PRELIMINARY INFORMATION STATEMENT
SCHEDULE 14(c) 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
DYNAMICWEB ENTERPRISES, INC.
_________________________________________________________________
(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 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:
_________________________________________________________________
4) Proposed maximum aggregate value of transaction:
_________________________________________________________________
5) Total fee paid:
_________________________________________________________________
[ ] Fee previously paid with preliminary materials.
[ ] 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.
1) Amount Previously Paid:
_________________________________________________________________
2) Form, Schedule or Registration Statement No.:
_________________________________________________________________
3) Filing Party:
_________________________________________________________________
4) Date Filed:
_________________________________________________________________
<PAGE>
May __, 1997
DEAR SHAREHOLDER:
We are pleased to invite you to the 1997 Annual Meeting of
Shareholders of Dynamicweb Enterprises, Inc. to be held on
Thursday, June 12, 1997 at 2:00 p.m., at the offices of the
Corporation located at 271 Route 46 West, Building F, Suite 209,
Fairfield, New Jersey.
The Notice of the Annual Meeting and the Information
Statement on the following pages address the formal business of
the Annual Meeting, which includes the election of directors, the
consideration of the amendment and restatement of the
Corporation's Certificate of Incorporation, the consideration of
the 1997 Employee Stock Option Plan, the consideration of the
1997 Stock Option Plan for Outside Directors, and the
ratification of the selection of auditors for the year ending
September 30, 1997. At the Annual Meeting, the Corporation's
management will address other corporate matters which may be of
interest to you and will be available to respond to your
questions.
Sincerely,
Steve L. Vanechanos, Jr.
Chairman of the Board of Directors
and President
<PAGE>
__________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 12, 1997
__________________________________
TO THE SHAREHOLDERS OF DYNAMICWEB ENTERPRISES, INC.:
Notice is hereby given that the Annual Meeting of
Shareholders of DYNAMICWEB ENTERPRISES, INC. (the "Corporation")
will be held at 2:00 p.m., on Thursday, June 12, 1997 at the
offices of the Corporation at 271 Route 46 West, Building F,
Suite 209, Fairfield, New Jersey, for the following purposes:
1. To elect the members of the Board of Directors to
serve until their successors are elected and qualified;
2. To approve an amendment and restatement of the
Corporation's Certificate of Incorporation;
3. To approve the Corporation's 1997 Employee Stock
Option Plan;
4. To approve the Corporation's 1997 Stock Option
Plan for Outside Directors;
5. To ratify the selection of Richard A. Eisner &
Company, LLP, New York, New York, Certified Public
Accountants, as the Corporation's independent auditors for
the year ending September 30, 1997;
6. To transact such other business as may properly
come before the Annual Meeting and any adjournment or
postponement thereof.
In accordance with the By-laws of the Corporation and action
of the Board of Directors, only those shareholders of record at
the close of business on April 14, 1997 will be entitled to
notice of and to vote at the Annual Meeting.
A copy of the Corporation's Annual Report on Form 10-K for
the fiscal year ended September 30, 1996 is being mailed with
this Notice.
By Order of the Board of Directors,
Steve Vanechanos, Sr.
Secretary
May __, 1997
<PAGE>
DYNAMICWEB ENTERPRISES, INC.
_________________________
INFORMATION STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON JUNE 12, 1997
_________________________
GENERAL INFORMATION
Introduction. This Information Statement is being furnished
in connection with the Annual Meeting of Shareholders (the
"Annual Meeting") of DynamicWeb Enterprises, Inc. (the
"Corporation") to be held on Thursday, June 12, 1997 at 2:00
p.m., at the principal executive office of the Corporation
located at 271 Route 46 West, Building F, Suite 209, Fairfield,
New Jersey, and at any adjournment or postponement of the Annual
Meeting.
The telephone number for the Corporation is (201) 244-1000.
All inquiries should be directed to Steve L. Vanechanos, Jr.,
Chairman of the Board of Directors and President of the
Corporation.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY.
Voting Securities and Record Date. At the close of business
on Monday, April 14, 1997, the Corporation had outstanding
7,667,270 shares of Common Stock, $.0001 par value per share (the
"Common Stock"). Only holders of Common Stock of record at the
close of business on April 14, 1997 will be entitled to notice of
and to vote at the Annual Meeting. Cumulative voting rights do
not exist with respect to the election of directors. On all
matters to come before the Annual Meeting, each share of Common
Stock is entitled to one vote and, accordingly, holders of Common
Stock are entitled to cast a total of 7,667,270 votes at the
Annual Meeting.
Quorum. Pursuant to Article III, Section 9, of the By-laws
of the Corporation, the presence, in person or by proxy, of
shareholders entitled to cast at least a majority of the votes
which all shareholders are entitled to cast shall constitute a
quorum. Abstentions and broker non-votes will not constitute or
be counted as "votes" cast for purposes of the Annual Meeting but
will be used for purposes of determining whether a quorum exists
at the Annual Meeting.
PRINCIPAL BENEFICIAL OWNERS OF THE CORPORATION'S COMMON STOCK
Principal Owners. The following table sets forth, as of
March 26, 1997, for (i) each person who owns of record or is
known by the Board of Directors to be the beneficial owner of
more than five percent (5%) of the Corporation's outstanding
Common Stock, (ii) each of the Corporation's directors and each
of the nominees for election as a director at the Annual Meeting,
(iii) each person named in the Summary Compensation Table set
forth herein under "Proposal 1 -- Election of Directors --
Executive Compensation" and (iv) all current directors and
executive officers of the Corporation as a group, such person's
name and address, the number of shares beneficially owned by such
person, and the percentage of the Corporation's outstanding
Common Stock so owned. Unless otherwise indicated in a footnote,
each of the following persons holds sole voting and investment
power over the shares listed as beneficially owned.
Name and Address Amount and Nature
of of Beneficial Percent of
Beneficial Owner Ownership(1)(2) Class(3)
Steve L. Vanechanos, Jr. 1,892,554 24.68%
29 Clarken Drive
West Orange, NJ 07052
Steve L. Vanechanos, Sr. 1,872,260 24.42%
96 Union Avenue
Rutherford, NJ 07070
Kenneth R. Konikowski(4) 860,000 11.22%
36 Pinebrook Road
Towaco, NJ 07082
Michael Vanechanos 602,577 7.86%
129 S. Telegraph Hill Road
Holmdel, NJ 07703
Sierra Growth & Opportunity, Inc. 460,000 5.99%
551 Fifth Avenue, Suite 605
New York, New York 10017
F. Patrick Ahearn, Jr. 13,775 0.18%
107 Maple Street
Rutherford, NJ 07070
Frank T. DiPalma 43,356(5) 0.57%
179 Claremont Road
Ridgewood, NJ 07450
Robert Droste 13,775 0.18%
24 Summit Road
Clifton, NJ 07012
Denis Clark (6) 0 0.00%
8417 Greenside Drive
Dublin, Ohio 43017
Jonathan B. Lassers (7) 165,000 2.15%
275 Uxbridge
Cherry Hill, New Jersey 08034
All directors and executive 4,695,720 61.25%
officers as a group (6 in
number)(8)
____________________
(1) The securities "beneficially owned" by an individual
are determined in accordance with the definitions of
"beneficial ownership" set forth in the General Rules
and Regulations of the Securities and Exchange
Commission ("SEC") and may include securities owned by
or for the individual's spouse and minor children and
any other relative who has the same home, as well as
securities to which the individual has or shares voting
or investment power or has the right to acquire
beneficial ownership within sixty (60) days after
March 26, 1997. Beneficial ownership may be disclaimed
as to certain of the securities.
(2) Information furnished by the directors and executive
officers of the Corporation.
(3) Does not reflect 286,632 shares of Common Stock which
the Corporation sold (but has not yet issued) in April
1997, as part of certain units (the "Units"), in a
private placement pursuant to Section 4(2) and
Regulation D under the Securities Act of 1933, as
amended (the "Private Placement"). The number of such
shares to be issued is subject to adjustment based on
(i) the reverse stock split described herein and
(ii) the provisions of the Units adjusting the number
of shares to equal the quotient of (a) 18,750 divided
by (b) the price at which shares of Common Stock are
sold in the Corporation's proposed public offering.
See "Proposal 2 -- Amendment and Restatement of the
Corporation's Certificate of Incorporation." The
Corporation anticipates that it will issue such shares
on the earlier of (i) concurrently with the issuance of
shares in such proposed public offering, or (ii)
October 31, 1997.
(4) Does not include additional shares that may be issuable
in connection with the prior acquisition of Software
Associates, Inc. ("Software Associates"). See "CERTAIN
TRANSACTIONS -- Acquisition of Software Associates and
Megascore."
(5) All of such shares of Common Stock are held jointly by
Mr. DiPalma and his spouse.
(6) Mr. Clark has been nominated by the Board of Directors
to fill a current vacancy thereon.
(7) Mr. Lassers served as President and Chief Executive
Officer and a director of the Corporation from May 1995
until March 26, 1996. He has not been affiliated with
the Corporation since such date.
(8) Does not include shares owned by Jonathan B. Lassers.
See Footnote (6) above.
PROPOSAL 1
ELECTION OF DIRECTORS
General. The By-laws of the Corporation provide that the
Corporation's business and affairs shall be managed by its Board
of Directors. The By-laws provide that the number of directors
shall not be less than five nor more than 25. Within the
foregoing limits, the Board of Directors may from time to time
fix the number of directors. The Board of Directors has fixed
the current number of directors on the Board at seven. Vacancies
on the Board of Directors may be filled by a majority of the
remaining members of the Board of Directors, though less than a
quorum, or the shareholders, and each person so appointed shall
be a director until the next succeeding annual meeting of
shareholders and until his successor shall have been elected and
qualified.
At the 1997 Annual Meeting of Shareholders, seven directors
shall be elected to serve until the next annual meeting of
shareholders and until their successors are elected and
qualified. However, if Proposal 2, the amendment and restatement
of the Corporation's Certificate of Incorporation, described
herein is approved by the shareholders at the Annual Meeting, the
Board of Directors will be divided into three classes on the
effective date of such amendment and restatement, and four of the
seven directors will serve for two or three year terms. See
"Proposal 2 -- Amendment and Restatement of Certificate of
Incorporation." The seven nominees who receive the highest
number of votes cast at the Annual Meeting will be elected as
directors.
The Board of Directors does not have a standing nominating
committee to nominate candidates for the Board of Directors.
Rather, the Board of Directors performs such function. The Board
of Directors unanimously nominated Steve L. Vanechanos, Jr.,
Steve Vanechanos, Sr., Kenneth R. Konikowski, F. Patrick
Ahearn, Jr., Denis Clark, Frank DiPalma and Robert Droste for
election as directors at the Annual Meeting. Each of such
persons, except for Mr. Clark, is currently serving as a director
of the Corporation.
Any shareholder who desires to propose an individual for
consideration by the shareholders at the Annual Meeting as a
nominee for director should submit a proposal in writing to the
Secretary of the Corporation containing the following
information: the name, age, business address and, if known,
residence address of each nominee proposed in such notice, and
(ii) the principal occupation or employment of each such nominee.
The Bylaws of the Corporation provide that a director shall be at
least eighteen years of age and, unless waived by the Board of
Directors, must have been a shareholder of record of the
Corporation for a period of time equal to the lesser of (i) three
years or (ii) the time elapsed since March 26, 1996.
Information as to Nominees for Directors and Executive
Officers. The following table contains certain information with
respect to the nominees for directors and the executive officers
of the Corporation.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
Steve L. Vanechanos, Jr.(1) 43 Chairman of the Board and President
Steve Vanechanos, Sr.(1) 67 Director, Vice President, Treasurer
and Secretary
Kenneth R. Konikowski 50 Director and Executive Vice President
F. Patrick Ahearn, Jr.(2) 49 Director
Denis Clark 53 Nominee
Frank DiPalma(3) 51 Director
Robert Droste(2)(3) 43 Director
__________________
</TABLE>
(1) Steve Vanechanos, Sr. is the father of Steve L.
Vanechanos, Jr. and Michael Vanechanos who, as of
March 26, 1997, beneficially owns 7.86% of the Common
Stock. See "PRINCIPAL BENEFICIAL OWNERS OF THE
CORPORATION'S COMMON STOCK."
(2) Member of the Audit Committee of the Board of
Directors. The Audit Committee recommends an outside
auditor for the year and reviews the financial
statements and progress of the Corporation. This
Committee was formed in 1997.
(3) Member of the Compensation Committee. The Compensation
Committee meets on an as-needed basis between meetings
of the Board of Directors to discuss compensation
related matters. This Committee was formed in 1997.
Steve L. Vanechanos, Jr. became President and Chairman of
the Board of Directors of the Corporation on March 26, 1996. He
has been President of DynamicWeb Transaction Systems, Inc.
("DWTS") since its incorporation in 1995. He also was a
co-founder of Megascore, Inc. ("Megascore"), a wholly-owned
subsidiary of the Corporation, in 1981. He has a Bachelor of
Science Degree in Finance and Economics from Fairleigh Dickinson
University, Rutherford Campus.
Steve L. Vanechanos, Sr. became Vice President, Secretary,
Treasurer and a director of the Corporation on March 26, 1996.
He was a co-founder of Megascore in 1981 and DWTS in 1995. He
attended Newark College of Engineering in Newark for two years.
He continued his education with certifications from PSI
Programming Institute in New York City and with courses in
principles of accounting at ABA Institute, Hudson County Chapter.
Kenneth R. Konikowski became the Executive Vice President
and a director of the Corporation on December 1, 1996. Prior to
that date, Mr. Konikowski was President of Software Associates,
which he founded in 1985.
F. Patrick Ahearn, Jr. became a director of the Corporation
on March 26, 1996. Since 1993, Mr. Ahearn has served as the
Chairman of the Board of E.C.M. Group, Inc., White Plains, New
York. From 1992 to 1995, Mr. Ahearn served as Managing Director
for Continental Bank and the President of 22 of its subsidiaries.
He is also a Colonel in the United States Marine Corps.
Mr. Ahearn has a Bachelor of Arts Degree from the College of Holy
Cross.
Denis Clark has served as Vice President of Sterling
Commerce, Inc. from 1993 to 1996 and was employed by
IBM Corporation as a Director of Consulting from 1991 to 1992 and
as a Director of Software Marketing from 1989 to 1991.
Frank T. DiPalma became a director of the Corporation on
March 26, 1996. Since January 1997, Mr. DiPalma has been
employed as Vice President of Operations and Engineering for
Energy Corporation of America, Mountaineer Gas Division. Prior
to that time, and during the past five years, he held various
management positions for Public Service Electric and Gas, a
public utility located in Newark, New Jersey. In 1995 and 1996,
he was the owner of Palmer Associates, a management consulting
company. Mr. DiPalma graduated from New Jersey Institute of
Technology with a Bachelor of Science in Mechanical Engineering;
Fairleigh Dickinson University with a Masters in Business
Administration; and the University of Michigan's Executive
Development Program.
Robert Droste became a director of the Corporation on March
26, 1996. During the past five years, Mr. Droste has been the
Director of Administration and Manager of Internal Audit for Russ
Berrie & Co., Inc., Oakland, New Jersey. He has a Bachelor of
Science Degree in Accounting from Fairleigh Dickinson University,
Rutherford, New Jersey.
Board and Committee Meetings. During the year ended
September 30, 1996, the Corporation's Board of Directors held one
board meeting. Actions by the Board of Directors other than at
such meeting were taken by unanimous written consent. No
director received any fees for attendance at such Board of
Directors' meeting or for otherwise serving as a director during
the year ended September 30, 1996. The Board of Directors did
not have any committees during the year ended September 30, 1996.
EXECUTIVE COMPENSATION
There were no executive officers of the Corporation or any
of its subsidiaries whose salary and bonus exceeded $100,000 for
the fiscal year ended September 30, 1996. The following table
sets forth the compensation paid to Steve L. Vanechanos, Jr., the
Corporation's President and Chief Executive Officer from
March 26, 1996 to the present and Jonathan B. Lassers, the
Corporation's President and Chief Executive Officer from May 1995
until March 26, 1996.
