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SCHEDULE 14C
(RULE 14C-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF
THE SECURITIES EXCHANGE ACT OF 1934
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
LOCH EXPLORATION, INC.
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(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14-c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
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[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(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.
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(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
LOCH EXPLORATION, INC.
3200 Wilcrest, Suite 370
Houston, Texas 77042
March 12, 1999
Dear Stockholders:
The board of directors of Loch Exploration, Inc. has approved amending
the company's Articles of Incorporation to change the name of the company
from Loch Exploration, Inc. to Design Automation Systems Incorporated. The
board of directors has also approved the adoption of the 1999 Employee Stock
Option Plan.
The holders of more than 50% of the outstanding shares of common stock
of the company have also approved the foregoing actions by written consent.
Pursuant to the provisions of Texas law and the company's Articles of
Incorporation, as amended, the holders of at least a majority of the
outstanding voting shares are permitted to approve the Amendment and the
Stock Option Plan by written consent in lieu of a meeting, provided that
prompt notice of such actions are given to the other stockholders. Pursuant
to the rules and regulations promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended, an
information statement must be sent to the holders of the voting stock who do
not sign the written consent at least twenty days prior to the effective date
of the action. This notice, which is being sent to all the holders of record
as of March 8, 1999, is intended to serve as such notice under Texas law and
as the information statement required by the Exchange Act.
Please note that you are not being asked to send a proxy, and you are
requested not to send one.
Sincerely yours,
Carl R. Rose
Chairman of the Board and
Chief Executive Officer
<PAGE>
LOCH EXPLORATION, INC.
3200 Wilcrest, Suite 370
Houston, Texas 77042
Notice of Action by Written Consent of Stockholders
TO THE STOCKHOLDERS OF LOCH EXPLORATION, INC.:
Notice is hereby given that the holders of more than 50% of the
outstanding shares of common stock of the company have agreed to take action
by written consent of the stockholders to approve the following:
- An amendment to the company's Articles of Incorporation to change the name
of the company from Loch Exploration, Inc. to Design Automation Systems
Incorporated, and
- the adoption of the 1999 Employee Stock Option Plan.
The foregoing action is more fully described in the information
statement accompanying this notice. A record date of March 8, 1999 has been
fixed for the determination of stockholders entitled to notice of the taking
of such action by written consent of the stockholders. The actions are
expected to be effective on or about April 1, 1999.
BY ORDER OF THE BOARD OF DIRECTORS
Carl R. Rose
Chairman
March 12, 1999
Houston, Texas
<PAGE>
LOCH EXPLORATION, INC.
3200 WILCREST, SUITE 370
HOUSTON, TEXAS 77042
MARCH 12, 1999
INFORMATION STATEMENT
This Information Statement is being mailed to the stockholders of Loch
Exploration, Inc. commencing on or about March 12, 1999, in connection with
the previous approval by the board of directors of the company of the
corporate actions referred to below and their subsequent adoption by the
majority stockholder of the company. Accordingly, all necessary corporate
approvals in connection with the matters referred to herein have been
obtained, and 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, of these corporate actions before they take
effect. WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND
US A PROXY.
ACTIONS TAKEN
The company, as authorized by the necessary approvals of the board of
directors and the company's majority stockholder, has approved the following
actions:
- - adoption of an amendment, in the form of Exhibit "A" hereto, to the
company's Articles of Incorporation, as amended, to change the name of
the company from Loch Exploration, Inc. to Design Automation Systems
Incorporated; and
- - adoption of an Employee Stock Option Plan, in the form of Exhibit "B"
hereto.
The majority stockholder's consent with respect to the Amendment, and
the Stock Option Plan, will take effect 20 days after the mailing of this
Information Statement or on such other date as may be specified by the board
of directors. A complete summary of each of these matters is set forth herein.
CHANGE OF CORPORATE NAME
The board of directors and majority stockholder of the company adopted a
resolution setting forth an amendment to Article I of the company's Articles
of Incorporation, a copy of the Amendment is attached hereto as Exhibit "A."
The amendment will be effective upon when filed with the Secretary of State
of Texas and will amend Article I of the company's Articles of Incorporation
to read as follows:
"The name of the corporation shall be Design Automation Systems
Incorporated."
Upon the effective date of the name change, the trading symbol for the common
stock on the OTC Electronic Bulletin Board will also be changed to more
accurately reflect the new name. Stock certificates representing the
company's common stock issued prior to the effective date of the change in
the corporate name to "Design Automation Systems Incorporated" will continue
to represent the same number of shares, remain authentic, and will not be
required to be returned to the company or its transfer agent for reissuance.
New stock certificates issued upon transfer of shares of
<PAGE>
common stock after the name change will bear the name "Design Automation
Systems Incorporated." Delivery of existing stock certificates will continue
to be accepted in a sale transaction made by a shareholder after the
corporate name is changed.
ADOPTION OF THE 1999 EMPLOYEE STOCK OPTION PLAN
The 1999 Employee Stock Option Plan was adopted by the Board of
Directors and approved by the majority stockholder in February 1999. The
Plan will allow stock option grants, performance stock awards, restricted
stock awards, and stock appreciation rights ("SAR") as determined by the
company's compensation committee. The Board has reserved 3,000,000 shares
of common stock for issuance pursuant to the Plan. The purpose of the Plan
is to foster and promote the financial success of the company and increase
stockholder value by enabling eligible key employees and others to
participate in the long-term growth and financial success of the company. A
summary of the Plan is set forth below, and the full text of the Plan is
attached hereto as Exhibit "B."
ELIGIBILITY. The Plan is open to key employees (including officers and
directors) and consultants of the company and its affiliates ("Eligible
Persons").
TRANSFERABILITY. The grants are not transferrable.
CHANGES IN THE COMPANY'S CAPITAL STRUCTURE. The Plan will not effect the
right of the company to authorize adjustments, recapitalizations,
reorganizations or other changes in the company's capital structure. In the
event of an adjustment, recapitalization or reorganization the award shall be
adjusted accordingly. In the event of a merger, consolidation, or
liquidation, the Eligible Person will be eligible to receive a like number of
shares of stock in the new entity he would have been entitled to if
immediately prior to the merger he had exercised his option. The Board may
waive any limitations imposed under the Plan so that all options are
immediately exercisable. All outstanding options may be canceled by the
Board upon written notice to the Eligible Person and by granting a period in
which the options may be exercised.
OPTIONS AND SARS. The company may grant incentive or nonqualified stock
options.
OPTION PRICE. Incentive options shall be not less than the greater of
(i)100% of fair market value on the date of grant, or (ii) the aggregate par
value of the shares of stock on the date of grant. The compensation
committee, at its option, may provide for a price greater than 100% of fair
market value. The price for 10% or more stockholders shall be not less than
110% of fair market value.
DURATION. No option or SAR may be exercisable after the period of 10
years. In the case of a 10% or more stockholder no incentive option may be
exercisable after the expiration of five years.
AMOUNT EXERCISABLE-INCENTIVE OPTIONS. No option may be exercisable
within six months from its date of grant unless a shorter time is designated
by the Board. In the event an Eligible Person exercises incentive options
during the calendar year whose aggregate fair market value exceeds $100,000,
the exercise of options over $100,000 will be considered non qualified stock
options.
EXERCISE OF OPTIONS. Options may be exercised by written notice to the
compensation committee with:
- - cash, certified check, bank draft, or postal or express money order
payable to the order of the Company for an amount equal to the option
price of the shares;
- - stock at its fair market value on the date of exercise;
- - an election to make a cashless exercise through a registered
broker-dealer (if approved in advance by the compensation committee);
- - an election to have shares of stock, which otherwise would be issued
on exercise, withheld in payment of the exercise price (if approved in
advance by the compensation committee); and/or
<PAGE>
- - any other form of payment which is acceptable to the compensation
committee, including without limitation, payment in the form of a
promissory note, and specifying the address to which the certificates
for the shares are to be mailed.
