<PAGE>
As filed with the Securities and Exchange Commission on December ___, 2000
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/X/ Preliminary Information Statement
/ / Confidential, For Use of the Commission Only
(as permitted by Rule 14c-5(d)(2))
/ / Definitive Information Statement
MANHATTAN SCIENTIFICS, INC.
-----------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
-----------------------------------------------------------------------------
(Name of Person Filing Information 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 Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) 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):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials:
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-1l(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid: $
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(2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE>
MANHATTAN SCIENTIFICS, INC.
641 Fifth Avenue, Suite 36F
New York, New York 10022
December ___, 2000
Dear Stockholder:
I am writing to inform you that the Board of Directors of Manhattan
Scientifics, Inc., a Delaware corporation (the "Company"), and holders of more
than a majority of the issued and outstanding shares of capital stock of the
Company entitled to vote on the matters set forth herein, have approved the
following corporate actions in lieu of a meeting pursuant to Section 141(f) of
the Delaware General Corporation Law:
1. The election of three (3) directors to the Board of Directors
of the Company to hold office until the next annual meeting of
stockholders or until their successors shall have been duly
elected and qualified;
2. The adoption of the Company's 2000 Stock Option Plan
(the "2000 Option Plan") to replace the Company's 1998 Stock
Option Plan;
3. The adoption of an amendment to the Company's Certificate of
Incorporation to increase the total number of authorized
shares of Common Stock from 150,000,000 shares to 250,000,000
shares; and
4. The ratification of the appointment of the accounting firm
of Richard A. Eisner & Company, LLP as the Company's
independent accountants.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
This Information Statement, which describes the above corporate actions
in more detail, is being furnished to stockholders of the Company for
informational purposes only. The Company will file the Certificate of Amendment
to its Certificate of Incorporation to increase the total number of authorized
shares of Common Stock twenty (20) calendar days after the mailing of this
Information Statement.
Sincerely,
MARVIN MASLOW,
Chairman of the Board
and Chief Executive Officer
<PAGE>
PRELIMINARY COPY
MANHATTAN SCIENTIFICS, INC.
641 Fifth Avenue, Suite 36F
New York, New York 10022
INFORMATION STATEMENT
December ___, 2000
This Information Statement is being mailed to the stockholders of
Manhattan Scientifics, Inc., a Delaware corporation (the "Company"), on or about
December ___, 2000 in connection with the corporate actions referred to below.
The Company's Board of Directors (the "Board") and holders of more than a
majority of the issued and outstanding shares of capital stock of the Company
entitled to vote on the matters set forth herein have approved all such matters.
Accordingly, this Information Statement is furnished solely for the purpose of
informing stockholders, in the manner required under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), of these corporate actions. No other
stockholder approval is required. The record date for determining stockholders
entitled to receive this Information Statement has been established as the close
of business on October 20, 2000 (the "Record Date").
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
CORPORATE ACTION
As of the Record Date, Lancer Offshore Fund, Lancer Offshore Inc.,
Lancer Partners L.P., The Viator Fund, The Orbiter Fund, Michael Lauer, Jack
Harrod, Scott L. Bach, Novars Gesellschaft Fur Neue Technologien MBH, Petra
Koschany, Landcaster Capital, Cherry Hill Inc., Mountain Ranch Partners,
Inc., Robsal Inc., Alan Cohen, Bruce Evans, Diana E. Schachter, Louis White,
and Lynn Dixon (the "Majority Stockholders"), as the holders of an aggregate of
approximately 57,438,926 shares of Common Stock, par value $.001 per share (the
"Common Stock"), of the Company, representing approximately 52.95% of the total
shares entitled to vote on the matters set forth herein, consented in writing
without a meeting to the matters described below. As a result, no further votes
will be needed. As of the Record Date, the Company had outstanding approximately
103,214,972 shares of Common Stock, no shares of Series A Preferred Stock,
245,165 shares of Series B Preferred Stock, par value $.001 per share (the
"Series B Preferred Stock"), and 14,000 shares of Series C Preferred Stock, par
value $.001 per share (the "Series C Preferred Stock"). As of the Record Date,
all of the issued and outstanding shares of Series B Preferred Stock were
convertible into 2,451,650 shares of Common Stock and all of the issued and
outstanding shares of Series C Preferred Stock were convertible into 933,334
shares of Common Stock. A plurality of the votes cast by the stockholders
entitled to vote was required to elect the director nominees and a majority of
the votes cast by the stockholders entitled to vote was required to take all
other actions. The corporate actions described in this Information Statement
will not afford stockholders the opportunity to dissent from the actions
described herein or to receive an agreed or judicially appraised value for their
shares.
2
<PAGE>
The Board and the Majority Stockholders have consented to the following
corporate actions:
1. The election of Marvin Maslow, Scott L. Bach and David A.
Teich to the Board to hold office until the next annual
meeting of stockholders or until their successors shall have
been duly elected and qualified;
2. The adoption of the 2000 Option Plan to replace the Company's
1998 Stock Option Plan;
3. The adoption of an amendment to the Company's Certificate of
Incorporation to increase the total number of authorized
shares of Common Stock from 150,000,000 shares to 250,000,000
shares; and
4. The ratification of the appointment of the accounting firm of
Richard A. Eisner & Company, LLP as the Company's independent
accountants.
The Company will pay the expenses of furnishing this Information
Statement, including the cost of preparing, assembling and mailing this
Information Statement. The 2000 Option Plan is attached hereto as Exhibit A.
3
<PAGE>
PROPOSAL 1 - ELECTION OF DIRECTORS
On October 20, 2000, the Majority Stockholders elected three directors
to serve as directors of the Company until the next annual meeting of the
stockholders or until their respective successors shall have been elected and
qualified. The Bylaws of the Company provide that the Company shall have no less
than one director or such other minimum number as required by law.
The following table sets forth certain information regarding the
directors of the Company:
Name Age Position
---- --- --------
Marvin Maslow 63 Chairman of the Board and Chief Executive
Officer since January 1998
Scott L. Bach 38 Director and Secretary since January 1998
David A. Teich 44 Director since May 1999
Marvin Maslow has served as the Company's chief executive officer and
chairman of the Board since January 1998. From June 1990 through September 1996,
Mr. Maslow served as chief executive officer of Projectavision, Inc., a company
he co-founded to develop and market video projection technology. Since November
1996, Mr. Maslow has served as chief executive officer and chairman of the board
of Tamarack Storage Devices, Inc., a wholly-owned subsidiary of the Company.
Since August 1999, Mr. Maslow has also served as a director of NMXS.com, Inc., a
company in which the Company owns approximately 27% of the outstanding common
stock. For more than 20 years, Mr. Maslow has been President of Normandie
Capital Corp., a private investment and consulting company. Mr. Maslow received
an A.A.S. degree from the Rochester Institute of Technology in 1957.
Scott L. Bach has served as a director and secretary of the Company
since January 1998. Since November 1996, Mr. Bach has served as secretary and
director of Tamarack Storage Devices, Inc., a wholly-owned subsidiary of the
Company. Since August 1999, Mr. Bach has also served as a director of NMXS.com,
Inc. In 1995, Mr. Bach founded Bach & Associates, a law firm specializing in
commercial matters. From 1988 to 1995, he was associated with the law firm of
Robinson Silverman Pearce Aronsohn & Berman. From 1987 to 1988, he was
associated with the law firm of Zalkin, Rodin & Goodman. Mr. Bach received a
B.A. from Queens College, City University of New York in 1984 and a J.D. from
Hofstra Law School in 1987.
David A. Teich has served as a director of the Company since May 1999
and is the managing partner of Teich, Beim & Moro, P.C. Since January 1999, Mr.
4
<PAGE>
Teich's accounting firm has acted as the Company's internal controller. Mr.
Teich graduated with a B.B.A. degree from Pace University in 1979, became a
certified public accountant in 1982, and has been employed by his firm in
various capacities, including accountant, manager, partner and managing partner
since 1977.
The term of office of the directors is one year, expiring on the date
of the next annual meeting of stockholders and thereafter until their respective
successors shall have been elected and qualified.
Security Ownership of Certain Beneficial Owners and Management Ownership
The following table sets forth, as of the Record Date, the names,
addresses and number of shares of Common Stock beneficially owned by (i) all
persons known to the management of the Company to be the beneficial owners of
more than 5% of the outstanding shares of Common Stock, (ii) each director of
the Company, (iii) each executive officer of the Company, and (iv) all directors
and executive officers of the Company as a group. Except as indicated, each
beneficial owner listed exercises sole voting power and sole dispositive power
over the shares beneficially owned. Share ownership in each case includes shares
issuable upon exercise of options exercisable within 60 days after the Record
Date for purposes of computing the percentage of Common Stock owned by such
person but not for purposes of computing the percentage owned by any other
person.
Percentage of
Number of Outstanding
Shares Shares
Beneficially Beneficially
Name and Address Owned Owned
---------------- ------------- -------------
Marvin Maslow (1)............................. 15,000,000 12.8%
c/o Manhattan Scientifics, Inc.
641 Fifth Avenue, Suite 36F
New York, New York 10022
Robert Hockaday (2)........................... 6,998,000 6.8%
c/o Manhattan Scientifics, Inc.
641 Fifth Avenue, Suite 36F
New York, New York 10022
Scott L. Bach (3)............................. 1,100,000 *
c/o Manhattan Scientifics, Inc.
641 Fifth Avenue, Suite 36F
New York, New York 10022
Jack Harrod (4)............................... 4,750,000 4.5%
c/o Manhattan Scientifics, Inc.
641 Fifth Avenue, Suite 36F
New York, New York 10022
5
<PAGE>
Percentage of
Number of Outstanding
Shares Shares
Beneficially Beneficially
Name and Address Owned Owned
---------------- ------------- -------------
David A. Teich (5)............................ 502,000 *
Teich, Beim & Moro, P.C.
