SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
XCEED INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3006788
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
488 Madison Avenue, New York, New York 10022
(Address of Principal Offices) (Zip Code)
THE 1998 STOCK OPTION PLAN
(Full title of the plan)
Richard Blumberg, Esq., McLaughlin & Stern, LLP
260 Madison Avenue, New York, NY 10016
212-448-1100
(Address and telephone number of agent for service)
This Registration Statement shall become effective immediately upon filing with
the Securities and Exchange Commission, and sales of the securities herein begun
as soon as practicable after such effective date.
<TABLE>
Calculation of Registration Fee
<CAPTION>
Proposed Proposed
Title of maximum maximum Amount of
securities to be Amount to be offering price aggregate offering registration
registered registered per unit price fee
- ----------------------- ------------------------ -------------------- ------------------------- --------------------
<S> <C> <C> <C> <C>
Common Stock 2,000,000 shares 1 $10.125 $20,250,000 $5,629.50 2
par value
$.01 per share
<FN>
1 This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Xceed 1997 Stock Option Plan by
reason of any stock dividend, stock split, recapitalization or any other similar
transaction without receipt of consideration which results in an increase in the
number of outstanding shares of Common Stock of Xceed Inc.
2 Calculated solely for purposes of this offering under Rule 457(h) of
the Securities Act of 1933, as Amended, on the basis of 100% of the average of
the high and low prices reported on the NASDAQ National Market System on March
12, 1999.
</FN>
</TABLE>
<PAGE>
PART II
Information Required in the Registration Statement
Item 3 - Incorporation of Certain Documents by Reference
The documents listed in (a) through (c) below are incorporated by
reference in the registration statement, and all documents subsequently filed by
Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities
Exchange Act of 1934, prior to the filing of a post-effective amendment which
indicates that all securities offered have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
reference in the registration statement and to be a part thereof from the date
of filing such documents.
(a) Xceed's Annual Report on Form 10-K pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act") for the year ended August 31, 1998 filed
with the Commission on December 9, 1998 and transmitted to all
shareholders of record on February 12, 1999.
(b) The following reports filed pursuant to Section 13(a) or 15(d)
of the Exchange Act:
(1) Form 10-Q for the three months ended November 30,1998
filed with the Commission on January 15, 1999.
(2) Form 8-K reporting redemption of Redeemable Class B
Warrants filed with the Commission on January 29,
1999.
(c) The description of the shares of Common Stock is contained in
the Registrant's Registration Statement on Form SB-2, File No.
33-23910, initially filed with the Commission on April 15,
1995.
Item 4 - Description of Securities
Not Applicable
Item 5 - Interests of Named Financial Experts and Counsel
Not Applicable
Item 6 - Indemnification of Directors and Officers
Pursuant to Section 145 of the General Corporation Law of Delaware (the
"Delaware Corporation Law"), Article 7 of the Company's Certificate of
Incorporation provides that the Company shall indemnify, to the fullest extent
permitted by Section 145 of the Delaware Corporation Law, as amended from time
to time, each person that such section grants the
1
<PAGE>
Corporation the power to indemnify. Section 145 of the Delaware Corporation Law
permits the Company to indemnify any person in connection with the defense or
settlement of any threatened, pending or completed legal proceeding (other than
a legal proceeding by or in the right of the Company) by reason of the fact that
he is or was a director or officer of the Company or is or was a director or
officer of the Company serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership or other
enterprise against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred in connection with
the defense or settlement of such legal proceeding if he acted in good faith and
in a manner that he reasonably believes to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action of
proceeding, if he had no reasonable cause to believe that his conduct was
unlawful. If the legal proceeding, however, is by or in the right of the
Company, the director or officer may be indemnified by the Company against
expense (including attorneys' fees) actually and reasonably incurred in
connection with the defense or settlement of such legal proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company and except that he may not be indemnified in
respect of any claim, issue or matter as to which he shall have been adjudged to
be liable to the Company unless a court determines otherwise.
Pursuant to Section 102(b)(7) of the Delaware Corporation Law, Article
7 of the Certificate of Incorporation of the Company provides that no director
of the Company shall be personally liable to the Company or its stockholders for
monetary damages for any breach of his fiduciary duty as a director; provided,
however, that such clause shall not apply to any liability of a director (i) for
breach of his duty of loyalty to the Company or its stockholders, (ii) for acts
or omissions that are not in good faith or involve intentional misconduct or a
knowing violation of the law, (iii) under Section 174 of the Delaware
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. The aforesaid provision also eliminates the liability
of any stockholder for managerial acts or omissions, pursuant to Section 350 of
the Delaware Corporation Law or any other provision of Delaware law, to the same
extent that such liability is limited for a director.