SARS. SARs may, at the discretion of the compensation committee, be
included in each option granted under the Plan to permit the Eligible Person
to surrender that option, or a portion of the part which is then exercisable,
and receive in exchange an amount equal to the excess of the fair market
value of the stock covered by the option, over the aggregate exercise price
of the stock. The payment may be made in shares of stock valued at fair
market value, in cash, or partly in cash and partly in shares of stock, as
the compensation committee determines. SARs may be exercised only when the
fair market value of the stock covered by the option surrendered exceeds the
exercise price of the stock. In the event of the surrender of an option, or
a portion of it, to exercise the SARs, the shares represented by the option
or that part of it which is surrendered, shall not be available for
reissuance under the Plan. Each SAR issued in tandem with an option (a) will
expire not later than the expiration of the underlying option, (b) may be for
no more than 100% of the difference between the exercise price of the
underlying option and the fair market value of a share of stock at the time
the SAR is exercised, (c) is transferable only when the underlying option is
transferable, and under the same conditions, and (d) may be exercised only
when the underlying option is eligible to be exercised.
TERMINATION OF OPTIONS OR SARS. Unless expressly provided in the option
or SAR agreement, options or SARs shall terminate one day less than three
months after an employees severance of employee with the company other than
death, disability or retirement.
DEATH. Unless the option or SAR expires sooner, the option or SAR will
expire one year after the death of the Eligible Person.
DISABILITY. Unless the option or SAR expires sooner, the option or SAR
will expire one day less than one year after the disability of the Eligible
Person.
RETIREMENT. Unless it is expressly provided otherwise in the option
agreement, before the expiration of an incentive option, the employee shall
be retired in good standing from the employ of the company under the then
established rules of the company, the incentive option shall terminate on the
earlier of the option's expiration date or one day less than one year after
his retirement; provided, if an incentive option is not exercised within
specified time limits prescribed by the Internal Revenue Code, it will become
a nonqualified option by operation of law. Unless it is expressly provided
otherwise in the option agreement, if before the expiration of a nonqualified
option, the employee shall be retired in good standing from the employ of the
company under the then established rules of the company, the nonqualified
option shall terminate on the earlier of the nonqualified option's expiration
date or one day less than one year after his retirement. In the event of
retirement, the employee shall have the right prior to the termination of the
nonqualified option to exercise the nonqualified option, to the extent to
which he was entitled to exercise it immediately prior to his retirement,
unless it is expressly provided otherwise in the option agreement. Upon
retirement, a SAR shall continue to be exercisable for the remainder of the
term of the SAR agreement.
RELOAD OPTIONS. The Board or compensation committee shall have the
authority (but not an obligation) to include as part of any option agreement
a provision entitling the Eligible Person to a further option (a "Reload
Option") in the event the Eligible Person exercises the option in accordance
with the Plan and the terms and conditions of the option agreement. Any such
Reload Option (a) shall be for a number of shares equal to the number of
shares surrendered as part or all of the exercise price of such option, (b)
shall have an expiration date which is the greater of (i) the same expiration
date of the option the exercise of which gave rise to such Reload Option, or
(ii) one year from the date of grant of the Reload Option, and (c) shall have
an exercise price which is equal to one hundred percent (100%) of the fair
market value of the stock subject to the Reload Option on the date of
exercise of the original option. Notwithstanding the foregoing, a Reload
Option which is an incentive option and which is granted to a 10%
Stockholder, shall have an exercise price which is equal to one hundred ten
percent (110%) of the fair market value of the stock subject to the Reload
Option on the date of exercise of the original option and shall have a term
which is no longer than five (5) years.
<PAGE>
RESTRICTED STOCK AWARDS. The compensation committee may issue shares
of stock to an Eligible Person subject to the terms of a restricted stock
agreement. The restricted stock may be issued for no payment by the Eligible
Person or for a payment below the fair market value on the date of grant.
Restricted stock shall be subject to restrictions as to sale, transfer,
alienation, pledge or other encumbrance and generally will be subject to
vesting over a period of time specified in the restricted stock agreement.
The compensation committee shall determine the period of vesting, the number
of shares, the price, if any, of stock included in a restricted stock award,
and the other terms and provisions which are included in a restricted stock
agreement.
AWARD OF PERFORMANCE STOCK. The compensation committee may award shares
of stock, without any payment for such shares, to designated Eligible Persons
if specified performance goals established by the Compensation Committee are
satisfied. The terms and provisions herein relating to these performance
based awards are intended to satisfy Section 162(m) of the Code and
regulations issued thereunder. The designation of an employee eligible for a
specific performance stock award shall be made by the compensation committee
in writing prior to the beginning of the period for which the performance is
measured (or within such period as permitted by IRS regulations).
AMENDMENT OR TERMINATION OF THE PLAN. The Board may amend, terminate or
suspend the Plan at any time, in its sole and absolute discretion; provided,
however, that to the extent required to qualify the Plan under Rule 16b-3
promulgated under Section 16 of the Exchange Act, no amendment that would (a)
materially increase the number of shares of stock that may be issued under
the Plan, (b) materially modify the requirements as to eligibility for
participation in the Plan, or (c) otherwise materially increase the benefits
accruing to participants under the Plan, shall be made without the approval
of the company's Stockholders; provided further, however, that to the extent
required to maintain the status of any incentive option under the Code, no
amendment that would (a) change the aggregate number of shares of stock which
may be issued under incentive options, (b) change the class of employees
eligible to receive incentive options, or (c) decrease the option price for
incentive options below the fair market value of the stock at the time it is
granted, shall be made without the approval of the Stockholders. Subject to
the preceding sentence, the Board shall have the power to make any changes in
the Plan and in the regulations and administrative provisions under it or in
any outstanding incentive option as in the opinion of counsel for the company
may be necessary or appropriate from time to time to enable any incentive
option granted under this Plan to continue to qualify as an incentive stock
option or such other stock option as may be defined under the Code so as to
receive preferential federal income tax treatment
BY ORDER OF THE BOARD OF DIRECTORS
Carl R. Rose, Chief Executive Officer
March 12, 1999
<PAGE>
EXHIBIT A
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
LOCH EXPLORATION, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporations Act, the undersigned corporation adopts the following Articles
of Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the corporation is Loch Exploration, Inc.
ARTICLE TWO
The following amendments and additions were adopted by the shareholders
of the corporation on February 24, 1999.
The amendment alters in full Article I of the original Articles of
Incorporation to read as follows:
ARTICLE I.
The name of the corporation is Design Automation Systems Incorporated.
ARTICLE THREE
Each statement made by these Amended Articles of Incorporation has been
effected in conformity with the provisions of the Texas Business Corporations
Act. These Articles of Amendment to the Articles of Incorporation were adopted
by the Shareholders of the corporation on February 24, 1999.
ARTICLE FOUR
The number of shares of the Company outstanding at the time of the adoption
was 20,160,000 and the number of shares entitled to vote on the amendment was
20,160,000.
<PAGE>
ARTICLE FIVE
The holder of 14,400,000 shares outstanding entitled to vote on the
amendment has signed a consent in writing adopting the amendment.
LOCH EXPLORATION, INC.
By:
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Name: Carl R. Rose
Title: Chief Executive officer
STATE OF TEXAS Section
COUNTY OF HARRIS Section
Before me, a notary public, on this day personally appeared, Carl R. Rose,
known to me to be the person whose name is subscribed to the foregoing document
and, being by me first duly sworn, declared that the statements therein
contained are true and correct.
