SCHEDULE 14C
INFORMATION REQUIRED IN INFORMATION STATEMENT
Information Statement
Pursuant to Section 14(c) of the
Securities Exchange Act of 1934
Check the appropriate box:
[x] Preliminary Information Statement
[ ] Confidential, for use of the Commission only
[ ] Definitive Information Statement
Steiner Optics International, 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.
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2) Aggregate number of securities to which transaction applies:
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3) Price per unit or other underlying value of transaction pursuant to
Exchange Act Rule 0-11. (Set forth the amount on which the filing
fee is calculated and state how it was determined.)
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
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4) Date Filed:
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STEINER OPTICS INTERNATIONAL, INC.
Dr. Hans-Frisch-Strasse 9
D-95448 Bayreuth, Germany
INFORMATION STATEMENT
To the Holders of Common Stock:
The purpose of this Information Statement is to notify you that Carl
Steiner, the holder of shares representing a majority of the Common Stock of
Steiner Optics International, Inc. (the "Company"), has given his written
consent to the resolutions adopted by the Board of Directors of the Company
to (1) amend the certificate of incorporation of the Company so as to
(i) effect a reverse split of the Common Stock of the Company in the ratio of
1:1,000, and (ii) authorize the Company to issue additional 850,000 shares of
the Common Stock of the Company and (2) adopt the 2000 Stock and Stock Option
Plan (the "Plan"). The management anticipates that this Information
Statement will be mailed to shareholders of record on May 15, 2000. On or
after June 12, 2000, (i) the Plan will be deemed approved and (ii) the
amendment to the Certificate of Incorporation will be filed with the Delaware
Secretary of State and become effective.
The Delaware Corporation Law permits holders of a majority of the
voting power to take shareholder action by written consent in lieu of a
meeting and a vote thereat. Accordingly, the Company will not hold a meeting
of its shareholders to consider or vote upon the proposed amendment to the
certificate of incorporation of the Company.
WE ARE NOT ASKING YOU FOR A PROXY.
YOU ARE REQUESTED NOT TO SEND US A PROXY.
May 15, 2000 CARL STEINER, President
ROBERT ECKERT, CFO
VOTING SECURITIES
All stockholders of record for purposes of this stockholder action are
determined as of the close of business on May 4, 2000 (the "Record Date"). As
of the Record Date, 150,000,000 shares of common stock of the Company, par
value $0.00001 ("Common Stock"), were authorized and issued. Each share of
Common Stock is entitled to one vote. On the Record Date, there were
149,275,984 shares of Common Stock issued, outstanding and entitled to vote.
PRINCIPAL STOCKHOLDERS
The following table sets forth the equity securities of the Company
beneficially owned (i) by any person who, to the knowledge of the Company,
owned beneficially more than 5% of the voting stock as of May 4, 2000,
(ii) by all directors of the Company, and (iii) by the directors and officers
of the Company as a group. The table also indicates the percentage of the
total voting power represented by such shares. None of the persons identified
below owns any securities of the Company other than the shares of Common Stock
listed below.
Amount and
Nature of Percentage
Beneficial of Voting
Title of Class Beneficial Owner Ownership Power
- -------------------------------------------------------------------
Common Stock, Carl Steiner 104,046,694(a) 69.4%
par value $0.00001 shares of
record
Common Stock, Robert Eckert 0 0%
par value $0.00001 shares of
record
Common Stock, All Directors and 104,046,694(a) 69.4%
par value $0.00001 Officers as a shares of
Group (2 persons) record
(a) Includes 500,000 shares held by Mr. Steiner's son.