Two Executive Boulevard, Suite 103
Suffern, New York 10901
Lancer Management Group, LLC (6).............. 33,895,512 32.8%
375 Park Avenue, Suite 2006
New York, New York 10152
Lancer Management Group, II, LLC (7).......... 22,000,000 19.4%
375 Park Avenue, Suite 2006
New York, New York 10152
Lancer Offshore, Inc. (8)..................... 28,250,000 27.3%
375 Park Avenue, Suite 2006
New York, New York 10152
Michael Lauer (9).............................. 55,895,512 49.4%
375 Park Avenue, Suite 2006
New York, New York 10152
All executive officers and
directors as a group
(4 persons).................................... 21,352,000 17.6%
------------------
* Less than 1%.
(1) Consists of options that are immediately exercisable to purchase
15,000,000 shares of Common Stock at a price of $0.05 per share. In
November 2000, Mr. Maslow transferred options to purchase 1,350,010
shares of common Stock.
(2) Mr. Hockaday, an independent contractor to the Company, is not an
employee, executive officer or director of the Company.
(3) Consists of 100,000 shares of Common Stock and options that are
immediately exercisable to purchase 1,000,000 shares of Common Stock at
a price of $0.05 per share. In November 2000, Mr. Bach transferred
options to purchase 10,000 shares of Common Stock.
6
<PAGE>
(4) Consists of 2,000,000 shares of Common Stock and options that are
immediately exercisable to purchase 2,750,000 shares of Common Stock at
a price of $0.20 per share.
(5) Consists of 2,000 shares of Common Stock and options that are
immediately exercisable to purchase 500,000 shares of Common Stock at a
price of $0.05 per share.
(6) Consists of the following shareholders of record: Lancer Offshore, Inc.
(28,250,000 shares), Lancer Offshore Fund (2,150,000), Viator Fund Ltd.
(750,000 shares), Michael Lauer (2,245,512 shares), and The Orbiter
Fund (500,000 shares). Michael Lauer is the Managing Member of Lancer
Manager Group, LLC. Lancer Management Group, LLC has voting and
dispositive power over the shares held by the business entities listed
above, and is thus deemed the beneficial owner thereof.
(7) Consists of 12,000,000 shares of Common Stock and warrants to purchase
10,000,000 shares of Common Stock that are exercisable at a price of
$0.05 per share held by Lancer Partners, L.P. Lancer Management Group
II, LLC has voting and dispositive power over these shares and thus is
deemed the beneficial owner thereof. Michael Lauer is the managing
member of Lancer Management Group II, LLC.
(8) Lancer Management Group, LLC has voting and dispositive power over
these shares and thus is deemed the beneficial owner thereof.
(9) Consists of shares beneficially owned by Lancer Management Group, LLC
and Lancer Management Group II, LLC, in addition to shares held in Mr.
Lauer's name. As the managing member of Lancer Management Group LLC and
Lancer Management Group II, LLC, Mr. Lauer has voting and dispositive
power over there shares and thus may be deemed the beneficial owner
thereof.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Eighty percent of the Company's annual rent of $60,000 for its
executive offices in New York is paid by Normandie Capital Corp., a company
owned by Mr. Maslow, the Company's chief executive officer. Eighty five percent
of the Company's annual rent of $47,000 for its executive offices in Los Alamos,
New Mexico is paid by Energy Related Devices, Inc., a stockholder of the
Company.
On November 24, 1999, Lancer Management Group, LLC, the beneficial
owner of 32.8% of the outstanding shares of Common Stock, indicated its
willingness to loan the Company, on an as-needed basis, funds to continue the
Company's operations through December 15, 2001, upon reasonable terms and
conditions to be agreed upon.
In August 1999, the Orbiter Fund, a stockholder and an affiliate of the
Company's largest stockholder, provided the Company with a loan in the principal
amount of $500,000. Such loan bore interest at an annual rate of 13.5% and was
repaid in October 1999.
In October 1999, the Company borrowed $500,000 from the Peters
Corporation, a stockholder of the Company. The loan, which bore interest at a
rate per annum equal to Citicorp prime plus 1%, was repaid on December 19, 1999.
In connection with this loan, the Company issued the Peters Corporation 150,000
shares of Common Stock.
7
<PAGE>
NMXS.com, Inc. pays Mr. Maslow, the Company's chief executive officer,
an annual salary of $60,000 and leases a car for his use as consideration for
his services.
During 1999, Bach & Associates, a law firm of which Mr. Bach, the
secretary and a director of the Company, is the sole proprietor, received
$83,100 as compensation for legal services rendered to the Company.
During 1999, Teich, Beim & Moro, P.C., an accounting firm in which Mr.
Teich, a director of the Company, is a principal, received $29,000 as
compensation for accounting services rendered to the Company.
On August 8, 1999, the Company borrowed $275,000 from Jack Harrod, the
Company's chief operating officer. The loan bears interest at an annual rate of
5.5% and is due upon the earlier of (i) February 7, 2001 or (ii) the date the
Company completes a private placement of a class of securities aggregating at
least $1.5 million. The Company may prepay the loan at any time, in whole or in
part, without penalty.
Board Meetings and Committees
The Board met twice during the fiscal year ended December 31, 1999.
Each director attended or participated in such meetings of the Board. From time
to time, the members of the Board acted by unanimous written consent. The
Company currently has no audit, compensation or nominating committees.
Board of Directors Compensation
Non-employee directors are not compensated for attending Board
meetings. Reasonable out-of-pocket expenses incurred in connection with their
attendance at Board meetings are reimbursed by the Company. In addition, Mssrs.
Bach and Teich each received options to purchase 500,000 shares of Common Stock
in consideration for their services as directors of the Company.
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following tables set forth all compensation awarded to the chief
executive officer of the Company for the fiscal years ended December 31, 1998
and December 31, 1999. No executive officer's aggregate annual compensation
exceeded $100,000 for the year ended December 31, 1999.
8
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation Awards
------------------- ---------------------
Securities
Name and Other Annual Underlying Restricted
Principal Position Year Salary Compensation Options/SARs Stock
------------------ ---- ------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
Marvin Maslow, 1999 0 $69,195(1) 15,000,000(2) 0
Chairman of the
Board and Chief
Executive Officer
</TABLE>
----------
(1) Throughout 1998, the Company granted a monthly non-accountable expense
allowance to Mr. Maslow of $2,500. Throughout 1999, the Company granted
a monthly non-accountable expense allowance to Mr. Maslow of $4,000,
excluding the reimbursement of accountable expenses. Includes an annual
salary of $60,000 and a car allowance of $1,195 paid for by NMXS.com,
Inc.
(2) On May 6, 1999, the Company granted Mr. Maslow additional options to
purchase 15,000,000 shares of Common Stock at an exercise price of
$0.05 per share. In November 2000, Mr. Maslow transferred options to
purchase 1,300,000 shares of Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of stock options made
by the Company during the fiscal year ending December 31, 1999 to its chief
executive officer:
<TABLE>
<CAPTION>
Potential realizable
Number of Percent of Total value at assumed annual
Securities Options/SARs rates of stock price
Underlying Granted Exercise or Market Price appreciation for option
Options to Employees in Base Price on Date of Expiration term
Name Granted Fiscal Year ($/Share) Grant Date 5% 10%
---- -------- ----------- --------- ----- ---- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Marvin Maslow 15,000,000 100% $0.05 $0.50 5/06/09 7,125,000 7,500,000
</TABLE>
Stock Option Exercises
The following table contains information relating to the exercise of
the Company's stock options by the chief executive officer of the Company in
fiscal 1999, as well as the number and value of their unexercised options as of
the Record Date:
9
<PAGE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Options at In-the-Money Options
Shares Acquired Fiscal Year-End(#)(1) at Fiscal Year End($)
on Value --------------------- ---------------------
Name Exercise(#) Realized($) Exerc. Unexerc. Exerc. Unexerc.
---- ----------- ----------- ----- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Marvin Maslow 0 0 15,000,000 0 0 --
</TABLE>
-----------------
(1) The sum of the numbers under the Exercisable and Unexercisable columns of
this heading represents such officer's total outstanding options to
purchase shares of Common Stock.
Employment Agreements
The Company currently has no employment agreements with its officers or
directors. On September 1, 1999, the Company entered into one-year employment
agreement with Robert E. Hermes, Ph.D., the Company's Senior Staff Scientist,
which was automatically renewed for an additional one-year period. Unless either
party provides notice to the other of their intention not to renew the
Agreement, Mr. Hermes' employment will extend until September 2002. Mr. Hermes
receives an annual salary of $117,500 and is eligible to receive 500,000 stock
options, which shall vest over a three-year period.
Report on Executive Compensation
The Board determines the compensation of the Company's officers and
sets policies for and reviews the compensation awarded to each of them.
Salaries. Base salaries for the Company's officers are determined
initially by evaluating the responsibilities of the position held and the
experience of the individual, and by reference to the competitive marketplace
for management talent, including a comparison of base salaries for comparable
positions at comparable companies within the Company's industry. The Company's
salaries are below average as compared to its competitors. Annual salary
adjustments are determined by evaluating the competitive marketplace, the
performance of the Company, the performance of the executive particularly with
respect to the ability to manage growth of the Company, the length of the
executive's service to the Company and any increased responsibilities assumed by
the executive.
Compensation of Chief Executive Officer. Mr. Maslow, the Company's
chief executive officer, does not receive a salary from the Company. Mr. Maslow
currently beneficially owns options to acquire 13,700,000 shares of Common
Stock. See "Security Ownership of Certain Beneficial Owners and Management
Ownership." The Board believes he is substantially motivated, both by reason of
his ownership of the aforementioned options and his commitment to the Company,
to act on behalf of all stockholders to optimize overall corporate performance.
Accordingly, the Board has not considered it necessary to specifically relate
Mr. Maslow's compensation to corporate performance. The Company does not have an
employment agreement with Mr. Maslow.
Board of Directors Interlocks and Insider Participation in Compensation
Decisions
Mr. Maslow, a member of the Board and chief executive officer of the
Company during the fiscal year ended December 31, 1999, participated in
deliberations of the Board concerning officer compensation.