Given under my hand and seal this __________ day of __________, 1999.
_______________________________
Notary Public, State of Texas
My commission expires:
______________________, 1999
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EXHIBIT B
DESIGN AUTOMATION SYSTEMS INCORPORATED
1999 STOCK OPTION PLAN
ARTICLE I - PLAN
1.1 PURPOSE. This Plan is a plan for key Employees (including
officers and employee directors) and Consultants of the Company and its
Affiliates and is intended to advance the best interests of the Company, its
Affiliates, and its stockholders by providing those persons who have
substantial responsibility for the management and growth of the Company and
its Affiliates with additional incentives and an opportunity to obtain or
increase their proprietary interest in the Company, thereby encouraging them
to continue in the employ of the Company or any of its Affiliates.
1.2 RULE 16b-3 PLAN. The Company is subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "1934
Act"), and therefore the Plan is intended to comply with all applicable
conditions of Rule 16b-3 (and all subsequent revisions thereof) promulgated
under the 1934 Act. To the extent any provision of the Plan or action by the
Board of Directors or Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Committee. In addition, the Board of Directors may amend the Plan from time
to time as it deems necessary in order to meet the requirements of any
amendments to Rule 16b-3 without the consent of the shareholders of the
Company.
1.3 EFFECTIVE DATE OF PLAN. The Plan shall be effective April 1999
(the "Effective Date"), provided that within one year of the Effective Date,
the Plan shall have been approved by at least a majority vote of stockholders
voting in person or by proxy at a duly held stockholders' meeting, or if the
provisions of the corporate charter, by-laws or applicable state law
prescribes a greater degree of stockholder approval for this action, the
approval by the holders of that percentage, at a duly held meeting of
stockholders. No Incentive Option, Nonqualified Option, Stock Appreciation
Right, Restricted Stock Award or Performance Stock Award shall be granted
pursuant to the Plan ten years after the Effective Date.
ARTICLE II - DEFINITIONS
The words and phrases defined in this Article shall have the meaning set
out in these definitions throughout this Plan, unless the context in which
any such word or phrase appears reasonably requires a broader, narrower, or
different meaning.
2.1 "AFFILIATE" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation (other than
the Company) in an unbroken chain of corporations ending with the Company if,
at the time of the action or transaction, each of the corporations other than
the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in the chain.
The term "subsidiary corporation" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if,
at the time of the action or transaction, each of the corporations other than
the last corporation in the unbroken chain owns stock possessing 50% or more
of the total combined voting power of all classes of stock in one of the
other corporations in the chain.
2.2 "AWARD" means each of the following granted under this Plan:
Incentive Option, Nonqualified Option, Stock Appreciation Right, Restricted
Stock Award or Performance Stock Award.
2.3 "BOARD OF DIRECTORS" means the board of directors of the
Company.
2.4 "CHANGE IN CONTROL" shall mean and include the following
transactions or situations:
B-1
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(a) A sale, transfer, or other disposition by the Company
through a single transaction or a series of transactions of securities of the
Company representing thirty (30%) percent or more of the combined voting
power of the Company's then outstanding securities to any "Unrelated Person"
or "Unrelated Persons" acting in concert with one another. For purposes of
this definition, the term "Person" shall mean and include any individual,
partnership, joint venture, association, trust corporation, or other entity
(including a "group" as referred to in Section 13(d)(3) of the 1934 Act). For
purposes of this definition, the term "Unrelated Person" shall mean and
include any Person other than the Company, a wholly-owned subsidiary of the
Company, or an employee benefit plan of the Company; provided however, a sale
to underwriters in connection with a public offering of the Company's
securities pursuant to a firm commitment shall not be a Change of Control.
(b) A sale, transfer, or other disposition through a single
transaction or a series of transactions of all or substantially all of the
assets of the Company to an Unrelated Person or Unrelated Persons acting in
concert with one another.
(c) A change in the ownership of the Company through a single
transaction or a series of transactions such that any Unrelated Person or
Unrelated Persons acting in concert with one another become the "Beneficial
Owner," directly or indirectly, of securities of the Company representing at
least thirty (30%) percent of the combined voting power of the Company's then
outstanding securities. For purposes of this definition, the term "Beneficial
Owner" shall have the same meaning as given to that term in Rule 13d-3
promulgated under the 1934 Act, provided that any pledgee of voting
securities is not deemed to be the Beneficial Owner thereof prior to its
acquisition of voting rights with respect to such securities.
(d) Any consolidation or merger of the Company with or into an
Unrelated Person, unless immediately after the consolidation or merger the
holders of the common stock of the Company immediately prior to the
consolidation or merger are the beneficial owners of securities of the
surviving corporation representing at least fifty (50%) percent of the
combined voting power of the surviving corporation's then outstanding
securities.
(e) During any period of two years, individuals who, at the
beginning of such period, constituted the Board of Directors of the Company
cease, for any reason, to constitute at least a majority thereof, unless the
election or nomination for election of each new director was approved by the
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period.
(f) A change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A promulgated under the 1934 Act, or any successor regulation of
similar importance, regardless of whether the Company is subject to such
reporting requirement.
2.5 "CODE" means the Internal Revenue Code of 1986, as amended.
2.6 "COMMITTEE" means the Compensation Committee of the Board of
Directors or such other committee designated by the Board of Directors.
2.7 "COMPANY" means Design Automation Systems Incorporated.
2.8 "CONSULTANT" means any person, including an advisor, engaged by
the Company or Affiliate to render services and who is compensated for such
services.
2.9 "DISINTERESTED PERSON" means a "disinterested person" as that
term is defined in Rule 16b-3 under the 1934 Act.
B-2
<PAGE>
2.10 "ELIGIBLE PERSONS" shall mean, with respect to the Plan, those
persons who, at the time that an Award is granted, are (i) key personnel
(including officers and directors) of the Company or Affiliate, or (ii)
Consultants or independent contractors who provide valuable services to the
Company or Affiliate as determined by the Committee.
2.11 "EMPLOYEE" means a person employed by the Company or any
Affiliate to whom an Award is granted.
2.12 "FAIR MARKET VALUE" of the Stock as of any date means (a) the
average of the high and low sale prices of the Stock on that date on the
principal securities exchange on which the Stock is listed; or (b) if the
Stock is not listed on a securities exchange, the average of the high and low
sale prices of the Stock on that date as reported on the NASDAQ National
Market System; or (c) if the Stock is not listed on the NASDAQ National
Market System, the average of the high and low bid quotations for the Stock
on that date as reported by the National Quotation Bureau Incorporated; or
(d) if none of the foregoing is applicable, an amount at the election of the
Committee equal to (x), the average between the closing bid and ask prices
per share of Stock on the last preceding date on which those prices were
reported or (y) that amount as determined by the Committee in good faith.
2.13 "INCENTIVE OPTION" means an option to purchase Stock granted
under this Plan which is designated as an "Incentive Option" and satisfies
the requirements of Section 422 of the Code.
2.14 "NONQUALIFIED OPTION" means an option to purchase Stock
granted under this Plan other than an Incentive Option.
2.15 "OPTION" means both an Incentive Option and a Nonqualified
Option granted under this Plan to purchase shares of Stock.
2.16 "OPTION AGREEMENT" means the written agreement by and between
the Company and an Eligible Person which sets out the terms of an Option.
2.17 "PLAN" means the Design Automation Systems Incorporated 1999
Stock Option Plan, as set out in this document and as it may be amended from
time to time.
2.18 "PLAN YEAR" means the Company's fiscal year.