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by,
or paid by Steiner Optik GmbH, a German limited liability company and a
wholly-owned subsidiary of the Company, to Messrs. Steiner & Eckert, the
Company's only executive officers, for services rendered in all capacities to
Steiner Optik GmbH during the fiscal years ended December 31, 1997, 1998 and
1999, respectively:
Summary Compensation Table
Name and Position Year Salary Bonus Other(a)
- --------------------------------------------------------------------
Carl Steiner 1997(b) $140,244 $17,249 $16,439
(President & Chief 1998(c) $138,665 $17,055 $16,254
Executive Officer) 1999(d) $132,852 $16,340 $15,573
Robert Eckert 1997(b) $140,244 $23,713 $16,439
(Controller & Chief 1998(c) $138,665 $22,347 $16,254
Financial Officer) 1999(d) $132,852 $31,431 $15,573
(a) Represents premiums paid by Steiner Optik GmbH to fund an annuity for the
benefit of Messrs. Steiner & Eckert. Steiner Optik GmbH purchased an
annuity to fund their pensions effective on their attaining the age of 65
and equal to 50% of their then current compensation from Steiner Optik
GmbH (the "Pension Amount"). The Pension Amount will be payable for the
balance of their respective lives. Upon their death, their widows will be
entitled to receive, for the balance of their respective lives, an amount
equal to 60% of the Pension Amount, and their children will be entitled to
receive an amount equal, in the aggregate, to 40% of the Pension Amount
until they reach the age of 18 or, if they continue to be full-time
students, until they reach the age of 28.
(b) Based upon an average exchange rate of DM 1.7392 per U.S. Dollar during
1997.
(c) Based upon an average exchange rate of DM 1.7590 per U.S. Dollar during
1998.
(d) Based upon an average exchange rate of DM 1.83597 per U.S. Dollar during
1999.
COMPENSATION OF DIRECTORS
The executive officers do not hold any stock options, SAR or other
equity-related incentives and do not participate in any incentive compensation
plan. The members of the Board of Directors do not receive any compensation
for their services qua members of the Board. Commencing January 1, 1998,
however, each director of the Company has received $2,500 per month from the
Company, and the Secretary of the Company has received $500 per month for work
done by them under the agreement dated December 15, 1997, between the Company
and Steiner Optik GmbH. Pursuant to that agreement, the Company undertook to
advertise products manufactured by Steiner Optik GmbH in international markets,
to conduct market surveys, to maintain customer contacts, to procure special
orders and to draft contracts with the customers of Steiner Optik GmbH.
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT OF THE COMMON STOCK
AND TO INCREASE THE AUTHORIZED SHARES
Introduction
The Board has unanimously adopted a resolution (the "Resolution") that
authorized the Board to cause to be filed, subject to shareholders' approval,
an amendment to the Certificate of Incorporation of the Company (the
"Amendment") that would (i) effect a reverse split of Common Stock at the
ratio of 1:1,000 (the "Reverse Split") and (ii) authorize the Company to issue
additional 850,000 shares of Common Stock of the Company. Carl Steiner, the
holder of shares representing a majority of Common Stock, has given his
written consent to the Resolution (the "Consent"). Under Delaware Corporation
Law, the Consent is effective as shareholders' approval. The Amendment will
be filed with the Secretary of State of Delaware on or after June 12, 2000,
and become effective on the date of such filing (the "Effective Date").
Pursuant to the Resolution and the Amendment, each 1,000 shares of
Common Stock outstanding at the Effective Date will be exchanged for one post
Reverse Split share of common stock of the Company ("New Common Stock"). The
Amendment will also effect a reduction in the number of shares of Common Stock
that the Company is authorized to issue from 150,000,000 shares of Common
Stock, $0.00001 par value per share, to 150,000 shares of New Common Stock,
$0.01 par value per share. No fractional shares or scrip will be issued;
rather, stockholders who would otherwise be entitled to a fractional share
as a result of the Reverse Split will receive cash in the amount described
below.
Reasons for Approving the Reverse Stock Split
The Company requires additional financing to fund its plan for
continued growth. The Board has reviewed various alternatives for additional
financing and came to the conclusion that an increase in the per share value
of the Common Stock, which may result from a reduction in the number of
outstanding shares through the Reverse Split, may improve the Company's
prospects for obtaining additional financing by enhancing the marketability
of the Common Stock.