10
<PAGE>
PROPOSAL 2 - ADOPTION OF THE 2000 STOCK OPTION PLAN
Proposed Amendment
On the Record Date, the Board and the Majority Stockholders adopted the
2000 Option Plan to replace the Company's 1998 Stock Option Plan.
The 2000 Option Plan
The purpose of the 2000 Option Plan is to enable the Company to compete
successfully in attracting, motivating and retaining directors, officers,
employees and consultants by making it possible for them to own shares of Common
Stock, thereby giving them a direct and continuing interest in the future
success of the Company's business. The 2000 Option Plan is intended to provide a
method whereby directors, officers, employees and consultants who are making or
expected to make substantial contributions to the successful growth and
development of the Company may be offered additional incentives, thereby
advancing the interests of the Company and its shareholders. The Board believes
that the 2000 Option Plan increases the Company's flexibility in furthering such
purposes.
Terms of the 2000 Option Plan
The 2000 Option Plan provides for the grant of incentive stock options
("ISO"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), non-qualified stock options, SARs, restricted stock and
stock bonuses.
The purchase price of shares of Common Stock covered by an ISO must be
at least 110% of the fair market value of such shares of Common Stock on the
date the option is granted. The purchase price for all options is payable in
cash or, subject to Board approval, with shares of Common Stock previously owned
by participant, by way of a broker assisted exercise procedure or by such other
method as the Board may approve. No ISO will be granted to any employee who, at
the time of such grant, owns more than 10% of the total combined voting power or
value of all classes of capital stock of the Company, or any subsidiary of the
Company, unless the option price is at least 110% of the fair market value of
the shares of Common Stock subject to the option on the date the option is
granted and the option expires no later than five years from the date the option
is granted. In addition, the aggregate fair market value of the shares of Common
Stock, determined at the date of grant, with respect to which ISOs are
exercisable for the first time by a participant during any calendar year, shall
not exceed $100,000. No ISO may be granted under the 2000 Option Plan to any
individual who is not an employee of the Company. The purchase price of shares
of Common Stock covered by a non-qualified stock option may be equal to or less
than 100% of the fair market value of such shares of Common Stock on the date
the option is granted.
The 2000 Option Plan also provides for the grant of SARs, which entitle
a participant to receive a cash payment, equal to the difference between the
11
<PAGE>
fair market value of a share of Common Stock on the exercise date and the
exercise price of the SAR. The terms and the exercise price of a SAR will be
determined by the Board in its discretion at the time of the grant.
Awards of restricted stock ("Restricted Stock") which are grants of
shares of Common Stock that are subject to a restricted period during which such
shares may not be sold, assigned, transferred, made subject to gift or otherwise
encumbered and Stock Bonuses, which are bonuses in the form of Common Stock, may
also be made under the 2000 Option Plan.
Administration of the 2000 Option Plan
The 2000 Option Plan is currently administered by the Board. The Board
will have full authority, in its sole discretion, to interpret the 2000 Option
Plan, to establish from time to time regulations for the administration of the
2000 Option Plan and to determine the directors, officers, employees and
consultants to whom awards will be granted and the terms of such awards. The
2000 Option Plan provides that the Board may appoint a Compensation Committee of
the Board (the "Compensation Committee") to administer the 2000 Option Plan. In
such event, such Compensation Committee may not take any action under the 2000
Option Plan unless it solely is at all times composed of not less than three
"Non-Employee Directors" within the meaning of Rule 16(b)(3) ("Rule 16(b)(3)")
under the Exchange Act. In the event that the composition of the Compensation
Committee does not comply with Rule 16(b)(3), the Board shall take any and all
actions required or permitted to be taken by the Compensation Committee under
the 2000 Option Plan and shall serve as the Compensation Committee.
Exercise of Options and Rights
Under the 2000 Option Plan, options or SARs may be exercised and the
restrictions on Restricted Stock cease to apply, at such times and in such
installments as are specified in the terms of its grant, but with respect to
options and SARs not later than the expiration of ten years from the date of its
grant, (or five years in the case of an ISO granted to any employee who owns
more than 10% of the Company's voting stock) subject to earlier termination,
expiration or cancellation as provided in the grant or the 2000 Option Plan.
SARs may be granted in tandem with options and, to the extent that they
are so granted and such stock appreciation rights are exercised, the related
options shall be canceled. Similarly, if such options are exercised, the related
stock appreciation rights shall be canceled.
Options and SARs are not transferable by the participant otherwise than
by will or the laws of descent and distribution and are exercisable during the
participant's lifetime only by such participant. Restricted Stock is not
transferable until all of the restrictions with respect thereto cease to apply.
Unless otherwise provided in a grant, if participant's employment with
the Company shall terminate (as determined by the Board in its sole discretion)
for any reason other than retirement, disability, death or for cause, (a) to the
extent exercisable at the time of such termination, options shall remain
12
<PAGE>
exercisable until 90 days after the date of such termination and stock
appreciation rights shall be exercisable on and until the 30th day after such
termination on which date they shall expire, and (b) options and stock
appreciation rights granted to such participant to the extent that they are not
exercisable and all Restricted Stock, to the extent still restricted at the time
of such termination, shall expire at the close of business on the date of such
termination. In the event that the employment of such participant shall
terminate as a result of retirement, disability or death, (x) options and SARs
granted to such participant, to the extent that they were exercisable at the
time of such termination, shall remain exercisable until the expiration of their
term and (y) options and SARs granted to such participant to the extent that
they were not exercisable and all Restricted Stock to the extent still
restricted at the time of such termination shall expire at the close of business
on the date of such termination. In the event an participant's employment
terminates for cause, all options or stock appreciation rights granted to the
participant to the extent not exercised and all Restricted Stock to the extent
still restricted at the time of such termination shall expire on the close of
business on the date of such termination. The effect of exercising any ISO on a
day that is more than 90 days after the date of such termination (or, in the
case of a termination of employment on account of death or disability, on a day
that is more than one year after the date of such termination) will be to cause
such ISO to be treated as a non-qualified stock option pursuant to Section 422
of the Code.
Amendment of the 2000 Option Plan
The Board may at any time, or from time to time, suspend or terminate
the 2000 Option Plan in whole or in part, or amend it in such respects as the
Board may deem appropriate. No amendment, suspension or termination of the 2000
Option Plan shall, without the participant's consent, alter or impair any of the
rights or obligations under any option plan theretofore granted to a participant
under the 2000 Option Plan.
Federal Income Tax Consequences
The following summary is intended only as a general guide as to the
federal income tax consequences under current law with respect to participation
in the 2000 Option Plan and does not attempt to describe all possible federal or
other tax consequences of such participation. Furthermore, the tax consequences
of awards made under the 2000 Option Plan are complex and subject to change, and
a taxpayer's particular situation may be such that some variation of the
described rules is applicable.
Incentive Stock Options. Options designated as incentive stock options
are intended to fall within the provisions of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). An optionee recognizes no taxable
income for regular income tax purposes as the result of the grant or exercise of
such an option. If an optionee does not dispose of his/her shares for two years
following the date the option was granted or within one year following the
transfer of the shares upon exercise of the option, the gain on the sale of the
shares (which is the difference between the sale price and the purchase price of
the shares) will be taxed as long-term capital gain. If an optionee satisfies
such holding periods, upon a sale of the shares, the Company will not be
entitled to any deduction for federal income tax purposes. If an optionee
disposes of the shares within two years after the date of grant or within one
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<PAGE>
year from the date of exercise (a "disqualifying disposition"), the difference
between the fair market value of the shares on the date of exercise and the
option exercise price (not to exceed the gain realized on the sale if the
disposition is a transaction with respect to which a loss, if sustained, would
be recognized) will be taxed as ordinary income for the taxable year in which
the disqualifying disposition occurs. Any gain in excess of that amount will be
a capital gain. If a loss is recognized, there will be no ordinary income, and
such loss will be a capital loss. A capital gain or loss will be long-term if
the optionee's holding period is more than one year. Any ordinary income
recognized by the optionee upon the disqualifying disposition of the shares
should be deductible as compensation paid by the Company for federal income tax
purposes, subject to the general "reasonableness" and other deductibility
requirements of Section 162 of the Code. The Company may be required to withhold
additional taxes from the wages of the employee with respect to the amount of
ordinary income taxable to the employee.
The excess of the fair market value of the Common Stock acquired by
exercise of an ISO (determined on the date of exercise) over the exercise price
constitutes an item of adjustment in determining "alternative minimum taxable
income" for purposes of computing "alternative minimum tax" ("AMT") under
Section 55 of the Code.
Nonstatutory Stock Options. Options that do not qualify as incentive
stock options are nonstatutory stock options and have no special tax status. An
optionee generally recognizes no taxable income upon the grant of such an
option.
Upon the exercise of a nonstatutory stock option, the optionee normally
recognizes ordinary income in the amount equal to the difference between the
option exercise price and the fair market value of the shares on the
determination date (which is generally the date of exercise). If the optionee is
an employee, such ordinary income generally is subject to withholding of income
and employment taxes. The "determination date" is, in general, the date on which
the option is exercised unless the shares received are not vested and/or the
sale of the shares at a profit would subject the optionee to liability under
Section 16(b) of the Exchange Act ("Section 16(b)"), in which case the
determination date is the later of (i) the date on which the shares vest, or
(ii) the date the sale of the shares at a profit would no longer subject the
optionee to liability under Section 16(b) (Section 16(b) generally is applicable
only to officers, directors and beneficial owners of more than 10% of the Common
Stock of the Company). Upon the sale of stock acquired by the exercise of a
nonstatutory stock option, any gain or loss, based on the difference between the
sale price and the fair market value on the date of recognition of income, will
be taxed as capital gain or loss. A capital gain or loss will be long-term if
the optionee's holding period is more than one year. No tax deduction is
available to the Company with respect to the grant of a nonstatutory option or
the sale of the stock acquired pursuant to such grant. The Company should be
entitled to a deduction equal to the amount of ordinary income recognized by the
optionee as a result of the exercise of a nonstatutory option, subject to the
general "reasonableness" and other deductibility requirements of Section 162 of
the Code.
