Exhibit 10.4
DIVERSIFIED TECHNOLOGIES, INC.
1997 COMPENSATORY STOCK OPTION PLAN
1. Purpose of this Plan.
This Compensatory Stock Option Plan ("Plan") is intended as an
employment incentive, to aid in attracting and retaining in the employ or
service of DIVERSIFIED TECHNOLOGIES, INC. ("Company"), a Wyoming corporation,
and any Affiliated Company, persons of experience and ability and whose services
are considered valuable, to encourage the sense of proprietorship in such
persons, and to stimulate the active interest of such persons in the development
and success of the Company. This Plan provides for the issuance of non-statutory
stock options ("CSOs" or "Options') which are not intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended ("Code"). Certain other terms also are defined
In Paragraph 17 and elsewhere of this Plan.
2. Administration of this Plan.
The Company's Board of Directors ("Board") way appoint and maintain as
administrator of this Plan the Compensation Committee ("Committee") of the Board
which shall consist of at least two members of the Board who are Non-Employee
Directors as defined in Rule 16b-3 under the Securities Exchange Act of 1934, as
amended ("Exchange Act"). At any time that the Committee is not duly
constituted, the Board itself shall have and fulfill the duties herein allocated
to the Committee. The Committee shall have full power and authority to designate
Plan participants, to determine the provisions and terms of respective CSOs
(which need not be identical as to number of shares covered by any CSO, the
method of exercise as related to exercise in whole or in installments, or
otherwise), including the CSO price, and to interpret the provisions and
supervise the administration of this Plan. The Committee may in its discretion
provide that certain CSOs not vest (that is, become exercisable) until
expiration of a certain period after issuance or until other conditions are
satisfied, so long as not contrary to this Plan.
A majority of the members of the Committee shall constitute a quorum.
All decisions and selections made by the Committee pursuant to this Plan's
provisions shall be made by a majority of its members. Any decision reduced to
writing and signed by all of the members shall be fully effective as if it had
been made by a majority at a meeting duly held. The Committee shall select one
of its members as its chairman and shall hold its meetings at such times and
places as it deems advisable. Each Option shall be evidenced by a written
agreement containing terms and conditions established by the Committee
consistent with the provisions of this Plan.
3. Designation of Participants.
Only Employees shall be eligible for participation in this Plan. The
Committee shall have full power to designate, from among eligible individuals,
the persons to whom CSOs may be granted. A person who has been granted a CSO
hereunder may be granted an additional CSO or CSOs, if the Committee shall so
determine. Persons eligible under this Plan additionally may be granted one or
more options under any other compensation or stock option plan or awarded shares
under any other benefit plan of the Company. No Option shall confer any right
upon the Optionee with respect to the continuation of his employment (or his
position as an officer, director, employee or consultant) with the Company or
any Affiliated Company, and shall not interfere with the right of the Company or
any Affiliated Company to terminate such relationship(s) at any time in
accordance with law and any agreements then in force.
4. Stock Reserved for this Plan.
Subject to adjustment as provided in Paragraph 9 below, a total of
1,500,000 shares of Common Stock of the Company ("Option Stocks" or "Option
Shares") shall be subject to this Plan. The Option Stock subject to this Plan
shall consist of unissued shares of Common Stock or previously issued shares of
Common Stock reacquired and held by the Company or any Affiliated Company, and
such number of Option Shares shall be and is hereby reserved for sale for such
purpose. Any Option Shares which may remain unsold and which are not subject to
outstanding CSOs at the termination of this Plan shall cease to be reserved for
the purpose of this Plan, but until termination of this Plan the Company shall
at all times reserve a sufficient number of shares to meet the requirements of
this Plan. Should any CSO expire or be
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cancelled prior to its exercise in full, the unexercised Option Shares
theretofore subject to such CSO may again be subjected to a CSO under this Plan.