Summary Compensation Table
Name and All Other
Principal Position Year Salary Compensation(1)
Steve L. Vanechanos, Jr. 1996(2) $58,762(3) $10,580
President and Chief
Executive Officer
Jonathan B. Lassers 1996 (4) 0
Former President and 1995 (5) 0
Chief Executive Officer
_________________
(1) Consists of (a) lease payments totaling $4,580 made by the
Company for automobiles used by Mr. Vanechanos, and
(b) travel and entertainment expenses of approximately
$6,000 paid by the Company.
(2) Mr. Vanechanos commenced his employment with the Corporation
on March 26, 1996.
(3) This amount includes salary paid by Megascore during the
year ended September 30, 1996. Megascore was acquired by
the Corporation on September 30, 1996.
(4) Management has been unable to ascertain the amount of
compensation paid to Mr. Lassers during the year ended
September 30, 1996.
(5) According to the Corporation's Annual Report on Form 10-K
for the year ended December 31, 1995, Mr. Lassers'
compensation was less than $100,000 for such year.
Stock Options
There were no executive officers of the Corporation or any
of its subsidiaries who received or exercised stock options,
stock appreciation rights or other stock awards from the
Corporation during the fiscal year ended September 30, 1996. As
of September 30, 1996, except for the Corporation's 1992 Stock
Option Plan, the Corporation did not have in place any stock
option, stock appreciation right, or similar compensation plan,
nor were any options or stock appreciation rights outstanding and
exercisable as of such date under the 1992 Stock Option Plan or
otherwise. On March 7, 1997, the Corporation terminated the 1992
Stock Option Plan. The Board of Directors has adopted the 1997
Employee Stock Option Plan and the 1997 Stock Option Plan for
Outside Directors (collectively, the "1997 Plans"), each subject
to shareholder approval. See "Proposal 3 -- 1997 Employee Stock
Option Plan" and "Proposal 4 -- 1997 Stock Option Plan for
Outside Directors."
Employment Agreement
As of September 30, 1996, the Corporation had no employment
agreements with any of its executive officers. On December 1,
1996, Kenneth R. Konikowski, Executive Vice President of the
Corporation, entered into an Employment Agreement with the
Corporation (the "Employment Agreement"). The Employment
Agreement expires on November 30, 2001 and specifies: term; Mr.
Konikowski's position and duties; compensation; benefits; and
termination rights. The Employment Agreement also contains a
covenant not to compete, a proprietary right to inventions
provision and confidentiality provisions, which inure to the
benefit of the Corporation. The Employment Agreement also
contains provisions allowing the Corporation to terminate
Mr. Konikowski's employment for "Cause," as defined therein.
Under the terms of his Employment Agreement, Mr. Konikowski
serves as Executive Vice President and a member of the
Corporation's Board of Directors and is entitled to an annual
salary of $135,600. The Employment Agreement provides that this
amount may be increased based on annual performance reviews
pursuant to the Corporation's policies and practices.
Mr. Konikowski is also eligible to be paid an annual bonus based
on the Corporation's to-be-established incentive bonus plan.
Mr. Konikowski also receives certain employee benefits:
including $500,000 of life insurance, disability and health
insurance, vacation days, and an automobile. He is also eligible
to participate in the 1997 Employee Stock Option Plan.
The Employment Agreement provides that if Mr. Konikowski's
employment is terminated by the Corporation other than for
"Cause," "Disability" or "Material Breach," each as defined
therein, or if he terminates his employment for "Good Reason," as
defined therein, Mr. Konikowski is entitled to, in a lump sum, an
amount equal to the commuted value of his base salary in effect
or authorized at the time of termination for the period remaining
until November 30, 2001 (determined by discounting all payments
at a rate equal to the bond equivalent yield of the latest
two-year Treasury Bill auction), to be paid in cash in the month
next following his termination of employment. The Corporation is
also required to maintain in full force and effect certain of
Mr. Konikowski's employee benefits.
CERTAIN TRANSACTIONS
Acquisition of Software Associates and Megascore. On
November 30, 1996, pursuant to the Stock Purchase Agreement dated
such date among the Corporation, Software Associates and
Kenneth R. Konikowski, the sole shareholder of Software
Associates (the "SA Agreement"), the Corporation exchanged
860,000 shares of its Common Stock for all of the issued and
outstanding capital stock of Software Associates. Software
Associates is presently a wholly-owned subsidiary of the
Corporation. It is engaged in the business of helping companies
realize the benefits of expanding their data processing and
electronic communications infrastructures through the use of
Electronic Data Interchange ("EDI").
Pursuant to the SA Agreement, Kenneth R. Konikowski was
named Executive Vice President and a director of the Corporation,
and the Employment Agreement was executed. The Corporation
further agreed to issue to Mr. Konikowski up to 1,140,000
additional shares of its Common Stock in the event the average
closing bid price of the Common Stock does not equal $3.375 per
share for the five trading days immediately prior to January 30,
1999. If any such additional shares are issued, the ownership
interest of the other holders of Common Stock will be diluted in
favor of Mr. Konikowski. On a pro forma basis assuming all of
such shares were issued to Mr. Konikowski on April 17, 1997,
Mr. Konikowski would own 22.7% of the outstanding Common Stock,
and Steve L. Vanechanos, Jr. and Steve Vanechanos, Sr. would own
21.5% and 21.3% of the outstanding Common Stock, respectively.
Pursuant to a letter agreement dated April 17, 1997 between
the Corporation and Mr. Konikowski, the 1,140,000 shares and
$3.375 per share price are subject to adjustment pursuant to any
stock split, dividend, reclassification or combination (such as
the reverse stock split described in "Proposal 2 -- Amendment and
Restatement of the Corporation's Certificate of Incorporation"
pursuant to which such amount and price will be adjusted to
297,368 shares and $12.939 per share, respectively).
On September 30, 1996, pursuant to the Stock Purchase
Agreement dated such date among the Corporation, Megascore and
its shareholders (the "Megascore Agreement"), the Corporation
acquired all of the issued and outstanding capital stock of
Megascore in exchange for 50,000 shares of Common Stock. Prior
to such acquisition, Steve L. Vanechanos, Jr. and Steve
Vanechanos, Sr. were the President and Vice President, Treasurer
and Secretary, respectively, and collectively owned of record
76.4% of the outstanding capital stock, of Megascore. Megascore
is presently a wholly-owned subsidiary of the Corporation. It is
a full-service systems integrator specializing in distribution,
accounting and point-of-sale computer software consulting
services for suppliers and retailers.
Significant Shareholder. As of March 26, 1997, Michael
Vanechanos is the beneficial owner of 602,577 shares of Common
Stock (7.86%). He purchased 327,577 of those shares from the
Corporation for $100,000 in January 1996, and received 275,000 of
those shares as a finder's fee from Berkshire Financial Corp. in
connection with the Corporation's acquisition of DWTS.
Mr. Vanechanos is presently employed as a securities trader at
H.J. Meyers & Co., Inc. H.J. Meyers & Co., Inc. served as
placement agent for the Private Placement and, in consideration
therefor, received a fee of $60,000. Michael Vanechanos is the
brother of Steve L. Vanechanos, Jr., the Corporation's Chairman
of the Board, President and Chief Executive Officer, and is the
son of Steve Vanechanos, Sr., the Corporation's Vice President,
Treasurer, Secretary and a director. See "MANAGEMENT."
Office Lease. The Corporation leases a portion of its
office facility from the Mark Group, a partnership in which
Kenneth R. Konikowski, the Executive Vice President of the
Corporation and a director, is a partner. The annual rent under
such lease is $37,500, subject to annual increases of up to 5%.
Insider Loan. Steven L. Vanechanos, Jr. loaned $40,000 to
the Corporation on February 27, 1997, and loaned an additional
$10,000 to the Corporation on March 26, 1997. These loans have
an aggregate outstanding principal balance of $40,000 as of
April 30, 1997, which balance bears interest at a rate of 8% per
annum.
PROPOSAL 2
AMENDMENT AND RESTATEMENT OF THE
CORPORATION'S CERTIFICATE OF INCORPORATION
Introduction
The Board of Directors of the Corporation has unanimously
adopted resolutions approving, and submitting for shareholder
approval at the Annual Meeting, an amendment and restatement of
the Corporation's Certificate of Incorporation (the "Amendment
and Restatement") to read in its entirety as set forth in Annex A
to this Information Statement. The Corporation is amending its
Certificate of Incorporation in order to effect a
0.2608491-for-one reverse stock split of the Common Stock (the
"Reverse Split"), and to adopt certain anti-takeover provisions
which the Board of Directors believes are in the best interests
of the Corporation's shareholders. The Board of Directors
believes that a restatement of its Certificate of Incorporation
is necessary in connection with the amendment thereto because
(i) its current Certificate of Incorporation was prepared by the
Corporation's prior management and is not in the form preferred
by current management; and (ii) a restatement consolidates its
current Certificate of Incorporation, which consists of the
original certificate and seven amendments, making it less
cumbersome to read and more concise. If the Amendment and
Restatement is approved by the Corporation's shareholders at the
Annual Meeting, management will file the Amendment and
Restatement with the New Jersey Secretary of State as soon as
practicable after the Annual Meeting. The Amendment and
Restatement and the Reverse Split will be effective on the date
of such filing (the "Effective Date").
Reverse Split
Description. Pursuant to the Reverse Split, on the
Effective Date, each share of Common Stock outstanding will be
converted into 0.2608491 of one share (the "New Common Stock").
No fractional shares or scrip will be issued; rather,
shareholders who would otherwise be entitled to a fractional
share as a result of the Reverse Split will receive cash in the
amount described below. The price for such fractional share will
be based upon the mean between the high and low bid quotation per
share for the Common Stock for the ten trading days immediately
preceding the Effective Date of the Reverse Split, as provided by
the NASD.
Reasons for the Reverse Split. The Corporation requires
additional financing to fund its plans for continued growth. On
February 7, 1997, the Corporation signed a letter of intent with
an investment banking firm (the "Investment Banker") to
underwrite, on certain terms and conditions, a public offering
(the "Public Offering") that would result in gross proceeds of
$6.0 million. No assurance can be given that the Investment
Banker will underwrite the Public Offering or that the Public
Offering will be completed.
The Investment Banker has advised the Corporation that an
increase in the per share value of the Common Stock, effected
through a reduction in the number of outstanding shares caused by
the Reverse Split, should improve the Corporation's prospects for
completing the Public Offering by enhancing the marketability of
the Common Stock. Accordingly, the Investment Banker has advised
the Corporation that completion of the Reverse Split is one of
its conditions to participation in the Public Offering.
As of the date hereof, the Common Stock is regulated by the
SEC as a "penny stock" (a stock trading for under $5.00 per
share). The Board of Directors believes that the implementation
of the Reverse Split will improve the market for the Common Stock
in part because the Common Stock may trade above $5.00 per share
following the Reverse Split. Many brokerage firms are reluctant
to recommend lower price stocks (especially those trading for
under $5.00 per share) for their clients, and the policies and
practices of a number of brokerage houses tend to discourage
individual brokers within those firms from dealing in lower price
stocks. Also, the brokerage commission on the purchase or sale
of a stock with a relatively low per share price generally tends
to represent a higher percentage of the sales price than the
brokerage commission charged on a stock with a relatively high
per share price, to the detriment of the holders of the Common
Stock and the market for the Common Stock. The Board of
Directors believes that (i) these issues are best addressed by an
increase in the price per share of Common Stock that is
anticipated as a result of the Reverse Split; (ii) it is unlikely
that the Corporation can successfully complete the Public
Offering absent the Reverse Split.
Management of the Corporation is not aware of any present
efforts by any person to accumulate a block of the Common Stock,
and the Reverse Split is not intended to prevent or deter a
nonnegotiated change in control of the Corporation.
Additional Considerations. There can be no assurance that
the price of the Common Stock will rise following implementation
of the Reverse Split, or that such price, if it does rise, will
rise in proportion to the Reverse Split or will continue to
escalate or be sustained for a significant period. See " --
Effect on Market for Common Stock." In addition, there can be no
assurance that additional financing will ultimately be obtained.
Nevertheless, the Board of Directors believes that shareholder
approval of the Amendment and Restatement to effect the Reverse
Split is advisable at this time.
Vesting Discretion in the Board of Directors. But for
requirements of the Investment Banker in connection with the
proposed Public Offering, the Board of Directors would not view
the Reverse Split as desirable. At present, the Board expects to
direct management to file the Amendment and Restatement in the
form set forth on Annex A to this Information Statement.
However, if it appears likely that the Public Offering cannot be
consummated for any reason or if an as yet unidentified
alternative source of financing becomes available, the Board
would direct management to delete the provisions effecting the
Reverse Split from the Amendment and Restatement prior to filing.
General Effect of Reverse Split. The New Common Stock will
not be different from the Common Stock and the holders of the New
Common Stock or options or warrants to purchase the New Common
Stock will have the same relative rights following the Effective
Date as they had prior thereto.
The effect of the Reverse Split on the aggregate number of
shares of the Common Stock as of March 31, 1997 is set forth in
the table below. Except for the following data, the Reverse
Split will not have any effect on the shareholders' equity
section of the Company's balance sheet.
Prior to
Proposed After Proposed
Reverse Split Reverse Split
Number of Shares(1)
Common Stock
Authorized . . . . . . . . . . 50,000,000 50,000,000
Issued and Outstanding . . . . 7,667,266 1,999,999
Available for issuance . . . . 42,332,734 48,000,001
Par value per share. . . . . . 0.0001 0.0001
____________________
(1) The number of shares outstanding prior to the Reverse Split
are as of March 31, 1997. Shares outstanding after the
Reverse Split do not reflect any adjustments that may result
from the repurchase of fractional shares and do not reflect
the shares sold in the Private Placement or the proposed
issuance of shares in the Public Offering.
Effect on Registration. The Common Stock is currently
registered under Section 12(g) of the Exchange Act, and as a
result, the Company is subject to the periodic reporting and
other requirements of the Exchange Act. The Reverse Split will
not affect the registration of the Common Stock under the
Exchange Act.
Effect on the Market for the Common Stock. The Common Stock
is traded in the over-the-counter market. The Common Stock is
presently quoted on the National Association of Securities
Dealers ("NASD") OTC Bulletin Board Service. The Corporation's
Annual Report on Form 10-K for the year ended September 30, 1996
sets forth the high and low bid quotations for shares of Common
Stock for each quarter beginning with the quarter ended
December 31, 1994 through the quarter ended March 31, 1997, as
reported by the NASD.
Management anticipates that after the Effective Date, the
market price of shares of New Common Stock will rise as a result
of the decrease in the number of shares outstanding. However, it
cannot be predicted whether any increase in market price would be
in proportion to the Reverse Split. If the market price of the
Common Stock were not to adjust proportionately, a significant
loss of aggregate market value of the outstanding Common Stock
could result. In addition, a Reverse Split reduces the number of
shares of Common Stock outstanding, thereby adversely affecting
liquidity and possibly depressing the price of the Common Stock.
Following implementation of the Reverse Split, and until the
Common Stock is listed on an exchange or is accepted for
quotation on NASDAQ, the Corporation believes that trading in New
Common Stock will continue in the over-the-counter market in
transactions handled through the market makers of the Common
Stock.
Holders of Common Stock are entitled to receive such
dividends as may be declared by the Corporation's Board of
Directors. No dividends on Common Stock were paid during the
year ended September 30, 1996 or during the six month period
ended March 31, 1997. The Corporation presently intends to
retain all future earnings for the expansion of its business and
consequently does not presently intend to pay any cash dividends
on the New Common Stock or the Common Stock.