Stock Appreciation Rights. A participant will not be required to
recognize any income for federal income tax purposes upon the grant of a stock
appreciation right ("SAR"). However, upon the date of exercise of a SAR, the
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<PAGE>
participant will be required to recognize as ordinary income the amount of the
cash payment received (which is equal to the excess of the fair market value of
a share of Common Stock on the exercise date over the exercise price of the
SAR). The Company should be entitled to a deduction equal to the amount of the
ordinary income recognized by the participant upon the settlement of the SAR,
subject to the general "reasonableness" and other deductibility requirements of
Section 162 of the Code.
Restricted Stock. In general, a participant will not be required to
recognize any income for federal income tax purposes upon the grant or issuance
of shares of Restricted Stock. Upon the vesting of such shares of Restricted
Stock, the participant will be required to recognize, as ordinary income, an
amount equal to the fair market value of such shares on the vesting date, except
that if the sale of such shares at a profit within six months after the issuance
of such shares could subject the participant to liability under Section 16(b),
the participant would not recognize income until the earlier of (i) the
expiration of such six-month period, or (ii) the first day on which the sale of
such shares at a profit would not subject the participant to liability under
Section 16(b). Alternatively, no later than thirty days after the date of
issuance of shares of Restricted Stock, the participant may also be able to
elect, under Section 83(b) of the Code (a "Section 83(b) Election"), to include
as ordinary income for the taxable year of such issuance, the fair market value
of such shares at the time of issuance (without regard to any Section 16(b) or
other "lapse" restriction). Any subsequent appreciation in shares of Restricted
Stock with respect to which a Section 83(b) Election is made will be taxed as
capital gain, and then only when such shares are sold or otherwise disposed of
in a taxable transaction. Such capital gain will be long-term capital gain if
the participant's holding period of such stock is more than one year. However,
if the shares with respect to which a Section 83(b) Election is made are
subsequently forfeited to the Company (e.g., upon termination of the
participant's employment with the Company prior to the vesting of such shares),
the participant will be unable to claim a deduction in respect of such
forfeiture for the amount previously included as ordinary income. The Company
should be entitled to a deduction equal to the amount of the ordinary income
recognized by the participant, subject to the general "reasonableness" and other
deductibility requirements of Section 162 of the Code.
Stock Bonuses. Unless shares of Common Stock granted to a participant
as part of a Stock Bonus are not vested or the participant could otherwise be
subject to liability under Section 16(b), the participant will be required to
recognize, as ordinary income, an amount equal to the fair market value of such
shares at the time of issuance. If such shares are not vested or the participant
could be subject to liability under Section 16(b) at the time of issuance, then,
unless a Section 83(b) Election is made, the participant will not be required to
recognize taxable income in respect of such shares until the later of the date
(i) on which such shares vest, or (ii) the sale of such shares at a profit would
no longer subject the participant to liability under Section 16(b). The Company
should be entitled to a deduction equal to the amount of the ordinary income
recognized by the participant, subject to the general "reasonableness" and other
deductibility requirements of Section 162 of the Code.
15
<PAGE>
PROPOSAL 3 - AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO INCREASE THE NUMBER OF
AUTHORIZED SHARESOF COMMON STOCK
Proposed Amendment
On October 20, 2000, the Board and the Majority Shareholders adopted a
resolution to amend the Fourth Article of the Company's Certificate of
Incorporation to increase the number of authorized shares of Common Stock from
150,000,000 shares to 250,000,000 shares.
As of the Record Date, the Company had 103,214,972 shares of Common
Stock outstanding, no shares of Series A Preferred Stock outstanding, 245,165
shares of Series B Preferred Stock outstanding and 14,000 shares of Series C
Preferred Stock outstanding. As of the Record Date, all of the issued and
outstanding shares of the Series B Preferred Stock were convertible into
2,451,650 shares of Common Stock and the Series C Preferred Stock were
convertible into 933,334 shares of Common Stock. Thirty million shares of Common
Stock are available for issuance under the 2000 Option Plan, none of which were
covered by outstanding options.
The Board believed that the number of authorized shares of Common Stock
remaining available was not sufficient to enable the Company to respond to
potential business opportunities and pursue important objectives that may
present themselves. Accordingly, the Board believed it was in the Company's best
interests to increase the number of authorized shares of Common Stock as
described above. The Board also believed that the availability of such shares
will provide the Company with the flexibility to issue Common Stock for proper
corporate purposes that may be identified by the Board from time to time, such
as stock dividends (including stock splits in the form of stock dividends),
financings, acquisitions, or strategic business relationships. Further, the
Board believed the availability of additional shares of Common Stock will enable
the Company to attract and retain talented employees through the grant of stock
options and other stock-based incentives. An important part of the Company's
business strategy is to develop various technologies, including through the
acquisition of assets and businesses deemed synergistic with the Company's
operations. Although the Company does not currently have any agreements with
respect to future acquisitions, the Company continues to review acquisition
opportunities. The issuance of additional shares of Common Stock may have a
dilutive effect on earnings per share and a person who does not purchase
additional shares will not be able to maintain his or her pro rata interest, on
a stockholder's percentage voting power.
The authorized shares of Common Stock in excess of those issued will be
available for issuance at such times and for such corporate purposes as the
Board may deem advisable without further action by the Company's shareholders,
except as may be required by applicable laws or the rules of any stock exchange
or national securities association trading system on which the securities may be
listed or traded. Upon issuance, such shares will have the same rights as the
outstanding shares of Common Stock. Holders of Common Stock do not have
preemptive rights. The Board does not intend to issue any Common Stock except on
terms which the Board deems to be in the best interest of the Company and its
then-existing shareholders.
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<PAGE>
The Board does not recommend this proposed amendment with the intent to
use the ability to issue additional Common Stock to discourage tender offers or
takeover attempts. However, the availability of authorized Common Stock for
issuance could render more difficult or discourage a merger, tender offer, proxy
contest or other attempt to obtain control of the Company. The amendment is not
in response to any effort on the part of any party to accumulate material
amounts of Common Stock or to acquire control of the Company by means of merger,
tender offer, proxy contest or otherwise, or to change the Company's management.
In addition, the proposal is not part of any plan by management to recommend a
series of similar amendments to the Board and the shareholders.
The text of subparagraph (a) of the Fourth Article of the Certificate
of Incorporation, as it is proposed to be amended pursuant to this proposal, is
as follows:
"(a) Common. 250,000,000 shares of Common Stock having a par
value of $.001 per share;".
17
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PROPOSAL NO. 4 - INDEPENDENT AUDITORS
The firm of Richard A. Eisner & Company, LLP served as the Company's
independent auditors for the fiscal year ended December 31, 1999 and has been
approved by the Board and the Majority Stockholders to serve as the Company's
independent auditors for the fiscal year ending December 31, 2000.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of Forms 3 and 4 furnished to the Company
pursuant to Rule 16a-3(e) and statements from directors and executive officers
that no report on Form 5 is due, no reporting person failed to file reports
required under Section 16(a) of the Exchange Act, with respect to the Company's
securities.
OTHER MATTERS
The Board is not aware that any matter other than those described in
this Information Statement is to be presented for the consent of the
shareholders.
UPON WRITTEN REQUEST BY ANY SHAREHOLDER TO THE SECRETARY OF THE
COMPANY, AT 641 FIFTH AVENUE, SUITE 36F, NEW YORK, NEW YORK 10022, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-KSB WILL BE PROVIDED WITHOUT CHARGE.
By Order of the Board of Directors,
MARVIN MASLOW,
Chairman of the Board
and Chief Executive Officer
Date: December ___, 2000
New York, New York
<PAGE>
Exhibit A
MANHATTAN SCIENTIFICS, INC.
2000 EQUITY INCENTIVE PLAN
This Manhattan Scientifics, Inc. 2000 Equity Incentive Plan (the
"Plan") is established by Manhattan Scientifics, Inc., a Delaware corporation
(the "Company"), effective as of October 20, 2000 (the "Effective Date"),
subject to the approval of the shareholders of the Company within twelve (12)
months thereafter. Capitalized terms not otherwise defined shall have the
meanings set forth in Section 25.
1. Purpose. The Plan is intended to provide qualifying Employees
(including officers and Directors), Independent Directors and Consultants with
equity ownership in the Company, thereby strengthening their commitment to the
success of the Company, promoting the identity of interests between the
Company's shareholders and such Employees, Independent Directors and Consultants
and stimulating their efforts on behalf of the Company, and to assist the
Company in attracting and retaining talented personnel.
2. Scope of the Plan. Subject to adjustment in accordance with Section
20, the total number of Shares for which grants under the Plan shall be
available is 30,000,000. If any Shares subject to any Award granted hereunder
are forfeited or such Award otherwise terminates without the issuance of such
Shares or for other consideration in lieu of such Shares, the Shares subject to
such Award, to the extent of any such forfeiture or termination, shall again be
available for grant under the Plan. Shares awarded under the Plan may be
treasury shares or newly-issued shares.
3. Administration.
--------------
(a) The Plan shall be administered by a Committee which shall
consist of at least two or more members of the Board, all of whom, so long as
the Company remains a Public Company, shall qualify as "non-employee directors"
under Section (b)(3)(i) of Rule 16b-3. If applicable requirements of Rule 16b-3
are met, grants of equity based compensation are not deemed to be purchases or
sales of underlying securities for purposes of Section 16(b) of the 1934 Act
(short swing liability). The number of members of the Committee may from time to
time be increased or decreased, and so long as the Company remains a Public
Company, shall be subject to such conditions, as the Board deems appropriate to
permit transactions in Shares pursuant to the Plan to satisfy such conditions of
Rule 16b-3 as then in effect. In the event there is not Committee or the
Committee is unable to act, the Board shall be take any and all actions required
or permitted to be taken by the Committee under the Plan and shall serve as the
Committee.