Additionally, the Company maintains directors and officers liability
insurance.
Item 7 - Exemption From Registration Claimed
The options granted under the 1998 Stock Option Plan were exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
2
<PAGE>
Item 8 - Exhibits
4(a) Description of Common Stock (1)
5 Opinion of McLaughlin & Stern, LLP *
23(a) Consent of Holtz, Rubenstein & Co., LLP *
23(b) Consent of McLaughlin & Stern, LLP (included in Exhibit 5 hereto) *
10(n) Copy of Water-Jel Technologies, Inc. [now known as Xceed Inc.] 1998 Stock
Option Plan *
- --------------
* Filed herewith.
(1) Incorporated by reference from the Company's Registration Statement
on Form S-18, File No. 2-90512-NY initially filed with the Commission on April
12, 1984.
Item 9 - Undertakings
The Registrant hereby undertakes:
(1) To file, during any period which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed in
this Registration Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered hereby which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provision, or otherwise, the
Registrant has been advised that in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel, the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
the requirements for filing on Form S-8 and has duly cause this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on March 18, 1999.
XCEED INC.
By:/s/ Werner Haase
Werner Haase, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
Signature Title Date
- --------- ----- ----
/s/ Werner G. Haase Chief Executive Officer and March 18, 1999
- -------------------- Co-Chairman of the Board
Werner G. Haase
/s/ Scott Mednick Chairman March 18, 1999
- --------------------
Scott Mednick
/s/ William Zabit President March 18, 1999
- --------------------
William Zabit
/s/ Terry Anderson Director March 18, 1999
- --------------------
Terry Anderson
/s/ John Bermingham Director March 18, 1999
- --------------------
John Bermingham
/s/ Norman Doctoroff Director March 18, 1999
- --------------------
Norman Doctoroff
Pursuant to the requirements of the Securities Act of 1933, the Stock
Option Committee has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
State of New York, on March 18, 1999.
THE 1998 STOCK OPTION PLAN
By:/s/ Werner Haase
Werner Haase, Chief Executive Officer
By:/s/ John A. Bermingham
John A. Bermingham, Director
By:/s/ Norman Doctoroff
Norman Doctoroff, Director
<PAGE>
Index to Exhibits Filed Herewith
5 Opinion of McLaughlin & Stern, LLP *
23(a) Consent of Holtz, Rubenstein & Co., LLP *
23(b) Consent of McLaughlin & Stern, LLP (included in Exhibit 5 hereto) *
10(n) Copy of Water-Jel Technologies, Inc. [now known as Xceed Inc.] 1998 Stock
Option Plan *
Exhibit 5
MCLAUGHLIN & STERN, LLP
260 MADISON AVENUE
NEW YORK, NEW YORK 10016
(212) 448-1100
FAX (212) 448-0066
RICHARD J. BLUMBERG MILLBROOK OFFICE
Direct Phone: (212) 448-6205 Franklin Avenue
P.O. Box 1369
Millbrook, New York 12545
(914) 677-5700
Fax (914) 677-0097
March 18, 1999
United States Securities & Exchange Commission
450 Fifth Street NW
Washington, DC 20549
Re: Xceed Inc.
Gentlepersons:
Reference is made to the Registration Statement on Form S-8
(the "Registration Statement"), filed with the Securities and Exchange
Commission by Xceed Inc. (the "Company") covering the registration of 2,000,000
shares of the Company's Common Stock to be issued pursuant to the 1998 Stock
Option Plan (the "Plan").
We hereby advise you that we have examined originals or copies
certified to our satisfaction of the Certificate of Incorporation and amendments
thereto and the By-Laws of the Company, minutes of meetings of the Board of
Directors and Shareholders and such other documents and instruments, and we have
made such examination of law as we deemed appropriate as to the basis for the
opinions hereinafter expressed. We express no opinion with respect to any
matters as they may impinge upon laws of the State of Delaware, the Company's
state of incorporation.
Based on the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly
existing and in good standing under the laws of the State of Delaware.
2. The Plan has been duly approved by the stockholders of
Xceed Inc. entitled to vote at the annual meeting held on February 20, 1998.
3. The 2,000,000 shares of Common Stock (the subject of this
Registration Statement) to be issued pursuant to the Plan will, upon issuance to
the persons entitled to participate in the Plan and the payment of the
consideration required under the terms of the Plan, be validly issued, fully
paid and non-assessable.
In addition, we hereby consent to the reference to this Firm
into this Registration Statement and to the filing of this opinion as an Exhibit
to this Registration Statement.
