire
those Option Shares under the Option Agreement. The Option
shall, however, remain outstanding for the balance of the
Option Shares (if any) in accordance with the terms of the
Option Agreement, and the Corporation shall issue a
replacement stock option agreement (substantially in the same
form of the surrendered Option Agreement) for those remaining
Option Shares.
c. In no event may this limited stock appreciation right be
exercised when there is not a positive spread between the Fair
Market Value of the Option Shares subject to the surrendered
option and the aggregate Exercise Price payable for such
shares. This limited stock appreciation right shall in all
events terminate upon the expiration or sooner termination of
the option term and may not be assigned or transferred by
Optionee, except to the extent the Option is transferable in
accordance with the provisions of the Option Agreement.
2. For purposes of this Addendum, the following definitions shall be in
effect:
a. A HOSTILE TAKE-OVER shall be deemed to occur upon the
acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under
common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange
Act of 1934, as amended) of securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's stockholders
which the Board does not recommend such stockholders to
accept.
b. The TAKE-OVER PRICE per share shall be deemed to be equal to
the GREATER of (i) the Fair Market Value per Option Share on
the option surrender date or (ii) the highest reported price
per share of Common Stock paid by the tender offer or in
effecting the Hostile Take-Over. However, if the surrendered
Option is designated as an Incentive Option in the Grant
Notice, then the Take-Over Price shall not exceed the clause
(i) price per share.
IN WITNESS HEREOF, Transnational Financial Network, Inc. has caused this
Addendum to be executed by its duly authorized officer.
TRANSNATIONAL FINANCIAL NETWORK, INC.
By: ______________________________
Title: ______________________________
EFFECTIVE DATE: _______________________________
<PAGE>
TRANSNATIONAL FINANCIAL NETWORK, INC.
STOCK ISSUANCE AGREEMENT
AGREEMENT made this ________ day of ______________________, by and between
Transnational Financial Network, Inc., a California corporation, and
_______________________________________________, a Participant in the
Corporation's 2000 Stock Incentive Plan.
All capitalized terms in this Agreement shall have the meaning assigned to them
in this Agreement or in the attached Appendix.
A. PURCHASE OR GRANT OF SHARES
1. PURCHASE, IF SHARES PURCHASED
Participant hereby purchases ______________ shares of Common
Stock (the "Purchased Shares") pursuant to the provisions of
the Stock Issuance Program at the purchase price of $_________
per share (the "Purchase Price").
2. PAYMENT, IF SHARES PURCHASED
Concurrently with the delivery of this Agreement to the
Corporation, Participant shall pay the Purchase Price for the
Purchased Shares in cash or check payable to the Corporation
and shall deliver a duly-executed blank Assignment Separate
Form Certificate (in the form attached hereto as Exhibit I)
with respect to the Purchased Shares.
3. GRANT OF SHARES, IF GRANTED
Participant hereby acknowledges receipt of _________________
shares of Common Stock (the "Granted Shares") pursuant to the
provisions of the Stock Issuance Program at the price of
$___________ per share (the "Grant Price").
4. GRANT CONDITIONS, IF SHARES GRANTED
Concurrent with the delivery of this Agreement to the
Corporation, Participant shall deliver a duly-executed blank
Assignment Separate Form Certificate (in the form attached
hereto as Exhibit I) with respect to the Purchased Shares.
Participant acknowledges that these shares are subject to the
vesting conditions and expiration of the Corporation's
Repurchase Rights, as spelled out in Paragraph C.3 of this
Agreement.
5. STOCKHOLDER RIGHTS
Until such time as the Corporation exercises the Repurchase
Right, Participant (or any successor in interest) shall have
all the rights of a stockholder (including voting, dividend
and liquidation rights) with respect to the Purchased Shares,
subject, however, to the transfer restrictions of this
Agreement.
6. ESCROW
The Corporation shall have the right to hold the Purchased
Shares in escrow until those shares have vested in accordance
with the Vesting Schedule.
7. COMPLIANCE WITH LAW
Under no circumstances shall shares of Common Stock or other
assets be issued or delivered to Participant pursuant to the
provisions of this Agreement unless, in the opinion of counsel
for the Corporation or its successors, there shall have been
compliance with all applicable requirements of Federal and
state securities laws, all applicable listing requirements of
any stock exchange (or the Nasdaq National, Small Cap or
Bulletin Board Markets, if applicable) on which the Common
Stock is at the time listed for trading and all other
requirements of law or of any regulatory bodies having
jurisdiction over such issuance and delivery.
B. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER
Except for any Permitted Transfer, Participant shall not
transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares that are subject to the Repurchase Right.
2. RESTRICTIVE LEGEND
The stock certificate for the Purchased Shares shall be
endorsed with the following restrictive legend: "The shares
represented by this certificate are unvested and subject to
certain repurchase rights granted to the Corporation and
accordingly may not be sold, assigned, transferred,
encumbered, or in any manner disposed of except in conformity
with the terms of a written agreement dated _______________,
______ between the Corporation and the registered holder of
the shares (or the predecessor in interest to the shares). A
copy of such agreement is maintained at the Corporation's
principal corporate offices."
3. TRANSFEREE OBLIGATIONS
Each person (other than the Corporation) to whom the Purchased
Shares are transferred by means of a Permitted Transfer must,
as a condition precedent to the validity of such transfer,
acknowledge in writing to the Corporation that such person is
bound by the provisions of this Agreement and that the
transferred shares are subject to the Repurchase Right to the
same extent such shares would be so subject if retained by
Participant.