(b) Subject to the express provisions of the Plan, the Committee has
full and final authority and discretion as follows:
(i) to determine when and to whom Awards should be
granted and the terms, conditions and restrictions applicable to each
<PAGE>
Award, including, without limitation, (A) the exercise price of the
Award, (B) the method of payment for Shares purchased upon the exercise
of the Award, (C) the method of satisfaction of any tax withholding
obligation arising in connection with the Award, (D) the timing, terms
and conditions of the exercisability of the Award or the vesting of any
Shares acquired upon the exercise thereof, (E) the time of the
expiration of the vesting of any Shares acquired upon the exercise
thereof, (F) the effect of the Grantee's termination of employment or
service with the Company on any of the foregoing, (G) all other terms,
conditions and restrictions applicable to the Award or such Shares not
inconsistent with the terms of the Plan, (H) the benefit payable under
any SAR or Performance Share, and (I) whether or not specific Awards
shall be identified with other specific Awards, and if so whether they
shall be exercisable cumulatively with, or alternatively to, such other
specific Awards;
(ii) to determine the amount, if any, that a Grantee
shall pay for Restricted Shares, whether to permit or require the
payment of cash dividends thereon to be deferred and the terms related
thereto, when Restricted Shares (including Restricted Shares acquired
upon the exercise of any Award) shall be forfeited and whether such
Shares shall be held in escrow;
(iii) to interpret the Plan and to make all
determinations necessary or advisable for the administration of
the Plan;
(iv) to make, amend and rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or
alternative versions of, the Plan, including, without limitation, rules
with respect to the exercisability and forfeitability of Awards upon
the termination of employment or service of a Grantee;
(v) to determine the terms, conditions and
restrictions of all Award Agreements (which need not be identical) and,
with the consent of the Grantee, to amend any such Award Agreement at
any time, among other things, to permit transfers of such Awards to the
extent permitted by the Plan, except that the consent of the Grantee
shall not be required for any amendment which (A) does not adversely
affect the rights of the Grantee or (B) is necessary or advisable (as
determined by the Committee) to carry out the purpose of the Award as a
result of any change in applicable law;
(vi) to cancel, with the consent of the Grantee,
outstanding Awards and to grant new Awards in substitution therefor;
(vii) to accelerate the exercisability of, and to
accelerate or waive any or all of the terms, conditions and
restrictions applicable to, any Award or any group of Awards for any
reason and at any time, including in connection with a termination of
employment or service (other than for Cause);
(viii) subject to Section 6(c), to extend the time
during which any Award or group of Awards may be exercised;
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(ix) to make such adjustments or modifications to
Awards to Grantees working outside the United States as are advisable
to fulfill the purposes of the Plan;
(x) to impose such additional terms, conditions and
restrictions upon the grant, exercise or retention of Awards as the
Committee may, before or concurrent with the grant thereof, deem
appropriate; and
(xi) to take any other action with respect to any
matters relating to the Plan for which it is responsible.
The determination of the Committee on all matters
relating to the Plan or any Award Agreement shall be final.
4. Indemnification and Reimbursement. Service as a member of the
Committee or any other duly appointed subcommittee shall constitute service as a
Board member, and such members shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service as members
of the Committee or any other duly appointed subcommittee. No Committee or other
duly appointed subcommittee member shall be liable for any act or omission made
in good faith with respect to the Plan or any Award granted under the Plan.
5. Eligibility. The Committee may, in its discretion, grant Awards to
any Eligible Person, whether or not he or she has previously received an Award,
except in the case of an ISO, which can only be granted to an Employee of the
Company or any Subsidiary.
6. Conditions to Grants.
--------------------
(a) General Conditions. Awards shall be evidenced by written
Award Agreements specifying the number of Shares covered thereby, in such form
as the Committee shall from time to time establish. Award Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
(i) The Grant Date of an Award shall be the date on
which the Committee grants the Award or such later date as specified
in advance by the Committee;
(ii) In the case of an Award of options, the Option
Term shall under no circumstances extend more than ten (10) years after
the Grant Date and shall be subject to earlier termination as herein
provided; and
(iii) Any terms and conditions of an Award not set
forth in the Plan shall be set forth in the Award Agreement related to
that Award.
(b) Grant of Options. No later than the Grant Date of any
option, the Committee shall determine the Option Price of such option. Subject
to Section 6(c), the Option Price of an option may be the Fair Market Value of a
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Share on the Grant Date or may be less than or more than that Fair Market Value.
An option shall be exercisable for unrestricted Shares, unless the Award
Agreement provides that it is exercisable for Restricted Shares.
(c) Grant of ISOs. At the time of the grant of any option, the
Committee may, in its discretion, designate that such option shall be made
subject to additional restrictions to permit the option to qualify as an
"incentive stock option" under the requirements of Section 422 of the Code. Any
option designated as an ISO:
(i) shall have an Option Price that is not less than
the Fair Market Value of a Share on the Grant Date and, if granted to a
Ten Percent Owner, have an Option Price that is not less than 110% of
the Fair Market Value of a Share on the Grant Date;
(ii) shall be for a period of not more than ten (10)
years and, if granted to a Ten Percent Owner, not more than five (5)
years, from the Grant Date and shall be subject to earlier termination
as provided herein or in the applicable Award Agreement;
(iii) shall meet the limitations of this subparagraph
6(c)(iii). If the aggregate Fair Market Value of Shares with respect to
which ISOs first become exercisable by a Grantee in any calendar year
exceeds the limit determined in accordance with the provisions of
Section 422 of the Code (the "Limit") taking into account Shares
subject to all ISOs granted by the Company that are held by the
Grantee, the excess will be treated as nonqualified options. To
determine whether the Limit is exceeded, the Fair Market Value of
Shares subject to options shall be determined as of the Grant Dates of
the options. In reducing the number of options treated as ISOs to meet
the Limit, the most recently granted options will be reduced first. If
a reduction of simultaneously granted options is necessary to meet the
Limit, the Committee may designate which Shares are to be treated as
Shares acquired pursuant to an ISO;
(iv) shall be granted within ten (10) years from
the Effective Date;
(v) shall require the Grantee to notify the Committee
of any disposition of any Shares issued upon the exercise of the ISO
under the circumstances described in Section 421(b) of the Code
(relating to certain disqualifying dispositions, a "Disqualifying
Disposition"), within ten (10) business days after such Disqualifying
Disposition; and
(vi) unless otherwise permitted by the Code, shall by
its terms not be assignable or transferable other than by will or the
laws of descent and distribution and may be exercised, during the
Grantee's lifetime, only by the Grantee, except that the Grantee may,
in accordance with Section 7, designate in writing a beneficiary to
exercise his or her ISOs after the Grantee's death.
4
<PAGE>
(d) Grant of SARs.
-------------
(i) When granted, SARs may, but need not, be
identified with a specific option, specific Restricted Shares, or
specific Performance Shares of the Grantee (including any option,
Restricted Shares, or Performance Shares granted on or before the Grant
Date of the SARs) in a number equal to or different from the number of
SARs so granted. If SARs are identified with Shares subject to an
option, with Restricted Shares, or with Performance Shares, then,
unless otherwise provided in the applicable Award Agreement, the
Grantee's associated SARs shall terminate upon (A) the expiration,
termination, forfeiture, or cancellation of such option, Restricted
Shares or Performance Shares, (B) the exercise of such option or
Performance Shares, or (C) the date such Restricted Shares become
nonforfeitable.
(ii) The strike price (the "Strike Price") of any SAR
shall equal, for any SAR that is identified with an option, the Option
Price of such option, or for any other SAR, one hundred percent (100%)
of the Fair Market Value of a Share on the Grant Date of such SAR,
except that the Committee may (A) specify a higher Strike Price in the
Award Agreement or (B) provide that the benefit payable upon exercise
of any SAR shall not exceed such percentage of the Fair Market Value of
a Share on such Grant Date as the Committee shall specify.
(e) Grant of Performance Shares.
---------------------------
(i) Before the grant of Performance Shares, the
Committee shall:
(A) determine objective performance goals,
which may consist of any one or more of the following goals
deemed appropriate by the Committee: earnings (either in the
aggregate or on a per share basis), operating income, cash
flow, EBITDA (earnings before interest, taxes, depreciation
and amortization), return on equity, indices related to EVA
(economic value added), per share rate of return on the Common
Stock (including dividends), general indices relative to
levels of general customer service satisfaction, as measured
through various randomly-generated customer service surveys,
market share (in one or more markets), customer retention
rates, market penetration rates, revenues, reductions in
expense levels, the attainment by the Common Stock of a
specified market value for a specified period of time, and any
other object performance goal deemed appropriate by the
Committee, in each case where applicable to be determined
either on a company-wide basis, individual basis or in respect
of any one or more business units, and the amount of
compensation under the goals applicable to such grant;
(B) designate a period for the measurement
of the extent to which performance goals are attained, which
may begin simultaneously with, prior to or following the Grant
Date (the "Performance Period"); and
(C) assign a performance percentage to each
level of attainment of performance goals during the
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<PAGE>
Performance Period, with the percentage applicable to minimum
attainment being zero percent and the percentage applicable to
maximum attainment to be determined by the Committee from time
to time (the "Performance Percentage").
(ii) If a Grantee is promoted, demoted, or
transferred to a different business unit of the Company during a
Performance Period, then, to the extent the Committee determines any
one or more of the performance goals, Performance Period or Performance
Percentage are no longer appropriate, the Committee may make any
changes thereto as it deems appropriate in order to make them
appropriate.