Very truly yours,
/s/ McLaughlin & Stern, LLP
MCLAUGHLIN & STERN, LLP
RJB:ww
Exhibit 23(a)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference into the Registration
Statement on Form S-8 of our report dated November 13, 1998 with respect to the
consolidated financial statements of Xceed Inc. included in the Annual Report on
Form 10-K for the year ended November 30, 1998.
/s/ Holtz Rubenstein & Co., LLP
HOLTZ RUBENSTEIN & CO., LLP
Melville, New York
March 18, 1999
Exhibit 23(b)
Included in, and incorporated by Exhibit 5 hereto
Exhibit 10(n)
Summary of the 1998 Stock Option Plan
The Company may grant to its officers, key employees and others who
render services to the Company, options to purchase ("Options") up to 2,000,000
shares of the Company's Common Stock at a price which may not be less than the
fair market value per share in the case of incentive stock options or 85% of
fair market value in the case of non-qualified options for such stock on the
date of the granting of the Option. Payment of the exercise price shall be made
in cash, or, with the consent of the Board, in whole or in part, in shares of
Common Stock or with a full recourse interest bearing promissory note of the
Optionee secured by a pledge of the shares received upon exercise of such
Option. If an option granted under the 1998 Plan shall expire, terminate or be
canceled for any reason without being exercised in full, the corresponding
number of unpurchased shares shall again be available for the purposes of the
1998 Plan. Options may be granted in the form of incentive stock options or
options which do not qualify for treatment as incentive stock options.
The 1998 Plan will be administered by the Board of Directors (the
"Board"). The Board determines the persons who are to be granted Options based
upon the contribution of such persons to the management and growth of the
Company. The 1998 Plan contains no preset criteria determining the identity or
amount of options to be granted to any person or group of persons. Therefore, no
determinations can be made at the present time as to the benefits or amounts
that will be or would have been issued to any specific person or group of
persons under the 1998 Plan. No Option may be exercised after the expiration of
10 years from the date of grant. No Option may be granted under the 1998 Plan
after March 1, 2008.
Incentive stock options are also subject to the following limitations:
(i) The aggregate fair market value (determined at the time an option is
granted) of stock with respect to which incentive stock options are exercisable
for the first time by an optionee during any calendar year (under all such plans
of the Company, its parent or subsidiary) shall not exceed $100,000, and (ii) if
the individual to whom the incentive stock options were granted is considered as
owning stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company, then (A) the option price at the time of grant
may not be less than 110% of the fair market value per share for such Common
Stock and (B) the option period must be no more than five years from the date of
grant.
Unless otherwise determined by the Board or by other provisions of the
Plan, upon the granting of any Option such Option may be immediately exercisable
with respect to 100% of the shares subject to the Option. The Board may, in its
discretion, (A) provide for the holding of such shares of Common Stock in escrow
for a period not exceeding five years, or (B) impose other restrictions on the
vesting of any Option or the vesting of any shares of Common Stock that an
Optionee receives upon exercise of any Option; provided that any and all such
restrictions shall lapse if there is a sale of (A) substantially all of the
assets or (B) 50 percent or more of the voting securities of the Company
(excluding for this purpose Company stock sold in a primary or secondary public
offering). Any restrictions the Board imposes on an Option pursuant to this
paragraph shall be specified in the stock option agreement governing such
Option.
<PAGE>
Upon issuance of any shares of Common Stock to an optionee pursuant to
the exercise of a nonstatutory option the Company or a subsidiary may issue a
supplemental cash award to the Optionee which shall be the smaller of (a) 65% of
the difference between the fair market value of the shares and the option price,
or (b) 90% of the option price.
An individual whose employment terminates by reason other than death
may generally exercise an Option within a thirty-day (30) period, or if
termination is by reason of death, within the twelve month period after such
termination, and then only if and to the extent that such Option was exercisable
at the date of termination of employment.
The Board of Directors may, at any time, alter, suspend or terminate
the 1998 Plan, except that the Board of Directors may not, without further
approval of the stockholders, (1) increase the maximum number of shares for
which Options may be granted under the 1998 Plan or which may be acquired by an
individual employee, (2) decrease the minimum purchase price for shares of
Common Stock to be issued upon exercise of Options or (3) change the class of
persons eligible to receive Options. Except in limited circumstances, the Board
may not make any change which would have a material adverse affect upon any
Option previously granted unless the consent of the Optionee is obtained. No
person may be divested of ownership of shares already issued under the 1998
Plan.
The foregoing summary of the 1998 Plan is qualified in its entirety by,
and reference is made to, the 1998 Plan, a copy of which is attached.