C. REPURCHASE RIGHT
1. GRANT
The Corporation is hereby granted the right (the "Repurchase
Right"), exercisable at any time during the ninety (90)-day
period following the date Participant ceases for any reason to
remain in Service, to repurchase at the Purchase Price all or
any portion of the Purchased Shares in which Participant is
not, at the time of his or her cessation of Service, vested in
accordance with the Vesting Schedule set forth in Paragraph
C.3 of this Agreement or the special vesting acceleration
provisions of Paragraph C.5 of this Agreement (such shares to
be hereinafter referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT
The Repurchase Right shall be exercisable by written notice
delivered to each Owner of the Unvested Shares prior to the
expiration of the ninety (90) day exercise periods. The notice
shall indicate the number of Unvested Shares to be repurchased
and the date on which the repurchase is to be effected, such
date to be not more than thirty (30) days after the date of
such notice. The certificates representing the Unvested Shares
to be repurchased shall be delivered to the Corporation on or
before the close of business on the date specified for the
repurchase. Concurrently with the receipt of such stock
certificates, the Corporation shall pay to Owner, in cash or
cash equivalent (including the cancellation of any
purchase-money indebtedness), an amount equal to the Purchase
Price previously paid for the Unvested Shares to be
repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT
The Repurchase Right shall terminate with respect to any
Unvested Shares for which it is not timely exercised under
Paragraph C.2. In addition, the Repurchase Right shall
terminate and cease to be exercisable with respect to any and
all Purchased Shares in which Participant vests in accordance
with the following Vesting Schedule:
a. Upon Participant's completion of one (1) year of
Service, measured from _________________, _________,
Participant shall acquire a vested interest in, and
the Repurchase Right shall lapse with respect to,
twenty-five percent (25%) of the Purchased Shares.
b. Participant shall acquire a vested interest in, and
the Repurchase Right shall lapse with respect to, the
remaining Purchased Shares in a series of thirty six
(36) successive equal monthly installments upon
Participant's completion of each additional month of
Service over the thirty-six (36)-month period
measured from the initial vesting date under
subparagraph (a) above.
4. RECAPITALIZATION
Any new, substituted or additional securities or other property
(including cash paid other than as a regular cash dividend) which is by
reason of any Recapitalization distributed with respect to the
Purchased Shares shall be immediately subject to the Repurchase Right
and any escrow requirements hereunder, but only to the extent the
Purchased Shares are at the time covered by such right or escrow
requirements. Appropriate adjustments to reflect such distribution
shall be made to the number and/or class of securities subject to this
Agreement and to the price per share to be paid upon the exercise of
the Repurchase Right in order to reflect the effect of any such
Recapitalization upon the Corporation's capital structure; PROVIDED,
however, that the aggregate purchase price shall remain the same.
5. CORPORATE TRANSACTION
a. Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in
its entirety and the Purchased Shares shall vest in full,
except to the extent the Repurchase Right is to be assigned to
the successor corporation (or parent thereof) in connection
with the Corporate Transaction.
b. To the extent the Repurchase Right remains in effect following
a Corporate Transaction, such right shall apply to the new
capital stock or other property (including any cash payments)
received in exchange for the Purchased Shares in consummation
of the Corporate Transaction, but only to the extent the
Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share
payable upon exercise of the Repurchase Right to reflect the
effect of the Corporate Transaction upon the Corporation's
capital structure; provided, however, that the aggregate
purchase price shall remain the same. The new securities or
other property (including cash payments) issued or distributed
with respect to the Purchased Shares in consummation of the
Corporate Transaction shall immediately be deposited in escrow
with the Corporation (or the successor entity) and shall not
be released from escrow until Participant vests in such
securities or other property in accordance with the same
Vesting Schedule in effect for the Purchased Shares.
D. SPECIAL TAX ELECTION
1. SECTION 83(b) ELECTION
Under Code Section 83, the excess of the fair market value of
the Purchased Shares on the date any forfeiture restrictions
applicable to such shares lapse over the Purchase Price paid
for such shares will be reportable as ordinary income on the
lapse date. For this purpose, the term "forfeiture
restrictions" includes the right of the Corporation to
repurchase the Purchased Shares pursuant to the Repurchase
Right. Participant may elect under Code Section 83(b) to be
taxed at the time the Purchased Shares are acquired, rather
than when and as such Purchased Shares cease to be subject to
such forfeiture restrictions. Such election must be filed with
the Internal Revenue Service within thirty (30) days after the
date of this Agreement. Even if the fair market value of the
Purchased Shares on the date of this Agreement equals the
Purchase Price paid (and thus no tax is payable), the election
must be made to avoid adverse tax consequences in the future.
THE FORM FOR MAKING THIS ELECTION IS ATTACHED AS EXHIBIT II
HERETO. PARTICIPANT UNDERSTANDS THAT FAILURE TO MAKE THIS
FILING WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL
RESULT IN THE RECOGNITION OF ORDINARY INCOME AS THE FORFEITURE
RESTRICTIONS LAPSE.
2. FILING RESPONSIBILITY. PARTICIPANT ACKNOWLEDGES THAT IT ISPARTICIPANT'S
SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO FILE A
TIMELYELECTION UNDER CODE SECTION 83(b), EVEN IF PARTICIPANT REQUESTS
THE CORPORATIONOR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER
BEHALF.
E. GENERAL PROVISIONS
1. ASSIGNMENT
The Corporation may assign the Repurchase Right to any person
or entity selected by the Board, including (without
limitation) one or more stockholders of the Corporation.
2. AT WILL EMPLOYMENT
Nothing in this Agreement or in the Plan shall confer upon
Participant any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in
any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Participant) or of
Participant, which rights are hereby expressly reserved by
each, to terminate Participant's Service at any time for any
reason, with or without cause.
3. NOTICES
Any notice required to be given under this Agreement shall be
in writing and shall be deemed effective upon personal
delivery or upon deposit in the U.S. mail, registered or
certified, postage prepaid and properly addressed to the party
entitled to such notice at the address indicated below such
party's signature line on this Agreement or at such other
address as such party may designate by ten (10) days advance
written notice under this paragraph to all other parties to
this Agreement.