At the present time there is no quoted market for Common Stock. The
Board believes that the Reverse Split is necessary to create a market for
Common Stock. Simply put, "penny stock" has a bad name and an even worse
reputation. Many brokerage firms are reluctant to recommend lower priced stocks
to their clients. The policies and practices of some brokerage houses tend to
discourage individual brokers within those firms from dealing in lower priced
stocks. Additionally, to the detriment of the holders of, and the market for,
Common Stock, the brokerage commission on the purchase or sale of 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. The Board believes that these
issues are best addressed by an increase in inherent value per share of Common
Stock that will occur as a result of the Reverse Split. The Board believes
that, absent the Reverse Split, the Company is not likely to obtain any
additional financing successfully. Accordingly, the Board believes that the
proposed Reverse Split is essential to the Company's prospects for raising
additional financing through the sale of its Common Stock.
The management is not aware of anyone currently making a market in
the shares of Common Stock. The management is not seeking actively either a
market maker or an additional financing at this time. Accordingly, the
management does not anticipate that, immediately following the implementation
of the Reverse Split, there will be a resumption in trading of Common Stock
in the over-the-counter market or elsewhere. Moreover, the management cannot
offer any assurance that, in the event the trading resumes, the market price
of the shares of New Common Stock will be greater, proportionately or
otherwise, than it would have been in the absence of the Reverse Split.
Nevertheless, for the reasons set forth hereinabove, the Board believes that
the implementation of the Reverse Split is advisable at this time.
General Effect of the Reverse Split
The New Common Stock will not be different from the Common Stock,
except that the par value of the New Common Stock will be $.01 per share and
the par value of the existing Common Stock is $.00001 per share. The holders
of 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 Common
Shares at December 31, 1999, is set forth in the table below. The column
labeled "After Reverse Split and Reduction of Common Shares Authorized" does
not reflect any adjustments that may result from the repurchase of fractional
shares. The management cannot calculate at this time the number of fractional
shares that will result from the Reverse Split. The management does not
anticipate that such number will be material.
Prior to After
Reverse Split Reverse Split
and Reduction of and Reduction of
Common Shares Common Shares
Authorized Authorized
- ---------------------------------------------------------------------------
Number of Shares(a)
Common Stock
Authorized ................... 150,000,000 150,000
Issued and outstanding ....... 149,275,984 149,276
Available for issuance ....... 724,016 724
Par value per share .......... $0.00001 $0.01
Exchange of Stock Certificates and Liquidation of Fractional Shares
On the Effective Date the outstanding certificates representing shares
of Common Stock will be automatically converted into certificates representing
shares of New Common Stock. Every stockholder who surrenders a certificate
representing shares of Common Stock to the Company's transfer agent will
receive a certificate representing the appropriate number of shares of New
Common Stock, together with a cash payment in lieu of a fractional share, if
any. The Company's transfer agent is:
Continental Stock Transfer & Trust Company
Two Broadway, 19th Floor
New York, N.Y. 10004
U.S.A.
Telephone: (212) 509-4000
Fax: (212) 616-7619
No scrip or fractional certificates will be issued in connection with
the Reverse Split. Rather, the Company will pay cash in lieu of any fraction
of a share that any stockholder would otherwise receive. In the absence of
any recent quotation prices per share of Common Stock provided by the National
Quotation Bureau, Inc., Management has determined to pay for such fractional
shares on the basis of the price of $10.00 per share of New Common Stock.
Reasons for Approving the Increase in Authorized Shares
The amendment to the Company's certificate of incorporation will
change the currently authorized 150,000,000 shares of Common Stock into
150,000 shares of New Common Stock. In addition, the amendment will increase
the authorized capital stock by 850,000 shares of New Common Stock. Accordingly,
after the filing of the amendment the authorized capital stock will consist
of 1,000,000 shares of New Common Stock. The management has the following
three (3) reasons to increase the authorized capital stock:
1. In 1993-94 Carl Steiner, the principal shareholder of the Company,
made much needed contributions in the aggregate amount of DM 1,000,000
(roughly $600,000 at then prevailing exchange rate) to the capital of the
Company. (He contributed DM 250,000 on December 31, 1993, and DM 750,000
on December 31, 1994.) The management intended to issue, in consideration
of this contribution, equity securities to Mr. Steiner, but decided to
delay such action until the Company complied with its reporting requirements
under the Securities and Exchange Act of 1934. The Company has recently
complied with such requirements. Accordingly, the management intends to
compensate Mr. Steiner for his contribution to the capital of the Company by
issuing to him 250,000 shares of New Common Stock on or after the Effective
Date.
