<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1999
Commission File Number
1-15261
IR OPERATING CORPORATION
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its Charter)
Delaware 11-2165149
---------------------------- ----------------------
(State or other jurisdiction (IRS employer
of Incorporation) identification number)
112 Main Street
Webster, MA 01570
(888)444-4762
-----------------------------------------
(Address including zip code and telephone
number, of principal executive offices)
Check whether the issuer (1) filed all reports required to be filed by Section13
or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes /X/ No / /
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Date: September 30, 1999 Class: Common Stock, par value $.01 per share
Shares Outstanding: 5,033,128
-1-
<PAGE>
IR OPERATING CORPORATION
FORM 10-QSB
INDEX
Description Page
----
Part I- Financial Information
Item 1. Consolidated Financial Statements
Balance Sheet-September 30, 1999 .................................. 3
Statements of Operations-Three months ended September 30, 1999
and September 30, 1998........................................... 4
Statements of Operations-Nine months ended September 30, 1999
and September 30, 1998........................................... 5
Statements of Cash Flows-Nine months ended September 30, 1999
and September 30, 1998........................................... 6
Notes to Consolidated Financial Statements......................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................10
Part II-Other Information
Item 6. Exhibits and Reports on Form 8-K...................................12
-2-
<PAGE>
IR OPERATING CORPORATION
CONSOLIDATED BALANCE SHEET
(A Development Stage Company)
( Unaudited )
ASSETS September 30, 1999
------------------
CURRENT ASSETS
Cash and cash equivalents $ 44,039
Prepaid expenses and other current assets 14,327
---------
Total Current Assets 58,366
PROPERTY AND EQUIPMENT, NET
OTHER ASSETS
Patents and Trademarks 62,108
---------
Total Assets $ 120,474
=========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 50,630
Loan Payable Shareholder 318,000
---------
Total Current Liabilities 368,630
=========
SHAREHOLDERS' EQUITY
Common stock, $.01 par value; 50,000,000
shares authorized; issued and
Outstanding: 8,900,332 Shares 8,900
Convertible preferred stock, $.01 par value;
1,000,000 shares; authorized; issued
and outstanding: None Issued
Additional paid in capital 441,863
Accumulated deficit (543,026)
Treasury Stock at Cost: 3,867,203 Shares (155,893)
---------
Total Shareholders' Equity (248,156)
---------
Total Liabilities and Shareholders' Equity $ 120,474
=========
See Notes to Consolidated Financial Statements.
-3-
<PAGE>
IR OPERATING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(A Development Stage Company)
( Unaudited )
Three months ended
September 30,
1999
Net Sales $ -0-
Cost of Sales $ -0-
----------
Gross Profit $ -0-
----------
Operating expenses 75,257
Other income and expense, net
----------
75,257
----------
Loss before income taxes
Income tax provision $(75,257)
----------
Net Loss $(75,257)
==========
Loss per common share
Basic and Diluted $(.01)
==========
Shares used in computing loss
per common share 8,816,262
==========
See Notes to Consolidated Financial Statements.
-4-
<PAGE>
IR OPERATING CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(A Development Stage Company)
( Unaudited )
Nine months ended
September 30,
1999
----------
Net Sales $ -0-
Cost of Sales $ -0-
----------
Gross Profit $ -0-
----------
Operating expenses $543,026
Other income and expense, net
----------
$543,026
----------
Loss before income taxes
Income tax provision $(543,026)
----------
Net Loss $(543,026)
==========
Loss per common share
Basic and Diluted $(.06)
==========
Shares used in computing loss
per common share 8,499,418
==========
See Notes to Consolidated Financial Statements.