4. NO WAIVER
The failure of the Corporation in any instance to exercise the
Repurchase Right shall not constitute a waiver of any other
repurchase rights that may subsequently arise under the
provisions of this Agreement or any other agreement between
the Corporation and Participant. No waiver of any breach or
condition of this Agreement shall be deemed to be a waiver of
any other or subsequent breach or condition, whether of like
or different nature.
5. CANCELLATION OF SHARES
If the Corporation shall make available, at the time and place
and in the amount and form provided in this Agreement, the
consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from
and after such time, the person from whom such shares are to
be repurchased shall no longer have any rights as a holder of
such shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such shares
shall be deemed purchased in accordance with the applicable
provisions hereof, and the Corporation shall be deemed the
owner and holder of such shares, whether or not the
certificates therefor have been delivered as required by this
Agreement.
6. PARTICIPANT UNDERTAKING
<PAGE>
Participant hereby agrees to take whatever additional action
and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect
one or more of the obligations or restrictions imposed on
either Participant or the Purchased Shares pursuant to the
provisions of this Agreement.
7. AGREEMENT IS ENTIRE CONTRACT
This Agreement constitutes the entire contract between the
parties hereto with regard to the subject matter hereof. This
Agreement is made pursuant to the provisions of the Plan and
shall in all respects be construed in conformity with the
terms of the Plan.
8. GOVERNING LAW
This Agreement shall be governed by, and construed in
accordance with, the laws of the State of California without
resort to that State's conflict-of-laws rules.
9. COUNTERPARTS
This Agreement may be executed in counterparts, each of which
shall be deemed to be an original, but all of which together
shall constitute one and the same instrument.
10. SUCCESSORS AND ASSIGNS
The provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors
and assigns and upon Participant, Participant's assigns and
the legal representatives, heirs and legatees of Participant's
estate, whether or not any such person shall have become a
party to this Agreement and have agreed in writing to join
herein and be bound by the terms hereof.
<PAGE>
IN WITNESS HEREOF, the parties have executed this Agreement on the day and year
first indicated above.
TRANSNATIONAL FINANCIAL NETWORK, INC.
By: ______________________________
Title: _________________________
Address: ______________________
-----------------------------
PARTICIPANT
------------------------------
Signature
Address: _____________________
-----------------------------
<PAGE>
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of the Participant has read and hereby approves the
foregoing Stock Issuance Agreement. In consideration of the Corporation's
granting the Participant the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms of such Agreement, including (without
limitation) the right of the Corporation (or its assigns) to purchase any
Purchased Shares in which the Participant is not vested at the time of his or
her termination of Service.
------------------------------
PARTICIPANT'S SPOUSE
Address: ______________________
------------------------------
<PAGE>
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED _______________________________ hereby sell(s), assign(s)and
transfer(s) unto Transnational Financial Network, Inc. (the "Corporation"),
_____________________________ (_____________) shares of the Common Stock of the
Corporation standing in his or her name on the books of the Corporation
represented by Certificate No. _____________________ herewith and do(es) hereby
irrevocably constitute and appoint ______________________________ Attorney to
transfer the said stock on the books of the Corporation with full power of
substitution in the premises.
Dated: _________________, _____.
Signature:
---------------------------------
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Participant.
<PAGE>
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
1. The taxpayer who performed the services is:
Name: _____________________________________________
Address: _____________________________________________
Taxpayer Ident. No.: _________________________________
2. The property with respect to which the election is being made is
____________ shares of the common stock of Transnational Financial
Network, Inc.
3. The property was issued on _________________, _________.
4. The taxable year in which the election is being made is the calendar
year ___________.
5. The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's service with the issuer terminates.
The issuer's repurchase right lapses in a series of annual and monthly
installments over a four (4)-year period ending on
____________________.
6. The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms
will never lapse) is $_____________ per share.
7. The amount paid for such property is $_____________ per share.
8. A copy of this statement was furnished to Transnational Financial
Network, Inc. for whom taxpayer rendered the services underlying the
transfer of property.
9. This statement is executed on ________________________, _______.
- ----------------------------------------- ------------------------------------
Spouse (if any) TAXPAYER
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE CENTER WITH WHICH
TAXPAYER FILES HIS OR HER FEDERAL INCOME TAX RETURNS AND MUST BE MADEWITHIN
THIRTY (30) DAYS AFTER THE EXECUTION DATE OF THE STOCK ISSUANCEAGREEMENT. THIS
FILING SHOULD BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED.
PARTICIPANT MUST RETAIN TWO (2) COPIES OF THE COMPLETED FORM FOR FILING WITH HIS
OR HER FEDERAL AND STATE TAX RETURNS FOR THE CURRENT TAX YEAR AND AN ADDITIONAL
COPY FOR HIS OR HER RECORDS.
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Issuance Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. COMMON STOCK shall mean shares of the Corporation's common stock.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
1. A merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those
securities immediately prior to such transaction; or
2. The sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean Transnational Financial Network, Inc., a
California corporation, and any successor corporation to all or
substantially all of the assets or voting stock of Transnational
Financial Network, Inc.
G. GRANT PRICE shall have the meaning assigned to such term in Paragraph
A.3 of the Stock Issuance Agreement
H. OWNER shall mean Participant and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a
Permitted Transfer from Participant.
I. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided
each corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
J. PARTICIPANT shall mean the person to whom the Purchased Shares are
issued under the Stock Issuance Program.
K. PERMITTED TRANSFER shall mean
1. A gratuitous transfer of the Purchased Shares, PROVIDED AND ONLY IF
Participant obtains the Corporation's prior written consent to such
transfer;
2. A transfer of title to the Purchased Shares effected pursuant to
Participant's will or the laws of intestate succession following
Participant's death; or
3. A transfer to the Corporation in pledge as security for any
purchase-money indebtedness incurred by Participant in connection with
the acquisition of the Purchased Shares.