2. The management needs shares to fund the 2000 Stock and Stock Option
Plan being adopted by the Company. The Plan is described herein below.
3. The management finds it useful to have a reserve of the shares of
Common Stock available for issuance from time to time in connection with
the prospective acquisition of other businesses, to raise additional
capital for the Company or for other corporate purposes that have not yet
been identified.
No Dissenters Rights
Under Delaware law, stockholders are not entitled to dissenters' rights
with respect to the Amendment that will effect the Reverse Split and increase
the authorized capital stock.
ADOPTION OF THE 2000 STOCK AND STOCK OPTION PLAN
To date, neither the Company nor its subsidiary, Steiner Optik GmbH,
has established an incentive plan for the management of the Company. The
Company needs to establish a flexible equity incentive plan that would offer
tax-advantaged equity incentives to the Company's management and employees.
Accordingly, the Board of Directors has approved, and Mr. Steiner has
consented to the adoption of, the 2000 Stock and Stock Option Plan (the
"Plan"). The Board of Directors intends to use the Plan in order to persuade
qualified individuals to become employees of the Company, to give employees
of the Company another incentive to contribute to its growth, and to reward
the management for past services.
Summary of the 2000 Stock and Stock Option Plan
STOCK OPTIONS. The Plan provides for grants of stock options
thereunder. The Board of Directors will determine the number of shares subject
to options and all other terms and conditions of the options. No option will
have a term of more than 10 years. The Board of Directors will provide a
vesting schedule for each option. No option will be transferable, except
by will or the laws of inheritance.
Some of these options may qualify under Section 422 of the Internal
Revenue Code of 1986 (the "Code"), and others may not. Stock options designed
to qualify thereunder are referred to hereinafter as incentive stock options.
All other stock options are referred to hereinafter as non-qualified stock
options. The essential differences between incentive stock options and non-
qualified stock options, as well as the differences in tax treatment under
the Code are described below.
For as long as the exercise price of a stock option is fair to the
Company, the Board of Directors may put any price on the exercise of a stock
option. In order to qualify under Section 422 of the Code, however, the
exercise price of an incentive stock option may not be less than (i) 110% of
the fair market value of a share of New Common Stock on the date the stock
option is granted to a shareholder who owns 10% or more of the voting power
in the Company, and (ii) 100% of the fair market value of a share of New
Common Stock on the date the stock option is granted to anyone else.
All options granted under the Plan shall expire not later than ten
(10) years from the date of the grant. Every incentive stock option granted
to a shareholder who owns 10% or more of the voting power in the Company, will
expire not later than five (5) years after the grant.
Grants of incentive stock options are limited in that the aggregate
exercise price of all stock options, incentive and otherwise, vesting in one
employee in any single calendar year may not exceed $100,000. There is no
limit on vesting of non-qualified stock options.
RESTRICTED STOCK. The Board of Directors may grant restricted stock
under the Plan. Each share of restricted stock will be subject to such terms,
conditions, restrictions, and/or limitations, if any, as the Board of Directors
deems appropriate. Such restrictions may include, by way of example, but not
limitation, restrictions on transferability of the shares and continued
employment of the grantee. In order to qualify a grant of restricted stock
under Section 162(m) of the Code, the Board of Directors may condition vesting
of the grant on the attainment of specific performance goals, using the same
criteria as described below for performance shares.
PERFORMANCE SHARES. The Board of Directors may also award "performance
shares" under the Plan. Such incentive awards are contingent and may be
converted into shares of Common Stock only if specific performance goals are
achieved over a period of not less than one year. If the performance goals are
not achieved, the awards are forfeited or reduced. A performance share is
equivalent in value to a share of Common Stock. Unless limited by the Board
of Directors, participants in the Plan may receive dividend equivalents on
performance shares.
ELIGIBILITY FOR PARTICIPATION. All employees of the Company, non-
employee directors of the Company, and consultants performing services for
the Company (other than services in connection with raising capital or
promoting the stock of the Company) are eligible to participate in the Plan.