Effect on Options. The number of shares that may be issued
under the 1997 Plans, if approved by the Corporation's
shareholders at the Annual Meeting, and the number of shares
issuable upon the exercise of any option outstanding on the
Effective Date will be decreased in proportion to the Reverse
Split. Conversely, the exercise price per share of any such
outstanding option will be proportionately increased on the
Effective Date. Any such outstanding option will be rounded to
the nearest whole share, and no cash payment will be made in
respect of any fractional share so rounded.
Exchange of Stock Certificates and Liquidation of Fractional
Shares. As soon as practicable after the Effective Date, the
shareholders will be notified and requested to surrender their
certificates representing shares of Common Stock to the
Corporation's transfer agent so that certificates representing
the appropriate number of shares of New Common Stock, together
with a cash payment in lieu of any fractional share, may be
issued in exchange therefor.
Federal Income Tax Consequences. A summary of the principal
federal income tax consequences of the proposed Reverse Split is
set forth below. The following discussion is based upon present
federal tax law and does not purport to be a complete discussion
of such consequences for all shareholders in all circumstances,
nor does it address state, local or foreign tax consequences or
considerations. ACCORDINGLY, SHAREHOLDERS ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS FOR MORE DETAILED INFORMATION REGARDING
THE EFFECTS OF THE PROPOSED REVERSE SPLIT ON THEIR INDIVIDUAL TAX
STATUS.
1. The proposed Reverse Split will not be a taxable
transaction to the Corporation.
2. A shareholder will not recognize any gain or loss as a
result of the Reverse Split unless the shareholder receives cash
in lieu of a fractional share. Although it is impossible to
predict with certainty the tax consequences to any shareholder
who receives cash in lieu of a fractional share, the Corporation
believes that such shareholder will recognize gain or loss as a
result of the Corporation's purchase of a fractional share based
upon the amount realized for the fractional share less the
holder's proportionate adjusted basis in such fractional share,
and such gain or loss will constitute capital gain or loss if his
or her Common Stock is held as a capital asset.
3. The aggregate tax basis of the New Common Stock
received by a shareholder pursuant to the Reverse Split will
equal the aggregate tax basis of the shareholder's Common Stock
prior to the Effective Date (except that such basis will be
reduced by any basis allocated to a fractional share redeemed by
the Corporation with respect to which the shareholder recognizes
gain or loss as described in paragraph 2 above). The holding
period of the New Common Stock received by the shareholder will
include the holding period of the shareholder's Common Stock
before the Reverse Split, provided the shares of Common Stock
were a capital asset in the hands of such shareholder.
Special taxation and withholding rules may apply to any
shareholder that is a nonresident alien or a foreign corporation.
Those rules are beyond the scope of this discussion and should be
discussed with a personal tax advisor. Shareholders will be
required to provide their social security or other taxpayer
identification numbers (or, in some instances, certain other
information) to the transfer agent in connection with the Reverse
Split to avoid backup withholding requirements that might
otherwise apply in connection with the receipt of cash in lieu of
fractional shares. See "Exchange of Certificates and Liquidation
of Fractional Shares." The letter of transmittal will require
each shareholder to deliver such information when the Common
Stock certificates are surrendered following the Effective Date.
Failure to provide such information may result in backup
withholding.
No Dissenters' Rights. Under New Jersey law, shareholders
are not entitled to dissenters' rights with respect to the
Reverse Split.
Anti-takeover Provisions
Reasons for Anti-takeover Provisions. The anti-takeover
provisions effected by the Amendment and Restatement are intended
to encourage potential acquirors of the Corporation to negotiate
directly with the Board of Directors of the Corporation. In the
Board of Directors' judgment, the Board is in the best position
to determine the true value of the Corporation and to negotiate
most effectively for what may be in the best interests of the
Corporation's shareholders. Accordingly, the Board of Directors
believes that it is in the best interests of the Corporation and
its shareholders to encourage potential acquirors to negotiate
directly with the Board of Directors and that these provisions
encourage such negotiations and discourage hostile takeover
attempts. It is also the Board of Directors' view that these
provisions do not discourage persons from proposing a merger or
other transaction at prices reflective of the true value of the
Corporation and which is in the best interest of all
shareholders.
Additional Considerations. These provisions may have the
effect of discouraging a future takeover attempt that is not
approved by the Board but which individual shareholders may deem
to be in their best interests or in which shareholders may
receive a substantial premium for their shares over the then
current market price. As a result, shareholders who might desire
to participate in such a transaction may not have an opportunity
to do so. Such provisions will also render the removal of the
Corporation's current Board of Directors or management more
difficult.
The following discussion is a general summary of certain
provisions of the Amendment and Restatement that may be deemed to
have such an "anti-takeover" effect. The description of these
provisions is necessarily general and reference should be made in
each case to the Amendment and Restatement attached hereto as
Annex A.
Classified Board of Directors and Related Provisions. The
Amendment and Restatement provides that the Board of Directors is
to be divided into three classes which shall be as nearly equal
in number as possible. The directors in each class will hold
office following their initial appointment to office for terms of
one year, two years and three years, respectively and, upon
reelection, will serve for terms of three years thereafter. Each
director will serve until his or her successor is elected and
qualified. Pursuant to the Amendment and Restatement, Directors
Ahearn and DiPalma and nominee Denis Clark will be Class I
directors to hold office until the annual shareholder election of
directors in 1998; Directors Droste and Vanechanos, Sr. will be
Class II directors to hold office until the annual shareholder
election of directors in 1999; and Directors Konikowski and
Vanechanos, Jr., will be Class III directors to hold office until
the annual shareholder election of directors in 2000.
The Amendment and Restatement provides that a director may
be removed by shareholders only upon the affirmative vote of at
least a majority of the votes which all shareholders would be
entitled to cast. The Amendment and Restatement further provides
that the Board of Directors shall have the exclusive power to
fill any vacancy occurring in the Board of Directors, including a
vacancy created by an increase in the number of directors, by a
majority vote of the directors then in office. Any director so
elected shall serve until the next annual meeting of
shareholders.
A classified board of directors could make it more difficult
for shareholders, including those holding a majority of the
outstanding shares, to force an immediate change in the
composition of a majority of the Board of Directors. Because the
terms of only one-third of the incumbent directors expire each
year, it requires at least two annual elections for the
shareholders to change a majority, whereas a majority of a
non-classified board may be changed in one year. In the absence
of the provisions of the Amendment and Restatement classifying
the Board, all of the directors would be elected each year.
Management of the Corporation believes that the staggered
election of directors tends to promote continuity of management
because only one-third of the Board of Directors is subject to
election each year. Staggered terms guarantee that in the
ordinary course approximately two-thirds of the directors, or
more, at any one time have had at least one year's experience as
directors of the Corporation, and moderate the pace of change in
the composition of the Board of Directors by extending the
minimum time required to elect a majority of directors from one
to two years.
Other Antitakeover Provisions. The Amendment and
Restatement contains certain other provisions that may also have
the effect of deterring or discouraging, among other things, a
non-negotiated tender or exchange offer for the Common Stock, a
proxy contest for control of the Corporation, the assumption of
control of the Corporation by a holder of a large block of the
Common Stock and the removal of the Corporation's management.
These provisions: (1) empower the Board of Directors, without
shareholder approval, to issue preferred stock, the terms of
which, including voting power, are set by the Board; (2) restrict
the ability of shareholders to remove directors; (3) require that
shareholders with at least 80% of total voting power approve
mergers and other similar transactions if the transaction is not
approved, in advance, by the Board of Directors; (4) prohibit
shareholders' actions without a meeting; (5) require that
shareholders with at least 80%, or in certain instances a
majority, of total voting power approve the repeal or further
amendment of the Certificate of Incorporation; (6) limit the
right of a person or entity to vote more than 10% of the
Corporation's voting stock; and (7) require that shares with at
least 66-2/3% of total voting power approve any repeal or
amendment of the Bylaws.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
APPROVAL OF THE AMENDMENT AND RESTATEMENT. Approval of the
Amendment and Restatement requires the affirmative vote of a
majority of the votes cast by the holders of the outstanding
shares of Common Stock entitled to vote thereon. Abstentions and
broker non-votes will not constitute or be counted as "votes"
cast for purposes of the Annual Meeting.
PROPOSAL 3
1997 EMPLOYEE STOCK OPTION PLAN
General
Introduction. The Board of Directors believes that stock
option programs constitute an important part of a corporate
compensation program and, accordingly, the Board of Directors has
adopted a new 1997 Employee Stock Option Plan (the "1997 Employee
Plan"), which is subject to shareholder approval. The
Corporation has previously granted options to employees under the
Corporation's 1982 Stock Option Plan, which has expired by its
terms, and the Corporation's 1992 Stock Option Plan, which the
Company has terminated. No options issued under such plans are
outstanding.
Set forth below is a summary of the provisions of the 1997
Employee Plan. This summary is qualified and amplified in its
entirety by the text of the 1997 Employee Plan set forth as
Annex B to this Information Statement and incorporated by
reference herein.
Purpose. The 1997 Employee Plan is designed to improve the
performance of the Corporation and its subsidiaries and, by doing
so, to serve the interests of the Corporation and its
shareholders. By encouraging ownership of the Corporation by
those who play significant roles in the Corporation's success,
implementation of the 1997 Employee Plan will have the effect of
more closely aligning the interests of the Corporation's
employees with those of its shareholders by relating capital
accumulation to increases in shareholder value. Moreover,
adoption of the 1997 Employee Plan should have a positive effect
on the Corporation's ability to attract, motivate and retain
employees having outstanding leadership and management ability.
Description. The 1997 Employee Plan authorizes the
Compensation Committee (the "Committee") of the Board of
Directors to grant options for the purchase of up to
900,000 shares of the Common Stock (which shall be reduced to
234,764 shares upon the consummation of the Reverse Split). Any
shares as to which an option expires, lapses unexercised, or is
terminated or canceled may be subject to a new option.
Under the 1997 Employee Plan, both "Incentive Stock Options"
(as defined in Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code")), which qualify for certain tax benefits,
and options which do not qualify for such tax benefits
("Nonqualified Stock Options") may be granted to eligible
employees of the Corporation and its subsidiaries. All current
employees of the Company are eligible to participate in the 1997
Employee Plan. As of April 14, 1996, the Corporation had
approximately 19 employees.
The Committee has the authority to grant options to
employees under the 1997 Employee Plan, based upon the
recommendation of the Corporation's Chief Executive Officer and
subject to the approval of a majority of the disinterested
members of the Board. Option grants to employees are anticipated
to be made annually. Eligible employees generally include all
key employees of the Corporation and its subsidiaries. This
would include the executive officers listed in the Summary
Compensation Table included under the section entitled
"Proposal 1 -- Election of Directors -- Executive Compensation"
in this Information Statement.
The 1997 Employee Plan authorizes the Committee to
administer and interpret the 1997 Employee Plan. The Committee
is composed of at least two members of the Board, who serve at
the discretion of the Board and are each required to be "outside
directors" within the meaning of Code Section 162(m).
The exercise price for Incentive Stock Options granted under
the 1997 Employee Plan will be equal to at least the fair market
value of the stock underlying the option on the date the option
is granted. However, the exercise price for Nonqualified Stock
Options granted under the 1997 Employee Plan will be such dollar
amount as may be specified by the Committee. Therefore, the
Corporation may issue Nonqualified Stock Options having an
exercise price which is less than the fair market value of the
stock underlying the option on the date of grant.
Incentive Stock Options granted under the 1997 Employee Plan
may be exercised for up to 10 years after the date of grant,
except in certain limited circumstances. Nonqualified Stock
Options granted under the 1997 Employee Plan may be exercised for
up to 10 years and 1 month after the date of grant. With the
approval of the Committee, an optionee may pay the required
exercise price for an option by surrendering shares of Common
Stock with a value equal to such exercise price, subject to
certain limitations with respect to payment with shares acquired
through the exercise of Incentive Stock Options. The aggregate
fair market value (determined at the time the option is granted)
of the shares of Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by an optionee
during any calendar year may not exceed $100,000. No employee
may receive option grants in excess of 250,000 shares under the
1997 Employee Plan during any twelve-month period. No option may
be transferred by the optionee other than by will or by the laws
of descent and distribution, and each option is exercisable
during the optionee's lifetime only by the optionee, or his
guardian or legal representative, unless otherwise approved by
the Committee.
Under the 1997 Employee Plan, options may not be exercised
during the 12-month period following the date of grant unless
(i) there occurs a "change in control" of the Corporation during
such period or (ii) the Committee waives the 12-month continuous
employment requirement for an employee whose employment has
terminated prior to the satisfaction of such requirement. In the
event of a "change in control," the options become immediately
exercisable. The term "change in control" is defined in the 1997
Employee Plan to mean, among other things, a merger,
consolidation or similar transaction in which (i) the
Corporation's shareholders do not own, after the transaction, at
least 662/3% of the voting securities of the surviving
institution, and (ii) persons who were members of the
Corporation's Board do not constitute at least 662/3% of the
members of the Board of the surviving institution.
Under the 1997 Employee Plan, in the event of an optionee's
retirement, Incentive Stock Options lapse at the earlier of three
months from the date of retirement or the expiration of the term
of the option, while Nonqualified Stock Options may continue to
be exercised during the term of the option for up to 24 months,
at the discretion of the Committee, from the date of retirement.
With respect to an optionee whose employment terminates due to
death or disability, the optionee or his or her legal
representative may exercise the option until the earlier of the
expiration of the term of the option or one year after such
termination of employment.
If an optionee's employment is terminated for any reason
except retirement, death or disability, all options granted to
such person under the 1997 Employee Plan terminate upon the date
employment is terminated, unless the Committee permits the
optionee to exercise such options until the earlier of (i) the
expiration of the term of the option or (ii) in the case of
Incentive Stock Options, three months after such termination of
employment, and in the case of Nonqualified Stock Options, up to
24 months from the date of termination.
The Board of Directors may amend, suspend or terminate the
1997 Employee Plan at any time without shareholder approval;
provided, however, that the Board may not, without shareholder
approval, amend the 1997 Employee Plan so as to (i) increase the
number of shares subject to the 1997 Employee Plan, (ii) change
the class of eligible employees, or (iii) make a change which
would otherwise require the approval of shareholders under
applicable tax, securities or other laws. In addition, the Board
may not modify or amend the 1997 Employee Plan with respect to
any outstanding options, or impair or cancel any outstanding
option, without the consent of the affected optionee.
Upon receipt of shareholder approval of the 1997 Employee
Plan, the Committee expects to make an initial grant of options
to purchase a total of approximately 250,000 shares of Common
Stock (which shall be reduced to 65, 213 shares after
consummation of the Reverse Split) to employees under the 1997
Employee Plan.
If the 1997 Employee Plan is approved by the shareholders,
the Corporation anticipates that the shares of Common Stock
issuable thereunder will be registered with the Securities and
Exchange Commission and with any applicable state securities
commission where registration is required. The cost of such
registrations will be borne by the Corporation.
Tax Consequences
General. The 1997 Employee Plan is not a qualified plan
under Code Section 401(a). The Corporation has been advised
that, under the Code, the following federal income tax
consequences will result when Incentive Stock Options or
Nonqualified Stock Options, or any combination thereof, are
granted or exercised, although the following is not intended to
be a complete statement of the applicable law.
Incentive Stock Options. An optionee generally will not be
deemed to receive any income for federal tax purposes at the time
an Incentive Stock Option is granted, nor will the Corporation be
entitled to a tax deduction at that time. No income is
recognized by an optionee upon the exercise of such an option.
Upon the sale or exchange of the shares at least two years after
the grant of the option and one year after receipt of the shares
by the optionee upon exercise, the optionee will recognize long-
term capital gain or loss upon the sale of such shares equal to
the difference between the amount realized on such sale and the
exercise price.