<PAGE>
L. PLAN shall mean the Corporation's 2000 Stock Incentive Plan.
M. PLAN ADMINISTRATOR shall mean either the Board or a committee of the
Board acting in its administrative capacity under the Plan.
N. PURCHASE PRICE shall have the meaning assigned to such term in
Paragraph A.1 of the Stock Issuance Agreement.
O. PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1 of the Stock Issuance Agreement.
P. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other
change affecting the Corporation's outstanding Common Stock as a class
without the Corporation's receipt of consideration.
Q. REPURCHASE RIGHT shall mean the right granted to the Corporation in
accordance with Paragraph C and all of its sub-paragraphs.
R. SERVICE shall mean the Participant's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an
employee, subject to the control and direction of the employer entity
as to both the work to be performed and the manner and method of
performance, a non-employee member of the board of directors or a
consultant or other advisor.
S. STOCK ISSUANCE PROGRAM shall mean the Stock Issuance Program under the
Plan.
T. SUBSIDIARY shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation,
provided each corporation (other than the last corporation) in the
unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
U. VESTING SCHEDULE shall mean the vesting schedule specified in Paragraph
C.3 or as otherwise specified by the Plan Administrator in its sole
discretion, pursuant to which the Purchased Shares are to vest in a
series of installments over Participant's period of Service.
V. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph C.1.
<PAGE>
ADDENDUM TO STOCK ISSUANCE AGREEMENT
The following provisions are hereby incorporated into, and are hereby made a
part of, that certain Stock Issuance Agreement (the "Issuance Agreement") by and
between Transnational Financial Network, Inc. (the "Corporation") and
______________________________ ("Participant") evidencing the stock issuance
made this day to Participant under the terms of the Corporation's 2000 Stock
Incentive Plan, and such provisions are effective immediately.
All capitalized terms in this Addendum, to the extent not otherwise defined
herein, shall have the meanings assigned to such terms in the Issuance
Agreement.
INVOLUNTARY TERMINATION FOLLOWING CORPORATE TRANSACTION/
CHANGE IN CONTROL
1. To the extent the Repurchase Right is assigned to the successor
corporation (or parent thereof) in connection with a Corporate
Transaction, no accelerated vesting of the Purchased Shares shall occur
upon such Corporate Transaction, and the Repurchase Right shall
continue to remain in full force and effect in accordance with the
provisions of the Issuance Agreement. The Participant shall, over
Participant's period of Service following the Corporate Transaction,
continue to vest in the Purchased Shares in one or more installments in
accordance with the provisions of the Issuance Agreement.
2. No accelerated vesting of the Purchased Shares shall occur upon a
Change in Control, and the Repurchase Right shall continue to remain in
full force and effect in accordance with the provisions of the Issuance
Agreement. The Participant shall, over Participant's period of Service
following the Change in Control, continue to vest in the Purchased
Shares in one or more installments in accordance with the provisions of
the Issuance Agreement.
3. Immediately upon an Involuntary Termination of Participant's Service
within eighteen (18) months following the Corporate Transaction or
Change in Control, the Repurchase Right shall terminate automatically,
and all the Purchased Shares shall vest in full at that time.
4. For purposes of this Addendum, the following definitions shall be in
effect:
INVOLUNTARY TERMINATION shall mean the termination of Participant's
Service by reason of:
A. Participant's involuntary dismissal or discharge by the Corporation for
reasons other than Misconduct; or
B. Participant's voluntary resignation following:
i. A change in Participant's position with the Corporation (or Parent or
Subsidiary employing Participant) which materially reduces
Participant's duties and responsibilities or the level of management to
which Participant reports;
ii. A reduction in Participant's level of compensation (including base
salary, fringe benefits and target bonus under any corporate
performance based bonus or incentive programs) by more than fifteen
percent (15%); or
iii. A relocation of Participant's place of employment by more than fifty
(50) miles, provided and only if such change, reduction or relocation
is effected by the Corporation without Participant's consent.
CHANGE IN CONTROL shall be deemed to occur in the event of a change in
ownership or control of the Corporation effected through either of the
following transactions:
A. The acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of
beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the
Corporation's stockholders; or
B. A change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have
been elected or nominated for election as Board members during
such period by at least a majority of the Board members
described in clause (i) who were still in office at the time
the Board approved such election or nomination.
MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Participant, any unauthorized use or disclosure by
the Participant of confidential information or trade secrets of the
Corporation (or any Parent or Subsidiary), or any other intentional
misconduct by the Participant adversely affecting the business or
affairs of the Corporation (or any Parent or Subsidiary) in a material
manner. The foregoing definition shall not be deemed to be inclusive of
all the acts or omissions which the Corporation (or any Parent or
Subsidiary) may consider as grounds for the dismissal or discharge of
the Participant or other person in the Service of the Corporation (or
any Parent or Subsidiary).
IN WITNESS HEREOF, Transnational Financial Network, Inc. has caused this
Addendum to be executed by its duly-authorized officer, effective as of the
Effective Date specified below.
TRANSNATIONAL FINANCIAL NETWORK, INC.