5. Option Exercise Price.
The purchase (exercise) price of each share of Option Stock made
subject to an Option shall not be less than eighty-five percent (85%) of the
Fair Market Value of a share of Common Stock on the date the Option is granted.
For purposes of this Plan, the "Fair Market Value" of a share of the Company's
Common Stock as of a given date shall be (i) the closing price of a share of the
Company's Common Stock on the principal exchange, NASDAQ system, NASDAQ Small
Cap Market, or other quotation medium, on which shares of the Company's Common
Stock are then trading or quoted, or (ii) if the Company's Common Stock is not
publicly traded, the fair market value established by the Committee acting in
good faith. The cash proceeds from the sale of Option Stock are to be added to
the general funds of the Company.
6. Exercise Period; Vesting.
(a) An Option shall have a term of not more than ten (10) years from
the date of grant and shall automatically terminate:
(i) Upon termination of the Optionee's employment with
the Company for cause;
(ii) At the expiration of a period to be determined by the
Committee at the time of grant which is not to exceed
twelve (12) months following the date of termination
of the Optionee's employment with the Company without
cause for any reason other than death; provided, that
if no such period is specified in the Option, the
Option shall automatically terminate thirty (30) days
following termination of Optionee's employment;
provided, further, that if the Optionee dies within
such period, subclause (iii) below shall apply; or
(iii) At the expiration of twelve (12) months after the
date of death of the Optionee; provided, that the
Committee may in its discretion provide that any
Option not be exercisable after the Optionee's death
or may be exercised for a period less than twelve
months.
(iv) Unless otherwise specified in the Option, if
termination is due to the Optionee's "permanent and
total disability" within the meaning of Section
422(c)(6) of the Code, an Option may be exercised at
any time within twelve (12) months following
termination of employment or relationship as a
consultant or director.
(b) "Employment with the Company" as used in this Plan shall include
employment or relationship as a consultant, adviser or director with the Company
or any Affiliated Company in any such capacity, even if employment or engagement
in another capacity ceases. Options granted under this Plan shall not be
affected by an employee's transfer of employment among the Company and any one
or more Affiliated Companies. An Optionee's employment with the Company shall
not be deemed interrupted or terminated by a bona fide leave of absence (such as
sabbatical leave or employment by the Government) duly approved, military leave
or sick leave.
(c) Each Option may be made exercisable (that is, vest) in whole or in
installments, cumulative or otherwise, during its term, or subject to other
restrictions or limitations. Unless otherwise set forth in the granting
resolution, an Option shall vest immediately upon grant. If an Option is made to
vest over time, any portion not vested at the time of termination of employment
or relationship as a director or consultant with the Company shall lapse as if
never granted. Nothing contained in this Section shall be construed to extend
the term of any Option or to permit anyone to exercise an Option after
expiration of its term, nor shall it be construed to increase the number of
shares as to which any Option is exercisable from the amount exercisable on the
date of termination of the Optionee's employment or relationship as a consultant
or director.
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7. Exercise of Options.
(a) The Committee, in granting CSOs, shall have discretion to determine
the terms upon which CSOs shall be exercisable, subject to applicable provisions
of this Plan. Once available for purchase, unpurchased Option Shares shall
remain subject to purchase until the CSO expires or terminates in accordance
with Paragraph 6 above. Unless otherwise provided in the CSO, a CSO may be
exercised in whole or in part, one or more times, but no CSO may be exercised
for a fractional share. Resulting fractions shall be rounded up or down, as
appropriate.
(b) CSOs may be exercised solely by the Optionee or a permitted
transferee during his lifetime or by a spouse or former spouse pursuant to a
qualified domestic relations order, or if the Option permits, after his death
(with respect to the number of shares which the Optionee could have purchased at
the time of death) by the person or persons entitled thereto under the
decedent's will or the laws of descent and distribution.