The grant or exercise of an incentive stock option will not generally
cause recognition of income by the Optionee; however, the amount by which the
fair market value of a share of Common Stock at the time of exercise of an
incentive stock option exceeds the option price, is a "tax preference item" for
purposes of the alternative minimum tax. In the event of a sale of the shares
received upon exercise of an incentive stock option more than two years from the
date of grant and more than one year from the date of exercise, any appreciation
of the shares received above the exercise price should qualify as long-term
capital gain. However, if shares of Common Stock acquired pursuant to the
exercise of an incentive stock option are sold by the Optionee before the
completion of such holding periods so much of the gain as does not exceed the
difference between the option price and the lesser of the fair market value of
the shares at the date of exercise or the fair market value at the date of
disposition will be taxable as ordinary income for the taxable year in which the
sale occurs. Any additional gain realized on the sale should qualify as a
capital gain. Although the Tax Reform Act of 1986 has eliminated the difference
in tax rates between long term capital gains and ordinary income, the concept of
long term capital gains remains and may, in certain circumstances be relevant.
The grant of an Option that is not an incentive stock option (a
"non-qualified option") should not result in recognition of income by the
Optionee. Upon exercise of a non-qualified option by an employee who is not an
officer or director or who is not otherwise subject to the provisions of Section
16(b) of the Exchange Act ("Section 16(b)"), the excess of the fair market value
of the shares on the exercise date over the option price should be considered
compensation taxable as ordinary income to the employee. If the Optionee is
subject to the restrictions of Section 16(b), income will
<PAGE>
be recognized at the time the restrictions lapse and should be measured by the
excess of the fair market value of the shares at such time over the option price
unless the Optionee elects to be taxed at the time of exercise. In the event of
a sale of the shares, any appreciation after the date of exercise or lapse of
the restriction of Section 16(b), as the case may be, should qualify as capital
gain.
In connection with incentive stock options and non-qualified options,
the Company will be entitled to a deduction for federal income tax purposes at
the same time and in the same amount as the ordinary income recognized by the
employee provided any Federal income tax withholding requirements are satisfied.
If applicable holding period requirements in connection with an incentive stock
option are not satisfied, no deduction will be available to the Company.
<PAGE>
WATER-JEL TECHNOLOGIES, INC. [now known as Xceed Inc.]
1998 STOCK OPTION PLAN
There is hereby established a 1998 Stock Option Plan (the "Plan"). The
Plan provides for the grant to certain employees and others who render services
to Water-Jel Technologies, Inc. (the "Company") or of any subsidiary thereof, of
options to purchase shares of the common stock, $.08 par value per share, of the
Company ("Options") and for the issuance, transfer or sale of such common stock
upon the exercise of such Options. The term "Company", as used in the Plan,
shall include Water-Jel Technologies, Inc. and any present or future subsidiary
thereof, unless the context otherwise requires. It is intended that certain of
the Options will constitute Incentive Stock Options within the meaning of
Section 422A of the Internal Revenue Code ("ISOs"), and the remainder of the
Options will constitute nonstatutory options ("Nonstatutory Options"). The Board
of Directors of the Company or a committee thereof appointed by the Board (the
term "Committee" as used herein shall refer to either such committee or the
Board of Directors as a whole, as the case may be) shall determine which Options
are to be ISOs and which are to be Nonstatutory Options and shall enter into
option agreements with the recipients accordingly.
1. Purpose: The purpose of the Plan is to provide additional
incentive to the officers, key employees, and others who render services to the
Company, who are primarily responsible for the management and growth of the
Company, or otherwise materially contribute to the conduct and direction of its
business, operations and affairs, in order to strengthen their desire to remain
in the employ of the Company, stimulate their efforts on behalf of the Company
and to retain and attract persons of competence, and, by encouraging ownership
of a stock interest in the Company, to gain for the organization the advantages
inherent in employees and others who render services to the Company having a
sense of proprietorship.
2. The Stock: The aggregate number of shares of common stock,
$.08 par value per share, which may be issued, transferred or sold upon the
exercise of Options granted under the Plan shall not, except as such number may
be adjusted in accordance with paragraph (g) of Article 6 hereof, exceed
2,000,000 shares of the common stock, $.08 par value per share, of the Company
("Common Shares") which may be either authorized and unissued common stock, $.05
par value per share, or issued common stock, $.05 par value per share,
reacquired by the Company. Notwithstanding the above limitation, if any Option
granted under the Plan shall expire, terminate or be canceled for any reason
without having been exercised in full, the corresponding number of unpurchased
shares shall again be available for the purposes of the Plan.
3. Employees: The term "employees" as used in the Plan, shall
mean officers and other employees of the Company (including officers and other
employees who are also directors) within the classes referred to in Article 1
hereof.