By: __________________________
Title: _________________________
EFFECTIVE DATE:___________________________
<PAGE>
TRANSNATIONAL FINANCIAL NETWORK, INC.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to purchase
shares of the Common Stock of Transnational Financial Network, Inc. (the
"Corporation"):
OPTIONEE:___________________________________________________________
GRANT DATE:_________________________________________________________
EXERCISE PRICE: $_________________________________________ per share
NUMBER OF OPTION SHARES: 15,000 shares
EXPIRATION DATE:____________________________________________________
TYPE OF OPTION: Non-Statutory Stock Option
DATE EXERCISABLE: Immediately Exercisable
VESTING SCHEDULE: The Option Shares shall initially be unvested and
subject to repurchase by the Corporation at the Exercise Price paid per
share. Optionee shall acquire a vested interest in, and the Corporation's
repurchase right shall accordingly lapse with respect to, the Option
Shares in a series of six (6) successive equal semi-annual installments
upon Optionee's completion of each six (6)-month period of service as a
member of the Corporation's Board of Directors (the "Board") over the
thirty-six (36) month period measured from the Grant Date. In no event
shall any additional Option Shares vest after Optionee's cessation of
Board Service.
Optionee understands and agrees that the Option is granted subject to and in
accordance with the terms of the automatic option grant program under the
Transnational Financial Network, Inc. 2000 Stock Incentive Plan (the "Plan").
Optionee further agrees to be bound by the terms of the Plan and the terms of
the Option as set forth in the Automatic Stock Option Agreement attached hereto
as EXHIBIT A.
Optionee hereby acknowledges the receipt of the Corporation's periodic reports
for the preceding twelve (12) month period as filed with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, and
attached hereto as EXHIBIT B. A copy of the Plan is available upon request made
to the Corporate Secretary at the Corporation's principal offices.
REPURCHASE RIGHT
OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTION SHARES ACQUIRED UPON
THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO A REPURCHASE RIGHT
EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE TERMS OF SUCH RIGHT
SHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND SUBSTANCE
SATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE TIME OF
THE OPTION EXERCISE.
NO IMPAIRMENT OF RIGHTS
Nothing in this Notice or the attached Automatic Stock Option Agreement
or in the Plan shall interfere with or otherwise restrict in any way
the rights of the Corporation and the Corporation's stockholders to
remove Optionee from the Board at any time in accordance with the
provisions of applicable law.
DEFINITIONS
All capitalized terms in this Notice shall have the meaning assigned to
them in this Notice or in the attached Automatic Stock Option
Agreement.
DATED: _________________, _______
TRANSNATIONAL FINANCIAL NETWORK, INC.
By___________________________
Title: _________________________
------------------------------
OPTIONEE
Address: ______________________
------------------------------
ATTACHMENTS:
EXHIBIT A - AUTOMATIC STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PERIODIC S.E.C. FILINGS
EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT
EXHIBIT B
PLAN SUMMARY AND PERIODIC S.E.C. FILINGS
<PAGE>
TRANSNATIONAL FINANCIAL NETWORK, INC.
NOTICE OF GRANT OF NON-EMPLOYEE DIRECTOR
AUTOMATIC STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to purchase
shares of the Common Stock of Transnational Financial Network, Inc. (the
"Corporation"):
OPTIONEE: ___________________________________________________________
GRANT DATE: _________________________________________________________
EXERCISE PRICE: $ _______________ per share
NUMBER OF OPTION SHARES: 5,000 shares
EXPIRATION DATE: ____________________________________________________
TYPE OF OPTION: Non-Statutory Stock Option
DATE EXERCISABLE: Immediately Exercisable
VESTING SCHEDULE: The Option Shares shall initially be unvested and
subject to repurchase by the Corporation at the Exercise Price paid per
share. Optionee shall acquire a vested interest in, and the
Corporation's repurchase right shall accordingly lapse with respect to,
the Option Shares in two (2) successive equal semi-annual installments
upon Optionee's completion of each six (6)-month period of service as a
member of the Corporation's Board of Directors (the "Board") over the
twelve (12) month period measured from the Grant Date. In no event
shall any additional Option Shares vest after Optionee's cessation of
Board Service.
Optionee understands and agrees that the Option is granted subject to and in
accordance with the terms of the automatic option grant program under the
Transnational Financial Network, Inc. 2000 Stock Incentive Plan (the "Plan").
Optionee further agrees to be bound by the terms of the Plan and the terms of
the Option as set forth in the Automatic Stock Option Agreement attached hereto
as EXHIBIT A.
Optionee hereby acknowledges the receipt of the Corporation's periodic reports
for the preceding twelve (12) month period as filled with the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended, and
attached hereto as EXHIBIT B. A copy of the Plan is available upon request made
to the Corporate Secretary at the Corporation's principal offices.
REPURCHASE RIGHT
OPTIONEE HEREBY AGREES THAT ALL UNVESTED OPTIONSHARES ACQUIRED UPON THE
EXERCISE OF THE OPTION SHALL BE SUBJECT TO A REPURCHASERIGHT
EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS. THE TERMS OF SUCH
RIGHTSHALL BE SPECIFIED IN A STOCK PURCHASE AGREEMENT, IN FORM AND
SUBSTANCESATISFACTORY TO THE CORPORATION, EXECUTED BY OPTIONEE AT THE
TIME OF THE OPTION EXERCISE.
NO IMPAIRMENT OF RIGHTS
Nothing in this Notice or the attached Automatic Stock Option Agreement
or in the Plan shall interfere with or otherwise restrict in any way
the rights of the Corporation and the Corporation's stockholders to
remove Optionee from the Board at any time in accordance with the
provisions of applicable law.
DEFINITIONS
All capitalized terms in this Notice shall have the meaning assigned to
them in this Notice or in the attached Automatic Stock Option
Agreement.
DATED: _________________, _______
THATLOOK.COM
By: __________________________
Title: _________________________
------------------------------
OPTIONEE
Address: ______________________
------------------------------
ATTACHMENTS:
EXHIBIT A - AUTOMATIC STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PERIODIC S.E.C. FILINGS
EXHIBIT A
AUTOMATIC STOCK OPTION AGREEMENT
EXHIBIT B
PLAN SUMMARY AND PERIODIC S.E.C. FILINGS
<PAGE>
TRANSNATIONAL FINANCIAL NETWORK, INC.