If the foregoing holding periods are not satisfied, the
optionee will recognize ordinary income equal to the difference
between the exercise price and the lower of the fair market value
of the stock at the date of the option exercise or the sale price
of the stock. If the sale price exceeds the fair market value on
the date of exercise, the gain in excess of the ordinary income
portion will be treated as either long-term or short-term capital
gain, depending on whether the stock has been held for more than
12 months on the date of sale. Any loss on disposition is a
long-term or short-term capital loss, depending upon whether the
optionee had held the stock for more than 12 months. A different
rule for measuring ordinary income upon such a premature
disposition may apply if the optionee is a director or 10 percent
shareholder of the Corporation or an officer of the Corporation
subject to Section 16(b) of the Exchange Act. If the Corporation
cancels an option, the optionee recognizes income to the extent
of the amount paid to the optionee by the Corporation to cancel
the option over the optionee's basis in such option, if any.
No income tax deduction will be allowed to the Corporation
with respect to shares purchased by an optionee upon the exercise
of an Incentive Stock Option, provided that such shares are held
at least two years after the date of grant and at least one year
after the date of exercise. However, if those holding periods
are not satisfied, the Corporation may deduct an amount equal to
the ordinary income recognized by the optionee upon disposition
of the shares.
The exercise of an Incentive Stock Option could subject an
optionee to alternative minimum tax liability for federal income
tax purposes.
Nonqualified Stock Options. An optionee will not be deemed
to receive any income for federal tax purposes at the time a
nonqualified stock option is granted, nor will the Corporation be
entitled to a tax deduction at that time. At the time of
exercise, however, the optionee will realize ordinary income in
an amount equal to the excess of the market value of the shares
at such time over the option price of such shares. The
Corporation will generally be allowed a federal income tax
deduction, at the time of such recognition by the optionee, in an
amount equal to the ordinary income recognized by the optionee,
subject to certain possible limitations under the Code. Gain or
loss on the subsequent disposition of option stock by the
optionee will normally be capital gain or loss.
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
ADOPTION OF THE 1997 EMPLOYEE PLAN. The affirmative vote of a
majority of all votes cast at the Annual Meeting is required to
adopt the 1997 Plan. Abstentions and broker non-votes will not
constitute or be counted as "votes" cast for purposes of the
Annual Meeting.
PROPOSAL 4
STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
General. On April 28, 1997, the Board of Directors adopted
a Stock Option Plan for Outside Directors (the "1997 Director
Plan"). The 1997 Director Plan is subject to approval by the
shareholders of the Corporation.
Set forth below is a summary of the provisions of the 1997
Director Plan. This summary is qualified and amplified in its
entirety by the text of the 1997 Director Plan set forth as
Annex C to this Information Statement, and incorporated by
reference herein.
Purpose of the 1997 Director Plan. The purpose of the 1997
Director Plan is to attract, retain and compensate highly
qualified individuals who are not employees to serve as members
of the Board of Directors by encouraging them to invest in the
Common Stock and thereby acquire a further proprietary interest
in the Corporation and an increased personal interest in the
Corporation's continued success and progress.
Eligibility and Number of Options. Each person (i) who is a
director of the Corporation and (ii) who is not, as of such date,
an employee of the Corporation shall, on the earlier of (a) the
date on which the Public Offering is completed, or
(b) September 30, 1997, and thereafter on the date of each
succeeding annual meeting of shareholders at which directors are
elected, automatically be granted an option to purchase
15,000 shares of the Common Stock (or 3,912 shares if the Reverse
Split occurs prior to the date of such grant). Future directors
elected by the Board to fill a vacancy will also receive such a
grant on the date of such initial election as a director.
Assuming that the 1997 Director Plan is approved by the
shareholders of the Corporation, and assuming that all of the
Board of Directors' non-employee nominees for director are
elected, Messrs. Ahearn, Clark, DiPalma and Droste will each
receive, on the earlier of (a) the date on which the Public
Offering is completed, or (b) September 30, 1997, options under
the 1997 Director Plan to purchase an aggregate of 15,000 shares
of the Common Stock (or 3,912 shares if the Reverse Split occurs
prior to the date of such grant).
The 1997 Director Plan authorizes the Committee to
administer and interpret the 1997 Director Plan. The 1997
Director Plan further authorizes the Committee to grant options
for the purchase of an aggregate amount up to 300,000 shares of
the Common Stock (which shall be reduced to 78,254 on the
Effective Date of the Reverse Split). Any shares as to which an
option expires, lapses unexercised, or is terminated or canceled
may be subject to a new option.
Only Nonqualified Stock Options may be granted under the
1997 Director Plan. The exercise price for options granted under
the 1997 Director Plan will be equal to the fair market value of
the stock underlying the option on the date the option is
granted.
Nonqualified Stock Options granted under the 1997 Director
Plan may be exercised for 10 years and 1 month after the date of
grant. No option may be transferred by the optionee other than
by will or by the laws of descent and distribution, and each
option is exercisable during the optionee's lifetime only by the
optionee, or his guardian or legal representative, unless
otherwise approved by the Committee.
Under the 1997 Director Plan, options may not be exercised
during the 11-month period following the date of grant unless
(i) there occurs a "change in control" of the Corporation during
such period or (ii) the Committee waives the 11-month continuous
service requirement for a director whose service as such has
terminated prior to the satisfaction of such requirement. In the
event of a "change in control," the options become immediately
exercisable. The term "change in control" is defined in the 1997
Director Plan to mean, among other things, a merger,
consolidation or similar transaction in which (i) the
Corporation's shareholders do not own, after the transaction, at
least 662/3% of the voting securities of the surviving
institution, and (ii) persons who were members of the
Corporation's Board do not constitute at least 662/3% of the
members of the Board of the surviving institution.
Under the 1997 Director Plan, in the event of an optionee's
retirement, options may continue to be exercised during the term
of the option for up to 24 months, at the discretion of the
Committee, from the date of retirement. With respect to an
optionee whose service as a director terminates due to death or
disability, the optionee or his or her legal representative may
exercise the option until the earlier of the expiration of the
term of the option or one year after such termination of service.
If an optionee's service as a director is terminated for any
reason except retirement, death or disability, all options
granted to such person under the 1997 Director Plan terminate on
the date such service is terminated, unless the Committee permits
the optionee to exercise such options until the earlier of
(i) the expiration of the term of the option or (ii) up to
24 months from the date of termination.
The Board of Directors may amend, suspend or terminate the
1997 Director Plan at any time without shareholder approval
unless the approval of shareholders is otherwise required under
applicable tax, securities or other laws. In addition, the Board
may not modify or amend the 1997 Director Plan with respect to
any outstanding option or impair or cancel any outstanding
option, without the consent of the affected optionee.
If the 1997 Director Plan is approved by the shareholders,
the Corporation anticipates that the shares of Common Stock
issuable thereunder will be registered with the SEC and with any
applicable state securities commission where registration is
required. The cost of such registrations will be borne by the
Corporation.
Federal Income Tax Consequences. Options granted pursuant
to the 1997 Director Plan will be Nonqualified Stock Options.
See "Proposal 3 -- 1997 Employee Stock Option Plan -- Tax
Consequences" for a description of the federal income tax
consequences relating to Nonqualified Stock Options.
Recommendation. THE BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE FOR ADOPTION OF THE 1997 DIRECTOR PLAN. The
affirmative vote of a majority of all votes cast at the Annual
Meeting is required to adopt the 1997 Director Plan. Abstentions
and broker non-votes will not constitute or be counted as "votes"
cast for purposes of the Annual Meeting.
NEW PLAN BENEFITS
The following table sets forth the benefits that would have
been received by the following people pursuant to the 1997 Plans
if they had been in effect in 1996: (i) the executive officers
named in the compensation tables beginning on page __; (ii) all
current executive officers as a group; (iii) all current
directors who are not executive officers as a group; and (iv) all
employees who are not executive officers, as a group.
1997 Plans
Name and Position Dollar Value ($) Number of Units(1)
Steve L. Vanechanos, Jr. 0 0
Chief Executive Officer
and President
All executive officers 0 0
as a group (3 persons)
All directors who are not (2) 60,000
executive officers, as a
group (3 persons)
All employees, excluding 0 0
executive officers, as a
group
___________________________
(1) The number of units shown corresponds to the number of the
Corporation's shares underlying options that will be
automatically granted on or before September 30, 1997 to the
optionees shown under the 1997 Director Plan, subject to
shareholder approval. As of May __, 1997, no options have
been granted under the 1997 Employee Plan.
(2) The exercise price for options to be granted under the 1997
Director Plan will be the fair market value of the stock
underlying the option on the date the option is granted.
Therefore, the options will not have any dollar value on the
date of grant.
PROPOSAL 5
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
General. The Board of Directors has appointed Richard A.
Eisner & Company, LLP, New York, New York, Certified Public
Accountants, as the Corporation's independent public accountants
for the year ending September 30, 1997, and has directed that the
selection of such auditors be submitted for ratification by the
shareholders at the Annual Meeting. The Corporation has been
advised by Richard A. Eisner & Company, LLP that none of its
members has any financial interest in the Corporation.
Termination of Prior Auditors. On February 19, 1997, the
Corporation terminated the engagement of Allen G. Roth, P.A.
("Roth") as the Corporation's independent auditors. On
February 24, 1997, the Corporation engaged the independent
certified public accounting firm of Richard A. Eisner & Company,
LLP to audit the Corporation's consolidated financial statements
for the year ended September 30, 1996, which audited financial
statements are set forth in the Corporation's Annual Report on
Form 10-K for the year ended September 30, 1996.
As previously reported, Seahawk Capital Corporation
("Seahawk"), a predecessor to the Corporation, on March 26, 1996,
acquired all of the issued and outstanding common stock of DWTS
in exchange for approximately 93% of Seahawk's issued and
outstanding common stock, and in connection therewith changed its
name to DynamicWeb Enterprises, Inc. For accounting purposes,
this transaction was treated as a recapitalization of DWTS, with
DWTS as the acquiring corporation. Accordingly, the
Corporation's historical financial statements covering periods
prior to March 26, 1996, as filed to date with the SEC, are those
of DWTS.
The consolidated financial statements of Seahawk for the
year ended December 31, 1995 were audited by R. Andrew Gately &
Co. ("Gately"). Roth audited the consolidated financial
statements of DWTS for the year ended September 30, 1995.
Accountants' Reports. Roth's report on DWTS' consolidated
financial statements at and for the period February 1, 1995 (date
of inception) to September 30, 1995 did not contain any adverse
opinion or disclaimer of opinion and was not modified as to
uncertainty, audit scope or accounting principles.
Gately's report on Seahawk's consolidated financial
statements at and for each of the years in the two-year period
ended December 31, 1995 provided, among other things, that:
"As further discussed in Notes 1 and 7, subsequent to
December 31, 1995, the Company purchased all of the
common stock of Dynamic Web [sic] Transaction Systems,
Inc. ("DYN"). For accounting purposes, the acquisition
was treated as recapitalization of DYN with DYN as the
inquiring [sic] corporation ("reverse acquisition").
Ongoing operations will be that of DYN and,
consequently, the past results of the Company have no
significance as to future operations of the Company.
Absence [sic] this transaction, the Company could not
have continued as a going concern."
Except for the foregoing, Gately's report did not contain
any adverse opinion or disclaimer of opinion and was not modified
as to uncertainty, audit scope or accounting principles.
There were no disagreements between the Corporation
(including Seahawk or DWTS) and either Gately or Roth on any
matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements,
if not resolved to such accountant's satisfaction, would have
caused such accountant to make reference to the subject matter of
the disagreement in connection with its report on the
consolidated financial statements of Seahawk or DWTS, as the case
may be.
Annual Meeting. In the event that the shareholders do not
ratify the selection of Richard A. Eisner & Company, LLP as the
Corporation's independent public accountants to perform audit
services for the 1997 fiscal year, another accounting firm may be
chosen to provide audit services for the 1997 fiscal year.
Representatives of Richard A. Eisner & Company, LLP, are
expected to attend the Annual Meeting, will be afforded an
opportunity to make a statement if they desire to do so and will
be available to respond to questions from shareholders.
Recommendation. THE BOARD OF DIRECTORS RECOMMENDS THAT THE
SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE SELECTION OF
RICHARD A. EISNER & COMPANY, LLP, AS THE AUDITORS FOR THE
CORPORATION FOR THE YEAR ENDING SEPTEMBER 30, 1997. Ratification
of the selection of Richard A. Eisner & Company, LLP will require
the affirmative vote of a majority of the shares of Common Stock
represented in person or by proxy at the Annual Meeting.
Abstentions and broker non-votes will not constitute or be
counted as "votes" cast for purposes of the Annual Meeting.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934
requires the Corporation's officers and directors and persons who
own more than ten percent of a registered class of the
Corporation's equity securities, to file reports of ownership and
changes in ownership with the Securities and Exchange Commission.
Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Corporation with copies
of all Section 16(a) forms they file. The rules of the SEC
regarding the filing of such statements require that "late
filings" of such statement be disclosed in this Information
Statement.
Based solely on review of the copies of such forms furnished
to the Corporation, or written representations that no Forms 5
were required, the Corporation believes that, during the fiscal
year ended September 30, 1996, its officers, directors, and
greater than ten-percent beneficial owners complied with
applicable Section 16(a) filing requirements, except that
F. Patrick Ahearn, Jr. and Robert Droste each inadvertently
neglected to file on a timely basis one such statement.
Messrs. Ahearn and Droste's statements were each required to be
filed to report their respective acquisitions of 157 shares of
Common Stock pursuant to the Corporation's acquisition of
Megascore, of which Messrs. Ahearn and Droste were shareholders.
ANNUAL REPORT
The Corporation's Annual Report on Form 10-K for the year
ended September 30, 1996 is being mailed to the Corporation's
shareholders for their information together with this Information
Statement. No part thereof is incorporated by reference in this
Information Statement. Upon the written request of any
shareholder and the payment of a fee of $0.25 per page covering
the Corporation's reasonable expenses in connection therewith,
the Corporation will furnish to such shareholder any exhibit to
the Form 10-K. Such request should be sent to Steve Vanechanos,
Sr., Secretary, DynamicWeb Enterprises, Inc., 271 Route 46 West,
Building F, Suite 209, Fairfield, New Jersey 07004, and shall set
forth a good faith representation that, as of April 14, 1997, the
person making the request was a beneficial owner of shares of the
Common Stock entitled to vote at the Annual Meeting.
By Order of the Board of Directors
Steve Vanechanos, Sr.
Secretary
<PAGE>
ANNEX A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
DYNAMICWEB ENTERPRISES, INC.
Pursuant to the provision of N.J.S.A. 14A:9-5, the
undersigned corporation, for the purpose of amending and
restating its Certificate of Incorporation, hereby certifies as
follows:
FIRST. The name of the Corporation is DynamicWeb
Enterprises, Inc.
SECOND. The location and post office address of the
Corporation's registered office in this state is 271 Route 46
West, Building F, Suite 209, Fairfield, New Jersey 07004 and its
registered agent at such address is Steve Vanechanos, Jr.
THIRD. The purpose of the Corporation is and it shall have
unlimited power to engage in and to do any lawful act concerning
any or all lawful business for which corporations may be
incorporated under provisions of the New Jersey Business
Corporation Act.
FOURTH. The term of the Corporation's existence is
perpetual.
FIFTH. Each share of common stock, par value $.0001 per
share, of the Company (the "Common Stock") issued and outstanding
immediately prior to the effective date of this Amended and
Restated Certificate of Incorporation (the "Effective Date")
shall be and hereby is, on and as of the Effective Date,
automatically changed without further action into 0.2608491 of a
fully paid and nonassessable share of Common Stock; provided,
however, that no fractional shares shall be issued pursuant to
such change. The Corporation will pay cash to shareholders who
would otherwise be entitled to a fractional share as a result of
this change. Such cash payments will be equal to the fractional
interest times the mean between the closing bid and asked prices
for the Common Stock as quoted by the NASD Electronic Bulletin
Board for the ten trading days preceding the Effective Date. On
and after the Effective Date, the aggregate number of shares of
capital stock which the Corporation shall have authority to issue
is 55,000,000 shares, divided into two classes consisting of
50,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock, having such par value as the board of directors
shall fix and determine, as provided in Article SIXTH below
("Preferred Stock").