4. Eligibility:
(a) Options may be granted to such employees of (or,
in the case of Nonstatutory Options only, to others who render services to) the
Company or its subsidiaries or parent as the Committee shall select from time to
time (the "Optionees"). The term "subsidiary" and
<PAGE>
"parent" as used in the Plan shall have the respective meanings set forth in
Sections 425(f) and (e) of the Internal Revenue Code.
(b) No individual who, at the time an ISO is granted,
is considered under Section 422A(b)(6) of the Internal Revenue Code as owning
stock possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or of its parent or any subsidiary corporation
shall be eligible to receive such ISO, provided that this restriction shall not
apply if at the time such ISO is granted the provisions of 7(f)(ii) are complied
with.
(c) An Optionee may hold more than one Option.
5. Subsidiary: The term "subsidiary", as used herein, shall be
deemed to mean any corporation (other than Water-Jel Technologies, Inc.) in an
unbroken chain of corporations beginning with and including Water-Jel
Technologies, Inc. if, at the time of the granting of an Option, each of the
corporations other than the last corporation in said unbroken chain owns stock
possessing 50 percent or more of the total combined voting power of all classes
of stock in one of the other corporation in such chain.
6. General Terms of Options:
(a) Consideration : The Committee shall determine the
consideration to the Company, for the granting of Options under the Plan, as
well as the conditions, if any, which it may deem appropriate to ensure that
such consideration will be receive by, or will accrue to the Company and, in the
discretion of the Committee, such consideration need not be the same, but may
vary for Options granted under the Plan at the same time or from time to time.
(b) Number of Options which may be Granted to, and
Number of Common Shares which may be Acquired by Employees. The Committee may
grant more than one Option to an individual during the life of the Plan and,
subject to the requirements of Section 422A of the Internal Revenue Code of
1986, as amended (the "Code"), with respect to incentive stock options, such
Option may be in addition to, in tandem with, or in substitution for, Options
previously granted under the Plan or of another corporation and assumed by the
Company.
The Committee may permit the voluntary surrender of all or a
portion of any Option granted under the Plan to be conditioned upon the granting
to the employee of a new Option for the same or a different number of Common
Shares as the Option surrendered, or may require such voluntary surrender as a
condition precedent to a grant of a new Option to such employee. Such new Option
shall be exercisable at the price, during the period, and in accordance with any
other terms or conditions specified by the Committee at the time the new Option
is granted, all determined in accordance with the provisions of the Plan without
regard to the price, period of exercise, or any other terms or conditions of the
Option surrendered (except as otherwise provided in paragraph (f) of Article 7
hereof).
<PAGE>
(c) Period of Grant of Options. Options under the
Plan may be granted at any time after the Plan has been approved by the
stockholders of the Company. However, no Option shall be granted under the Plan
after March 1, 2008.
(d) Option Agreement. The Company shall effect the
grant of Options under the Plan, in accordance with determinations made by the
Committee by execution of instruments in writing in a form approved by the
Committee. Each Option shall contain such terms and conditions (which need not
be the same for all Options, whether granted at the time or at different times)
as the Committee shall deem to be appropriate and not inconsistent with the
provisions of the Plan, and such terms and conditions shall be agreed to in
writing by the Optionee. The Committee may, in its sole discretion, and subject
to such terms and conditions as it may adopt, accelerate the date or dates on
which some or all outstanding Options may be exercised. Options shall be
exercised by submitting to the Company a signed copy of notice of exercise in a
form to be supplied by the Company. The exercise of an Option shall be effective
on the date on which the Company receives such notice at its principal corporate
offices.
(e) Supplemental Cash Award. Upon issuance of any
Common Shares to an Optionee pursuant to the exercise of a Non-statutory Option
that may be granted hereunder, the Company or a Subsidiary may issue a
supplemental cash award to the Optionee at the time that the stock certificates
representing such common stock are issued to him. The supplemental cash award
shall be the smaller of (i) 65% of the difference between the fair market value
of the Common Shares issued at the time of exercise and the option price
tendered by the Optionee for the Common Shares or (ii) 90% of the Option price
tendered by the Optionee pursuant to the exercise of Options hereunder. The
Company (or its Subsidiary) may withhold from this supplemental cash award all
required amounts including that which may be required as a result of the
Optionee's exercise of the option.
(f) Non-Transferability of Option. No Option granted
under the Plan to an Optionee shall be transferable by the Optionee or otherwise
than by will or by the laws of descent and distribution and during the
Optionee's lifetime, such Option shall be exercisable only by such Optionee.