2.19 "PERFORMANCE STOCK AWARD" means an award of shares of Stock
to be issued to an Eligible Person if specified predetermined performance
goals are satisfied as described in Article VI.
2.20 "RESTRICTED STOCK" means Stock awarded or purchased under a
Restricted Stock Agreement entered into pursuant to this Plan, together with
(i) all rights, warranties or similar items attached or accruing thereto or
represented by the certificate representing the stock and (ii) any stock or
securities into which or for which the stock is thereafter converted or
exchanged. The terms and conditions of the Restricted Stock Agreement shall
be determined by the Committee consistent with the terms of the Plan.
2.21 "RESTRICTED STOCK AGREEMENT" means an agreement between the
Company or any Affiliate and the Eligible Person pursuant to which the
Eligible Person receives a Restricted Stock Award subject to Article VI.
2.22 "RESTRICTED STOCK AWARD" means an Award of Restricted Stock.
B-3
<PAGE>
2.23 "RESTRICTED STOCK PURCHASE PRICE" means the purchase price, if
any, per share of Restricted Stock subject to an Award. The Restricted Stock
Purchase Price shall be determined by the Committee. It may be greater than
or less than the Fair Market Value of the Stock on the date of the Stock
Award.
2.24 "STOCK" means the common stock of the Company, $.001 par value
or, in the event that the outstanding shares of common stock are later
changed into or exchanged for a different class of stock or securities of the
Company or another corporation, that other stock or security.
2.25 "STOCK APPRECIATION RIGHT" and "SAR" means the right to receive
the difference between the Fair Market Value of a share of Stock on the grant
date and the Fair Market Value of the share of Stock on the exercise date.
2.26 "10% STOCKHOLDER" means an individual who, at the time the
Option is granted, owns Stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or of any Affiliate. An
individual shall be considered as owning the Stock owned, directly or
indirectly, by or for his brothers and sisters (whether by the whole or half
blood), spouse, ancestors, and lineal descendants; and Stock owned, directly
or indirectly, by or for a corporation, partnership, estate, or trust, shall
be considered as being owned proportionately by or for its stockholders,
partners, or beneficiaries.
ARTICLE III - ELIGIBILITY
The individuals who shall be eligible to receive Awards shall be those
Eligible Persons of the Company or any of its Affiliates as the Committee
shall determine from time to time. The Board of Directors of Directors may
designate one or more individuals who shall not be eligible to receive any
Award under this Plan or under other similar plans of the Company.
ARTICLE IV - GENERAL PROVISIONS RELATING TO AWARDS
4.1 AUTHORITY TO GRANT AWARDS. The Committee may grant to those
Eligible Persons of the Company or any of its Affiliates as it shall from
time to time determine, Awards under the terms and conditions of this Plan.
Subject only to any applicable limitations set out in this Plan, the number
of shares of Stock to be covered by any Award to be granted to an Eligible
Person shall be determined by the Committee.
4.2 DEDICATED SHARES. The total number of shares of Stock with
respect to which Awards may be granted under the Plan shall be 3,000,000
shares. The shares may be treasury shares or authorized but unissued shares.
[THE MAXIMUM NUMBER OF SHARES SUBJECT TO OPTIONS OR STOCK APPRECIATION RIGHTS
WHICH MAY BE ISSUED TO ANY ELIGIBLE PERSON UNDER THE PLAN DURING EACH PLAN
YEAR SHALL BE DETERMINED BY THE COMPENSATION COMMITTEE. THE MAXIMUM NUMBER OF
SHARES SUBJECT TO RESTRICTED STOCK AWARDS WHICH MAY BE GRANTED TO ANY ELIGIBLE
PERSON UNDER THE PLAN DURING EACH PLAN YEAR SHALL BE DETERMINED BY THE
COMPENSATION COMMITTEE. THE MAXIMUM NUMBER OF SHARES SUBJECT TO PERFORMANCE
STOCK AWARDS WHICH MAY BE GRANTED TO ANY ELIGIBLE PERSON DURING EACH PLAN
YEAR SHALL BE DETERMINED BY THE COMPENSATION COMMITTEE.] The number of shares
stated in this Section 4.2 shall be subject to adjustment in accordance with
the provisions of Section 4.5. In the event that any outstanding Award shall
expire or terminate for any reason or any Award is surrendered, the shares of
Stock allocable to the unexercised portion of that Award may again be subject
to an Award under the Plan.
4.3 NON-TRANSFERABILITY. Awards shall not be transferable by the
Eligible Person otherwise than by will or under the laws of descent and
distribution, and shall be exercisable, during the Eligible Person's
lifetime, only
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by him. Restricted Stock shall be purchased by and/or become vested under a
Restricted Stock Agreement during the Eligible Person's lifetime, only by
him. Any attempt to transfer an Award other than under the terms of the Plan
and the Agreement shall terminate the Award and all rights of the Eligible
Person to that Award.
4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell
or issue any Stock under any Award if issuing that Stock would constitute or
result in a violation by the Eligible Person or the Company of any provision
of any law, statute, or regulation of any governmental authority.
Specifically, in connection with any applicable statute or regulation
relating to the registration of securities, upon exercise of any Option or
pursuant to any Award, the Company shall not be required to issue any Stock
unless the Committee has received evidence satisfactory to it to the effect
that the holder of that Option or Award will not transfer the Stock except in
accordance with applicable law, including receipt of an opinion of counsel
satisfactory to the Company to the effect that any proposed transfer complies
with applicable law. The determination by the Committee on this matter shall
be final, binding and conclusive. The Company may, but shall in no event be
obligated to, register any Stock covered by this Plan pursuant to applicable
securities laws of any country or any political subdivision. In the event the
Stock issuable on exercise of an Option or pursuant to an Award is not
registered, the Company may imprint on the certificate evidencing the Stock
any legend that counsel for the Company considers necessary or advisable to
comply with applicable law. The Company shall not be obligated to take any
other affirmative action in order to cause the exercise of an Option or
vesting under an Award, or the issuance of shares pursuant thereto, to comply
with any law or regulation of any governmental authority.
4.5 CHANGES IN THE COMPANY'S CAPITAL STRUCTURE.
(a) The existence of outstanding Options or Awards shall not
affect in any way the right or power of the Company or its stockholders to
make or authorize any or all adjustments, recapitalizations, reorganizations
or other changes in the Company's capital structure or its business, or any
merger or consolidation of the Company, or any issue of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Stock or its
rights, or the dissolution or liquidation of the Company, or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise. If the
Company shall effect a subdivision or consolidation of shares or other
capital readjustment, the payment of a Stock dividend, or other increase or
reduction of the number of shares of the Stock outstanding, without receiving
compensation for it in money, services or property, then (a) the number,
class, and per share price of shares of Stock subject to outstanding Options
under this Plan shall be appropriately adjusted in such a manner as to
entitle an Eligible Person to receive upon exercise of an Option, for the
same aggregate cash consideration, the equivalent total number and class of
shares he would have received had he exercised his Option in full immediately
prior to the event requiring the adjustment; and (b) the number and class of
shares of Stock then reserved to be issued under the Plan shall be adjusted
by substituting for the total number and class of shares of Stock then
reserved, that number and class of shares of Stock that would have been
received by the owner of an equal number of outstanding shares of each class
of Stock as the result of the event requiring the adjustment.