SIXTH. The Preferred Stock may be issued from time to time
as a class without series or, if so determined by the board of
directors of the Corporation, either in whole or in part, in one
or more series. There is hereby expressly granted to and vested
in the board of directors of the Corporation authority to fix and
determine (except as fixed and determined herein), by resolution,
the par value, voting powers, full or limited, or no voting
powers, and such designations, preferences and relative,
participating, optional or other special rights, if any, and the
qualifications, limitations or restrictions thereof, if any,
including specifically, but not limited to, the dividend rights,
conversion rights, redemption rights and liquidation preferences,
if any, of any wholly unissued series of Preferred Stock (or the
entire class of Preferred Stock if none of such shares have been
issued), the number of shares constituting any such series and
the terms and conditions of the issue thereof. Prior to the
issuance of any shares of Preferred Stock, a statement setting
forth a copy of each such resolution or resolutions and the
number of shares of Preferred Stock of each such class or series
shall be executed and filed in accordance with the New Jersey
Business Corporation Act. Unless otherwise provided in any such
resolution or resolutions, the number of shares of capital stock
of any such class or series so set forth in such resolution or
resolutions may thereafter be increased or decreased (but not
below the number of shares then outstanding), by a statement
likewise executed and filed setting forth a statement that a
specified increase or decrease therein had been authorized and
directed by a resolution or resolutions likewise adopted by the
board of directors of the Corporation. In case the number of
such shares shall be decreased, the number of shares so specified
in the statement shall resume the status they had prior to the
adoption of the first resolution or resolutions.
SEVENTH. Each holder of record of Common Stock shall have
the right to one vote for each share of Common Stock standing in
such holder's name on the books of the Corporation. No
shareholder shall be entitled to cumulate any votes for the
election of directors.
EIGHTH. The management, control and government of the
Corporation shall be vested in a board of directors consisting of
not less than five (5) nor more than twenty-five (25) members in
number, as fixed by the board of directors of the Corporation
from time to time. The directors of the Corporation shall be
divided into three classes: Class I, Class II and Class III.
Each Class shall be as nearly equal in number as possible. If
the number of Class I, Class II or Class III directors is fixed
for any term of office, it shall not be increased during that
term, except by a majority vote of the board of directors. The
term of office of the initial Class I directors shall expire at
the annual election of directors by the shareholders of the
Corporation in 1998; the term of office of the initial Class II
directors shall expire at the annual election of directors by the
shareholders of the Corporation in 1999; and the term of office
of the initial Class III directors shall expire at the annual
election of directors by the shareholders of the Corporation in
2000. After the initial term of each Class, the term of office
of each Class shall be three (3) years, so that the term of
office of one class of directors shall expire each year when
their respective successors have been duly elected by the
shareholders and qualified. At each annual election by the
shareholders of the Corporation, the directors chosen to succeed
those whose terms then expire shall be identified as being of the
same class as the directors they succeed. Unless waived by the
board of directors of the Corporation, in order to qualify for
election as a director of the Corporation, a person must have
been a shareholder of record of the Corporation for a period of
time equal to the lesser of (i) three (3) years, or (ii) the time
elapsed since March 26, 1996. Shareholders of another
corporation that merges or consolidates with the Corporation, is
acquired by, or acquires the Corporation, or enters into any
similar transaction with the Corporation shall qualify for
election as a director of the Corporation if such shareholder was
a shareholder of record of the other corporation for a period of
time equal to the lesser of (i) three (3) years, or (ii) the time
elapsed since March 26, 1996. If, for any reason, a vacancy
occurs on the board of directors of the Corporation, a majority
of the remaining directors shall have the exclusive power to fill
the vacancy by electing a director to hold office for the
unexpired term in respect of which the vacancy occurred. No
director of the Corporation shall be removed for cause from
office, as a director, by the vote of shareholders, unless the
votes of shareholders cast in favor of the resolution for the
removal of such director constitute at least a majority of the
votes which all shareholders would be entitled to cast at an
annual election of directors.
NINTH. The number of directors constituting the current
Board of Directors is six, and the class, names and addresses of
the persons serving as directors are:
Class I
F. Patrick Ahearn, Jr.
107 Maple Street
Rutherford, NJ 07070
Denis Clark
8417 Greenside Drive
Dublin, OH 43017
Frank DiPalma
179 Clairmont Road
Ridgewood, NJ 07450
Class II
Robert Droste
24 Summit Road
Clifton, NJ 07012
Steve Vanechanos, Sr.
96 Union Avenue
Rutherford, NJ 07070
Class III
Kenneth R. Konikowski
36 Pinebrook Road
Towaco, NJ 07082
Steve L. Vanechanos, Jr.
92 Clarken Drive
West Orange, NJ 07052
TENTH. No holder of any class of capital stock of the
Corporation shall have preemptive rights, and the Corporation
shall have the right to issue and to sell to any person or
persons any shares of its capital stock or any option, warrant or
right to acquire capital stock, or any securities having
conversion or option rights without first offering such shares,
rights or securities to any holder of any class of capital stock
of the Corporation.
ELEVENTH. Except as set forth below, the affirmative vote
of shareholders entitled to cast at least 80 percent (80%) of the
votes which all shareholders of the Corporation are entitled to
cast, and if any class of shares is entitled to vote as a
separate class, the affirmative vote of shareholders entitled to
cast at least a majority of the votes entitled to be cast by the
outstanding shares of such class (or such greater amount as
required by the provisions of this Certificate of Incorporation
establishing such class) shall be required to approve any of the
following:
(a) any merger or consolidation of the Corporation
with or into any other corporation;
(b) any share exchange in which a corporation, person
or entity acquires the issued or outstanding shares of
capital stock of the Corporation pursuant to a vote of
shareholders;
(c) any sale, lease, exchange or other transfer of
all, or substantially all, of the assets of the Corporation
to any other corporation, person or entity; or
(d) any transaction similar to, or having similar
effect as, any of the foregoing transactions.
An affirmative vote as provided in the foregoing provisions shall
be, to the extent permitted by law, in lieu of the vote of the
shareholders otherwise required by law.
The board of directors of the Corporation shall have the
power and duty to determine, for purposes of this Article
ELEVENTH, on the basis of information known to the board, if any
transaction is similar to, or has an effect similar to, any of
the transactions identified above in this Article ELEVENTH. Any
such determination shall be conclusive and binding for all
purposes of this Article ELEVENTH.
The Corporation may voluntarily completely liquidate and/or
dissolve only in accordance with all applicable laws and only if
the proposed liquidation and/or dissolution is approved by the
affirmative vote of shareholders entitled to cast at least 80
percent (80%) of the votes which all shareholders are entitled to
cast.
The provisions of this Article ELEVENTH shall not apply to
any transaction which is approved in advance by 66-2/3 percent
(66-2/3%) of the members of the board of directors of the
Corporation, at a meeting duly called and held.
TWELFTH. Subsection 1. No Person or Group Acting in
Concert shall Acquire Voting Control of the Corporation, at any
time, except in accordance with the provisions of Article
ELEVENTH. The terms "Acquire," "Voting Control," "Group Acting
in Concert," and "Person" as used in this Article TWELFTH are
defined in subsection 4 hereof.
Subsection 2. If Voting Control of the Corporation is
acquired, in violation of this Article TWELFTH, all shares with
respect to which any Person or Group Acting in Concert has
acquired Voting Control in excess of the number of shares the
beneficial ownership of which is deemed under subsection 4 hereof
to confer Voting Control of the Corporation (as determined
without regard to this Subsection 2) shall be considered from and
after the date of acquisition by such Person or Group Acting in
Concert to be "excess shares" for purposes of this Article
TWELFTH. All shares deemed to be excess shares shall thereafter
no longer be entitled to vote on any matter or to take other
shareholder action. If, after giving effect to the first two
sentences of this Subsection 2, any Person or Group Acting in
Concert still shall be deemed to be in Voting Control of the
Corporation based on the number of votes then entitled to be cast
(rather than the number of issued and outstanding shares of
common stock of the Corporation), then shares held in excess of
the number of shares deemed to confer Voting Control upon such
Person or Group Acting in Concert also shall not be entitled to
vote on any matter or take any other shareholder action, but this
subsequent reduction in voting rights shall be effected only
once. The provisions of this Subsection 2 deeming shares to be
excess shares shall only apply for so long as such shares shall
be beneficially owned by such Person or Group Acting in Concert
who has acquired Voting Control. Notwithstanding the foregoing,
shares held in excess of the number of shares the beneficial
ownership of which would otherwise be deemed under Subsection 4
to confer Voting Control of the Corporation shall not be deemed
to be excess shares if such shares (i) are held by a Tax-
Qualified Employee Stock Benefit Plan or (ii) were held by a
shareholder of record on the effective date of this Amended and
Restated Certificate of Incorporation and continue to be held by
such shareholder.
Subsection 3. The provisions of this Article TWELFTH
shall be of no further force and effect after the consummation of
a transaction in which another Person Acquires shares of capital
stock of the Corporation entitled to cast 80% or more of the
votes which all shareholders are entitled to cast (as determined
without regard to the application of this Article TWELFTH) and
such transaction was approved in advance by the board of
directors of the Corporation.
Subsection 4. For purposes of this Article TWELFTH:
A. The term "Acquire" includes every type of
acquisition, whether effected by purchase, exchange,
operation of law or otherwise.
B. "Voting Control" means the sole or shared
power to vote or to direct the voting of, or to dispose or
to direct the disposition of, more than ten percent (10%) of
the issued and outstanding common stock of the Corporation;
provided that (i) the solicitation, holding and voting of
proxies obtained by the board of directors of the
Corporation pursuant to a solicitation under Regulation 14A
of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") shall
not constitute Voting Control, (ii) a Tax-Qualified Employee
Stock Benefit Plan which holds more than 10 percent (10%) of
the voting shares of the Corporation shall not be deemed to
have Voting Control of the Corporation, and (iii) any
trustee, member of any administrative committee or employee
beneficiary of a Tax-Qualified Employee Stock Benefit Plan
shall not be deemed to have Voting Control of the
Corporation either (A) as a result of their control of a
Tax-Qualified Employee Stock Benefit Plan, and/or their
beneficial interest in voting shares held by a Tax-Qualified
Employee Stock Benefit Plan, or (B) as a result of the
aggregation of both their beneficial interest in voting
shares held by a Tax-Qualified Employee Stock Benefit Plan
and voting shares held by such trustee, administrative
committee member or employee beneficiary independent of a
Tax-Qualified Employee Stock Benefit Plan.
C. "Group Acting in Concert" includes Persons
seeking to combine or pool their voting or other interests
in the voting shares for a common purpose, pursuant to any
contract, understanding, relationship, agreement or other
arrangement, whether written or otherwise, provided, that a
"Group Acting in Concert" shall not include (i) the members
of the board of directors of the Corporation solely as a
result of their board membership, (ii) the members of the
board of directors of the Corporation as a result of their
solicitation, holding and voting of proxies obtained by them
pursuant to a solicitation subject to rules and regulations
promulgated under the Exchange Act or any successor statute
(iii) any member or all the members of the board of
directors of the Corporation, or (iv) any Tax-Qualified
Employee Stock Benefit Plan and the trustees, administrative
committee members and employee beneficiaries thereof.
D. The term "Person" includes an individual, a
Group Acting in Concert, a corporation, a partnership, an
association, a joint stock company, a trust, an
unincorporated organization or similar company, a syndicate
or any other group formed for the purpose of acquiring,
holding or disposing of the equity securities of the
Corporation.
E. The term "Tax-Qualified Employee Stock
Benefit Plan" means any defined benefit plan or defined
contribution plan of the Corporation or any subsidiary, such as
an employee stock ownership plan, stock bonus plan, profit
sharing plan or other plan, that, with its related trust, meets
the requirements to be "qualified" under Section 401 of the
Internal Revenue Code of 1986, as amended.
Subsection 5. This Article TWELFTH shall not apply to
the purchase of securities of the Corporation by underwriters in
connection with a public offering of such securities by the
Corporation or by a holder of shares of capital stock of the
Corporation with written consent of the board of directors of the
Corporation; provided, however, that purchasers of securities of
the Corporation from any underwriter shall be subject to the
provisions of this Article TWELFTH.
The board of directors of the Corporation shall have the
power and duty to determine, for purposes of this Article
TWELFTH, on the basis of information known to the board, if and
when such other Person has acquired Voting Control of the
Corporation, and/or if any transaction is similar to, or has a
similar effect as, any of the transactions identified in this
Article TWELFTH. Any such determination shall be conclusive and
binding for all purposes of this Article TWELFTH.
THIRTEENTH. No action required to be taken or which may be
taken at any annual or special meeting of shareholders of the
Corporation may be taken without a meeting, and the power of the
shareholders of the Corporation to consent in writing to action
without a meeting is specifically denied. The presence, in
person or by proxy, of shareholders entitled to cast at least a
majority of the votes which all shareholders are entitled to cast
shall constitute a quorum of shareholders at any annual or
special meeting of shareholders of the Corporation.
FOURTEENTH. The authority to make, amend, alter, change or
repeal the By-Laws of the Corporation is hereby expressly and
solely granted to and vested in the board of directors of the
Corporation, subject always to the power of the shareholders to
change such action by the affirmative vote of shareholders of the
Corporation entitled to cast at least 66-2/3 percent (66-2/3%) of
the votes which all shareholders are entitled to cast.
FIFTEENTH. The Corporation shall indemnify every corporate
agent as defined in, and to the fullest extent permitted by,
Section 14A:3-5 of the New Jersey Business Corporation Act, and
to the fullest extent otherwise permitted by law.
SIXTEENTH. To the fullest extent from time to time
permitted by law, no director or officer of the Corporation shall
be personally liable to the Corporation or to any of its
shareholders, except for liabilities arising from any breach of
duty based upon an act or omission (i) in breach of such
director's or officer's duty of loyalty to the Corporation,
(ii) not in good faith or involving a knowing violation of law or
(iii) resulting in receipt by such director or officer of an
improper personal benefit. Neither the amendment or repeal of
this Article SIXTEENTH, nor the adoption of any provision of this
Amended and Restated Certificate of Incorporation inconsistent
with this Article SIXTEENTH, shall eliminate or reduce the
protection afforded by this Article SIXTEENTH to a director or
officer of the Corporation in respect to any matter which
occurred, or any cause of action, suit or claim which but for
this Article SIXTEENTH would have accrued or arisen, prior to
such amendment, repeal or adoption.
SEVENTEENTH. The Corporation reserves the right to amend,
alter, change or repeal any provision contained in its
Certificate of Incorporation in the manner now or hereafter
prescribed by statute and all rights conferred upon shareholders
and directors herein are hereby granted subject to this
reservation; provided, however, that the provisions set forth in
Articles SEVENTH, EIGHTH, and ELEVENTH through SEVENTEENTH,
inclusive, of this Amended and Restated Certificate of
Incorporation may not be repealed, altered or amended, in any
respect whatsoever, unless such repeal, alteration or amendment
is approved by either (a) the affirmative vote of shareholders of
the Corporation entitled to cast at least 80 percent (80%) of the
votes which all shareholders of the Corporation are then entitled
to cast or (b) the affirmative vote of 80 percent (80%) of the
members of the board of directors of the Corporation and the
affirmative vote of shareholders of the Corporation entitled to
cast at least a majority of the votes which all shareholders of
the Corporation are then entitled to cast.
IN TESTIMONY WHEREOF, the Corporation has caused this
Amended and Restated Certificate of Incorporation to be executed
by a duly authorized officer as of the ____ day of _________,
1997.
DYNAMICWEB ENTERPRISES, INC.