(g) Effect of Change in Common Stock. In the event of
a reorganization, recapitalization, liquidation, stock split, stock dividend,
combination of shares, merger or consolidation, or the sale, conveyance, lease
or other transfer by the Company of all or substantially all of its property, or
any change in the corporate structure or shares of common stock of the Company
pursuant to any of which events the then outstanding shares of the common stock
are split up or combined or changed into, become exchangeable at the holder's
election for, or entitle the holder thereof to other shares of common stock, or
in the case of any other transaction described in Section 425(a) of the Code,
the Committee may change the number and kind of shares of Common Shares
available under the Plan and any outstanding Option (including substitution of
shares of common stock of another corporation) and the price of any Option and
the fair market value determined under paragraph (i) of Article 6 hereof in such
manner as it shall deem equitable. Options granted under the Plan shall contain
such provisions as are consistent with the foregoing
<PAGE>
with respect to adjustments to be made in the number and kind of Common Shares
covered thereby and in the option price per share in the event of any such
change.
(h) Optionees not Stockholders. An Optionee or a
legal representative thereof shall have none of the rights of a stockholder with
respect to Common Shares subject to Options until such shares shall be issued,
transferred or sold upon exercise of the Option.
(i) Fair Market Value. As used in the Plan, the term
"fair market value" shall (i) if the common stock of the Company is traded in
the over-the-counter market, be the mean between the closing bid and asked sales
prices for the common stock of the Company as reported by the National Quotation
Bureau (or similar quotation agency) on the date the calculation thereof shall
be made or (ii) if the common stock of the Company is listed on a national
securities exchange, be the mean between the high and low sales prices for the
common stock of the Company on such exchange on the date the calculation thereof
shall be made, in each case with such adjustments, if any, as shall be made in
accordance with paragraph (g) of this Article 6. In the event the date of
calculation shall be a date on which there shall not have been reported a
closing bid and asked price for common stock of the Company or a date which
shall not be a trading date on such national securities exchange as the case may
be, determination of fair market value shall be made as of the first date prior
thereto on which there shall have been reported a closing bid and asked price
for common stock of the Company or the first date prior thereto which shall have
been a trading date on such national securities exchange, as the case may be.
(j) Types of Options. Options granted under the Plan
shall be in the form of (i) incentive stock options as defined in Section 422A
of the Code, or (ii) options not qualifying under such Section, or both, in the
discretion of the Committee. The status of each Option shall be identified in
the Option Agreement.
7. Terms of Options:
(a) Option Price. The price or prices per share of
Common Shares to be sold pursuant to an Option shall be such as shall be fixed
by the Committee but not less in any case than the fair market value per share
for such Common Shares in the case of Incentive Stock Options, or 85% of the
fair market value in the case of Nonstatutory Options on the date of the
granting of the Option, subject to adjustment pursuant or paragraph (g) of
Article 6 hereof.
For the purposes of this Article 7, the date of the granting
of an Option under the Plan shall be the date fixed by the Committee as the date
for such Option for the person who is to be the recipient thereof.
(b) Period of Option Vesting.
(i) Unless otherwise determined by the
Committee or by other provisions of the Plan, upon the granting of any Option
such Option will be vested and be exercisable with respect to the percentage of
the Common Shares subject to the Option as determined by the Committee. The
Committee may, in its discretion, (A) provide for the holding of such
<PAGE>
Common Shares in escrow for a period not exceeding five years, or (B) impose
other restrictions on the vesting of any Option or the vesting of any Common
Shares that an Optionee receives upon exercise of any Option; provided that any
and all such restrictions shall lapse if there is a sale of (A) substantially
all of the assets or (B) 50 percent or more of the voting securities of the
Company (excluding for this purpose Company stock sold in a primary or secondary
public offering). Any restrictions the Committee imposes on an Option pursuant
to this paragraph shall be specified in the stock option agreement governing
such Option.
(ii) Options will be exercisable thereafter
over the Option Period which, in the case of each Option, shall be for a period
of not more than ten years from the date of the grant of such Option, and,
subject to the provisions of paragraphs 4(b) or 6(d), will be exercisable, at
such times and in such amounts as determined by the Committee at the time each
Option is granted. Notwithstanding any other provision contained in the Plan, no
Option shall be exercisable after the expiration of the Option Period. Except as
provided in paragraphs (c) and (d) of this Article 7, no Option may be exercised
unless the Optionee is then in the employ of the Company and shall have been
continuously so employed since the date of the grant of such Option. The Plan
shall not convey upon any Optionee any right with respect to continuation of
employment by the Company, nor shall it interfere in any way with the employee's
right or the Company's right to terminate employment at any time.
(c) Termination of Optionee's Employment or Other
Services.