(c) The purchase price of the Option Shares as to which a CSO is
exercised shall be paid or delivered in full at the time of exercise and no
Option Shares shall be issued until full payment is made therefor. Payment shall
be made by any one or more of the following means:
(i) in cash, represented by bank or cashier's check,
certified check or money order, or made by bank wire
transfer;
(ii) by offsetting against the purchase price a cash
obligation of the Company which is both liquidated
(meaning the dollar amount is fixed and known or
easily determinable) and uncontested;
(iii) with the prior approval of the Committee, by
delivering shares of the Company's Common Stock which
have been beneficially owned by the Optionee, the
Optionee's spouse or both of them, for a period of at
least six (6) months prior to the time of exercise
(the "Delivered Stock"), the Delivered Stock to be
valued by the Committee in good faith at its Fair
Market Value on the date of exercise;
(iv) with the prior approval of the Committee, by delivery
of shares of corporate stock which are freely
tradeable without restriction and which are part of a
class of securities which has been listed for trading
on the Nasdaq National Market System, the Nasdaq
Small Cap Market or a national securities exchange,
with an aggregate Fair Market Value on the date of
exercise equal to or greater than the exercise price
of the Option Shares being purchased under the Option
("Other Shares"); or
(v) with the prior approval of the Committee, by
delivering to the Company the Optionee's personal
recourse promissory note, adequately secured by
property other than the Option Shares thereby
purchased, containing such terms and conditions as
the Committee shall determine.
(d) An Option shall be deemed exercised when written notice thereof,
accompanied by the appropriate payment in full, is received by the Company. No
holder of an Option shall be, or have any of the rights and privileges of, a
shareholder of the Company in respect of any Option Shares purchasable upon
exercise of an Option unless and until certificates evidencing such shares shall
have been issued by the Company to him, her or it.
(e) An Option may, but need not, provide that the Optionee may at any
time when and to the extent the Option is exercisable, effect an Option
Exchange, provided the then market price of the Common Stock exceeds the
Option's exercise price. To effect an Option Exchange, the Optionee must
surrender the Option at the Company's principal offices stating the intent to
effect the Option Exchange and the number of Option Shares being exchanged, and
the Option Exchange shall be deemed to take place on the date of the Company's
receipt thereof or such later date as the Optionee specifies in writing. In
connection with any Option Exchange, an Option shall represent the right to
subscribe for and acquire the number of Option Shares equal to [i] the number of
Option Shares specified by the Optionee in its notice of exchange (the "Total
Number") LESS [ii] the number of Option Shares equal to the quotient obtained by
dividing (A) the product of the Total Number and the exercise price by (B) the
current Fair Market Value
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of a share of the Common Stock on the date of exchange, or if such date is not a
trading day, on the trading day preceding. One or more certificates for the
Option Shares issuable and, if applicable, a new Option of like tenor evidencing
the balance of the Option Shares remaining subject to the Option, shall be
issued as of the exercise date.
8. Non-Transferability of Options.
No Option shall be assignable or otherwise transferable except by will
or by operation of law, pursuant to a qualified domestic relations order (as
defined in Rule 16b-3 of the Securities and Exchange Commission, or any
successor rule), or pursuant to Title I of the Employee Retirement Income
Security Act of 1974, as amended (ERISA), or rules thereunder. No CSO shall be
pledged or hypothecated in any manner, whether by operation of law or otherwise,
nor be subject to execution, attachment or similar process. The same
restrictions on transfer or assignment shall apply to any heirs, devisees,
beneficiaries, legal representatives or other persons acquiring this Option or
an interest herein under such an Instrument or by operation of law. Any attempt
to transfer or otherwise dispose of an Option in contravention of its terms
shall void the Option.