-5-
<PAGE>
IR OPERATING CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(A Development Stage Company)
( Unaudited )
Nine months ended
September 30,
1999
OPERATING ACTIVITIES
Net Loss $(543,026)
Adjustments to reconcile net loss to net cash
used in operating activities
Depreciation and amortization
Loss incurred in merger transaction 200,000
Non-cash compensation 18,000
Changes in operating assets and liabilities
Accounts receivable
Inventories
Prepaid expenses and other current assets (14,327)
Other assets
Accounts payable 27,500
Accrued expenses and other current liabilities
-----------
Net Cash Used in Operating Activities $311,853
-----------
INVESTING ACTIVITIES
Net cash used in business acquistion $(200,000)
Acquisition of intangible ( 62,108)
-----------
Net Cash Used in Investing Activities $(262,108)
-----------
FINANCING ACTIVITIES
Proceeds from loan payable stockholder $318,000
Proceeds from issuance of common stock 300,000
Purchase and retirement of treasury stock
Proceeds from issuance of convertible securities,
net of issuance costs
Proceeds from exercise of stock options, net
-----------
Net Cash Provided by Financing Activities $618,000
-----------
-6-
<PAGE>
NET DECREASE IN CASH AND
CASH EQUIVALENTS $ 44,039
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE PERIOD -0-
-----------
CASH AND CASH EQUIVALENTS AT THE
END OF THE PERIOD $ 44,039
===========
See Notes to Consolidated Financial Statements.
IR OPERATING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations:
IR Operating Corporation's (the "Company") financial statements for
the period ended September 30, 1999 have been prepared on a going concern basis
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. The Company incurred a net
loss of approximately $392,000 for the period January 10, 1999 (inception)
through March 31, 1999. This is due to the fact that the Company has been in the
development stage since inception. Management's plans regarding improving the
results of future operations and liquidity include acquisitions and mergers.
2. Summary of Significant Accounting Policies:
a. Statement of cash flows
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or less
to be cash equivalents.
b. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
-7-
<PAGE>
c. Organization costs
The Company expenses organization costs as incurred. Organization
costs incurred in the period January 10, 1999 (inception) through March 31, 1999
and the three months ended June 30, 1999 approximated $70,000 and $57,000,
respectively.
d. Interim financial statements
The unaudited financial statements reflect all adjustments (consisting
only of normal recurring accruals) which are, in the opinion of management,
necessary for a fair statement of the results for the period. The results of
operations are not necessarily indicative of the results expected for the fiscal
year.
3. Loan Payable-Stockholder:
On March 31, 1999, the Company issued a promissory note to a stockholder
in the amount of $73,000, and on September 2, 1999, issued a note in the amount
of $5,000 and on September 14, 1999 issued a note in the amount of $75,000 and
on September 30, 1999 issued a note in the amount of $20,000 together with
interest accruing at the rate of 5.5% per annum, until such time as the notes
are paid. The entire amounts must be repaid when the Company receives funding of
$1,500,000.
In the event of default when due, or in the event of suspension of actual
business, insolvency, assignment for the benefit of creditors, adjudication of
bankruptcy, or appointment of a receiver, the unpaid principal balance shall, at
the option of the holder, become immediately due, with the amount then due
accruing interest at a rate of 18% per annum or the highest rate permitted by
law, which ever is less.
4. Merger Agreement:
On March 29, 1999, Atlantic Medical Corporation ("Atlantic") acquired
100% of the issued and outstanding common stock of Fox Group Enterprises, Inc.
("Fox") making the Fox a wholly owned subsidiary of Atlantic. Under the terms of
the merger agreement, the holders of Fox were issued 7,441,700 shares of the
Company's common stock. A maximum of 750,000 of the shares issued to the Fox
holders are subject to reversion to the Atlantic shareholders in the event
certain conditions are not met within 180 days after the merger. An additional
1,062,230 shares of common stock (valued at $18,000) were issued to consultants
in connection with the transaction. The pre merger shareholders of Atlantic were
paid $200,000 by Fox. Subsequently 3,867,203 shares were returned to the
treasury (See Note 5c).
Although in the form of a merger, the transaction is, in substance, an
acquisition of Atlantic by Fox. Atlantic and stockholders agree that all issued
and outstanding shares of common stock of Fox, equal to one hundred percent
(100%), shall be exchanged with Atlantic for approximately 84% of the common
stock of Atlantic. Stockholders represent and warrant that they will hold such
shares of Atlantic for investment purposes and not for further public
-8-
<PAGE>
distribution. These shares will be appropriately restricted.