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS:
1. The Corporation has implemented an automatic option grant program under
the Plan pursuant to which eligible non-employee members of the Board
will automatically receive special option grants at periodic intervals
over their period of Board service in order to provide such individuals
with a meaningful incentive to continue to serve as members of the
Board.
2. Optionee is an eligible non-employee Board member, and this Agreement
is executed pursuant to, and is intended to carry out the purposes of,
the Plan in connection with the automatic grant of an option to
purchase shares of Common Stock under the Plan.
3. All capitalized terms in this Agreement shall have the meaning assigned
to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION.
The Corporation hereby grants to Optionee, as of the Grant Date, a
Non-Statutory Option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term specified in paragraph 2 at
the Exercise Price.
2. OPTION TERM
This option shall have a term of ten (10) years measured from the Grant
Date and shall accordingly expire at the close of business on the
Expiration Date, unless sooner terminated in accordance with Paragraph
5, 6 or 7.
3. LIMITED TRANSFERABILITY
a. This option may, in connection with the Optionee's estate
plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate
family or to a trust established for the exclusive benefit of
one or more such family members. The assigned portion shall be
exercisable only by the person or persons who acquire a
proprietary interest
b. In the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those
in effect for this option immediately prior to such
assignment.
c. Should the Optionee die while holding this option, then this
option shall be transferred in accordance with Optionee's will
or the laws of descent and distribution. However, Optionee may
designate one or more persons as the beneficiary or
beneficiaries of this option, and this option shall, in
accordance with such designation, automatically be transferred
to such beneficiary or beneficiaries upon the Optionee's death
while holding such option. Such beneficiary or beneficiaries
shall take the transferred option subject to all the terms and
conditions of this Agreement, including (without limitation)
the limited time period during which this option may, pursuant
to Paragraph 5, be exercised following Optionee's death or by
the Optionee's designated beneficiary or beneficiaries of that
option.
4. EXERCISABILITY/VESTING
a. This option shall be immediately exercisable for any or all of
the Option Shares, whether or not the Option Shares are at the
time vested in accordance with the Vesting Schedule, and shall
remain so exercisable until the Expiration Date or sooner
termination of the option term under Paragraphs 5, 6 or 7.
b. Optionee shall, in accordance with the Vesting Schedule set
forth in the Grant Notice, vest in the Option Shares in one or
more installments over his or her period of Board service.
Vesting in the Option Shares may be accelerated pursuant to
the provisions of Paragraphs 5, 6 or 7. In no event, however,
shall any additional Option Shares vest following Optionee's
cessation of service as a Board member.
5. CESSATION OF BOARD SERVICE
Should Optionee's service as a Board member cease while this option
remains outstanding, then the option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior
to the Expiration Date in accordance with the following provisions:
a. Should Optionee cease to serve as a Board member for any reason (other
than death or Permanent Disability) while this option is outstanding,
then the period during which this option may be exercised shall be
reduced to a twelve (12)-month period measured from the date of such
cessation of Board service, but in no event shall this option be
exercisable at any time after the Expiration Date. During such limited
period of exercisability, this option may not be exercised in the
aggregate for more than the number of Option Shares (if any) in which
Optionee is vested on the date of his or her cessation of Board
service. Upon the EARLIER of (i) the expiration of such twelve (12)
month period or (ii) the specified Expiration Date, the option shall
terminate and cease to be exercisable with respect to any vested Option
Shares for which the option has not been exercised.
b. Should Optionee die during the twelve (12) month period following his
or her cessation of Board service and hold this option, at the time of
his or her death, then the personal representative of Optionee's estate
or the person or persons to whom the option is transferred pursuant to
Optionee's will or in accordance with the laws of descent and
distribution or the designated beneficiary or beneficiaries of this
option (as the case may be) shall have the right to exercise this
option for any or all of the Option Shares in which Optionee is vested
at the time of Optionee's cessation of Board service (less any Option
Shares purchased by Optionee after such cessation of Board service but
prior to death). Such right of exercise shall terminate, and this
option shall accordingly cease to be exercisable for such vested Option
Shares, upon the EARLIER of (i) the expiration of the twelve (12) month
period measured from the date of Optionee's cessation of Board service
or (ii) the specified Expiration Date.
c. Should Optionee cease service as a Board member by reason of death or
Permanent Disability, then all Option Shares at the time subject to
this option but not otherwise vested shall vest in full so that this
option may be exercised for any or all of the Option Shares as fully
vested shares of Common Stock at any time prior to the EARLIER of (i)
the expiration of the twelve (12)-month period measured from the date
of Optionee's cessation of Board service or (ii) the specified
Expiration Date, whereupon this option shall terminate and cease to be
outstanding.
d. Upon Optionee's cessation of Board service for any reason other than
death or Permanent Disability, this option shall immediately terminate
and cease to be outstanding with respect to any and all Option Shares
in which Optionee is not otherwise at that time vested in accordance
with the normal Vesting Schedule or the special vesting acceleration
provisions of Paragraphs 6 and 7 below.
6. CORPORATE TRANSACTION
a. In the event of a Corporate Transaction, all the Option Shares at the
time subject to this option but not otherwise vested shall
automatically vest so that this option shall, immediately prior to the
specified effective date for the Corporate Transaction, become
exercisable for all of the Option Shares as fully-vested shares of
Common Stock and may be exercised for all or any portion of those
vested shares. Immediately following the consummation of the Corporate
Transaction, this option shall terminate and cease to be outstanding,
except to the extent assumed by the successor corporation or its parent
company.
b. If this option is assumed in connection with a Corporate Transaction,
then this option shall be appropriately adjusted, immediately after
such Corporate Transaction, to apply to the number and class of
securities which would have been issuable to Optionee in consummation
of such Corporate Transaction had the option been exercised immediately
prior to such Corporate Transaction, and appropriate adjustments shall
also be made to the Exercise Price, PROVIDED the aggregate Exercise
Price shall remain the same.