By_________________________________
Steve Vanechanos, Jr.,
President
<PAGE>
ANNEX B
DYNAMICWEB ENTERPRISES, INC.
1997 EMPLOYEE STOCK OPTION PLAN
<PAGE>
TABLE OF CONTENTS
Page
Article
Article 1. PURPOSE OF THE PLAN . . . . . . . . . . . . . .B-3
Article 2. DEFINITIONS . . . . . . . . . . . . . . . . . .B-3
Article 3. ADMINISTRATION OF THE PLAN. . . . . . . . . . .B-4
Article 4. COMMON STOCK SUBJECT TO THE PLAN. . . . . . . .B-6
Article 5. STOCK OPTIONS . . . . . . . . . . . . . . . . .B-6
Article 6. ELIGIBILITY . . . . . . . . . . . . . . . . . .B-8
Article 7. TERM AND EXERCISE OF OPTIONS. . . . . . . . . .B-9
Article 8. TERMINATION OF EMPLOYMENT . . . . . . . . . . B-13
Article 9. ADJUSTMENT PROVISIONS . . . . . . . . . . . . B-15
Article 10. GENERAL PROVISIONS. . . . . . . . . . . . . . B-16
<PAGE>
Article 1. PURPOSE OF THE PLAN
1.1 Purpose - The DynamicWeb Enterprises, Inc. 1997
Employee Stock Option Plan (the "Plan") is
intended to provide employees of DynamicWeb
Enterprises, Inc. (the "Corporation") and any of
its Subsidiaries an opportunity to acquire Common
Stock of the Corporation. The Plan is designed to
help the Corporation attract, retain and motivate
employees to make substantial contributions to the
success of the business. Stock Options are
granted under the Plan based on the Participant's
level of responsibility and performance within the
Corporation.
1.2 Stock Options to be Granted - Incentive Stock
Options within the meaning of Code Section 422(b)
and Nonqualified Stock Options may be granted
within the limitations of the Plan herein
described.
Article 2. DEFINITIONS
2.1 "Agreement" - The written instrument evidencing
the grant of an Option. A Participant may be
issued one or more Agreements from time to time,
reflecting one or more Options.
2.2 "Board" - The Board of Directors of the
Corporation.
2.3 "Code" - The Internal Revenue Code of 1986, as
amended.
2.4 "Committee" - The Committee which the Board
appoints to administer the Plan.
2.5 "Common Stock" - The Class A common stock of the
Corporation ($0.0001 par value) as described in
the Corporation's Articles of Incorporation, or
such other stock as shall be substituted therefor.
2.6 "Corporation" - DynamicWeb Enterprises, Inc., a
New Jersey corporation.
2.7 "Employee" - Any employee (including officers) of
the Corporation or a Subsidiary.
2.8 "Exchange Act" - The Securities Exchange Act of
1934, as amended.
2.9 "Incentive Stock Option" - A stock option intended
to satisfy the Requirements of Code
Section 422(b).
2.10 "Nonqualified Stock Option" - A stock option other
than an incentive stock option.
2.11 "Optionee" - A Participant who is awarded a Stock
Option pursuant to the provisions of the Plan.
2.12 "Participant" - An Employee selected by the
Committee to receive a grant of an Option under
the Plan.
2.13 "Plan" - The DynamicWeb Enterprises, Inc. 1997
Employee Stock Option Plan.
2.14 "Retirement" - The voluntary termination of
employment upon or following the attainment of age
sixty-five.
2.15 "Securities Act" - The Securities Act of 1933, as
amended.
2.16 "Stock Option" or "Option" - An award of a right
to purchase Common Stock pursuant to the
provisions of the Plan.
2.17 "Subsidiary" - A subsidiary corporation as defined
in Code Section 424(f) that is a subsidiary of the
Corporation.
Article 3. ADMINISTRATION OF THE PLAN
3.1 The Committee - The Plan shall be administered by
a committee of the Board (the "Committee")
composed of two or more members of the Board, all
of whom are "outside directors" within the meaning
of Code Section 162(m). The Board may from time
to time remove members from, or add members to,
the Committee. Vacancies on the Committee,
howsoever caused, shall be filled by the Board.
3.2 Powers of the Committee -
(a) The Committee shall be vested with full
authority to make such rules and regulations
as it deems necessary or desirable to
administer the Plan and to interpret the
provisions of the Plan, unless otherwise
determined by a majority of the disinterested
members of the Board. Any determination,
decision or action of the Committee in
connection with the construction,
interpretation, administration or application
of the Plan shall be final, conclusive and
binding upon all Optionees and any person
claiming under or through an Optionee, unless
otherwise determined by a majority of the
disinterested members of the Board.
(b) Subject to the terms, provisions and
conditions of the Plan and subject to review
and approval by a majority of the
disinterested members of the Board, the
Committee shall have exclusive jurisdiction
to:
(i) determine and select, based upon
the recommendation of the
Corporation's Chief Executive
Officer (except as to himself), the
Employees to be granted Options (it
being understood that more than one
Option may be granted to the same
person);
(ii) determine the number of shares
subject to each Option;
(iii) determine the date or dates when
the Options will be granted;
(iv) determine the purchase price of the
shares subject to each Option in
accordance with Article 5 of the
Plan;
(v) determine the date or dates when
each Option may be exercised within
the term of the Option specified
pursuant to Article 7 of the Plan;
(vi) determine whether or not an Option
constitutes an Incentive Stock
Option; and
(vii) prescribe the form, which shall be
consistent with the Plan, of the
Agreement evidencing any Options
granted under the Plan.
3.3 Terms - The grant of an Option under the Plan
shall be evidenced by an Agreement and may include
any terms and conditions consistent with this
Plan, as the Committee may determine.
3.4 Liability - No member of the Board or the
Committee shall be liable for any action or
determination made in good faith by the Board or
the Committee with respect to this Plan or any
Options granted under this Plan.
Article 4. COMMON STOCK SUBJECT TO THE PLAN
4.1 Common Stock Authorized - The aggregate number of
shares of Common Stock for which Options may be
granted under the Plan shall not exceed
900,000 shares. The limitation established by the
preceding sentence shall be subject to adjustment
as provided in Article 9 of the Plan.
4.2 Shares Available - The Common Stock to be issued
upon exercise of Options granted under the Plan
shall be the Corporation's Common Stock which
shall be made available at the discretion of the
Board, either from authorized but unissued Common
Stock or from Common Stock acquired by the
Corporation, including shares purchased in the
open market. In the event that any outstanding
Option under the Plan for any reason expires or is
terminated, the shares of Common Stock allocable
to the unexercised portion of such Option may
thereafter be regranted subject to option under
the Plan.
Article 5. STOCK OPTIONS
5.1 Exercise Price - The exercise price of Common
Stock shall be, in the case of an Incentive Stock
Option, 100 percent of the fair market value of
one share of Common Stock on the date the Option
is granted, except that the purchase price per
share shall be 110 percent of such fair market
value in the case of an Incentive Stock Option
granted to any individual described in Section 6.2
of the Plan. The exercise price of Common Stock
shall be, in the case of a Nonqualified Stock
Option, such dollar amount as may be specified by
the Committee. The exercise price shall be
subject to adjustment as provided in Article 9 of
the Plan.
5.2 Limitation on Incentive Stock Options - The
aggregate fair market value (determined as of the
date an Option is granted) of the stock with
respect to which Incentive Stock Options are
exercisable for the first time by any individual
in any calendar year (under the Plan and all other
plans maintained by the Corporation and
Subsidiaries) shall not exceed $100,000.
5.3 Determination of Fair Market Value -
(a) During such time as Common Stock is not
listed on an established stock exchange or
exchanges but is listed in the NASDAQ
National Market System, the fair market value
per share shall be the closing sale price for
the Common Stock on the day the Option is
granted. If no sale of Common Stock has
occurred on that day, the fair market value
shall be determined by reference to such
price for the next preceding day on which a
sale occurred.
(b) During such time as the Common Stock is not
listed on an established stock exchange or in
the NASDAQ National Market System, fair
market value per share shall be the mean
between the closing dealer "bid" and "asked"
prices for the Common Stock for the day of
the grant, and if no "bid" and "asked" prices
are quoted for the day of the grant, the fair
market value shall be determined by reference
to such prices on the next preceding day on
which such prices were quoted.
(c) If the Common Stock is listed on an
established stock exchange, the fair market
value shall be deemed to be the closing price
of Common Stock on such stock exchange on the
day the Option is granted or, if no sale of
Common Stock has been made on such stock
exchange on that day, the fair market value
shall be determined by reference to such
price for the next preceding day on which a
sale occurred.
(d) In the event that the Common Stock is not
traded on an established stock exchange or in
the NASDAQ National Market System, and no
closing dealer "bid" and "asked" prices are
available on the date of a grant, then fair
market value will be the price established by
the Committee in good faith.
5.4 Limitation on Grants - Grants to any Employee
under this Plan shall not exceed in the aggregate
250,000 Options during any period of 12
consecutive months. Such limitation shall be
subject to adjustment in the manner described in
Article 9 and by giving effect to any adjustment
in other Options granted during the relevant 12-
month period.
5.5 Transferability of Options - Unless otherwise
designated by the Committee to the contrary, each
Option granted under the Plan shall by its terms
be non-transferable by the Optionee (except by
will or the laws of descent and distribution), and
each Option shall be exercisable during the
Optionee's lifetime only by the Optionee, his
guardian or legal representative or by such other
means as the Committee may approve from time to
time that is not inconsistent with or contrary to
the provisions of either Section 16(b) of the
Exchange Act or Rule 16b-3, as either may be
amended from time to time, or any law, rule,
regulation or other provision that may hereafter
replace such Rule. An Optionee may also designate
a beneficiary to exercise his or her Options after
the Optionee's death. The Committee may amend
outstanding Options to provide for transfer,
without payment of consideration, to immediate
family members of the Optionee or to trusts or
partnerships for such family members.
Article 6. ELIGIBILITY
6.1 Participation - Options shall be granted only to
persons who are considered Employees, as
determined by the Committee, based upon the
recommendation of the Chief Executive Officer
(except as to himself) and ratified by a majority
of the disinterested members of the Board.
6.2 Incentive Stock Option Eligibility -
Notwithstanding any other provision of the Plan,
an individual who owns more than 10 percent of the
total combined voting power of all classes of
outstanding stock of the Corporation or of a
Subsidiary shall not be eligible for the grant of
an Incentive Stock Option, unless the special
requirements set forth in Sections 5.1 and 7.1 of
the Plan are satisfied. For purposes of this
Section 6.2, in determining stock ownership, 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.
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 shareholders, partners or beneficiaries.
"Outstanding stock" shall include all stock
actually issued and outstanding immediately before
the grant of the Option. "Outstanding stock"
shall not include shares authorized for issue
under outstanding Options held by the Optionee or
by any other person.
Article 7. TERM AND EXERCISE OF OPTIONS
7.1 Termination -
(a) Each Option granted under the Plan shall
terminate on the date determined by the
Committee and approved by a majority of the
disinterested members of the Board, and
specified in the Agreement; provided,
however, that (i) each intended Incentive
Stock Option granted to an individual
described in Section 6.2 of the Plan shall
terminate not later than five years after the
date of the grant, (ii) each other intended
Incentive Stock Option shall terminate not
later than ten years after the date of grant,
and (iii) each Option granted under the Plan
which is intended to be a Nonqualified Stock
Option shall terminate not later than ten
years and one month after the date of grant.
Except as otherwise provided in Section 8.4,
each Option granted under the Plan shall
become exercisable only after the earlier of
the date on which (i) the Optionee has
completed one year of continuous employment
with the Corporation or a Subsidiary
immediately following the date of the grant
of the Option or (ii) a Change in Control
occurs. The Committee at its discretion may
provide further limitations on the
exercisability of Options granted under the
Plan. An Option may be exercised only during
the continuance of the Optionee's employment,
except as provided in Article 8.
(b) For purposes of Section 7.1(a), a "Change in
Control" shall be deemed to have occurred
upon the happening of any of the following:
(i) any "Person" (as such term is used
in Sections 13(d) and 14(d) of the
Exchange Act (except for (1) the
Corporation or any Subsidiary, or
(2) any of the Corporation's
employee benefit plans (or any
trust forming a part thereof) (the
"Benefit Plan(s)")) is or becomes
the beneficial owner, directly or
indirectly, of the Corporation's
securities representing 19.9% or
more of the combined voting power
of the Corporation's then
outstanding securities, other than
pursuant to an excepted transaction
described in Clause (iii) below;
(ii) a binding written agreement is
executed (and, if legally required,
approved by the Corporation's
shareholders) providing for a sale,
exchange, transfer or other
disposition of substantially all of
the assets of the Corporation to
another entity, except to an entity
controlled directly or indirectly
by the Corporation;
(iii) the shareholders of the Corporation
approve a merger, consolidation,
share exchange, division or other
reorganization of or relating to
the Corporation, unless:
(A) the shareholders of the
Corporation immediately before
such merger, consolidation,
share exchange, division or
reorganization, own, directly
or indirectly immediately
following such merger,
consolidation, share exchange,
division or reorganization at
least 66-2/3% of the combined
voting power of the
outstanding voting securities
of the Corporation resulting
from such merger,
consolidation, share exchange,
division or reorganization
(the "Surviving Corporation")
in substantially the same
proportion as their ownership
of the voting securities
immediately before such
merger, consolidation, share
exchange, division or
reorganization; and
(B) the individuals who,
immediately before such
merger, consolidation, share
exchange, division or
reorganization, are members of
the Board (the "Incumbent
Board"), continue to
constitute at least 66-2/3% of
the Board of Directors of the
Surviving Corporation;
provided, however, that if the
election, or nomination for
election by the Corporation's
shareholders of any new
director was approved by a
vote of at least 66-2/3% of
the Incumbent Board, such new
director shall, for the
purposes hereof, be considered
a member of the Incumbent
Board; provided further,
however, that no individual
shall be considered a member
of the Incumbent Board if such
individual initially assumed
office as a result of either
an actual or threatened
"Election Contest" (as
described in Rule 14a-11
promulgated under the Exchange
Act) or other actual or
threatened solicitation of
proxies or consents by or on
behalf of a Person other than
the Board (a "Proxy Contest")
including by reason of any
agreement intended to avoid or
settle any Election Contest or
Proxy Contest; and
(C) no Person (except (1) the
Corporation or any Subsidiary,
(2) any Benefit Plan, (3) the
Surviving Corporation or any
subsidiary of the Surviving
Corporation, or (4) any Person
who, immediately prior to such
merger, consolidation, share
exchange, division or
reorganization had beneficial
ownership of 19.9% or more of
the then outstanding voting
securities of the Corporation)
has beneficial ownership of
19.9% or more of the combined
voting power of the Surviving
Corporation's then outstanding
voting securities immediately
following such merger,
consolidation, share exchange,
division or reorganization;
(iv) a plan of liquidation or
dissolution of the Corporation,
other than pursuant to bankruptcy
or insolvency laws, is adopted; or
(v) during any period of two
consecutive years, individuals, who
at the beginning of such period,
constituted the Board cease for any
reason to constitute at least a
majority of the Board, unless the
election, or the nomination for
election by the Corporation's
shareholders, of each new director
was approved by a vote of at least
66-2/3% of the directors then still
in office who were directors at the
beginning of the period; provided,
however, that no individual shall
be considered a member of the Board
at the beginning of such period if
such individual initially assumed
office as a result of either an
actual or threatened Election
Contest or Proxy Contest, including
by reason of any agreement intended
to avoid or settle any Election
Contest or Proxy Contest.