(b) If the Company is merged or consolidated with another
corporation and the Company is not the surviving corporation, or if the
Company is liquidated or sells or otherwise disposes of substantially all its
assets while unexercised Options remain outstanding under this Plan:
(i) subject to the provisions of clause (c) below, after
the effective date of the merger, consolidation, liquidation, sale or other
disposition, as the case may be, each holder of an outstanding Option shall
be entitled, upon exercise of the Option, to receive, in lieu of shares of
Stock, the number and class or classes of shares of stock or other securities
or property to which the holder would have been entitled if, immediately
prior to the merger, consolidation, liquidation, sale or other disposition,
the holder had been the holder of record of a number of shares of Stock equal
to the number of shares as to which the Option shall be so exercised;
(ii) the Board of Directors may waive any limitations set
out in or imposed under this Plan so that all Options, from and after a date
prior to the effective date of the merger, consolidation, liquidation, sale
or other disposition, as the case may be, specified by the Board of
Directors, shall be exercisable in full; and
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(iii) all outstanding Options may be canceled by the Board
of Directors as of the effective date of any merger, consolidation,
liquidation, sale or other disposition, if (i) notice of cancellation shall
be given to each holder of an Option and (ii) each holder of an Option shall
have the right to exercise that Option in full (without regard to any
limitations set out in or imposed under this Plan or the Option Agreement
granting that Option) during a period set by the Board of Directors preceding
the effective date of the merger, consolidation, liquidation, sale or other
disposition and, if in the event all outstanding Options may not be exercised
in full under applicable securities laws without registration of the shares
of Stock issuable on exercise of the Options, the Board of Directors may
limit the exercise of the Options to the number of shares of Stock, if any,
as may be issued without registration. The method of choosing which Options
may be exercised, and the number of shares of Stock for which Options may be
exercised, shall be solely within the discretion of the Board of Directors.
(c) After a merger of one or more corporations into the
Company or after a consolidation of the Company and one or more corporations
in which the Company shall be the surviving corporation, each Eligible Person
shall be entitled to have his Restricted Stock and shares earned under a
Performance Stock Award appropriately adjusted based on the manner the Stock
was adjusted under the terms of the agreement of merger or consolidation.
(d) In each situation described in this Section 4.5, the
Committee will make similar adjustments, as appropriate, in outstanding Stock
Appreciation Rights.
(e) The issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, for cash
or property, or for labor or services either upon direct sale or upon the
exercise of rights or warrants to subscribe for them, or upon conversion of
shares or obligations of the Company convertible into shares or other
securities, shall not affect, and no adjustment by reason of such issuance
shall be made with respect to, the number, class, or price of shares of Stock
then subject to outstanding Awards.
4.6 ELECTION UNDER SECTION 83(b) OF THE CODE. No Employee shall exercise
the election permitted under Section 83(b) of the Code without written
approval of the Committee. Any Employee doing so shall forfeit all Awards
issued to him under this Plan.
ARTICLE V - OPTIONS AND STOCK APPRECIATION RIGHTS
5.1 TYPE OF OPTION. The Committee shall specify at the time of
grant whether a given Option shall constitute an Incentive Option or a
Nonqualified Option. Incentive Stock Options may only be granted to Employees.
5.2 OPTION PRICE. The price at which Stock may be purchased under
an Incentive Option shall not be less than the greater of: (a) 100% of the
Fair Market Value of the shares of Stock on the date the Option is granted or
(b) the aggregate par value of the shares of Stock on the date the Option is
granted. The Committee in its discretion may provide that the price at which
shares of Stock may be purchased under an Incentive Option shall be more than
100% of Fair Market Value. In the case of any 10% Stockholder, the price at
which shares of Stock may be purchased under an Incentive Option shall not be
less than 110% of the Fair Market Value of the Stock on the date the
Incentive Option is granted. The price at which shares of Stock may be
purchased under a Nonqualified Option shall be such price as shall be
determined by the Committee in its sole discretion but in no event lower than
the par value of the shares of Stock on the date the Option is granted.
5.3 DURATION OF OPTIONS AND SARS. No Option or SAR shall be
exercisable after the expiration of ten (10) years from the date the Option
or SAR is granted. In the case of a 10% Stockholder, no Incentive Option
shall be exercisable after the expiration of five years from the date the
Incentive Option is granted.
5.4 AMOUNT EXERCISABLE -- INCENTIVE OPTIONS. Each Option may be
exercised from time to time, in whole or in part, in the manner and subject
to the conditions the Committee, in its sole discretion, may provide in the
Option Agreement, as long as the Option is valid and outstanding, and further
provided that no Option may be
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exercisable within six (6) months of the date of grant unless a shorter
period is designated by the Committee. To the extent that the aggregate Fair
Market Value (determined as of the time an Incentive Option is granted) of
the Stock with respect to which Incentive Options first become exercisable by
the optionee during any calendar year (under this Plan and any other
incentive stock option plan(s) of the Company or any Affiliate) exceeds
$100,000, the portion in excess of $100,000 of the Incentive Option shall be
treated as a Nonqualified Option. In making this determination, Incentive
Options shall be taken into account in the order in which they were granted.
5.5 EXERCISE OF OPTIONS. Each Option shall be exercised by the
delivery of written notice to the Committee setting forth the number of
shares of Stock with respect to which the Option is to be exercised, together
with:
(a) cash, certified check, bank draft, or postal or express
money order payable to the order of the Company for an amount equal to the
option price of the shares,
(b) Stock at its Fair Market Value on the date of exercise,
(c) an election to make a cashless exercise through a
registered broker-dealer (if approved in advance by the Committee),
(d) an election to have shares of Stock, which otherwise would
be issued on exercise, withheld in payment of the exercise price (if approved
in advance by the Committee), and/or
(e) any other form of payment which is acceptable to the
Committee, including without limitation, payment in the form of a promissory
note, and specifying the address to which the certificates for the shares are
to be mailed.
As promptly as practicable after receipt of written notification and
payment, the Company shall deliver to the Eligible Person certificates for
the number of shares with respect to which the Option has been exercised,
issued in the Eligible Person's name. If shares of Stock are used in payment,
the aggregate Fair Market Value of the shares of Stock tendered must be equal
to or less than the aggregate exercise price of the shares being purchased
upon exercise of the Option, and any difference must be paid by cash,
certified check, bank draft, or postal or express money order payable to the
order of the Company. Delivery of the shares shall be deemed effected for all
purposes when a stock transfer agent of the Company shall have deposited the
certificates in the United States mail, addressed to the Eligible Person, at
the address specified by the Eligible Person.
Whenever an Option is exercised by exchanging shares of Stock owned by
the Eligible Person, the Eligible Person shall deliver to the Company
certificates registered in the name of the Eligible Person representing a
number of shares of Stock legally and beneficially owned by the Eligible
Person, free of all liens, claims, and encumbrances of every kind,
accompanied by stock powers duly endorsed in blank by the record holder of
the shares represented by the certificates (with signature guaranteed by a
commercial bank or trust company or by a brokerage firm having a membership
on a registered national stock exchange). The delivery of certificates upon
the exercise of Options is subject to the condition that the person
exercising the Option provide the Company with the information the Company
might reasonably request pertaining to exercise, sale or other disposition.
5.6 STOCK APPRECIATION RIGHTS. All Eligible Persons shall be
eligible to receive Stock Appreciation Rights. The Committee shall determine
the SAR to be awarded from time to time to any Eligible Person. The grant of
an SAR to be awarded from time to time shall neither entitle such person to,
nor disqualify such person, from participation in any other grant of awards
by the Company, whether under this Plan or any other plan of the Company. If
granted as a stand-alone SAR Award, the terms of the Award shall be provided
in a Stock Appreciation Rights Agreement.