The excess of the consideration paid over the fair value of the net
assets received was charged to operations in the period ended March 31, 1999.
Prior to the closing of the merger agreement unanimous written consent
was received of Atlantic's directors and a majority of Atlantic's shareholders
approved Atlantic changing its name to "IR Operating Corporation".
5. Stockholders' Equity:
a. Capitalization
Pursuant to an amendment of the Company's certificate of
incorporation, the Company has authorized shares of common stock of 50,000,000
at $.01 par value.
b. Net loss per share
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" (SFAS No. 128) requires dual presentation of basic and diluted EPS. Basic
EPS excludes dilution and is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding for the
period. Diluted EPS reflects the potential dilution that could occur if stock
options or convertible securities were exercised or converted into common stock.
Basic and diluted loss per share amounts were equivalent for all periods
presented.
c. Return of Shares-Fox Holders
In accordance with the agreements signed by all the former stockholders
of Fox 3,867,203 shares of common stock held by these stockholders were returned
to the treasury effective September 29, 1999.
d. Escrow Agreement
In accordance with the Escrow Agreements between the former Fox
Shareholders and Reva Enterprises effective September 29, 1999, the 750,000
shares held in escrow were transferred to Reva Enterprises as the Company did
not meet the requirements of the Escrow Agreement.
6. Loss on Aborted Acquisition:
During the period January 10, 1999 (inception) through March 31, 1999
and the three months ended June 30, 1999, the Company incurred charges to
operations of approximately $104,000 and $18,000, respectively, relating to an
aborted acquisition of assets.
-9-
<PAGE>
7. Supplementary Information-Statement of Cash Flows:
The Company assumed accounts payable approximating $23,100 in connection
with the merger with Atlantic.
8. Commitment:
The Company entered into an employment agreement with an officer,
commencing July 1, 1999, which provides for a minimum annual salary of $100,000.
9. Year 2000 Compatibility
The Company has no issues relating to the Year 2000 Compatibility
IR OPERATING CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Both the Company and Fox were inactive during 1998, therefore the
financial statements in this report on Form 10-QSB do not include comparative
data from the prior year.
QUARTER ENDED September 30, 1999
Results of Operations
Net Sales and Gross Profit
The Company had no sales or profits during the quarter. The Company
generally has been inactive. The Company plans to seek and acquire suitable
business opportunities or technologies within the recycling field. The cash
requirements for this search are minimal and it is not anticipated that
additional funds will be needed until such time an acquisition occurs. The
Company will not require any employees until a suitable business has been
acquired.
Since its acquisition of Fox Group, the Company has conducted no
business operations except for organizational activities. Prior to the
acquisition of Fox Group, the Issuer was an inactive company. It has no material
assets, no business, no sales or revenue.
During the quarter ended September 30, 1999, the Company has acquired ownership
of two Patents through the acquisition of a debt owed by the former owner of the
Patents, and then foreclosing on the debt, for a process known as the I-ROCK
Process. This process is a cold extrusion process for converting waste plastic
into profile shapes that can be used for a variety of
-10-
<PAGE>
applications. The Company is currently negotiating for a plant site and
equipment which is located in Bradley, IL. If the Company is able to negotiate
favorable terms for obtaining the plant and equipment for the I-ROCK Process the
Company plans to take over the existing facility and to commercialize the I-ROCK
Process.
Operating Expenses
Operating expenses for the period were $ 75,257 which were related to
obtaining the Patents.
Net Loss
The Company generated a loss of $75,257, or $0.01 per share, for
the quarter ended September 30, 1999.
NINE MONTHS ENDED SEPTEMBER 30, 1999
Results of Operations
Net Sales and Gross Profit
The Company had no sales or profits for the nine months ended September
30, 1999, the Company generally has been inactive.
Operating Expenses
The Operating Expenses for the nine months ended September 30, 1999,
were $ 543,026 which were primarily organizational expenses for the Company.
Net Loss
The net loss for the nine months ended September 30, 1999, was $543,026
or a loss of $(0.06) per share.