Notwithstanding the foregoing, a Change in
Control shall not be deemed to have occurred
if a Person becomes the beneficial owner,
directly or indirectly, of securities
representing 19.9% or more of the combined
voting power of the Corporation's then
outstanding securities solely as a result of
an acquisition by the Corporation of its
voting securities which, by reducing the
number of shares outstanding, increases the
proportionate number of shares beneficially
owned by such Person; provided, however, that
if a Person becomes a beneficial owner of
19.9% or more of the combined voting power of
the Corporation's then outstanding securities
by reason of share repurchases by the
Corporation and thereafter becomes the
beneficial owner, directly or indirectly, of
any additional voting securities of the
Corporation (other than pursuant to a stock
split, stock dividend or similar
transaction), then a Change in Control shall
be deemed to have occurred with respect to
such Person under Clause (i).
7.2 Exercise -
(a) A person electing to exercise an Option shall
give written notice to the Corporation of
such election and of the number of shares he
has elected to purchase, in such form as the
Committee shall have prescribed or approved,
and shall at the time of exercise tender the
full purchase price of the shares he has
elected to purchase. The purchase price
shall be paid in full, in cash, upon the
exercise of the Option; provided, however,
that in lieu of cash, with the approval of
the Committee at or prior to exercise, an
Optionee may exercise his Option by tendering
to the Corporation shares of Common Stock
owned by him and having a fair market value
equal to the cash exercise price applicable
to his Option (with the fair market value of
such stock to be determined in the manner
provided in Section 5.3 hereof) or by
delivering such combination of cash and such
shares as the Committee in its sole
discretion may approve. Notwithstanding the
foregoing, Common Stock acquired pursuant to
the exercise of an Incentive Stock Option may
not be tendered as payment unless the holding
period requirements of Code Section 422(a)(1)
have been satisfied.
(b) A person holding more than one Option at any
relevant time may, in accordance with the
provisions of the Plan, elect to exercise
such Options in any order.
(c) In addition, at the request of the
Participant and to the extent permitted by
applicable law, the Corporation may, in its
sole discretion, selectively approve
arrangements with a brokerage firm under
which such brokerage firm, on behalf of the
Participant, shall pay to the Corporation the
exercise price of the Options being
exercised, and the Corporation, pursuant to
an irrevocable notice from the Participant,
shall promptly deliver the shares being
purchased to such firm.
Article 8. TERMINATION OF EMPLOYMENT
8.1 Retirement - In the event of Retirement, an Option
shall lapse at the earlier of the expiration of
the term of the Option or:
(a) In the case of an Incentive Stock Option,
three months from the date of Retirement; and
(b) in the case of Options other than Incentive
Stock Options, up to 24 months, at the
discretion of the Committee, from the date of
Retirement.
8.2 Death or Disability - In the event of termination
of employment due to death or disability (as
defined in Code Section 72(m)), the Option shall
lapse at the earlier of the expiration of the term
of the Option or one year after termination due to
any such cause.
8.3 Other Termination - Except as otherwise provided
in Sections 8.4(a) and (c), in the event of
termination of employment for any reason other
than is described in Section 8.1 or 8.2, all
Options shall lapse as of the date of termination.
8.4 Special Termination Provisions -
(a) Notwithstanding anything herein to the
contrary, the Committee may, in its
discretion and subject to the approval of a
majority of the disinterested members of the
Board, waive the one-year continuous
employment requirement set forth in
Section 7.1(a) and permit the exercise of an
Option held by an Employee whose employment
has terminated prior to the satisfaction of
such requirement. Any such waiver may be
made with retroactive effect provided it is
made within 60 days following the Optionee's
termination of employment.
(b) In the event the Committee waives the
continuous service requirement with respect
to an Option and the circumstance of the
Employee's termination is described in
Section 8.1 or 8.2, the Option will lapse as
otherwise provided in the relevant section.
(c) Notwithstanding anything herein to the
contrary, the Committee may, in its
discretion, waive the lapse provisions of
Section 8.3 and permit the exercise of an
Option until a date which is the earlier of
the expiration of the term of such Option or:
(i) in the case of an Incentive Stock
Option, three months from the date
of termination of employment; and
(ii) in the case of Options other than
Incentive Stock Options, up to
24 months from the date of
termination.
Article 9. ADJUSTMENT PROVISIONS
9.1 Share Adjustments -
(a) In the event that the shares of Common Stock
of the Corporation, as presently constituted,
shall be changed into or exchanged for a
different number or kind of shares of stock
or other securities of the Corporation or of
another corporation (whether by reason of
merger, consolidation, recapitalization,
reclassification, split-up, combination of
shares or otherwise) or if the number of such
shares of stock shall be increased through
the payment of a stock dividend, then,
subject to the provisions of Subsection (c)
below, there shall be substituted for or
added to each share of Common Stock of the
Corporation which was theretofore
appropriated, or which thereafter may become
subject to an Option under the Plan, the
number and kind of shares of stock or other
securities into which each outstanding share
of the Common Stock of the Corporation shall
be so changed or for which each such share
shall be exchanged or to which each such
share shall be entitled, as the case may be.
Outstanding Options shall also be
appropriately amended as to price and other
terms, as may be necessary to reflect the
foregoing events.
(b) If there shall be any other change in the
number or kind of the outstanding shares of
the Common Stock of the Corporation, or of
any stock or other securities in which such
Common Stock shall have been changed, or for
which it shall have been exchanged, and if a
majority of the disinterested members of the
Board shall, in its sole discretion,
determine that such change equitably requires
an adjustment in any Option which was
theretofore granted or which may thereafter
be granted under the Plan, then such
adjustment shall be made in accordance with
such determination.
(c) The grant of an Option pursuant to the Plan
shall not affect in any way the right or
power of the Corporation to make adjustments,
reclassifications, reorganizations or changes
of its capital or business structure, to
merge, to consolidate, to dissolve, to
liquidate or to sell or transfer all or any
part of its business or assets.
9.2 Corporate Changes - A dissolution or liquidation
of the Corporation, or a merger or consolidation
in which the Corporation is not the surviving
Corporation, shall cause each outstanding Option
to terminate, except to the extent that another
corporation may and does in the transaction assume
and continue the Option or substitute its own
options.
9.3 Fractional Shares - Fractional shares resulting
from any adjustment in Options pursuant to this
Article 9 may be settled as a majority of the
disinterested members of the Board or the
Committee (as the case may be) shall determine.
9.4 Binding Determination - To the extent that the
foregoing adjustments relate to stock or
securities of the Corporation, such adjustments
shall be made by a majority of the disinterested
members of the Board, whose determination in that
respect shall be final, binding and conclusive.
Notice of any adjustment shall be given by the
Corporation to each holder of an Option which
shall have been adjusted.
Article 10. GENERAL PROVISIONS
10.1 Effective Date - The Plan shall become effective
upon its adoption by the Board, provided that any
grant of an Option is subject to the approval of
the Plan by the shareholders of the Corporation
within 12 months of adoption by the Board.
10.2 Termination of the Plan - Unless previously
terminated by the Board of Directors, the Plan
shall terminate on, and no Options shall be
granted after, the tenth anniversary of its
adoption by the Board.
10.3 Limitation on Termination, Amendment or
Modification
(a) The Board may at any time terminate, amend,
modify or suspend the Plan, provided that
without the approval of the stockholders of
the Corporation no amendment or modification
shall be made by the Board which:
(i) increases the maximum number of
shares of Common Stock as to which
Options may be granted under the
Plan;
(ii) changes the class of eligible
Employees; or
(iii) otherwise requires the approval of
shareholders under applicable tax,
securities or other law.
(b) No amendment, modification, suspension or
termination of the Plan shall in any manner
affect any Option theretofore granted under
the Plan without the consent of the Optionee
or any person validly claiming under or
through the Optionee.
10.4 No Right to Employment - Neither anything
contained in the Plan or in any instrument under
the Plan nor the grant of any Option hereunder
shall confer upon any Optionee any right to
continue in the employ of the Corporation or of
any Subsidiary or limit in any respect the right
of the Corporation or of any Subsidiary to
terminate the Optionee's employment at any time
and for any reason.
10.5 Withholding Taxes - The Corporation will require
that an Optionee, as a condition of the exercise
of an Option, or any other person or entity
receiving Common Stock upon exercise of an Option,
pay or reimburse any taxes which the Corporation
is required to withhold in connection with the
exercise of the Option.
10.6 Listing and Registration of Shares -
(a) No Option granted pursuant to the Plan shall
be exercisable in whole or in part if at any
time a majority of the disinterested members
of the Board shall determine in its
discretion that the listing, registration or
qualification of the shares of Common Stock
subject to such Option on any securities
exchange or under any applicable law, or the
consent or approval of any governmental
regulatory body, is necessary or desirable as
a condition of, or in connection with, the
granting of such Option or the issue of
shares thereunder, unless such listing,
registration, qualification, consent or
approval shall have been effected or obtained
free of any conditions not acceptable to a
majority of the disinterested members of the
Board.
(b) If a registration statement under the
Securities Act with respect to the shares
issuable upon exercise of any Option granted
under the Plan is not in effect at the time
of exercise, as a condition of the issuance
of the shares, the person exercising such
Option shall give the Committee a written
statement, satisfactory in form and substance
to the Committee, that he is acquiring the
shares for his own account for investment and
not with a view to their distribution. The
Corporation may place upon any stock
certificate for shares issuable upon exercise
of such Option the following legend or such
other legend as the Committee may prescribe
to prevent disposition of the shares in
violation of the Securities Act or other
applicable law:
"THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("ACT")
AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR
OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT WITH
RESPECT TO THEM UNDER THE ACT OR A
WRITTEN OPINION OF COUNSEL FOR THE
CORPORATION THAT REGISTRATION IS NOT
REQUIRED."
<PAGE>
ANNEX C
DYNAMICWEB ENTERPRISES, INC.
1997 STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
<PAGE>
TABLE OF CONTENTS
Page
Article
Article 1. PURPOSE OF THE PLAN . . . . . . . . . . . . . .C-3
Article 2. DEFINITIONS . . . . . . . . . . . . . . . . . .C-3
Article 3. ADMINISTRATION OF THE PLAN. . . . . . . . . . .C-4
Article 4. COMMON STOCK SUBJECT TO THE PLAN. . . . . . . .C-5
Article 5. STOCK OPTIONS . . . . . . . . . . . . . . . . .C-6
Article 6. ELIGIBILITY . . . . . . . . . . . . . . . . . .C-8
Article 7. TERM AND EXERCISE OF OPTIONS. . . . . . . . . .C-8
Article 8. TERMINATION OF STATUS AS DIRECTOR . . . . . . C-12
Article 9. ADJUSTMENT PROVISIONS . . . . . . . . . . . . C-13
Article 10. GENERAL PROVISIONS. . . . . . . . . . . . . . C-15
<PAGE>
Article 1. PURPOSE OF THE PLAN
1.1 Purpose - The DynamicWeb Enterprises, Inc. 1997
Stock Option Plan For Outside Directors (the
"Plan") is intended to provide certain directors
of DynamicWeb Enterprises, Inc. (the
"Corporation") an opportunity to acquire Common
Stock of the Corporation. The Plan is designed to
provide such directors with an opportunity to
acquire an equity interest in the Corporation,
thereby giving them a stake in the continued
growth and success of its business.
1.2 Stock Options to be Granted - Only Nonqualified
Stock Options may be granted within the
limitations of the Plan herein described.
Article 2. DEFINITIONS
2.1 "Agreement" - The written instrument evidencing
the grant of an Option. A Participant may be
issued one or more Agreements from time to time,
reflecting one or more Options.
2.2 "Board" - The Board of Directors of the
Corporation.
2.3 "Code" - The Internal Revenue Code of 1986, as
amended.
2.4 "Committee" - The Committee which the Board
appoints to administer the Plan.
2.5 "Common Stock" - The Class A common stock of the
Corporation ($0.0001 par value) as described in
the Corporation's Articles of Incorporation, or
such other stock as shall be substituted therefor.
2.6 "Corporation" - DynamicWeb Enterprises, Inc., a
New Jersey corporation.
2.7 "Director" - Any director of the Corporation who
is not also, at the time of a grant, a common law
employee of the Corporation.
2.8 "Exchange Act" - The Securities Exchange Act of
1934, as amended.
2.9 "Incentive Stock Option" - A stock option intended
to satisfy the Requirements of Code
Section 422(b).
2.10 "Nonqualified Stock Option" - A stock option other
than an Incentive Stock Option.
2.11 "Optionee" - A Participant who is awarded a Stock
Option pursuant to the provisions of the Plan.
2.12 "Participant" - A Director selected by the
Committee to receive a grant of an Option under
the Plan.
2.13 "Plan" - The DynamicWeb Enterprises, Inc. 1997
Stock Option Plan for Outside Directors.
2.14 "Retirement" - The voluntary termination of an
individual as a Director upon or following the
attainment of age sixty-five.
2.15 "Securities Act" - The Securities Act of 1933, as
amended.
2.16 "Stock Option" or "Option" - An award of a right
to purchase Common Stock pursuant to the
provisions of the Plan.
Article 3. ADMINISTRATION OF THE PLAN
3.1 The Committee - The Plan shall be administered by
a committee of the Board (the "Committee")
composed of two or more members of the Board, all
of whom are "outside directors" within the meaning
of Code Section 162(m). The Board may from time
to time remove members from, or add members to,
the Committee. Vacancies on the Committee,
howsoever caused, shall be filled by the Board.
3.2 Powers of the Committee -
(a) The Committee shall be vested with full
authority to make such rules and regulations
as it deems necessary or desirable to
administer the Plan and to interpret the
provisions of the Plan, unless otherwise
determined by a majority of the members of
the Board. Any determination, decision or
action of the Committee in connection with
the construction, interpretation,
administration or application of the Plan
shall be final, conclusive and binding upon
all Optionees and any person claiming under
or through an Optionee, unless otherwise
determined by a majority of the members of
the Board.
(b) Subject to the terms, provisions and
conditions of the Plan and subject to review
and approval by a majority of the members of
the Board, the Committee shall have exclusive
jurisdiction to:
(i) determine the date or dates when
each Option may be exercised within
the term of the Option specified
pursuant to Article 7 of the Plan;
and
(ii) prescribe the form, which shall be
consistent with the Plan, of the
Agreement evidencing any Options
granted under the Plan.
3.3 Terms - The grant of an Option under the Plan
shall be evidenced by an Agreement and may include
any terms and conditions consistent with this
Plan, as the Committee may determine.
3.4 Liability - No member of the Board or the
Committee shall be liable for any action or
determination made in good faith by the Board or
the Committee with respect to this Plan or any
Options granted under this Plan.
Article 4. COMMON STOCK SUBJECT TO THE PLAN
4.1 Common Stock Authorized - The aggregate number of
shares of Common Stock for which Options may be
granted under the Plan shall not exceed 300,000
shares. The limitation established by the
preceding sentence shall be subject to adjustment
as provided in Article 9 of the Plan.
4.2 Shares Available - The Common Stock to be issued
upon exercise of Options granted under the Plan
shall be the Corporation's Common Stock which
shall be made available at the discretion of the
Board, either from authorized but unissued Common
Stock or from Common Stock acquired by the
Corporation, including shares purchased in the
open market. In the event that any outstanding
Option under the Plan for any reason expires or is
terminated, the shares of Common Stock allocable
to the unexercised portion of such Option may
thereafter be regranted subject to option under
the Plan.
Article 5. STOCK OPTIONS
5.1 Grant of Options; Exercise Price -
(a) Each Director shall be granted, on the date
of his or her election and on each date of
his or her reelection (whether at an annual
meeting or an adjournment thereof), an Option
to acquire 15,000 shares of Common Stock. In
the event the Corporation's Board shall at
any time be classified, for purposes of this
Plan, any continuing Director not on the
slate for reelection at an annual meeting of
the Corporation's shareholders shall,
notwithstanding such fact, be treated as
being reelected at such meeting (or any
adjournment thereof).
(b) The exercise price of a Nonqualified Stock
Option to purchase a share of Common Stock
shall be the fair market value of a share on
the grant date, as determined in Section 5.2.
The exercise price shall be subject to
adjustment as provided in Article 9 of the
Plan.