(iii) When granted, Performance Shares may, but need
not, be identified with Shares subject to a specific option, specific
Restricted Shares or specific SARs of the Grantee granted under the
Plan in a number equal to or different from the number of the
Performance Shares so granted. If Performance Shares are so identified,
then, unless otherwise provided in the applicable Award Agreement, the
Grantee's associated Performance Shares shall terminate upon (A) the
expiration, termination, forfeiture or cancellation of the option,
Restricted Shares or SARs with which the Performance Shares are
identified, (B) the exercise of such option or SARs, or (C) the date
Restricted Shares become nonforfeitable.
(f) Grant of Restricted Shares.
--------------------------
(i) The Committee shall determine the amount, if any,
that a Grantee shall pay for Restricted Shares, subject to the
following sentence. The Committee shall require the Grantee to pay at
least the Minimum Consideration for each Restricted Share. Such payment
shall be made in full by the Grantee before the delivery of the shares
and in any event no later than ten (10) business days after the Grant
Date. In the discretion of the Committee and to the extent permitted by
law, payment may also be made in accordance with Section 9.
(ii) The Committee may, but need not, provide that
all or any portion of a Grantee's Restricted Shares, or Restricted
Shares acquired upon exercise of an option, shall be forfeited:
(A) except as otherwise specified in the
Plan or the Award Agreement, upon the Grantee's termination of
employment or service within a specified time period after the
Grant Date; or
(B) if the Company or the Grantee does not
achieve specified performance goals (if any) within a
specified time period after the Grant Date and before the
Grantee's termination of employment or service; or
(C) upon failure to satisfy such other
conditions as the Committee may specify in the Award
Agreement.
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<PAGE>
(iii) If Restricted Shares are forfeited and the
Grantee was required to pay for such shares or acquired such Restricted
Shares upon the exercise of an option, the Grantee shall be deemed to
have resold such Restricted Shares to the Company at a price equal to
the lesser of (A) the amount paid by the Grantee for such Restricted
Shares or (B) the Fair Market Value of the Restricted Shares on the
date of forfeiture, which shall be paid to the Grantee in cash as soon
as administratively practicable. Such Restricted Shares shall cease to
be outstanding and shall no longer confer on the Grantee thereof any
rights as a shareholder of the Company, from and after the date of the
event causing the forfeiture, whether or not the Grantee accepts the
Company's tender of payment for such Restricted Shares.
(iv) The Committee may provide that the certificates
for any Restricted Shares (A) shall be held (together with a stock
power executed in blank by the Grantee) in escrow by the Secretary of
the Company until such Restricted Shares become nonforfeitable or are
forfeited or (B) shall bear an appropriate legend restricting the
transfer of such Restricted Shares. If any Restricted Shares become
nonforfeitable, the Company shall cause certificates for such shares to
be issued without such legend.
(v) At the time of a grant of Restricted Shares, the
Committee may require the payment of cash dividends thereon to be
deferred and, if the Committee so determines, reinvested in additional
Restricted Shares. Stock dividends or deferred cash dividends issued
with respect to Restricted Shares shall be subject to the same
restrictions and other terms as apply to the Restricted Shares with
respect to which such dividends are issued. The Committee may in its
discretion provide for payment of interest on deferred cash dividends.
(g) Grant of Stock Bonuses. The Committee may grant Bonus
Shares to any Eligible Employee.
7. Non-Transferability. An Award granted hereunder shall not be
assignable or transferable other than by will or the laws of descent and
distribution and may be exercised during the Grantee's lifetime only by the
Grantee or his or her guardian or legal representative, except that, subject to
Section 6(c) in respect of ISOs, a Grantee may, if permitted by the Committee,
in its discretion, (a) designate in writing a beneficiary to exercise an Award
after his or her death (if that designation has been received by the Company
prior to the Grantee's death) and (b) transfer the Award to one or more members
of the Grantee's Immediate Family or any other individuals or entities.
8. Exercise.
--------
(a) Exercise of Options.
-------------------
(i) Subject to Section 6, each option shall become
exercisable at such time or times as may be specified by the Committee
from time to time in the applicable Award Agreement.
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(ii) An option shall be exercised by the delivery to
the Company during the Option Term of (A) a written notice of intent to
purchase a specific number of Shares subject to the option in
accordance with the terms of the option by the person entitled to
exercise the option and (B) payment in full of the Option Price of such
specific number of Shares in accordance with Section 8(a)(iii).
(iii) Payment of the Option Price may be made by any
one or more of the following means:
(A) cash, check, or wire transfer;
(B) with the approval of the Committee,
Mature Shares, valued at their Fair Market Value on the
date of exercise;
(C) with the approval of the Committee,
Restricted Shares held by the Grantee for at least six (6)
months prior to the exercise of the option, each such share
valued at the Fair Market Value of a Share on the date of
exercise;
(D) so long as the Company remains a Public
Company, in accordance with procedures previously approved by
the Company, through the sale of the Shares acquired on
exercise of the option through a bank or broker-dealer to whom
the Grantee has submitted an irrevocable notice of exercise
and irrevocable instructions to deliver promptly to the
Company the amount of sale or loan proceeds sufficient to pay
for such Shares, together with, if requested by the Company,
the amount of federal, state, local or foreign withholding
taxes payable by Grantee by reason of such exercise; or
(E) in the discretion of the Committee,
payment may also be made in accordance with Section 9.
(F) with the approval of the Committee, in
any combination of the foregoing or such other manner
determined by the Committee.
The Committee may in its discretion specify that, if any Restricted Shares are
used to pay the Option Price ("Tendered Restricted Shares"), (A) all the Shares
acquired on exercise of the option shall be subject to the same restrictions as
the Tendered Restricted Shares, determined as of the date of exercise of the
option or (B) a number of Shares acquired on exercise of the option equal to the
number of Tendered Restricted Shares shall be subject to the same restrictions
as the Tendered Restricted Shares, determined as of the date of exercise of the
option.
(b) Exercise of SARs.
----------------
(i) Subject to Section 6(d), (A) each SAR not
identified with any other Award shall become exercisable at such time
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or times as may be specified by the Committee from time to time in the
applicable Award Agreement and (B) except as otherwise provided in the
applicable Award Agreement, each SAR which is identified with any other
Award shall become exercisable as and to the extent that the option or
Restricted Shares with which such SAR is identified may be exercised or
becomes nonforfeitable, as the case may be.
(ii) SARs shall be exercised by delivery to the
Company of written notice of intent to exercise a specific number of
SARs. Unless otherwise provided in the applicable Award Agreement, the
exercise of SARs that are identified with Shares subject to an option or
Restricted Shares shall result in the cancellation or forfeiture of such
option or Restricted Shares, as the case may be, to the extent of such
exercise.
(iii) The benefit for each SAR exercised shall be
equal to (A) the Fair Market Value of a Share on the date of such
exercise, minus (B) the Strike Price specified in such SAR. Such benefit
shall be payable in cash, except that the Committee may provide in the
Award Agreement that benefits may be paid wholly or partly in Shares.
(c) Payment of Performance Shares. Unless otherwise provided
in the Award Agreement with respect to an Award of Performance Shares, if the
minimum performance goals applicable to such Performance Shares have been
achieved during the applicable Performance Period, then the Company shall pay to
the Grantee of such Award that number of Shares equal to the product of:
(i) the sum of (A) number of Performance Shares
specified in the applicable Award Agreement and (B) the number of
additional Shares that would have been issuable if such Performance
Shares had been Shares outstanding throughout the Performance Period
and the stock dividends, cash dividends (except as otherwise provided
in the Award Agreement), and other property paid in respect of such
Shares had been reinvested in additional Shares as of each dividend
payment date, multiplied by
(ii) the Performance Percentage achieved during
such Performance Period.
The Committee may, in its discretion, determine that cash be paid in lieu of
some or all of such Shares. The amount of cash payable in lieu of a Share shall
be determined by valuing such Share at its Fair Market Value on the business day
immediately preceding the date such cash is to be paid. Payments pursuant to
this Section 8 shall be made as soon as administratively practical after the end
of the applicable Performance Period. Any Performance Shares with respect to
which the performance goals shall not have been achieved by the end of the
applicable Performance Period shall expire.
9. Loans. The Committee may in its discretion allow a Grantee to defer
payment to the Company of all or any portion of (a) the Option Price of an
option, (b) the purchase price of Restricted Shares, or (c) any taxes associated
with the exercise, nonforfeitability of, or payment of benefits in connection
with, an Award. Any such payment deferral by the Company shall be on such terms
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<PAGE>
and conditions as the Committee may determine, except that a Grantee shall not
be entitled to defer the payment of such Option Price, purchase price, or any
related taxes unless the Grantee (a) enters into a binding obligation to pay the
deferred amount and (b) other than with respect to treasury shares, pays upon
exercise of an option or grant of Restricted Shares, as applicable, an amount at
least equal to the Minimum Consideration therefor. If the Committee has
permitted a payment deferral in accordance with this Section 9, then the
Committee may require the immediate payment of such deferred amount upon the
Grantee's termination of employment or if the Grantee sells or otherwise
transfers his or her Shares purchased pursuant to such deferral. The Committee
may at any time in its discretion forgive the repayment of any or all of the
principal of, or interest on, any such deferred payment obligation.
10. Notification under Section 83(b). If the Grantee, in connection
with the exercise of any option or the grant of Restricted Shares, makes the
election permitted under Section 83(b) of the Code to include in such Grantee's
gross income in the year of transfer the amounts specified in Section 83(b) of
the Code, then such Grantee shall notify the Company, in writing, of such
election within ten (10) days after filing the notice of the election with the
Internal Revenue Service, in addition to any filing and notification required
pursuant to regulations issued under Section 83(b) of the Code. The Committee
may, in connection with the grant of an Award or at any time thereafter,
prohibit a Grantee from making the election described in this Section 10.
11. Mandatory Tax Withholding.
-------------------------
(a) Whenever under the Plan, Shares are to be delivered upon
exercise or payment of an Award or upon Restricted Shares becoming
nonforfeitable, or any other event with respect to rights and benefits
hereunder, the Company shall be entitled to require (i) that the Grantee remit
an amount in cash, or in the Company's discretion, Mature Shares or any other
form of consideration, sufficient to satisfy all federal, state and local tax
withholding requirements related thereto ("Required Withholding"), (ii) the
withholding of such Required Withholding from compensation otherwise due to the
Grantee or from any Shares due to the Grantee under the Plan, or (iii) any
combination of the foregoing.