9. Reorganizations and Recapitalizations of the Company.
(a) No Limit Imposed on Corporate Powers. The existence of this Plan
and Options granted hereunder shall not affect in any way the right or power of
the Company or its shareholders to make or authorize any and all adjustments,
recapitalizations, reorganizations or other changes in the Company's capital
structure or its business, or any merger or consolidation of the Company, or any
issue of bonds, debentures or other indebtedness, or any preferred or prior
preference stocks senior to or affecting the Common Stock or the rights thereof;
or the dissolution or liquidation of the Company, or any sale, exchange or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
(b) Certain Adjustment to be Made. The Option Shares with respect to
which Options may be granted hereunder are shares of the Common Stock of the
Company as currently constituted. In certain instances, the number of shares
purchasable upon exercise of Options and the exercise price shall be adjusted as
provided herein. All adjustments and made under this Section shall be made by
the Committee in good faith in its sole discretion. Every adjustment in
outstanding Options shall be made without change in the total price applicable
to the unexercised portion of the Option but with a corresponding adjustment in
the exercise price per share and number (and if applicable, kind) of shares
purchasable.
(c) Stock Split, Stock Combinations, Etc. If, and whenever, prior to
delivery by the Company of all of the Option Shares which are subject to Options
granted hereunder, the Company shall effect a split or combination of the Common
Stock or other capital readjustment, the payment of a Common Stock dividend, or
recapitalization, reclassification or other increase or reduction of the number
of shares of the Common Stock outstanding without receiving compensation
therefor in money, services or property, then the number of Option Shares
available under this Plan and the number of Option Shares with reaped to which
Options granted hereunder may thereafter be exercised shall (i) in the event of
an increase in the number of outstanding shares of Common Stock, be
proportionately increased, and the cash consideration payable per share shall be
proportionately reduced; and (ii) in the event of a reduction in the number of
outstanding shares of Common Stock, be proportionately reduced, and the cash
consideration payable per share shall be proportionately increased.
(d) Certain Other Changes In the Common Stock. If the outstanding
Common Stock shall be hereafter increased or decreased, or changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation, by reason of reorganization, merger,
consolidation, share exchange or other business combination in which the Company
is the surviving parent corporation, appropriate adjustment shall be made by the
Committee in the number and kind of shares to which Options may be granted under
the Plan. In addition, the Committee shall make appropriate adjustment in the
number and kind of shares as to which outstanding and unexercised Options shall
be exercisable, to the end that the proportionate interest of the holder of the
Option shall, to the extent practicable, be maintained as before the occurrence
of such event.
(e) Certain Defined Reorganizations. For purposes of this Section, the
term "Reorganization" shall mean any reorganization, merger, consolidation,
share exchange, or other business combination pursuant to which the Company is
not the surviving parent corporation after the effective date of the
Reorganization, or any sale or lease of all or
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substantially all of the assets of the Company, and the term "Reorganization
Agreement" shall mean a plan or agreement with respect to a Reorganization.
Nothing herein shall require the Company to adopt a Reorganization Agreement, or
to make provision for the adjustment, change, conversion, or exchange of any
Options, or the shares subject thereto, in any Reorganization Agreement which it
does adopt. In the event of a Reorganization (as hereinafter defined), then,
(i) If there is no Reorganization Agreement, or if the
Reorganization Agreement does not specifically provide for the
adjustment, change, conversion, or exchange of the outstanding and
unexercised options for cash or other property or securities of another
corporation, then any outstanding and unexercised options shall
terminate as of a future date to be fixed by the Committee; or,
(ii) If there is a Reorganization Agreement, and the
Reorganization Agreement specifically provides for the adjustment,
change, conversion, or exchange of the outstanding and unexercised
options for cash or other property or securities of another
corporation, the Committee shall adjust the shares under such
outstanding and unexercised options, and shall adjust the shares
remaining under the Plan which are then available for the issuance of
options under the Plan if the Reorganization Agreement for the
adjustment, change, conversion, or exchange of such options and shares.
(iii) The Committee shall provide to each Optionee then
holding an outstanding and unexercised Option not less than thirty (30)
calendar Days' advance written notice of any date fixed by the
Committee pursuant to this Section 13 and of the terms of any
Reorganization Agreement providing for the adjustment, change,
conversion, or exchange of outstanding and unexercised Options. Except
as the Committee may otherwise provide, each Optionee shall have the
right during such period to exercise his Option only to the extent that
the Option was exercisable on the date such notice was provided to the
Optionee.