7. CHANGE IN CONTROL/HOSTILE TAKE-OVER
a. All the Option Shares subject to this option at the time of a Change in
Control but not otherwise vested shall automatically vest so that this
option shall, immediately prior to the effective date of such Change in
Control, become exercisable for all of the Option Shares as
fully-vested shares of Common Stock and may be exercised for all or any
portion of those vested shares. This option shall remain exercisable
for such fully-vested Option Shares until the EARLIEST to occur of (i)
the specified Expiration Date, (ii) the sooner termination of this
option in accordance with Paragraph 5 or 6 or (iii) the surrender of
this option under Paragraph 7(b).
b. Optionee shall have an unconditional right, exercisable at the time
during the thirty (30)-day period immediately following the
consummation of a Hostile Take-Over to surrender this option to the
Corporation in exchange for a cash distribution from the Corporation in
an amount equal to the excess of (i) the Take-Over Price of the Option
Shares at the time subject to the surrendered option (whether or not
those Option Shares are otherwise at the time vested) over (ii) the
aggregate Exercise Price payable for such shares. This Paragraph 7(b)
limited stock appreciation right shall in all events terminate upon the
expiration or sooner termination of the option term and may not be
assigned or transferred by Optionee.
c. To exercise the Paragraph 7(b) limited stock appreciation right,
Optionee must, during the applicable thirty (30)-day exercise period,
provide the Corporation with written notice of the option surrender in
which there is specified the number of Option Shares as to which the
option is being surrendered. Such notice must be accompanied by the
return of Optionee's copy of this Agreement, together with any written
amendments to such Agreement. The cash distribution shall be paid to
Optionee within five (5) business days following such delivery date.
The exercise of such limited stock appreciation right in accordance
with the terms of this Paragraph 7 has been pre-approved pursuant to
the express provisions of the Automatic Option Grant Program, and
neither the approval of the Plan Administrator nor the consent of the
Board shall be required at the time of the actual option surrender and
cash distribution. Upon receipt of the cash distribution, this option
shall be cancelled with respect to the shares subject to the
surrendered option (or the surrendered portion), and Optionee shall
cease to have any further right to acquire those Option Shares under
this Agreement. The option shall, however, remain outstanding for the
balance of the Option Shares (if any) in accordance with the terms and
provisions of this Agreement, and the Corporation shall accordingly
issue a replacement stock option agreement (substantially in the same
form as this Agreement) for those remaining Option Shares.
8. ADJUSTMENT IN OPTION SHARES
Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares,
exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration,
appropriate adjustments shall be made to (i) the total number and/or
class of securities subject to this option and (ii) the Exercise Price
in order to reflect such change and thereby preclude a dilution or
enlargement of benefits hereunder.
9. STOCKHOLDER RIGHTS
The holder of this option shall not have any stockholder rights with
respect to the Option Shares until such person shall have exercised the
option, paid the Exercise Price and become a holder of record of the
purchased shares.
10. MANNER OF EXERCISING OPTION.
a. In order to exercise this option with respect to all or any
part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons
exercising the option) must take the following actions:
i. To the extent the option is exercised for vested
Option Shares, execute and deliver to the Corporation
a Notice of Exercise for the Option Shares for which
the option is exercised. To the extent this option is
exercised for unvested Option Shares, execute and
deliver to the Corporation a Purchase Agreement for
those unvested Option Shares.
ii. Pay the aggregate Exercise Price for the purchased
shares in one or more of the following forms:
A. Cash or check made payable to the Corporation;
B. Shares of Common Stock held by Optionee (or any other person or persons
exercising the option) for the requisite period necessary to avoid a
charge to the Corporation's earnings for financial reporting purposes
and valued at Fair Market Value on the Exercise Date; or
C. To the extent the option is exercised for vested Option Shares, through
a special sale and remittance procedure pursuant to which Optionee (or
any other person or persons exercising the option) shall concurrently
provide irrevocable instructions (I.) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased shares and
remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Exercise Price
payable for the purchased shares plus all applicable Federal, state and
local income and employment taxes required to be withheld by the
Corporation by reason of such exercise and (II.) to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale.
iii. Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if
other than Optionee) have the right to exercise this
option.
b. Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of
the Exercise Price must accompany the Notice of Exercise (or
the Purchase Agreement) delivered to the Corporation in
connection with the option exercise.
c. As soon after the Exercise Date as practical, the Corporation
shall issue to or on behalf of Optionee (or any other person
or persons exercising this option) a certificate for the
purchased Option Shares, with the appropriate legends affixed
thereto. To the extent any such Option Shares are unvested,
the certificates for those Option Shares shall be endorsed
with an appropriate legend evidencing the Corporation's
repurchase rights and may be held in escrow with the
Corporation until such shares vest.
d. In no event may this option be exercised for any fractional shares.
11. NO IMPAIRMENT OF RIGHTS
This Agreement shall not in any way affect the right of the Corporation
to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or
assets. In addition, this Agreement shall not in any way be construed
or interpreted so as to affect adversely or otherwise impair the right
of the Corporation or the stockholders to remove Optionee from the
Board at any time in accordance with the provisions of applicable law.
12. COMPLIANCE WITH LAWS AND REGULATIONS.
a. The exercise of this option and the issuance of the Option
Shares upon such exercise shall be subject to compliance by
the Corporation and Optionee with all applicable requirements
of law relating thereto and with all applicable regulations of
any Stock Exchange (or the Nasdaq National, Small Cap or
Bulletin Board Markets, if applicable) on which the Common
Stock may be listed for trading at the time of such exercise
and issuance.
b. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to
be necessary to the lawful issuance and sale of any Common
Stock pursuant to this option shall relieve the Corporation of
any liability with respect to the non-issuance or sale of the
Common Stock as to which such approval shall not have been
obtained. The Corporation, however, shall use its best efforts
to obtain all such approvals.