(b) Any Grantee who makes a Disqualifying Disposition or an
election under Section 83(b) of the Code shall remit to the Company an amount
sufficient to satisfy all resulting Required Withholding, except that in lieu of
or in addition to the foregoing, the Company shall have the right to withhold
such Required Withholding from compensation otherwise due to the Grantee or from
any Shares or other payment due to the Grantee under the Plan.
(c) Any surrender by a Section 16 Grantee of previously owned
shares of Common Stock to satisfy tax withholding arising upon exercise of the
Award must comply with the applicable provisions of Rule 16b-3(e) under the 1934
Act.
12. Elective Share Withholding. At the Company's discretion, a Grantee
may, with the prior consent of the Committee, elect the withholding by the
Company of a portion of the Shares otherwise deliverable to such Grantee upon
the exercise of an Award or upon Restricted Shares becoming nonforfeitable
(each, a "Taxable Event") having a Fair Market Value equal to the minimum amount
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necessary to satisfy the Required Withholding liability attributable to the
Taxable Event.
13. Termination of Employment or Service.
------------------------------------
(a) For Cause. Except as otherwise provided by the Committee
in an Award Agreement, if a Grantee's employment or service is terminated for
Cause, (i) the Grantee's Restricted Shares (and any SARs identified therewith)
that are then forfeitable shall on the date of the Grantee's termination of
employment or service be forfeited on such date, subject to the provisions of
Section 6(f)(iii) regarding repayment of certain amounts to the Grantee; and
(ii) any unexercised option, SAR or Performance Share shall terminate effective
immediately upon such termination of employment or service.
(b) On Account of Death. Except as otherwise provided by the
Committee in the Award Agreement, if a Grantee's employment or service
terminates on account of death, then:
(i) the Grantee's Restricted Shares (and any SARs
identified therewith) that are then forfeitable shall on the date of
the Grantee's termination of employment or service be forfeited on such
date;
(ii) any unexercised option or SAR, to the extent
exercisable on the date of such termination of employment or service,
may be exercised, in whole or in part, within the first twelve (12)
months after such termination of employment or service (but only during
the Option Term) after the death of the Grantee by (A) his or her
personal representative or by the person to whom the option or SAR, as
applicable, is transferred by will or the applicable laws of descent
and distribution, (B) the Grantee's designated beneficiary, or (C) a
Permitted Transferee; and
(iii) any unexercised Performance Shares may be
exercised in whole or in part, at any time within six (6) months after
such termination of employment or service on account of the death of
the Grantee, by (A) his or her personal representative or by the person
to whom the Performance Shares are transferred by will or the
applicable laws of descent and distribution, (B) the Grantee's
designated beneficiary, or (C) a Permitted Transferee, except that the
benefit payable with respect to any Performance Shares for which the
Performance Period has not ended as of the date of such termination of
employment or service on account of death shall be equal to the product
of Fair Market Value of such Performance Shares multiplied successively
by each of the following:
(A) a fraction, the numerator of which is
the number of months (including as a whole month any partial
month) that has elapsed since the beginning of such
Performance Period until the date of such termination of
employment or service and the denominator of which is the
number of months (including as a whole month any partial
month) in the Performance Period; and
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(B) a percentage determined in the
discretion of the Committee that would be earned under the
terms of the applicable Award Agreement assuming that the rate
at which the performance goals have been achieved as of the
date of such termination of employment or service would
continue until the end of the Performance Period, or, if the
Committee elects to compute the benefit after the end of the
Performance Period, the Performance Percentage, as determined
by the Committee, attained during the Performance Period for
such Performance Shares.
(c) On Account of Disability. Except as otherwise provided by the
Committee in the Award Agreement, if a Grantee's employment or service
terminates on account of Disability, then:
(i) the Grantee's Restricted Shares (and any SARs
identified therewith) that are then forfeitable shall on the date of
the Grantee's termination of employment or service be forfeited on such
date;
(ii) any unexercised option or SAR, to the extent
exercisable on the date of such termination of employment or service,
may be exercised in whole or in part, within the first twelve (12)
months after such termination of employment or service (but only during
the Option Term) by the Grantee, or by (A) his or her personal
representative or by the person to whom the option or SAR, as
applicable, is transferred by will or the applicable laws of descent
and distribution, (B) the Grantee's designated beneficiary, or (C) a
Permitted Transferee; and
(iii) any unexercised Performance Shares may be
exercised in whole or in part, at any time within six (6) months after
such termination of employment or service on account of Disability by
the Grantee, or by (A) his personal representative or by the person to
whom the Performance Shares are transferred by will or the applicable
laws of descent and distribution, (B) the Grantee's designated
beneficiary, or (C) a Permitted Transferee, except that the benefit
payable with respect to any Performance Shares for which the
Performance Period has not ended as of the date of such termination of
employment or service on account of Disability shall be equal to the
product of the Fair Market Value of the Performance Shares multiplied
successively by each of the following:
(A) a fraction, the numerator of
which is the number of months (including as a whole month any
partial month) that have elapsed since the beginning of such
Performance Period until the date of such termination of
employment or service and the denominator of which is the
number of months (including as a whole month any partial
month) in the Performance Period; and
(B) a percentage determined in the
discretion of the Committee that would be earned under the
terms of the applicable Award Agreement assuming that the rate
at which the performance goals have been achieved as of the
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<PAGE>
date of such termination of employment or service would
continue until the end of the Performance Period, or, if the
Committee elects to compute the benefit after the end of the
Performance Period, the Performance Percentage, as determined
by the Committee, attained during the Performance Period for
such Performance Shares.
(d) Any Reason Other Than For Cause Or On Account of Death or
Disability. Except as otherwise provided by the Committee in the Award
Agreement, if a Grantee's employment or service terminates for any reason other
than for Cause, or on account of death or Disability, then:
(i) the Grantee's Restricted Shares (and any SARs
identified therewith), that are then forfeitable shall on the date of
the Grantee's termination of employment or service be forfeited on such
date;
(ii) any unexercised option or SAR (other than a SAR
identified with a Restricted Share or Performance Share), to the extent
exercisable immediately before the Grantee's termination of employment
or service, may be exercised in whole or in part, not later than three
(3) months after such termination of employment or service (but only
during the Option Term); and
(iii) the Grantee's Performance Shares (and any SARs
identified therewith) shall terminate effective immediately upon such
termination of employment or service.
14. Substituted Awards. If the Committee cancels any Award (whether
granted under the Plan or any plan of any entity acquired by the Company or a
Subsidiary), the Committee may, in its discretion, substitute a new Award
therefor upon such terms and conditions consistent with the Plan as the
Committee may determine, except that (a) the Option Price of any new option, and
the Strike Price of any new SAR, shall not be less than one hundred percent
(100%) (one hundred ten percent (110%) in the case of an incentive stock option
granted to a Ten Percent Owner) of the Fair Market Value of a Share on the date
of the grant of the new Award; and (b) the Grant Date of the new Award shall be
the date on which such new Award is granted.
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<PAGE>
15. Securities Law Matters.
----------------------
(a) If the Committee deems necessary to comply with any
applicable securities law, the Committee may require a written investment intent
representation by the Grantee and may require that a restrictive legend be
affixed to certificates for Shares. If, based upon the advice of counsel to the
Company, the Committee determines that the exercise or nonforfeitability of, or
delivery of benefits pursuant to, any Award would violate any applicable
provision of (i) federal or state securities laws or (ii) the listing
requirements of any national exchange or national market system on which are
listed any of the Company's equity securities, then the Committee may postpone
any such exercise, nonforfeitability or delivery, as applicable, but the Company
shall use all reasonable efforts to cause such exercise, nonforfeitability or
delivery to comply with all such provisions at the earliest practicable date.
(b) Grants of options to Section 16 Grantees shall comply with
Rule 16b-3 and shall contain such additional conditions or restrictions as may
be required thereunder for such grants to qualify for exemption from liability
under Section 16(b) of the 1934 Act.
16. No Employment Rights. Neither the establishment of the Plan nor the
grant of any Award shall (a) give any Grantee the right to remain employed by or
in the service of the Company or any Subsidiary or to any benefits not
specifically provided by the Plan or (b) modify the right of the Company or any
Subsidiary to modify, amend, or terminate the Plan or any other employee benefit
plan or employment, consulting or other agreement.
17. No Rights as a Shareholder. A Grantee shall not have any rights as
a shareholder of the Company with respect to the Shares (other than Restricted
Shares) which may be deliverable upon exercise or payment of an Award until such
Shares have been delivered to him or her. Restricted Shares, whether held by a
Grantee or in escrow by the Company, shall confer on the Grantee all rights of a
shareholder of the Company, except as otherwise provided in the Plan or
applicable Award Agreement.
18. Nature of Payments. Awards shall be special incentive payments to
the Grantee and shall not be taken into account in computing the amount of
salary or compensation of the Grantee for purposes of determining any pension,
retirement, death or other benefit under (a) any pension, retirement,
profit-sharing, bonus, insurance or other employee benefit plan of the Company
or any Subsidiary or (b) any agreement between (i) the Company or any Subsidiary
and (ii) the Grantee, except as such plan or agreement shall otherwise expressly
provide.
19. Non-uniform Determinations. The Committee's determinations under
the Plan need not be uniform and may be made by the Committee selectively among
persons who receive, or are eligible to receive, Awards, whether or not such
persons are similarly situated. Without limiting the generality of the
foregoing, the Committee shall be entitled to enter into non-uniform and
selective Award Agreements as to (a) the identity of the Grantees, (b) the terms
and provisions of Awards, including, without limitation, vesting and manner of
payment of purchase price upon exercise, and (c) the treatment of terminations
of employment or service.