(i) In the event of the termination of an
Optionee's employment with or rendering of other services to the Company, any
parent or subsidiary of the Company, and any successor corporation to either the
Company or any parent or subsidiary of the Company other than by reason of
death, all Options previously granted to such Optionee shall terminate, except
with respect to Options which the Optionee was entitled to exercise prior to the
date of such termination (the "Termination Date").
(ii) With respect to any Option which the
Optionee was entitled to exercise prior to the Termination Date but had not as
yet done so as of such date, such Option will lapse unless exercised by the
Optionee within the earlier of (A) thirty days after the Termination Date or (B)
the last date such Option could have been exercised had the Optionee's position
with the Company not terminated. Nothing in the Plan or in any Option or stock
option agreement shall confer on any Optionee any right to continue in the
service of the Company or any parent or subsidiary of the Company or interfere
with the right of Company to terminate such Optionee's employment or other
services at any time.
(iii) In the event that termination of an
Optionee's services results from (A) the Optionee having been convicted of a
felony, a crime of moral turpitude or any crime involving the Company (other
than pursuant to actions taken at the direction or with approval of the
Committee), or (B) a determination by the Committee that the Optionee was
engaged in fraud, misappropriation or embezzlement, the Company shall have the
right, exercisable within 60 days of the Termination Date, to repurchase any
Common Shares acquired by the Optionee pursuant or this Plan and owned by the
Optionee at the Termination Date at the lower of (A) the option price of
<PAGE>
such Common Shares, (B) if such Common Shares are not publicly traded, their
book value on the Termination Date, or (C) if such Common Shares are publicly
traded, the average of their high and low market price on the Termination Date.
(d) Death of Optionee. If an Optionee should die
while in the employ of the Company, the Option theretofore granted shall be
exercisable by the estate of the Optionee or by a person who acquired the right
to exercise such Option by bequest or inheritance or by reason of the death of
the Optionee, but then only if and to the extent that the Optionee was entitled
to exercise the Option at the date of death, giving effect to the limitations,
if any, which may have been imposed by the Committee pursuant or paragraph
(b)(ii) of this Article 7 with respect to the percent of the total number of
Common Shares to which the Option relates which may be purchased from time to
time during the Option Period; provided, however, that such Option shall be
exercisable only within the twelve-month period next succeeding the death of the
Optionee and in no event after the expiration of the Option Period.
(e) Payment for Common Shares. Upon exercise of an
Option, the Optionee shall make full payment of the Option Price (i) in cash;
(ii) with the common stock of the Company (valued at their fair market value, as
determined by the Committee, as of such date of exercise), (iii) with the
consent of the Committee with a full recourse interest bearing promissory note
of the Optionee, secured by a pledge of the Common Shares received upon exercise
of such Option, and having such other terms and conditions as determined by the
Committee, or (iv) with the consent of the Committee, any combination of
(i),(ii), or (iii) above.
(f) Incentive Stock Options. Options granted in the
form of incentive stock options shall be subject in addition to the foregoing
provisions of this Article 7, to the following provisions:
(i) Aggregate Fair Market Value Limitation.
The aggregate fair market value (determined at the time the Option is granted)
of the stock with respect to which incentive stock options are exercisable for
the first time by an Optionee during any calendar year (under all such plans of
the Company, its parent or subsidiary) shall not exceed $100,000.
(ii) Ten Percent Shareholder. Any stock
option granted to any individual who, at the time of the proposed grant, owns
common stock possessing more than ten percent of the total combined voting power
of all classes of stock of the Company or any subsidiary shall, in addition to
such other terms as may be required by this Article 7(f) provide that (A) the
prices per share for Common Shares to be sold pursuant or such incentive stock
option shall not be less than 110% of the fair market value per share for such
Common Shares on the date of the granting of the incentive stock option, subject
to adjustment pursuant to paragraph (g) of Article 6 hereof and (B) the Option
Period of such incentive stock option shall be for a period of not more than
five years from the date of the grant of such incentive stock option.
The Company intends that Options designated by the Committee
as incentive stock options shall constitute incentive stock options under
Section 422A of the Code. Should any of the foregoing provisions not be
necessary in order to so comply or should any additional provisions be
<PAGE>
required, the Board of Directors of the Company may amend the Plan accordingly
without the necessity of obtaining the approval of the stockholders of the
Company.
8. Withholding Taxes:
(a) In the case of Common Shares that an Optionee
receives pursuant to his exercise of an Option, the Company shall have the right
to withhold from any salary, wages, or other compensation for services payable
by the Company to such Optionee, amounts sufficient to satisfy any withholding
tax liability attributable to such Optionee's receipt of such Common Shares or
the supplemental cash award.