Liquidity and Capital Resources
As of September 30, 1999, the Company had negative working capital of
$310,264 and cash and cash equivalents of $44,039. To date the Company has bee
financed through loans from stockholders. The Company is presently investigating
several sources of investment capital relative to the financing of its growth
strategies. Although there can be no assurance that these efforts will be
successful, the Company believes that it will be able to secure financing in the
amounts, and upon terms, acceptable to it.
Statements that are not historical facts, including statements about the
Company's confidence
-11-
<PAGE>
and strategies, and expectations about new or existing products, technologies
and opportunities, market demand or acceptance of new or existing products are
forward-looking statements that involve risks and uncertainties. These
uncertainties include, but are not limited to, product demand and market
acceptance risks, impact of competitive products and prices, product
development, commercialization or technological delays or difficulties, and
trade, legal, social, financial and economic risks. Readers are referenced to
the Company's report on form 10-SB.
Part II-Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. With the exception of the following, all exhibits
required by Item 601 of Regulation SB and required hereunder, as filed with the
Securities and Exchange Commission on Form 10-QSB on August 26, 1999, are
incorporated herein by reference.
Item Description
---- -----------
4(i) Incentive Stock Option Plan for employees, directors
and officers
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IR OPERATING CORPORATION
Dated: November 10, 1999 By: /s/ Murray Fox
--------------------------------
Murray Fox
Chief Executive officer and
Chief Financial Officer
-12-
<PAGE>
Exhibit 4(i)
I-ROCK INDUSTRIES, INC.
1999 STOCK OPTION PLAN
There is hereby established a 1999 Stock Option Plan (the "Plan"). The Plan
provides for the grant to certain employees and others who render services to
I-ROCK Industries, Inc. or its subsidiaries (the "Company") of options
("Options") to purchase shares of common stock of the Company ("Common Stock").
1. Purpose: The purpose of the Plan is to provide additional incentive to
the officers, employees, and others who render services to the Company, who are
responsible for the management and growth of the Company, or otherwise
contribute to the conduct and direction of its business, operations and affairs.
It is intended that Options granted under the Plan strengthen the desire of such
persons to join and remain in the employ of the Company and stimulate their
efforts on behalf of the Company.
2. The Stock: The aggregate number of shares of Common Stock which may be
subject to Options shall not exceed 3,000,000. Such shares may be either
authorized and unissued shares, or treasury shares. If any Option granted under
the Plan shall expire, terminate or be canceled for any reason without having
been exercised in full, the corresponding number of unpurchased shares shall
again be available for the purposes of the Plan.
3. Types of Options. Options granted under the Plan shall be in the form
of (i) incentive stock options ("ISO's"), as defined in Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code") or (ii) non-statutory
options which do not qualify under such Section ("NSO's"), or both, in the
discretion of the Board of Directors or any committee appointed by the Board
(each, the "Committee"). The status of each Option shall be identified in the
Option Agreement.
4. Eligibility:
(a) ISO's may be granted to such employees (including officers and
directors who are employees) of the Company as the Committee
shall select from time to time.
(b) NSO's may be granted to such employees (including officers and
directors) of the Company, and to other persons who render
services to the Company, as the Committee shall select from
time to time.
(c) In no event shall the number of shares which are subject to
options awarded under the Plan to any one employee (including
any options which have been exercised, canceled or expired)
exceed 3,000,000.
5. Option Price.
(a) The price or prices per share of Common Stock to be sold
pursuant to an Option (the "exercise price") shall be such as
shall be fixed by the Committee but shall in any case not be
less than:
(i) the fair market value per share for such Common Stock
on the date of grant in the case of ISOs other than
to a 10% Shareholder,
(ii) 110% of the fair market value per share for such
Common Stock on the date of grant in the case of ISOs
to a 10% Shareholder, and
(iii) the fair market value on the date of grant in the
case of NSO's.
ESO Plan 4/5/99
<PAGE>
(b) A "10% Shareholder" means an individual who within the meaning
of Section 422(b)(6) of the Code owns stock possessing more
than 10 percent of the total combined voting power of all
classes of stock of the Company or of its parent or any
subsidiary corporation.