The Board of Directors will have sole discretion as to the selection of
persons eligible to participate in the Plan.
AVAILABLE SHARES. The Board of Directors shall have the authority to
make awards under the Plan, over a ten year period, providing for the
issuance, in the aggregate, of up to three hundred thousand (300,000) shares
of Common Stock. After the tenth anniversary of the Effective Date, no award
may be made.
AWARDS TO DATE. To date, the Board of Directors has made no award
under the Plan. The Board of Directors intends to reward Carl Steiner and
Robert Eckert, the President of the Company and its Chief Financial Officer,
respectively, for their unceasing efforts on behalf of the Company over the
past ten (10) years by awarding to each of them a stock option that would
entitle the holder thereof, upon exercise, to purchase 25,000 shares of New
Common Stock. To date, the Board has made no determination as to the timing
of such award. Nor has the Board determined the exercise price per share.
Lastly, the Company intends to award to each of them annually 7,500 shares
of New Common Stock or an option to purchase, upon exercise, as many shares
of New Common Stock, or a combination thereof, as incentive compensation paid
to retain their services. The Board of Directors intends to grant the
following stock options to the officers of the Company under the Plan during
the next ten (10) years:
Name and Position Options to Be Granted
------------------------------------------------------
Carl Steiner, President 100,000 shares
Robert Eckert, CFO 100,000 shares
All officers as a group 200,000 shares
FEDERAL INCOME TAX MATTERS RELATING TO STOCK OPTIONS. The Company
believes that the following is an accurate summary of the principal U.S.
Federal income tax consequences, under present law, of the issuance and
exercise of stock options granted under the Plan. This summary is not intended
to be exhaustive. Among other things, this summary does not describe state or
local tax consequences.
A participant will not be deemed to have received any income subject
to tax at the time an incentive stock option or, under certain circumstances,
a non-qualified stock option is granted. Nor will the Company be entitled to
a tax deduction at that time.
When a non-qualified stock option is exercised, the participant will
be deemed to have received an amount of ordinary income equal to the excess
of the fair market value of the shares of Common Stock purchased over the
exercise price. The Company will be allowed a tax deduction in the year the
shares are valued in an amount equal to the ordinary income that the
participant is deemed to have received.
If an incentive stock option is exercised by a participant who is
employed by the Company at the time of exercise or has been employed by the
Company within three months prior to exercise, the participant will not be
deemed to have received any income subject to tax at such time, although the
excess of the fair market value of the Common Stock so acquired on the date
of exercise over the exercise price will be an item of tax preference for
purposes of the alternative minimum tax.
The participant who exercises an incentive stock option and holds
his shares of Common Stock for at least (i) one year after the exercise date
and (ii) two years after the date of the grant will realize a long-term
capital gain or loss, in the amount of the difference between the exercise
price and the sales price, upon the subsequent sale of such shares.
A "disqualifying disposition" of an incentive stock option will result
whenever the shares of Common Stock acquired upon the exercise of an incentive
stock option are not held for at least one year. At that time the participant
will be deemed to have received an amount of ordinary income equal to the
lesser of (a) the excess of the fair market value of the shares of Common
Stock on the date of exercise over the exercise price, or (b) the excess of
the amount realized on the disposition of the shares of Common Stock over
the exercise price.
If the amount realized on the "disqualifying disposition" of the shares
of Common Stock exceeds the fair market value on the date of exercise, the
gain on the excess of the ordinary income portion will be treated as capital
gain. Any loss on the disposition of the shares of Common Stock acquired
through the exercise of incentive stock options is capital loss.
In the event of a "disqualifying disposition," the Company will be
entitled to a tax deduction equal to the amount of ordinary income recognized
by the participant. In the absence of a "disqualifying disposition," no income
tax deduction will be allowed to the Company with respect to the shares of
Common Stock purchased by the participant through the exercise of an Incentive
Stock Option.
* * * *
STEINER OPTICS INTERNATIONAL, INC.
2000 Stock and Stock Option Plan
ARTICLE 1. ESTABLISHMENT AND PURPOSE
1.1 Establishment of the Plan. Steiner Optics International, Inc.,
a Delaware corporation (the "Company"), does hereby establish an incentive
compensation plan described hereinbelow (the "Plan").