(b) In the case of Common Shares that an Optionee
receives pursuant to his exercise of an Option which is an ISO, if such Optionee
disposes of such Common Shares within two years from the date of the granting of
the ISO or within one year after the transfer of such Common Shares to him, the
Company shall have the right to withhold from any salary, wages, or other
compensation for services payable by the Company to such Optionee, amounts
sufficient to satisfy any withholding tax liability attributable to such
disposition.
(c) In the case of a disposition described in Section
8(b) above, the Optionee shall give written notice to the Company of such
disposition within 30 days following the disposition within 30 days following
the disposition, which notice shall include such information as the Company may
reasonably request to effectuate the provisions hereof.
9. Agreements and Representations to Optionees:
(a) As a condition to the exercise of an Option,
unless counsel to the Company opines that it is not necessary under the
Securities Act of 1933, as amended, and the pertinent rules thereunder, as the
same are then in effect, the Optionee shall represent in writing that the Common
Shares being purchased are being purchased only for investment and without any
present intent at the time of the acquisition of such Common Shares to sell or
otherwise dispose of the same.
(b) In the event there is a stockholders agreement in
effect among the Company and shareholders owning more than 50% of the Company's
common stock (the "Shareholders"), or among substantially all the Shareholders,
which agreement deals with restrictions on the disposition of shares of common
stock, then, as a further condition to the exercise of an Option, the Optionee
may be required to execute appropriate papers, making him a party to such
agreement or agreements, or such part thereof as the Committee determines would
be in the best interests of the Company and the Shareholders.
10. Administration of the Plan: The Plan shall be administered
by the Board of Directors or by a Committee which shall consist of three or more
members of the Board of Directors whom the Board of Directors may appoint from
time to time (either the Board or such committee, as the case may be, being
referred to herein as the "Committee"). Subject to the express provisions of the
Plan, the Committee shall have authority, in its discretion, to determine the
individuals to
<PAGE>
receive Options, the times when they shall receive them and the number of Common
Shares to be subject to each Option. Directors, including those that may be
members of the Committee, shall be eligible to receive Options under the Plan.
Subject to the express provisions of the Plan, the Committee
shall also have authority to construe the respective option agreements and the
Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of the respective option agreements
(which need not be identical) and to make all other determinations necessary or
advisable for administering the Plan. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any option
agreement in the manner and to the extent it shall deem expedient to carry it
into effect, and it shall be the sole and final judge of such expediency. The
determinations of the Committee on the matters referred to in this Section 10
shall be conclusive.
11. Amendment and Discontinuance of the Plan:
(a) The Board of Directors of the Company may at any
time alter, suspend or terminate the Plan, but, except in accordance with the
provisions of paragraph (g) of Article 6 and Article 12 hereof, no change shall
be made which will have a material adverse effect upon any Option previously
granted, unless the consent of the Optionee is obtained; provided, however, that
except in the case of adjustment made pursuant or paragraph (g) of Article 6
hereof, the Board of Directors may not without further approval of the
stockholders, (i) increase the maximum number of Common Shares for which Options
may be granted under the Plan or which may be purchased by an individual
Optionee, (ii) decrease the minimum option price provided in the Plan, or (iii)
change the class of persons eligible to receive Options.
(b) Notwithstanding the foregoing provisions of this
Article 11, except as may otherwise be provided herein, no person may be
divested of the ownership of Common Shares previously issued, sold or
transferred under the Plan.
12. Other Conditions: If at any time counsel to the Company
shall be of the opinion that any sale or delivery of Common Shares pursuant to
an Option granted under the Plan is or may in the circumstances be unlawful
under the statutes, rules or regulations of any applicable jurisdiction, the
Company shall have no obligation to make such sale or delivery, and the Company
shall not be required to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933 or otherwise with
respect to Common Shares or Options under the Plan, and the right to exercise
any such Option may be suspended until, in the opinion of said counsel, such
sale or delivery shall be lawful.
Upon termination of any period of suspension under this
Article 12, any Option affected by such suspension which shall not then have
expired or terminated shall be reinstated as to all Common Shares available upon
exercise of the Option before such suspension and as to Common Shares which
would otherwise have become available for purchase during he period of such
suspension, but no suspension shall extend any Option Period.
<PAGE>
At the time of any grant or exercise of any Option, the
Company may, if it shall deem it necessary or desirable for any reason connected
with any law or regulation of any governmental authority relative to the
regulation of securities, condition the grant and/or exercise of such Option
upon the Optionee making certain representations to the Company and the
satisfaction of the Company with the correctness of such representations.
13. Approval; Effective Date: The Plan shall become effective
upon the approval by the stockholders of the Company at the Annual Meeting of
Stockholders to be held February 20, 1998 or at any adjournment thereof.