6. Period of Option Vesting.
(a) The Committee shall determine for each Option the period
during which such Option shall be exercisable in whole or in
part, provided that no ISO to a 10% Shareholder shall be
exercisable more than five years after the date of grant.
(b) Special Rule for ISO's. The aggregate fair market value
(determined at the time the ISO is granted) of the stock with
respect to which ISOs are exercisable for the first time by an
Optionee during any calendar year (under all such plans of the
Company, its parent or subsidiary) shall not exceed $100,000,
and any excess shall be considered an NSO.
7. Effect of Termination of Employment.
(a) The Committee shall determine for each Option the extent, if
any, to which such Option shall be exercisable in the event of
the termination of the Optionee's employment with or rendering
of other services to the Company.
(b) However, any such Option which is an ISO shall in all events
lapse unless exercised by the Optionee:
(i) prior to the 89th day after the date on which
employment terminated, if termination was other than
by reason of death; and
(ii) within the twelve-month period next succeeding the
death of the Optionee, if termination is by reason of
death.
(c) The Committee shall have the right, at any time, and from time
to time, with the consent of the Optionee, to modify the lapse
date of an Option and to convert an ISO into an NSO to the
extent that such modification in lapse date increases the life
of the ISO beyond the dates set forth above or beyond dates
otherwise permissible for an ISO.
8. Payment for Shares of Common Stock. Upon exercise of an Option, the
Optionee shall make full payment of the Option Price in cash, or, with the
consent of the Committee and to the extent permitted by it:
(a) with Common Stock of the Company valued at fair market value
on date of exercise, but only if held by the Optionee for a
period of time sufficient to prevent a pyramid exercise that
would create a charge to the Company's earnings,
(b) with a full recourse interest bearing promissory note of the
Optionee, secured by a pledge of the shares of Common Stock
received upon exercise of such Option, and having such other
terms and conditions as determined by the Committee,
(c) by delivering a properly executed exercise notice together
with irrevocable instructions to a broker to sell shares
acquired upon exercise of the Option and promptly to deliver
to the Company a portion of the proceeds thereof equal to the
exercise price, or
(d) any combination of any of the foregoing.
ESO Plan 4/5/99
<PAGE>
9. Option Exercises. Options shall be exercised by submitting to the
Company a signed copy of notice of exercise in a form to be supplied by the
Company. The exercise of an Option shall be effective on the date on which the
Company receives such notice at its principal corporate offices. The Company may
cancel such exercise in the event that payment is not effected in full, subject
to the other terms of this Plan.
10. Limited Transferability of Option. No Option shall be assignable or
transferable by the Optionee to whom it is granted, other than by will or the
laws of descent and distribution, except that, upon approval by the Board, the
Optionee may transfer an Option that is not intended to constitute an ISO (a)
pursuant to a qualified domestic relations order as defined for purposes of the
Employee Retirement Income Security Act of 1974, as amended, or (b) by gift: to
a member of the "Family" (as defined below) of the Optionee, to or for the
benefit of one or more organizations qualifying under Code sec. 501(c) (3) and
170(c) (2) (a "Charitable Organization") or to a trust for the exclusive benefit
of the Optionee, one or more members of the Optionee's Family, one or more
Charitable Organizations, or any combination of the foregoing, provided that any
such transferee shall enter into a written agreement to be bound by the terms of
this Agreement. For this purpose, "Family" shall mean the ancestors, spouse,
siblings, spouses of siblings, lineal descendants and spouses of lineal
descendants of the Optionee. During the lifetime of an Optionee to whom an ISO
is granted, only such Optionee (or, in the event of legal incapacity or
incompetence, the Optionee's guardian or legal representative) may exercise the
ISO.
11. Other Plan Terms.
(a) The Committee may grant more than one Option to an individual,
and, subject to the requirements of Section 422 of the Code,
with respect to ISOs, such Option may be in addition to, in
tandem with, or in substitution for, Options previously
granted under the Plan or of another corporation and assumed
by the Company.