(f) Dissolution or Liquidation. In the event of the dissolution or
liquidation of the Company, any outstanding and unexercised options shall
terminate as of a future date to be fixed by the Committee.
(g) No Adjustments to be Made. Except as expressly provided above, the
Company's issuance of shares of its capital stock of any class, or securities
convertible into shares of its capital stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into or exchangeable for shares of capital stock or
other securities of the Company, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of Option Shares subject to
CSOs granted hereunder or the purchase price of such shares.
10. Purchase for Investment.
Unless the Option Shares covered by this Plan have been registered
under the Act prior to issuance, each person exercising a CSO under this Plan
may be required by the Company to give a representation in writing that he is
acquiring such shares for his or her own account for Investment and not with a
view to, or for sale in connection with, the distribution of any part thereof.
11. Effective Date and Expiration of this Plan.
This Plan shall be effective as of January 18, 1997, the date of its
adoption by the Board, and no CSO shall be granted pursuant to this Plan after
its expiration. This Plan shall expire on January 17, 2007 except as to CSOs
then outstanding, which shall remain in effect until they have expired or been
exercised.
12. Amendments or Termination.
The Committee or Board may amend, alter or discontinue this Plan at any
time in such respects as it shall deem advisable in order to conform to any
change in any other applicable law, or in order to comply with the provisions of
any rule or regulation of the Securities and Exchange Commission required to
exempt this Plan or any CSOs granted thereunder from the operation of Section
16(b) of the Securities Exchange Act of 1934, as amended ("Exchange Act"), or in
any other respect not inconsistent with Section 16(b) of the Exchange Act
provided, that no amendment or alteration shall be made which would impair the
rights of any participant under any CSO theretofore granted, without his consent
(unless made solely to conform such CSO to, and necessary because of, changes in
the foregoing laws, rules or
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regulations), and except that no amendment or alteration shall be made without
the approval of shareholders which would increase the total number of shares
reserved for the purposes of this Plan (except as provided in Paragraph 9) or
extend the expiration date of this Plan as set forth in Paragraph 11.
13. Government Regulations.
This Plan, and the granting and exercise of CSOs hereunder, and the
obligation of the Company to sell and deliver Option Shares under such CSOs,
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national securities exchanges as may
be required.
14. Liability.
No member of the Board of Directors or the Committee, nor any officers,
employees or agents of the Company or any Affiliated Company shall be personally
liable for any action, omission or determination made in good faith in
connection with this Plan.
15. Options In Substitution for Other Options.
The Committee may, in its sole discretion, at any time during the term
of this Plan, grant new options to an employee under this Plan or any other
stock option plan of the Company on the condition that such employee shall
surrender for cancellation one or more outstanding options which represent the
right to purchase (after giving effect to any previous partial exercise thereof)
a number of shares, in relation to the number of shares to be covered by the new
conditional grant hereunder, determined by the Committee. If the Committee shall
have so determined to grant such new options on such a conditional basis ("New
Conditional Options"), no such New Conditional Option shall become exercisable
in the absence of such employee's consent to the condition and surrender and
cancellation as appropriate. New Conditional Options shall be treated in all
respects under this Plan as newly granted options. Options may be granted under
this Plan from time to time in substitution for similar rights held by employees
of other corporations who are about to become employees of the Company or an
Affiliated Company as a result of a merger or consolidation of the employing
corporation with the Company or an Affiliated Company, or the acquisition by the
Company or an Affiliated Company of the assets of the employing corporation, or
the acquisition by the Company or an Affiliated Company of stock of the
employing corporation as the result of which such other corporation becomes an
Affiliated Company.