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20. Adjustments. The Committee shall make equitable adjustment
of:
(a) the aggregate number of Shares available under the Plan
for Awards and the aggregate number of Shares for which Awards may be granted to
any individual Grantee in any calendar year pursuant to the second sentence of
Section 2;
(b) the number of Shares, SARs or Performance Shares covered
by an Award; and
(c) the Option Price of all outstanding options and the Strike
Price of all outstanding SARs;
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, spin-off, split-off,
reorganization, rights offering, liquidation or similar event of or by the
Company.
21. Amendment of the Plan. The Committee may from time to time, in its
discretion, amend the Plan without the approval of the Company's shareholders,
except (a) as such shareholder approval may be required under the listing
requirements of any securities exchange or national market system on which are
listed the Company's equity securities and (b) that the Committee may not
without the approval of the Company's shareholders amend the Plan to increase
the total number of shares reserved for the purposes of the Plan (other than in
accordance with Section 20).
22. Termination of the Plan. The Plan shall continue in effect until
the earlier of its termination by the Committee or the date on which all of the
shares of Common Stock available for issuance under the Plan have been issued
and all restrictions on such shares under the terms of the Plan and the
agreements evidencing Awards granted under the Plan have lapsed. However, all
Awards shall be granted, if at all, within ten (10) years from the earlier of
the date the Plan is adopted by the Committee or the date the Plan is duly
approved by the shareholders of the Company. Notwithstanding the foregoing, if
the maximum number of shares of Common Stock issuable pursuant to the Plan has
been increased at any time, all Awards shall be granted, if at all, no later
than the last day preceding the ten (10) year anniversary of the earlier of (a)
the date on which the latest such increase in the maximum number of shares of
Common Stock issuable under the Plan was approved by the shareholders of the
Company or (b) the date such amendment was adopted by the Committee. No
termination shall affect any Award then outstanding under the Plan.
23. No Illegal Transactions. The Plan and all Awards granted pursuant
to it are subject to all applicable laws and regulations. Notwithstanding any
provision of the Plan or any Award, Grantees shall not be entitled to exercise,
or receive benefits under any Award, and the Company shall not be obligated to
deliver any Shares or deliver benefits to a Grantee, if such exercise or
delivery would constitute a violation by the Grantee or the Company of any
applicable law or regulation.
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24. Constructive Sales. The Grantee shall not directly or indirectly,
through related parties or otherwise, "short" or "short against the box" (as
those terms are generally understood in the securities markets), or otherwise
directly or indirectly (through derivative instruments or otherwise) dispose of
or hedge, any securities of the Company issuable upon exercise of such Grantee's
Award(s).
25. Definitions. The terms set forth below have the indicated meanings
which are applicable to both the singular and plural forms thereof:
"Award" shall mean options, including ISOs, Restricted Shares,
Bonus Shares, SARs or Performance Shares granted under the Plan.
"Award Agreement" shall mean the written agreement by which an
Award shall be evidenced.
"Board" shall mean the Board of Directors of the Company.
"Bonus Shares" shall mean Shares that are awarded to a Grantee
without cost and without restrictions.
"Cause", with respect to any employee or consultant of the
Company shall have the meaning set forth in such person's employment or
consulting agreement or, in the absence of such an agreement or if such term is
not defined in such agreement, shall mean any one or more of the following, as
determined by the Committee (in the case of a Section 16 Grantee) or the Chief
Executive Officer or President of the Company (in the case of any other
Grantee):
(i) a Grantee's commission of a crime that is likely
to result in injury to the Company or a Subsidiary;
(ii) the material violation by the Grantee of written
policies of the Company or a Subsidiary;
(iii) the habitual neglect by the Grantee in the
performance of his or her duties to the Company or a Subsidiary; or
(iv) a Grantee's willful misconduct or inaction in
connection with his or her duties to the Company or a Subsidiary resulting in a
material injury to the Company or a Subsidiary.
[If the Company uses standardized definitions in its employment arrangements,
this definition and other termination related definitions should be conformed
with the standardized definitions used by the Company.]
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"Code" shall mean the Internal Revenue Code of 1986, as
amended or superseded, and the regulations and rulings thereunder. Reference to
a particular section of the Code shall include references to successor
provisions.
"Committee" shall mean the committee of the Board appointed
pursuant to Section 3(a), or if not so appointed or unable to act or with
reference to Awards to Independent Directors, shall mean the entire Board.
"Common Stock" shall mean the common stock, $0.001 par value
per share, of the Company.
"Consultant" shall mean any person, including a Director, who
is engaged by the Company or any Parent, Subsidiary or Affiliate thereof, to
render services to or for the benefit of the Company and is compensated for such
services.
"Director" shall mean a member of the Board.
"Disability" shall mean a permanent and total disability,
within the meaning of Section 22(e)(3) of the Code.
"Disqualifying Disposition" shall mean any disposition
(including any sale) of Common Stock before the later of (i) two (2) years after
the date Grantee was granted the ISOs hereunder or (ii) one year after the date
Grantee acquired the Common Stock by exercising the ISOs granted hereunder. If
Grantee dies before such Common Stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
"Effective Date" shall mean the date set forth in the first
paragraph hereof.
"Eligible Person" shall mean any Employee, Consultant or
Director of the Company or any Subsidiary, including any prospective Employee or
Employee on an approved leave of absence or layoff, if such leave or layoff does
not qualify as a Disability.
"Employee" shall mean any person treated as an employee
(including officers and directors) in the records of the Company (or Subsidiary)
and who is subject to the control and direction of the Company (or Subsidiary)
with regard to both the work to be performed and the manner and method of
performance. The payment of a director's fee by the Company (or Subsidiary) to a
Director shall not be sufficient to constitute "employment" of the Director by
the Company (or Subsidiary).
"Fair Market Value" per share of Common Stock on any relevant
date shall mean such value as determined in accordance with the following
provisions:
(i) If the Common Stock is at that time listed on a
national securities exchange, then the Fair Market Value shall mean the closing
selling price per share of Common Stock on the exchange on which such Common
Stock is principally traded on the relevant date or, if there were no sales on
17
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that date, the closing selling price of such Common Stock on the last preceding
date on which there were sales.
(ii) If the Common Stock is at that time traded on
the Nasdaq National Market(R), Nasdaq Small Cap Market(SM) or OTC Bulletin
Board(R), as the case may be, then the Fair Market Value shall mean the closing
selling price per share of Common Stock on the relevant date, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market(R), Nasdaq Small Cap Market(SM) or OTC Bulletin Board(R), as the
case may be, or any successor system. If there is no closing selling price for
the Common Stock on the relevant date, then the Fair Market Value shall mean the
closing selling price on the last preceding date for which such quotation
exists.
(iii) If the Common Stock is neither listed on any
national securities exchange nor traded on the Nasdaq National Market(R), Nasdaq
Small Cap Market(SM) or OTC Bulletin Board(R), then the Fair Market Value shall
mean that value determined by the Committee after taking into account such
factors as the Committee shall in good faith deem appropriate.
"Grant Date" shall have the meaning specified in Section 6(a).
"Grantee" shall mean a person who has been granted an Award or
any Permitted Transferee.
"ISO" shall mean an incentive stock option within the meaning
of Section 422 of the Code.
"Immediate Family" shall mean, with respect to a particular
Grantee, the Grantee's spouse, children and grandchildren.
"Independent Director" shall mean a member of the Board who in
not an Employee of the Company.
"Mature Shares" shall mean Shares for which the holder thereof
has good title, free and clear of all liens and encumbrances, and which such
holder has held for at least six (6) months.
"Minimum Consideration" shall mean par value per Share or such
other amount that is from time to time considered to be minimum consideration
under applicable law.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended. References to a particular section of the 1934 Act or rule thereunder,
include references to successor provisions.
"Option Price" shall mean the per share exercise price of an
option.
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<PAGE>
"Option Term" shall mean the period beginning on the Grant
Date of an option and ending on the expiration date of such option, as specified
in the Award Agreement for such option and as may, in the discretion of the
Committee and consistent with the provisions of the Plan, be extended from time
to time.
"Performance Shares" shall mean an Award to a Grantee pursuant
to Section 6(e).
"Permitted Transferee" shall mean a person to whom an Award
may be transferred or assigned in accordance with Section 7.
"Public Company" shall mean any entity issuing any class of
equity securities that has been, or is required to be, registered under Section
12 of the 1934 Act.
"Restricted Shares" shall mean Shares that are subject to
forfeiture if the Grantee does not satisfy the conditions specified in the Award
Agreement applicable to those Shares.
"Rule 16b-3" shall mean Rule 16b-3 of the SEC under the 1934
Act, as amended from time to time, together with any successor rule.
"SAR" shall mean a stock appreciation right.
"SEC" shall mean the Securities and Exchange Commission.
"Section 16 Grantee" shall mean a person who is subject to
potential liability under Section 16(b) of the 1934 Act with respect to
transactions involving equity securities of the Company.
"Share" shall mean a share of Common Stock.
"Strike Price" shall have the meaning specified in Section
6(d)(ii).
"Subsidiary" shall mean a subsidiary corporation, as defined
in Section 424(f) of the Code (with the Company being treated as the employer
corporation for purposes of this definition).
"Ten Percent Owner" shall mean a person who owns capital stock
(including stock treated as owned under Section 424(d) of the Code) possessing
more than ten percent of the total combined Voting Power of all classes of
capital stock of the Company or any Subsidiary.
"Voting Power" shall mean the combined voting power of the
then-outstanding securities of the Company entitled to vote generally in the
election of directors.
26. Controlling Law. The law of the State of Delaware, except its
law with respect to choice of law, shall control all matters relating to the
Plan.
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27. Severability. If any part of the Plan is declared by any court or
governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not invalidate any other part of the Plan. Any Section or part
of a Section so declared to be unlawful or invalid shall, if possible, be
construed in a manner which will given effect to the terms of such Section to
the fullest extent possible while remaining lawful and valid.
20