(b) The Committee may permit the voluntary surrender of all or a
portion of any Option granted under the Plan or otherwise to
be conditioned upon the granting to the employee of a new
Option for the same or a different number of shares of Common
Stock as the Option surrendered, or may require such voluntary
surrender as a condition precedent to a grant of a new Option
to such employee. Such new Option shall be exercisable at the
price, during the period, and in accordance with any other
terms or conditions specified by the Committee at the time the
new Option is granted, all determined in accordance with the
provisions of the Plan without regard to the price, period of
exercise, or any other terms or conditions of the Option
surrendered.
(c) Options under the Plan may be granted at any time after the
Plan has been approved by the shareholders of the Company.
However, no Option shall be granted under the Plan after April
4, 2009.
(d) In the event of a reorganization, recapitalization,
liquidation, stock split, stock dividend, combination of
shares, merger or consolidation, or the sale, conveyance,
lease or other transfer by the Company of all or substantially
all of its property, or any change in the corporate structure
or shares of common stock of the Company, pursuant to any of
which events the then outstanding shares of the common stock
are split up or combined or changed into, become exchangeable
at the holder's election for, or entitle the holder thereof to
other shares of common stock, or in the case of any other
transaction described in Section 424(a) of the Code, the
Committee may change the number and kind of shares of Common
Stock available under the Plan and any outstanding Option
(including substitution of shares of common stock of another
corporation) and the price of any Option and the fair market
value determined under this Plan in such manner as it shall
deem equitable in its sole discretion.
(e) An Optionee or a legal representative thereof shall have none
of the rights of a stockholder with respect to shares of
Common Stock subject to Options until such shares shall be
issued or transferred upon exercise of the Option.
ESO Plan 4/5/99
<PAGE>
(f) The Company shall effect the grant of Options under the Plan,
in accordance with determinations made by the Committee, by
execution of instruments in writing in a form approved by the
Committee. Each Option shall contain such terms and conditions
(which need not be the same for all Options, whether granted
at the time or at different times) as the Committee shall deem
to be appropriate and not inconsistent with the provisions of
the Plan, and such terms and conditions shall be agreed to in
writing by the Optionee.
12. Certain Definitions.
(a) Fair Market Value. As used in the Plan, the term "fair market
value" shall mean as of any date:
(i) if the Common Stock is not traded on any
over-the-counter market or on a national securities
exchange, the value determined by the Committee using
the best available facts and circumstances,
(ii) if the Common Stock is traded in the over-the-counter
market, based on most recent closing prices for the
Common Stock on the date the calculation thereof
shall be made, or
(iii) if the Common Stock is listed on a national
securities exchange, based on the most recent closing
prices for the Common Stock of the Company on such
exchange.
(b) Subsidiary and Parent. The term "subsidiary" and "parent" as
used in the Plan shall have the respective meanings set forth
in Sections 424(f) and (e) of the Internal Revenue Code.
13. Not an Employment Contract. Nothing in the Plan or in any Option or
stock option agreement shall confer on any Optionee any right to continue in the
service of the Company or any parent or subsidiary of the company or interfere
with the right of the Company to terminate such Optionee's employment or other
services at any time.
14. Withholding Taxes:
(a) Whenever the Company proposes or is required to issue or
transfer shares of Common Stock under the Plan, the Company
shall have the right to require the Optionee to remit to the
Company an amount sufficient to satisfy any Federal, state
and/or local withholding tax requirements prior to the
delivery of any certificate or certificates for such shares.
Alternatively, the Company may, in its sole discretion from
time to time, issue or transfer such shares of Common Stock
net of the number of shares sufficient to satisfy the
withholding tax requirements. For withholding tax purposes,
the shares of Common Stock shall be valued on the date the
withholding obligation is incurred.
(b) In the case of shares of Common Stock that an Optionee
receives pursuant to his exercise of an Option which is an
ISO, if such Optionee disposes of such shares of Common Stock
within two years from the date of the granting of the ISO or
within one year after the transfer of such shares of Common
Stock to him, the Company shall have the right to withhold
from any salary, wages, or other compensation for services
payable by the Company to such Optionee, amounts sufficient to
satisfy any withholding tax obligation attributable to such
disposition.