16. Withholding Taxes.
Pursuant to applicable federal and state laws, the Company may be
required to collect withholding taxes upon the exercise of a CSO. The Company
may require, as a condition to the exercise of a CSO, that the Optionee
concurrently pay to the Company the entire amount or a portion of any taxes
which the Company is required to withhold by reason of such exercise, in such
amount as the Committee or the Company in its discretion may determine. In lieu
of part or all of any such payment the Optionee may elect to have the Company
withhold from the shares to be issued upon exercise of the option that number of
shares having a Pair Market Value equal to the amount which the Company is
required to withhold.
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17. Other Definitions.
Whenever used in this Plan, except where the context might dearly
indicate otherwise, the following terms shall have the meanings set forth below:
a. "Act" means the U.S. Securities Act of 1933, as amended.
b. "Affiliated Company" means any Parent or Subsidiary of the
Company.
c. "Award" or "grant" means any grant of a CSO (Option) made
under this Plan.
d. "Board of Directors" means the Board of Directors of the
Company. The term "Committee" is defined in Section 2 of this
Plan.
e. "Common Stock" or "Common Shares" means the common stock, no
par value per share, of the Company, or in the event that the
outstanding Common Shares are hereafter changed into or
exchanged for different shares or securities of the Company or
any other issuer, such other shares or securities.
f. "Date of Grant" means the day the Committee authorizes the
grant of a CSO or such later date as may be specified by the
Committee as the date a particular grant will become
effective.
g. "Employee" means and includes the following persons: (i)
executive officers, officers and directors (including advisory
and other special directors) of'the Company or an Affiliated
Company; (ii) full- time and part-time employees of the
Company or an Affiliated Company, (iii) persons engaged by the
Company or an Affiliated Company as a consultant, advisor or
agent; and (iv) a lawyer, law firm, accountant or accounting
firm, or other professional or professional firm engaged by
the Company or an Affiliated Company.
h. "Optionee" means an Employee to whom a CSO is granted.
i. "Parent" means any corporation owning 50% or more of the total
combined voting stock of all classes of the Company or of
another corporation qualifying as a Parent within this
definition.
j. "Subsidiary" means a corporation more than 50% of whose total
combined capital stock of all classes is held by the Company
or by another corporation qualifying as a Subsidiary within
this definition.
18. Litigation.
In the event that any Optionee or Optionee's successor should bring any
lawsuit or other action or proceeding ("Action") against the Company or an
Affiliated Company based upon or arising in relation to an Option, an Optionee,
or successor, as the case may be, not prevailing in such Action shall be
required to reimburse the Company or Affiliated Company's costs and expenses,
including reasonable attorneys' fees, incurred in defending such action and
appealing any award by a lower court.
19. Miscellaneous Provisions.
The place of administration of this Plan shall be in the State of
Colorado (or subsequently, wherever the Company's principal executive offices
are located), and the validity, construction, interpretation and effect of this
Plan and of its rules, regulations and rights relating to it, shall be
determined solely in accordance with the laws of the State of Wyoming or
subsequent state of domicile, should the Company be redomiciled. Without
amending this Plan, the Committee may issue Options and Options Shares to
employees of the Company who are foreign nationals or employed outside the
United States, or both, on such terms and conditions different from those
specified in this Plan but consistent with the purpose of this Plan, as ii deems
necessary and desirable to create equitable opportunities given differences in
tax laws in other countries. All expenses of administering this Plan and issuing
Option and Option Shares shall be borne by the Company.
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* * *
By signature below, the undersigned officers of the Company hereby
certify that the foregoing is a true and correct copy of the 1997 Compensatory
Stock Option Plan of the Company.
<TABLE>
<S> <C>
DATED: January 18, 1997 DIVERSIFIED TECHNOLOGIES, INC.
[Corporate seal of Diversified Technologies, Inc.
appears in original document with the words By: /s/ J. B. Nelson
"Corporate Seal," "Diversified Technologies, Inc.," --------------------------------
"Wyoming," "1995."] Authorized Officer
By /s/
----------------------------------------------
Secretary or Assistant Secretary
</TABLE>
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