5.7 STOCK APPRECIATION RIGHTS IN TANDEM WITH OPTIONS. Stock
Appreciation Rights may, at the discretion of the Committee, be included in
each Option granted under the Plan to permit the holder of an Option to
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surrender that Option, or a portion of the part which is then exercisable,
and receive in exchange, upon the conditions and limitations set by the
Committee, an amount equal to the excess of the Fair Market Value of the
Stock covered by the Option, or the portion of it that was surrendered,
determined as of the date of surrender, over the aggregate exercise price of
the Stock. The payment may be made in shares of Stock valued at Fair Market
Value, in cash, or partly in cash and partly in shares of Stock, as the
Committee shall decide in its sole discretion. Stock Appreciation Rights may
be exercised only when the Fair Market Value of the Stock covered by the
Option surrendered exceeds the exercise price of the Stock. In the event of
the surrender of an Option, or a portion of it, to exercise the Stock
Appreciation Rights, the shares represented by the Option or that part of it
which is surrendered, shall not be available for reissuance under the Plan.
Each Stock Appreciation Right issued in tandem with an Option (a) will expire
not later than the expiration of the underlying Option, (b) may be for no
more than 100% of the difference between the exercise price of the underlying
Option and the Fair Market Value of a share of Stock at the time the Stock
Appreciation Right is exercised, (c) is transferable only when the underlying
Option is transferable, and under the same conditions, and (d) may be
exercised only when the underlying Option is eligible to be exercised.
5.8 CONDITIONS OF STOCK APPRECIATION RIGHTS. All Stock Appreciation
Rights shall be subject to such terms, conditions, restrictions or
limitations as the Committee deems appropriate, including by way of
illustration but not by way of limitation, restrictions on transferability,
requirement of continued employment, individual performance, financial
performance of the Company or payment of any applicable employment or
withholding taxes.
5.9 PAYMENT OF STOCK APPRECIATION RIGHTS. The amount of payment to
which the Eligible Person who reserves an SAR shall be entitled upon the
exercise of each SAR shall be equal to the amount, if any by which the Fair
Market Value of the specified shares of Stock on the exercise date exceeds
the Fair Market Value of the specified shares of Stock on the date of grant
of the SAR. The SAR shall be paid in either cash or Stock, as determined in
the discretion of the Committee as set forth in the SAR agreement. If the
payment is in Stock, the number of shares to be paid shall be determined by
dividing the amount of such payment by the Fair Market Value of Stock on the
exercise date of such SAR.
5.10 EXERCISE ON TERMINATION OF EMPLOYMENT. Unless it is expressly
provided otherwise in the Option or SAR agreement, Options and SAR granted to
Employees shall terminate one day less than three months after severance of
employment of the Employee from the Company and all Affiliates for any
reason, with or without cause, other than death, retirement under the then
established rules of the Company, or severance for disability. Whether
authorized leave of absence or absence on military or government service
shall constitute severance of the employment of the Employee shall be
determined by the Committee at that time.
5.11 DEATH. If, before the expiration of an Option or SAR, the
Eligible Person, whether in the employ of the Company or after he has retired
or was severed for disability, or otherwise dies, the Option or SAR shall
continue until the earlier of the Option's or SAR's expiration date or one
year following the date of his death, unless it is expressly provided
otherwise in the Option or SAR agreement. After the death of the Eligible
Person, his executors, administrators or any persons to whom his Option or
SAR may be transferred by will or by the laws of descent and distribution
shall have the right, at any time prior to the Option's or SAR's expiration
or termination, whichever is earlier, to exercise it, to the extent to which
he was entitled to exercise it immediately prior to his death, unless it is
expressly provided otherwise in the Option or SAR's agreement.
5.12 RETIREMENT. Unless it is expressly provided otherwise in the
Option Agreement, before the expiration of an Incentive Option, the Employee
shall be retired in good standing from the employ of the Company under the
then established rules of the Company, the Incentive Option shall terminate
on the earlier of the Option's expiration date or one day less than one year
after his retirement; provided, if an Incentive Option is not exercised
within specified time limits prescribed by the Code, it will become a
Nonqualified Option by operation of law. Unless it is expressly provided
otherwise in the Option Agreement, if before the expiration of a Nonqualified
Option, the Employee shall be retired in good standing from the employ of the
Company under the then established rules of the Company, the Nonqualified
Option shall terminate on the earlier of the Nonqualified Option's expiration
date or one day less than one year after his retirement. In the event of
retirement, the Employee shall have the right prior to the termination of the
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Nonqualified Option to exercise the Nonqualified Option, to the extent to
which he was entitled to exercise it immediately prior to his retirement,
unless it is expressly provided otherwise in the Option Agreement. Upon
retirement, an SAR shall continue to be exercisable for the remainder of the
term of the SAR agreement.
5.13 DISABILITY. If, before the expiration of an Option or SAR, the
Employee shall be severed from the employ of the Company for disability, the
Option or SAR shall terminate on the earlier of the Option's or SAR's
expiration date or one day less than one year after the date he was severed
because of disability, unless it is expressly provided otherwise in the
Option or SAR agreement. In the event that the Employee shall be severed from
the employ of the Company for disability, the Employee shall have the right
prior to the termination of the Option or SAR to exercise the Option, to the
extent to which he was entitled to exercise it immediately prior to his
retirement or severance of employment for disability, unless it is expressly
provided otherwise in the Option Agreement.
5.14 SUBSTITUTION OPTIONS. Options may be granted under this Plan
from time to time in substitution for stock options held by employees of
other corporations who are about to become employees of or affiliated with
the Company or any Affiliate as the result of a merger or consolidation of
the employing corporation with the Company or any Affiliate, or the
acquisition by the Company or any Affiliate of the assets of the employing
corporation, or the acquisition by the Company or any Affiliate of stock of
the employing corporation as the result of which it becomes an Affiliate of
the Company. The terms and conditions of the substitute Options granted may
vary from the terms and conditions set out in this Plan to the extent the
Committee, at the time of grant, may deem appropriate to conform, in whole or
in part, to the provisions of the stock options in substitution for which
they are granted.
5.15 RELOAD OPTIONS. Without in any way limiting the authority of
the Board of Directors or Committee to make or not to make grants of Options
hereunder, the Board of Directors or Committee shall have the authority (but
not an obligation) to include as part of any Option Agreement a provision
entitling the Eligible Person to a further Option (a "Reload Option") in the
event the Eligible Person exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Stock in
accordance with this Plan and the terms and conditions of the Option
Agreement. Any such Reload Option (a) shall be for a number of shares equal
to the number of shares surrendered as part or all of the exercise price of
such Option; (b) shall have an expiration date which is the greater of (i)
the same expiration date of the Option the exercise of which gave rise to
such Reload Option or (ii) one year from the date of grant of the Reload
Option; and (c) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Stock subject to the Reload
Option on the date of exercise of the original Option. Notwithstanding the
foregoing, a Reload Option which is an Incentive Option and which is granted
to a 10% Stockholder, shall have an exercise price which is equal to one
hundred ten percent (110%) of the Fair Market Value of the Stock subject to
the Reload Option on the date of exercise of the original Option and shall
have a term which is no longer than five (5) years.
Any such Reload Option may be an Incentive Option or a Nonqualified
Option, as the Board of Directors or Committee may designate at the time of
the grant of the original Option; provided, however, that the designation of
any Reload Option as an Incentive Option shall be subject to the one hundred
thousand dollar ($100,000) annual limitation on exercisability of Incentive
Stock Options described in the Plan and in Section 422(d) of the Code. There
shall be no Reload Options on a Reload Option. Any such Reload Option shall
be subject to the availability of sufficient shares under Section 4.2 herein
and shall be subject to such other terms and conditions as the Board of
Directors or Committee may determine which are not inconsistent with the
express provisions of the Plan regarding the terms of Options.