(c) In the case of a disposition described in Section (b), the
Optionee shall give written notice to the Company of such
disposition within 30 days following the disposition within 30
days following the disposition, which notice shall include
such information as the Company may reasonably request to
effectuate the provisions hereof.
15. Agreements and Representations of Optionees: As a condition to the
exercise of an Option, unless counsel to the Company opines that it is not
necessary under the Securities Act of 1933, as amended, and the pertinent rules
thereunder,
ESO Plan 4/5/99
<PAGE>
as the same are then in effect, the Optionee shall represent in writing that the
shares of Common Stock being purchased are being purchased only for investment
and without any present intent at the time of the acquisition of such shares of
Common Stock to sell or otherwise dispose of the same.
16. Administration of the Plan:
(a) The Plan shall be administered by the Committee. Subject to
the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine the individuals to
receive Options, the times when they shall receive them and
the number of shares of Common Stock to be subject to each
Option, and other terms relating to the grant of Options.
Directors, including those that may be members of the
Committee, shall be eligible to receive Options under the
Plan.
(b) Subject to the express provisions of the Plan, the Committee
shall have authority to construe the respective option
agreements and the Plan, to prescribe, amend and rescind rules
and regulations relating to the Plan, to determine the terms
and provisions of the respective option agreements (which need
not be identical) and, as specified in this Plan, the fair
market value of the common stock, and to make all other
determinations necessary or advisable for administering the
Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan or in any
option agreement in the manner and to the extent it shall deem
expedient to carry it into effect, and it shall be the sole
and final judge of such expediency. The determinations of the
Committee on the matters referred to in this Section 16 shall
be conclusive.
(c) The Committee may, in its sole discretion, and subject to such
terms and conditions as it may adopt, accelerate the date or
dates on which some or all outstanding Options may be
exercised.
(d) The Committee may require that any Option Shares issued be
legended as necessary to comply with applicable federal and
state securities laws.
17. Amendment and Discontinuance of the Plan:
(a) The Board of Directors of the Company may at any time alter,
suspend or terminate the Plan, but no change shall be made
which will have a materially adverse effect upon any Option
previously granted, unless the consent of the Optionee is
obtained; provided, however, that the Board of Directors may
not without further approval of the shareholders, (i) increase
the maximum number of shares of Common Stock for which Options
may be granted under the Plan or which may be purchased by an
individual Optionee, (ii) decrease the minimum option price
provided in the Plan, or (iii) change the class of persons
eligible to receive Options.
(b) The Company intends that Options designated by the Committee
as ISO's shall constitute ISOs under Section 422 of the Code.
Should any provision in this Plan for ISO's not be necessary
in order to so comply or should any additional provisions be
required, the Board of Directors of the Company may amend the
Plan accordingly without the necessity of obtaining the
approval of the shareholders of the Company.
18. Other Conditions:
(a) If at any time counsel to the Company shall be of the opinion
that any sale or delivery of shares of Common Stock pursuant
to an Option granted under the Plan is or may in the
circumstances be unlawful under the statutes, rules or
regulations of any applicable jurisdiction, the Company shall
have no obligation to make such sale or delivery, and the
Company shall not be required to make any application or to
effect or to maintain any qualification or registration under
the Securities Act of 1933 or otherwise with respect to shares
of Common Stock or Options under the Plan, and the right to
ESO Plan 4/5/99
<PAGE>
exercise any such Option may be suspended until, in the
opinion of said counsel, such sale or delivery shall be
lawful.
(b) At the time of any grant or exercise of any Option, the
Company may, if it shall deem it necessary or desirable for
any reason connected with any law or regulation of any
governmental authority relative to the regulation of
securities, condition the grant and/or exercise of such Option
upon the Optionee making certain representations to the
Company and the satisfaction of the Company with the
correctness of such representations.
19. Approval; Effective Date; Governing Law. The Plan was adopted by the
Board of Directors on April 5, 1999, and was concurrently therewith approved by
the stockholders of the Company. This Plan shall be interpreted in accordance
with the internal laws of the State of New York.
ESO Plan 4/5/99