1.2 Purpose of the Plan. The purpose of the Plan is to offer tax-
advantaged equity incentives to the Company's management and employees and
thereby to persuade qualified individuals to become employees of the Company,
to link the personal interests of the Company's employees to those of the
Company's shareholders and to promote the success and enhance the value of
the Company by giving the Company' employees another incentive to contribute
to its growth, as well as to reward the management for past services.
1.3 Effective Date of the Plan. The Plan shall become effective on
or after June 12, 2000.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meanings set
forth below:
(a) "Award" means, individually or collectively, a grant under this
Plan of non-qualified stock options, incentive stock options, restricted
stock, or performance shares.
(b) "Award Agreement" means an agreement between the Company and an
employee participating in the Plan, setting forth the terms and provisions
applicable to Awards granted to such employee thereunder.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Consultant" means a natural person under contract with the
Company to provide bona fide services to the Company which are not in
connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market
for the Company's securities.
(f) "Director" means any individual who is a member of the Board.
(g) "Disability" means inability of an employee participating in the
Plan to perform his or her normal employment functions due to any medically
determinable physical or mental disability that can last or has lasted 12
months, or is expected to result in death.
(h) "Eligible Person" means Director, Consultant or Employee (as
defined below).
(i) "Employee" means any officer or employee of the Company; provided,
however, that, for purposes of the Plan, Directors who are not otherwise
employed by the Company shall not be considered Employees.
(j) "Employment" means the condition of being an Employee, Director
or Consultant, as the case may be, of the Company. A change in status within
the categories of Eligible Persons shall not be deemed a termination of
Employment.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor thereto.
(l) "Exercise Price" means the price at which a Share of the Company's
common stock may be purchased by an employee participating in the Plan
pursuant to an Option (as defined below).
(m) "Fair Market Value" means (i) the closing price of the Shares (as
defined below) reported on the principal market for the Shares on the relevant
date (or, if there were no sales on such date, on the next preceding trading
date); (ii) when a public market is quoted without closing prices, the mean
of the closing high bid and low ask on the relevant date (as reported on the
principal market for the Shares); or (iii) when there is no public market for
the Shares, the value determined from time to time by the Board.
(n) "Incentive stock option" means an option to purchase Shares from
the Company, granted under this Plan and designed to qualify under Section
422 of the Code.
(o) "Insider" shall mean an Eligible Person who is, on the relevant
date, an officer, director, or ten percent (10%) beneficial owner of the
Company within the meaning of Section 16 of the Exchange Act.
(p) "Non-qualified stock option" means any option, other than incentive
stock option, to purchase Shares from the Company, granted under this Plan.
(q) "Option" shall mean any option to purchase Shares from the Company,
granted under this Plan.
(r) "Participant" means a person who holds an outstanding Award
granted under the Plan.
(s) "Performance Share" shall mean an Award granted to an Eligible
Person pursuant to Article 8 hereof.
(t) "Plan" means this 2000 Stock and Stock Option Plan.
(u) "Restricted Stock" means an Award of Stock granted to an Eligible
Person pursuant to Article 7 hereof.
(v) "Restriction Period" means the period during which Shares of
Restricted Stock are subject to restrictions or conditions under Article 7
hereof.
(w) "Shares" or "Stock" means the shares of common stock of the Company.
ARTICLE 3. ADMINISTRATION
3.1 Authority of the Board. The Board shall administer the Plan and
all Awards hereunder and shall have full power, except as limited by law and
subject to the provisions hereof, to select the recipients of Awards, to
determine the size and types of Awards, to determine the terms and conditions
of such Awards in a manner consistent with the Plan, to construe and
interpret the Plan and any agreement or instrument entered into thereunder,
to establish, amend, or waive rules and regulations for the Plan's
administration; and (subject to the provisions of Article 10 hereof) to amend
the terms and conditions of any outstanding Award to the extent such terms
and conditions are within the discretion of the Board as provided in the Plan.
Further, the Board shall make all other determinations necessary or advisable
for the administration of the Plan.