5.16 NO RIGHTS AS STOCKHOLDER. No Eligible Person shall have any
rights as a stockholder with respect to Stock covered by his Option until the
date a stock certificate is issued for the Stock.
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ARTICLE VI - RESTRICTED STOCK AWARDS
6.1 RESTRICTED STOCK AWARDS. The Committee may issue shares of
Stock to an Eligible Person subject to the terms of a Restricted Stock
Agreement. The Restricted Stock may be issued for no payment by the Eligible
Person or for a payment below the Fair Market Value on the date of grant.
Restricted Stock shall be subject to restrictions as to sale, transfer,
alienation, pledge or other encumbrance and generally will be subject to
vesting over a period of time specified in the Restricted Stock Agreement.
The Committee shall determine the period of vesting, the number of shares,
the price, if any, of Stock included in a Restricted Stock Award, and the
other terms and provisions which are included in a Restricted Stock Agreement.
6.2 RESTRICTIONS. Restricted Stock shall be subject to the terms
and conditions as determined by the Committee, including without limitation,
any or all of the following:
(a) a prohibition against the sale, transfer, alienation,
pledge or other encumbrance of the shares of Restricted Stock, such
prohibition to lapse (i) at such time or times as the Committee shall
determine (whether in annual or more frequent installments, at the time of
the death, disability or retirement of the holder of such shares, or
otherwise);
(b) a requirement that the holder of shares of Restricted Stock
forfeit, or in the case of shares sold to an Eligible Person, resell back to
the Company at his cost, all or a part of such shares in the event of
termination of the Eligible Person's employment during any period in which
the shares remain subject to restrictions;
(c) a prohibition against employment of the holder of
Restricted Stock by any competitor of the Company or its Affiliates, or
against such holder's dissemination of any secret or confidential information
belonging to the Company or an Affiliate;
(d) unless stated otherwise in the Restricted Stock Agreement,
(i) if restrictions remain at the time of severance of
employment with the Company and all Affiliates, other than for reason of
disability or death, the Restricted Stock shall be forfeited; and
(ii) if severance of employment is by reason of
disability or death, the restrictions on the shares shall lapse and the
Eligible Person or his heirs or estate shall be 100% vested in the shares
subject to the Restricted Stock Agreement.
6.3 STOCK CERTIFICATE. Shares of Restricted Stock shall be
registered in the name of the Eligible Person receiving the Restricted Stock
Award and deposited, together with a stock power endorsed in blank, with the
Company. Each such certificate shall bear a legend in substantially the
following form:
The transferability of this certificate and the shares of Stock
represented by it is restricted by and subject to the terms and
conditions (including conditions of forfeiture) contained in the
Design Automation Systems Incorporated 1999 Stock Option Plan,
and an agreement entered into between the registered owner and
the Company. A copy of the Plan and agreement is on file in the
office of the Secretary of the Company.
6.4 RIGHTS AS STOCKHOLDER. Subject to the terms and conditions of
the Plan, each Eligible Person receiving a certificate for Restricted Stock
shall have all the rights of a stockholder with respect to the shares of
Stock included in the Restricted Stock Award during any period in which such
shares are subject to forfeiture and restrictions on transfer, including
without limitation, the right to vote such shares. Dividends paid with
respect to shares of Restricted Stock in cash or property other than Stock in
the Company or rights to acquire stock in the Company shall be paid to the
Eligible Person currently. Dividends paid in Stock in the Company or rights
to acquire Stock in the Company shall be added to and become a part of the
Restricted Stock.
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6.5 LAPSE OF RESTRICTIONS. At the end of the time period during
which any shares of Restricted Stock are subject to forfeiture and
restrictions on sale, transfer, alienation, pledge, or other encumbrance,
such shares shall vest and will be delivered in a certificate, free of all
restrictions, to the Eligible Person or to the Eligible Person's legal
representative, beneficiary or heir; provided the certificate shall bear such
legend, if any, as the Committee determines is reasonably required by
applicable law. By accepting a Stock Award and executing a Restricted Stock
Agreement, the Eligible Person agrees to remit when due any federal and state
income and employment taxes required to be withheld.
6.6 RESTRICTION PERIOD. No Restricted Stock Award may provide for
restrictions continuing beyond ten (10) years from the date of grant.
ARTICLE VII - PERFORMANCE STOCK AWARDS
7.1 AWARD OF PERFORMANCE STOCK. The Committee may award shares of
Stock, without any payment for such shares, to designated Eligible Persons if
specified performance goals established by the Committee are satisfied. The
terms and provisions herein relating to these performance based awards are
intended to satisfy Section 162(m) of the Code and regulations issued
thereunder. The designation of an employee eligible for a specific
Performance Stock Award shall be made by the Committee in writing prior to
the beginning of the period for which the performance is measured (or within
such period as permitted by IRS regulations). The Committee shall establish
the maximum number of shares of Stock to be issued to a designated Employee
if the performance goal or goals are met. The Committee reserves the right to
make downward adjustments in the maximum amount of an Award if in its
discretion unforeseen events make such adjustment appropriate.
7.2 PERFORMANCE GOALS. Performance goals determined by the
Committee may be based on specified increases in cash flow, net profits,
Stock price, Company, segment or Affiliate sales, market share, earnings per
share, return on assets, and/or return on stockholders' equity.
7.3 ELIGIBILITY. The employees eligible for Performance Stock
Awards are the senior officers (i.e., chief executive officer, president,
vice presidents, secretary, treasurer, and similar positions) of the Company
and its Affiliates, and such other employees of the Company and its
Affiliates as may be designated by the Committee.
7.4 CERTIFICATE OF PERFORMANCE. The Committee must certify in
writing that a performance goal has been attained prior to issuance of any
certificate for a Performance Stock Award to any Employee. If the Committee
certifies the entitlement of an Employee to the Performance Stock Award, the
certificate will be issued to the Employee as soon as administratively
practicable, and subject to other applicable provisions of the Plan,
including but not limited to, all legal requirements and tax withholding.
However, payment may be made in shares of Stock, in cash, or partly in cash
and partly in shares of Stock, as the Committee shall decide in its sole
discretion. If a cash payment is made in lieu of shares of Stock, the number
of shares represented by such payment shall not be available for subsequent
issuance under this Plan.
ARTICLE VIII - ADMINISTRATION
The Plan shall be administered by the Committee. All questions of
interpretation and application of the Plan and Awards shall be subject to the
determination of the Committee. A majority of the members of the Committee
shall constitute a quorum. All determinations of the Committee shall be made
by a majority of its members. Any decision or determination reduced to
writing and signed by a majority of the members shall be as effective as if
it had been made by a majority vote at a meeting properly called and held.
This Plan shall be administered in such a manner as to permit the Options
which are designated to be Incentive Options to qualify as Incentive Options.
In carrying out its authority under this Plan, the Committee shall have full
and final authority and discretion, including but not limited to the
following rights, powers and authorities, to:
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(a) determine the Eligible Persons to whom and the time or
times at which Options or Awards will be made,
(b) determine the number of shares and the purchase price of
Stock covered in each Option or Award, subject to the terms of the Plan,
(c) determine the terms, provisions and conditions of each
Option and Award, which need not be identical,
(d) accelerate the time at which any outstanding Option or SAR
may be exercised, or Restricted Stock Award will vest,
(e) define the effect, if any, on an Option or Award of the
death, disability, retirement, or termination of employment of the Employee,
(f) prescribe, amend and rescind rules and regulations relating
to administration of the Plan, and
(g) make all other determinations and take all other actions
deemed necessary, appropriate, or advisable for the proper administration of
this Plan.