13. SUCCESSORS AND ASSIGNS
Except to the extent otherwise provided in Paragraph 3 or 6, the
provisions of this Agreement shall inure to the benefit of, and be
binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns, the legal representatives, heirs and
legatees of Optionee's estate and any beneficiaries of this option
designated by Optionee.
14. NOTICES
Any notice required to be given or delivered to the Corporation under
the terms of this Agreement shall be in writing and addressed to the
Corporation at its principal corporate offices. Any notice required to
be given or delivered to Optionee shall be in writing and addressed to
Optionee at the address indicated below Optionee's signature line on
the Grant Notice. All notices shall be deemed effective upon personal
delivery or upon deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
15. CONSTRUCTION
This Agreement and the option evidenced hereby are made and granted
pursuant to the Plan and are in all respects limited by and subject to
the terms of the Plan.
16. GOVERNING LAW
The interpretation, performance and enforcement of this Agreement shall
be governed by the laws of the State of California without resort to
that State's conflict-of-laws rules.
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
I hereby notify Transnational Financial Network, Inc. (the "Corporation") that I
elect to purchase _____________ shares of the Corporation's Common Stock (the
"Purchased Shares") at the option exercise price of $___________ per share (the
"Exercise Price") pursuant to that certain option (the "Option") granted to me
under the Corporation's 2000 Stock Incentive Plan on
- -----------------,--------.
Concurrently with the delivery of this Exercise Notice to the Corporation, I
shall hereby pay to the Corporation the Exercise Price for the Purchased Shares
in accordance with the provisions of my agreement with the Corporation (or other
documents) evidencing the Option and shall deliver whatever additional documents
may be required by such agreement as a condition for exercise. Alternatively, I
may utilize the special broker-dealer sale and remittance procedure specified in
my agreement to effect payment of the Exercise Price for any Purchased Shares in
which I am vested at the time of exercise of the Option.
Date: ____________________, ________
------------------------------
Optionee
Address: ______________________
------------------------------
Print name in exact manner
it is to appear on the
stock certificate: ______________________________________
Address to which certificate is to be sent, if different from address above:
-----------------------------------
-----------------------------------
Social Security Number: _________________________________
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Automatic Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CHANGE IN CONTROL shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
i. The acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by,
or is under common control with, the Corporation) of
beneficial ownership (within the meaning of Rule 13d-3 of the
1934 Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation's stockholders; or
ii. A change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a
majority of the Board members ceases, by reason of one or more
contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members
continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during
such period by at least a majority of the Board members
described in clause (A) who were still in office at the time
the Board approved such election or nomination.
D. COMMON STOCK shall mean shares of the Corporation's common stock.
E. CODE shall mean the Internal Revenue Code of 1986, as amended.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
i. A merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those
securities immediately prior to such transaction; or
ii. The sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
G. CORPORATION shall mean Transnational Financial Network, Inc., a
California corporation, and any successor corporation to all or
substantially all of the assets or voting stock of Transnational
Financial Network, Inc. which shall by appropriate action adopt the
Plan.
H. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 10 of the Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as specified in
the Grant Notice.
J. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
i. If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in
question on the Stock Exchange which serves as the primary
market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange.
If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which
such quotation exists.
ii. If the Common Stock is at the time traded on the Nasdaq
National, Small Cap or Bulletin Board Markets, then the Fair
Market Value shall be the closing selling price per share of
Common Stock on the date in question, as the price is reported
by the National Association of Securities Dealers on the
appropriate Nasdaq Market. If there is no closing selling
price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
L. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
M. GRANT NOTICE shall mean the Notice of Grant of Automatic Stock Option
accompanying the Agreement, pursuant to which Optionee has been
informed of the basic terms of the option evidenced hereby.
N. HOSTILE TAKEOVER shall mean the acquisition, directly or indirectly, by
any person or related group of persons (other than the Corporation or a
person that directly or indirectly controls, is controlled by, or is
under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender
or exchange offer made directly to the Corporation's stockholders which
the Board does not recommend such stockholders to accept.
O. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
P. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
Q. NOTICE OF EXERCISE shall mean the notice of exercise in the form of
Exhibit I.
R. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option.
S. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
T. PERMANENT DISABILITY shall mean the inability of Optionee to perform
his or her usual duties as a member of the Board by reason of any
medically determinable physical or mental impairment which is expected
to result in death or has lasted or can be expected to last for a
continuous period of twelve (12) months or more.
U. PLAN shall mean the Corporation's 2000 Stock Incentive Plan.
V. PURCHASE AGREEMENT shall mean the stock purchase agreement (in form and
substance satisfactory to the Corporation) which grants the Corporation
the right to repurchase, at the Exercise Price, any and all unvested
Option Shares held by Optionee at the time of Optionee's cessation of
Board service and which precludes the sale, transfer or other
disposition of any purchased Option Shares while those shares are
unvested and subject to such repurchase right.
W. STOCK EXCHANGE shall mean the American Stock Exchange or the New York
Stock Exchange.
X. TAKE-OVER PRICE shall mean the GREATER of
i. The Fair Market Value per share of Common Stock on the date the option
is surrendered to the Corporation in connection with a Hostile
Take-Over; or
ii. The highest reported price per share of Common Stock paid by the tender
offer or in effecting the Hostile Take-Over.
Y. VESTING SCHEDULE shall mean the vesting schedule specified in the Grant
Notice, pursuant to which the Option Shares will vest in one or more
installments over the Optionee's period of Board service, subject to
acceleration in accordance with the provisions of the Agreement.