(c) Notwithstanding the provisions of
Section 5.1(a) and (b), in the initial
calendar year of the Plan, the Option grant
to each Director shall be made as of the
earlier of (i) the closing date of a public
offering of Common Stock by the Corporation,
or (ii) September 30, 1997. The exercise
price of such Option grants shall be the fair
market value of such Common Stock, as
determined in Section 5.2, on the grant date.
5.2 Determination of Fair Market Value -
(a) During such time as Common Stock is not
listed on an established stock exchange or
exchanges but is listed in the NASDAQ
National Market System, the fair market value
per share shall be the closing sale price for
the Common Stock on the day the Option is
granted. If no sale of Common Stock has
occurred on that day, the fair market value
shall be determined by reference to such
price for the next preceding day on which a
sale occurred.
(b) During such time as the Common Stock is not
listed on an established stock exchange or in
the NASDAQ National Market System, fair
market value per share shall be the mean
between the closing dealer "bid" and "asked"
prices for the Common Stock for the day of
the grant, and if no "bid" and "asked" prices
are quoted for the day of the grant, the fair
market value shall be determined by reference
to such prices on the next preceding day on
which such prices were quoted.
(c) If the Common Stock is listed on an
established stock exchange, the fair market
value shall be deemed to be the closing price
of Common Stock on such stock exchange on the
day the Option is granted or, if no sale of
Common Stock has been made on such stock
exchange on that day, the fair market value
shall be determined by reference to such
price for the next preceding day on which a
sale occurred.
(d) In the event that the Common Stock is not
traded on an established stock exchange or in
the NASDAQ National Market System, and no
closing dealer "bid" and "asked" prices are
available on the date of a grant, then fair
market value will be the price established by
the Committee in good faith.
5.3 Transferability of Options - Unless otherwise
designated by the Committee to the contrary, each
Option granted under the Plan shall by its terms
be non-transferable by the Optionee (except by
will or the laws of descent and distribution), and
each Option shall be exercisable during the
Optionee's lifetime only by the Optionee, his
guardian or legal representative or by such other
means as the Committee may approve from time to
time that is not inconsistent with or contrary to
the provisions of either Section 16(b) of the
Exchange Act or Rule 16b-3, as either may be
amended from time to time, or any law, rule,
regulation or other provision that may hereafter
replace such Rule. An Optionee may also designate
a beneficiary to exercise his or her Options after
the Optionee's death. The Committee may amend
outstanding Options to provide for transfer,
without payment of consideration, to immediate
family members of the Optionee or to trusts or
partnerships for such family members.
Article 6. ELIGIBILITY
6.1 Participation - Options shall be granted only to
persons who are Directors.
Article 7. TERM AND EXERCISE OF OPTIONS
7.1 Termination -
(a) Each Option granted under the Plan shall
terminate on the date determined by the
Committee and approved by a majority of the
members of the Board, and specified in the
Agreement; provided, however, that no Option
shall terminate later than ten years and one
month after the date of grant. Except as
otherwise provided in Section 8.4, each
Option granted under the Plan shall become
exercisable only after the earlier of the
date on which (i) the Optionee has completed
11 months of continuous service as a Director
with the Corporation immediately following
the date of the grant of the Option or (ii) a
Change in Control occurs. The Committee at
its discretion may provide further
limitations on the exercisability of Options
granted under the Plan. An Option may be
exercised only during the continuance of the
Optionee's service as a Director, except as
provided in Article 8.
(b) For purposes of Section 7.1(a), a "Change in
Control" shall be deemed to have occurred
upon the happening of any of the following:
(i) any "Person" (as such term is used
in Sections 13(d) and 14(d) of the
Exchange Act (except for (1) the
Corporation or any Subsidiary, or
(2) any of the Corporation's
employee benefit plans (or any
trust forming a part thereof) (the
"Benefit Plan(s)")) is or becomes
the beneficial owner, directly or
indirectly, of the Corporation's
securities representing 19.9% or
more of the combined voting power
of the Corporation's then
outstanding securities, other than
pursuant to an excepted transaction
described in Clause (iii) below;
(ii) a binding written agreement is
executed (and, if legally required,
approved by the Corporation's
shareholders) providing for a sale,
exchange, transfer or other
disposition of substantially all of
the assets of the Corporation to
another entity, except to an entity
controlled directly or indirectly
by the Corporation;
(iii) the shareholders of the Corporation
approve a merger, consolidation,
share exchange, division or other
reorganization of or relating to
the Corporation, unless:
(A) the shareholders of the
Corporation immediately before
such merger, consolidation,
share exchange, division or
reorganization, own, directly
or indirectly immediately
following such merger,
consolidation, share exchange,
division or reorganization at
least 66-2/3% of the combined
voting power of the
outstanding voting securities
of the Corporation resulting
from such merger,
consolidation, share exchange,
division or reorganization
(the "Surviving Corporation")
in substantially the same
proportion as their ownership
of the voting securities
immediately before such
merger, consolidation, share
exchange, division or
reorganization; and
(B) the individuals who,
immediately before such
merger, consolidation, share
exchange, division or
reorganization, are members of
the Board (the "Incumbent
Board"), continue to
constitute at least 66-2/3% of
the Board of Directors of the
Surviving Corporation;
provided, however, that if the
election, or nomination for
election by the Corporation's
shareholders of any new
director was approved by a
vote of at least 66-2/3% of
the Incumbent Board, such new
director shall, for the
purposes hereof, be considered
a member of the Incumbent
Board; provided further,
however, that no individual
shall be considered a member
of the Incumbent Board if such
individual initially assumed
office as a result of either
an actual or threatened
"Election Contest" (as
described in Rule 14a-11
promulgated under the Exchange
Act) or other actual or
threatened solicitation of
proxies or consents by or on
behalf of a Person other than
the Board (a "Proxy Contest")
including by reason of any
agreement intended to avoid or
settle any Election Contest or
Proxy Contest; and
(C) no Person (except (1) the
Corporation or any Subsidiary,
(2) any Benefit Plan, (3) the
Surviving Corporation or any
subsidiary of the Surviving
Corporation, or (4) any Person
who, immediately prior to such
merger, consolidation, share
exchange, division or
reorganization had beneficial
ownership of 19.9% or more of
the then outstanding voting
securities of the Corporation)
has beneficial ownership of
19.9% or more of the combined
voting power of the Surviving
Corporation's then outstanding
voting securities immediately
following such merger,
consolidation, share exchange,
division or reorganization;
(iv) a plan of liquidation or
dissolution of the Corporation,
other than pursuant to bankruptcy
or insolvency laws, is adopted; or
(v) during any period of two
consecutive years, individuals, who
at the beginning of such period,
constituted the Board cease for any
reason to constitute at least a
majority of the Board, unless the
election, or the nomination for
election by the Corporation's
shareholders, of each new director
was approved by a vote of at least
66-2/3% of the directors then still
in office who were directors at the
beginning of the period; provided,
however, that no individual shall
be considered a member of the Board
at the beginning of such period if
such individual initially assumed
office as a result of either an
actual or threatened Election
Contest or Proxy Contest, including
by reason of any agreement intended
to avoid or settle any Election
Contest or Proxy Contest.
Notwithstanding the foregoing, a Change in
Control shall not be deemed to have occurred
if a Person becomes the beneficial owner,
directly or indirectly, of securities
representing 19.9% or more of the combined
voting power of the Corporation's then
outstanding securities solely as a result of
an acquisition by the Corporation of its
voting securities which, by reducing the
number of shares outstanding, increases the
proportionate number of shares beneficially
owned by such Person; provided, however, that
if a Person becomes a beneficial owner of
19.9% or more of the combined voting power of
the Corporation's then outstanding securities
by reason of share repurchases by the
Corporation and thereafter becomes the
beneficial owner, directly or indirectly, of
any additional voting securities of the
Corporation (other than pursuant to a stock
split, stock dividend or similar
transaction), then a Change in Control shall
be deemed to have occurred with respect to
such Person under Clause (i).
7.2 Exercise -
(a) A person electing to exercise an Option shall
give written notice to the Corporation of
such election and of the number of shares he
has elected to purchase, in such form as the
Committee shall have prescribed or approved,
and shall at the time of exercise tender the
full purchase price of the shares he has
elected to purchase. The purchase price
shall be paid in full, in cash, upon the
exercise of the Option; provided, however,
that in lieu of cash, with the approval of
the Committee at or prior to exercise, an
Optionee may exercise his Option by tendering
to the Corporation shares of Common Stock
owned by him and having a fair market value
equal to the cash exercise price applicable
to his Option (with the fair market value of
such stock to be determined in the manner
provided in Section 5.2 hereof) or by
delivering such combination of cash and such
shares as the Committee in its sole
discretion may approve.
(b) A person holding more than one Option at any
relevant time may, in accordance with the
provisions of the Plan, elect to exercise
such Options in any order.
(c) In addition, at the request of the
Participant and to the extent permitted by
applicable law, the Corporation may, in its
sole discretion, selectively approve
arrangements with a brokerage firm under
which such brokerage firm, on behalf of the
Participant, shall pay to the Corporation the
exercise price of the Options being
exercised, and the Corporation, pursuant to
an irrevocable notice from the Participant,
shall promptly deliver the shares being
purchased to such firm.
Article 8. TERMINATION OF STATUS AS DIRECTOR
8.1 Retirement - In the event of Retirement, an Option
shall lapse at the earlier of the expiration of
the term of the Option or up to 24 months, at the
discretion of the Committee, from the date of
Retirement.
8.2 Death or Disability - In the event of termination
of an individual's status as a Director due to
death or disability (as defined in Code
Section 72(m)), the Option shall lapse at the
earlier of the expiration of the term of the
Option or one year after termination due to any
such cause.
8.3 Other Termination - Except as otherwise provided
in Sections 8.4(a) and (c), in the event of
termination of an individual's status as a
Director for any reason other than is described in
Section 8.1 or 8.2, all Options shall lapse as of
the date of termination.
8.4 Special Termination Provisions -
(a) Notwithstanding anything herein to the
contrary, the Committee may, in its
discretion and subject to the approval of a
majority of the members of the Board, waive
the eleven-month continuous service
requirement set forth in Section 7.1(a) and
permit the exercise of an Option held by a
Director whose service as such has terminated
prior to the satisfaction of such
requirement. Any such waiver may be made
with retroactive effect provided it is made
within 60 days following the Optionee's
termination.
(b) In the event the Committee waives the
continuous service requirement with respect
to an Option and the circumstance of the
Director's termination is described in
Section 8.1 or 8.2, the Option will lapse as
otherwise provided in the relevant section.
(c) Notwithstanding anything herein to the
contrary, the Committee may, in its
discretion, waive the lapse provisions of
Section 8.3 and permit the exercise of an
Option until a date which is the earlier of
the expiration of the term of such Option or
up to 24 months from the date of termination.
Article 9. ADJUSTMENT PROVISIONS
9.1 Share Adjustments -
(a) In the event that the shares of Common Stock
of the Corporation, as presently constituted,
shall be changed into or exchanged for a
different number or kind of shares of stock
or other securities of the Corporation or of
another corporation (whether by reason of
merger, consolidation, recapitalization,
reclassification, split-up, combination of
shares or otherwise) or if the number of such
shares of stock shall be increased through
the payment of a stock dividend, then,
subject to the provisions of Subsection (c)
below, there shall be substituted for or
added to each share of Common Stock of the
Corporation which was theretofore
appropriated, or which thereafter may become
subject to an Option under the Plan, the
number and kind of shares of stock or other
securities into which each outstanding share
of the Common Stock of the Corporation shall
be so changed or for which each such share
shall be exchanged or to which each such
share shall be entitled, as the case may be.
Outstanding Options shall also be
appropriately amended as to price and other
terms, as may be necessary to reflect the
foregoing events.
(b) If there shall be any other change in the
number or kind of the outstanding shares of
the Common Stock of the Corporation, or of
any stock or other securities in which such
Common Stock shall have been changed, or for
which it shall have been exchanged, and if a
majority of the members of the Board shall,
in its sole discretion, determine that such
change equitably requires an adjustment in
any Option which was theretofore granted or
which may thereafter be granted under the
Plan, then such adjustment shall be made in
accordance with such determination.
(c) The grant of an Option pursuant to the Plan
shall not affect in any way the right or
power of the Corporation to make adjustments,
reclassifications, reorganizations or changes
of its capital or business structure, to
merge, to consolidate, to dissolve, to
liquidate or to sell or transfer all or any
part of its business or assets.
9.2 Corporate Changes - A dissolution or liquidation
of the Corporation, or a merger or consolidation
in which the Corporation is not the surviving
Corporation, shall cause each outstanding Option
to terminate, except to the extent that another
corporation may and does in the transaction assume
and continue the Option or substitute its own
options.
9.3 Fractional Shares - Fractional shares resulting
from any adjustment in Options pursuant to this
Article 9 may be settled as a majority of the
members of the Board or the Committee (as the case
may be) shall determine.
9.4 Binding Determination - To the extent that the
foregoing adjustments relate to stock or
securities of the Corporation, such adjustments
shall be made by a majority of the members of the
Board, whose determination in that respect shall
be final, binding and conclusive. Notice of any
adjustment shall be given by the Corporation to
each holder of an Option which shall have been
adjusted.
Article 10. GENERAL PROVISIONS
10.1 Effective Date - The Plan shall become effective
upon its adoption by the Board.
10.2 Termination of the Plan - Unless previously
terminated by the Board of Directors, the Plan
shall terminate on, and no Options shall be
granted after, the tenth anniversary of its
adoption by the Board.
10.3 Limitation on Termination, Amendment or
Modification
(a) The Board may at any time terminate, amend,
modify or suspend the Plan, provided that
without the approval of the stockholders of
the Corporation no amendment or modification
shall be made by the Board which otherwise
requires the approval of such stockholders
under applicable tax, securities or other
law.
(b) No amendment, modification, suspension or
termination of the Plan shall in any manner
affect any Option theretofore granted under
the Plan without the consent of the Optionee
or any person validly claiming under or
through the Optionee.
10.4 No Right to Continued Status as Director - Neither
anything contained in the Plan or in any
instrument under the Plan nor the grant of any
Option hereunder shall confer upon any Optionee
any right to continue as a Director (or to be
nominated for such position) of the Corporation.
10.5 Withholding Taxes - The Corporation will require
that an Optionee, as a condition of the exercise
of an Option, or any other person or entity
receiving Common Stock upon exercise of an Option,
pay or reimburse any taxes which the Corporation
may be required to withhold in connection with the
exercise of the Option.
10.6 Listing and Registration of Shares -
(a) No Option granted pursuant to the Plan shall
be exercisable in whole or in part if at any
time a majority of the members of the Board
shall determine in its discretion that the
listing, registration or qualification of the
shares of Common Stock subject to such Option
on any securities exchange or under any
applicable law, or the consent or approval of
any governmental regulatory body, is
necessary or desirable as a condition of, or
in connection with, the granting of such
Option or the issue of shares thereunder,
unless such listing, registration,
qualification, consent or approval shall have
been effected or obtained free of any
conditions not acceptable to a majority of
the members of the Board.
(b) If a registration statement under the
Securities Act with respect to the shares
issuable upon exercise of any Option granted
under the Plan is not in effect at the time
of exercise, as a condition of the issuance
of the shares, the person exercising such
Option shall give the Committee a written
statement, satisfactory in form and substance
to the Committee, that he is acquiring the
shares for his own account for investment and
not with a view to their distribution. The
Corporation may place upon any stock
certificate for shares issuable upon exercise
of such Option the following legend or such
other legend as the Committee may prescribe
to prevent disposition of the shares in
violation of the Securities Act or other
applicable law:
"THE SHARES REPRESENTED BY THIS
CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 ("ACT")
AND MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR
OFFERED FOR SALE IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT WITH
RESPECT TO THEM UNDER THE ACT OR A
WRITTEN OPINION OF COUNSEL FOR THE
CORPORATION THAT REGISTRATION IS NOT
REQUIRED."