The actions of the Committee in exercising all of the rights,
powers, and authorities set out in this Article and all other Articles of
this Plan, when performed in good faith and in its sole judgment, shall be
final, conclusive and binding on all parties.
ARTICLE IX - AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend, terminate or suspend
this Plan at any time, in its sole and absolute discretion; provided,
however, that to the extent required to qualify this Plan under Rule 16b-3
promulgated under Section 16 of the Securities Exchange Act of 1934, as
amended, no amendment that would (a) materially increase the number of shares
of Stock that may be issued under this Plan, (b) materially modify the
requirements as to eligibility for participation in this Plan, or (c)
otherwise materially increase the benefits accruing to participants under
this Plan, shall be made without the approval of the Company's stockholders;
provided further, however, that to the extent required to maintain the status
of any Incentive Option under the Code, no amendment that would (a) change
the aggregate number of shares of Stock which may be issued under Incentive
Options, (b) change the class of employees eligible to receive Incentive
Options, or (c) decrease the Option price for Incentive Options below the
Fair Market Value of the Stock at the time it is granted, shall be made
without the approval of the Company's stockholders. Subject to the preceding
sentence, the Board of Directors shall have the power to make any changes in
the Plan and in the regulations and administrative provisions under it or in
any outstanding Incentive Option as in the opinion of counsel for the Company
may be necessary or appropriate from time to time to enable any Incentive
Option granted under this Plan to continue to qualify as an incentive stock
option or such other stock option as may be defined under the Code so as to
receive preferential federal income tax treatment.
ARTICLE X - MISCELLANEOUS
10.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set
aside nor shall a trust fund of any kind be established to secure the rights
of any Eligible Person under this Plan. All Eligible Persons shall at all
times rely solely upon the general credit of the Company for the payment of
any benefit which becomes payable under this Plan.
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10.2 NO EMPLOYMENT OBLIGATION. The granting of any Option or Award
shall not constitute an employment contract, express or implied, nor impose
upon the Company or any Affiliate any obligation to employ or continue to
employ any Eligible Person. The right of the Company or any Affiliate to
terminate the employment of any person shall not be diminished or affected by
reason of the fact that an Option or Award has been granted to him.
10.3 FORFEITURE. Notwithstanding any other provisions of this Plan,
if the Committee finds by a majority vote after full consideration of the
facts that an Eligible Person, before or after termination of his employment
with the Company or an Affiliate for any reason (a) committed or engaged in
fraud, embezzlement, theft, commission of a felony, or proven dishonesty in
the course of his employment by the Company or an Affiliate, which conduct
damaged the Company or Affiliate, or disclosed trade secrets of the Company
or an Affiliate, or (b) participated, engaged in or had a material, financial
or other interest, whether as an employee, officer, director, consultant,
contractor, stockholder, owner, or otherwise, in any commercial endeavor in
the United States which is competitive with the business of the Company or an
Affiliate without the written consent of the Company or Affiliate, the
Eligible Person shall forfeit all outstanding Options and all outstanding
Awards, and including all exercised Options and other situations pursuant to
which the Company has not yet delivered a stock certificate. Clause (b) shall
not be deemed to have been violated solely by reason of the Eligible Person's
ownership of stock or securities of any publicly owned corporation, if that
ownership does not result in effective control of the corporation.
The decision of the Committee as to the cause of an Employee's
discharge, the damage done to the Company or an Affiliate, and the extent of
an Eligible Person's competitive activity shall be final. No decision of the
Committee, however, shall affect the finality of the discharge of the
Employee by the Company or an Affiliate in any manner.
10.4 TAX WITHHOLDING. The Company or any Affiliate shall be entitled
to deduct from other compensation payable to each Eligible Person any sums
required by federal, state, or local tax law to be withheld with respect to
the grant or exercise of an Option or SAR, lapse of restrictions on
Restricted Stock, or award of Performance Stock. In the alternative, the
Company may require the Eligible Person (or other person exercising the
Option, SAR or receiving the Stock) to pay the sum directly to the employer
corporation. If the Eligible Person (or other person exercising the Option or
SAR or receiving the Stock) is required to pay the sum directly, payment in
cash or by check of such sums for taxes shall be delivered within 10 days
after the date of exercise or lapse of restrictions. The Company shall have
no obligation upon exercise of any Option or lapse of restrictions on Stock
until payment has been received, unless withholding (or offset against a cash
payment) as of or prior to the date of exercise or lapse of restrictions is
sufficient to cover all sums due with respect to that exercise. The Company
and its Affiliates shall not be obligated to advise an Eligible Person of the
existence of the tax or the amount which the employer corporation will be
required to withhold.
10.5 WRITTEN AGREEMENT. Each Option and Award shall be embodied in a
written agreement which shall be subject to the terms and conditions of this
Plan and shall be signed by the Eligible Person and by a member of the
Committee on behalf of the Committee and the Company or an executive officer
of the Company, other than the Eligible Person, on behalf of the Company. The
agreement may contain any other provisions that the Committee in its
discretion shall deem advisable which are not inconsistent with the terms of
this Plan.
10.6 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS.
With respect to administration of this Plan, the Company shall indemnify each
present and future member of the Committee and the Board of Directors
against, and each member of the Committee and the Board of Directors shall be
entitled without further act on his part to indemnity from the Company for,
all expenses (including attorney's fees, the amount of judgments and the
amount of approved settlements made with a view to the curtailment of costs
of litigation, other than amounts paid to the Company itself) reasonably
incurred by him in connection with or arising out of any action, suit, or
proceeding in which he may be involved by reason of his being or having been
a member of the Committee and/or the Board of Directors, whether or not he
continues to be a member of the Committee and/or the Board of Directors at
the time of incurring the expenses, including, without limitation, matters as
to which he shall be finally adjudged in any action, suit or proceeding to
have been found to have been negligent in the performance of his duty as a
member of the Committee or the Board
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of Directors. However, this indemnity shall not include any expenses incurred
by any member of the Committee and/or the Board of Directors in respect of
matters as to which he shall be finally adjudged in any action, suit or
proceeding to have been guilty of gross negligence or willful misconduct in
the performance of his duty as a member of the Committee and the Board of
Directors. In addition, no right of indemnification under this Plan shall be
available to or enforceable by any member of the Committee and the Board of
Directors unless, within 60 days after institution of any action, suit or
proceeding, he shall have offered the Company, in writing, the opportunity to
handle and defend same at its own expense. This right of indemnification
shall inure to the benefit of the heirs, executors or administrators of each
member of the Committee and the Board of Directors and shall be in addition
to all other rights to which a member of the Committee and the Board of
Directors may be entitled as a matter of law, contract, or otherwise.
10.7 GENDER. If the context requires, words of one gender when used
in this Plan shall include the others and words used in the singular or
plural shall include the other.
10.8 HEADINGS. Headings of Articles and Sections are included for
convenience of reference only and do not constitute part of the Plan and
shall not be used in construing the terms of the Plan.
10.9 OTHER COMPENSATION PLANS. The adoption of this Plan shall not
affect any other stock option, incentive or other compensation or benefit
plans in effect for the Company or any Affiliate, nor shall the Plan preclude
the Company from establishing any other forms of incentive or other
compensation for employees of the Company or any Affiliate.
10.10 OTHER OPTIONS OR AWARDS. The grant of an Option or Award shall
not confer upon the Eligible Person the right to receive any future or other
Options or Awards under this Plan, whether or not Options or Awards may be
granted to similarly situated Eligible Persons, or the right to receive
future Options or Awards upon the same terms or conditions as previously
granted.
10.11 GOVERNING LAW. The provisions of this Plan shall be construed,
administered, and governed under the laws of the State of Texas.
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