No Award may be made under the Plan after the tenth anniversary
thereof.
All determinations and decisions made by the Board pursuant to the
provisions of the Plan and all related orders or resolutions of the Board
shall be final, conclusive, and binding on all persons, including the Company,
its shareholders, Eligible Persons, Participants, and their estates and
beneficiaries.
Subject to the terms hereof, the Board is authorized, and shall not
be limited in its discretion, to use any of the performance criteria set forth
in Section 8.3(a) hereof in its determination of Awards under this Plan.
ARTICLE 4. SHARES SUBJECT TO THE PLAN
4.1 Number of Shares. Subject to adjustment as provided in Section
4.2 hereof, the number of Shares available for grant under the Plan shall not
exceed three hundred thousand (300,000) Shares. The Shares granted under this
Plan may be either authorized but unissued or reacquired Shares.
Without limiting the discretion of the Board under this section,
unless otherwise provided by the Board, the following rules will apply for
purposes of the determination of the number of Shares available for grant
under the Plan or compliance with the foregoing limits:
(a) The grant of an Option or a Restricted Stock Award shall reduce
the Shares available for grant under the Plan by the number of Shares subject
to such Award; provided, however, that Shares previously owned by a Participant
and used by him or her to pay the Exercise Price or any taxes, or withheld to
pay taxes, shall be available for regrant hereunder.
(b) The number of Performance Shares granted hereunder shall be
deducted from the number of Shares available for grant hereunder, except that
the Performance Shares that cannot be, or are not, converted into Shares and
distributed to the Participant (after any applicable tax withholding) following
the end of the Performance Period shall be available for regrant hereunder.
(c) If any Award granted hereunder is canceled, terminates, expires,
or lapses for any reason, Shares subject to such Award shall be available for
regrant of an Award under the Plan.
4.2 Adjustments in Authorized Plan Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation,
Stock dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the Shares, the Board shall adjust (i) the
number and class of Shares that may be delivered hereunder, (ii) the number,
class and/or price of Shares subject to outstanding Awards granted hereunder,
and/or (iii) the number of outstanding Options, Shares of Restricted Stock,
and Performance Shares constituting outstanding Awards, as the Board
determines, in its sole discretion, to be appropriate and equitable to prevent
dilution or enlargement of rights.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 Eligibility. All Eligible Persons are eligible to participate in
this Plan.
5.2 Actual Participation. The Board will have sole discretion, subject to
the provisions thereof, to select recipients of any Awards among Eligible
Persons and to determine the nature and amount of each Award. No Eligible
Person is entitled to receive an Award unless so selected by the Board.
ARTICLE 6. OPTIONS
6.1 Grant of Options. The Board may, subject to the terms and
provisions hereof, grant incentive stock options, non-qualified stock options,
or a combination thereof, to Eligible Persons at any time. The Board shall
determine, in its sole discretion, the number of Shares subject to Options
granted to each Eligible Person and terms and conditions of such grants.
6.2 Form of Issuance. Each Option grant may be issued in the form of
an Award Agreement and/or may be recorded on the books and records of the
Company for the account of the Participant. The Board shall determine whether
to issue an Option in the form of an Award Agreement or otherwise. The terms
and conditions of an Option shall be set forth in the Award Agreement, in the
notice of the issuance of the grant, or in other documents chosen by the Board
to reflect the grant and shall include the Exercise Price, the duration of the
Option, the number of Shares subject to the Option (unless otherwise provided
by the Board, each Option may be exercised to purchase one Share), and any
other provisions determined by the Board, including, without limitation,
whether the Option is intended to be an incentive stock option or a non-
qualified stock option.
6.3 Exercise Price. For as long as the Exercise Price of an Option
is fair to the Company, the Board of Directors may put any Exercise Price on
an Option. In order to qualify under Section 422 of the Code, however, the
exercise price of an incentive stock option may not be less than (i) 110% of
the Fair Market Value of a Share on the date the Option is granted to a
shareholder who owns 10% or more of the voting power in the Company, and
(ii) 100% of the Fair Market Value of a Share on the date the Option is
granted to anyone else.
6.4 Duration of Options. The Board shall determine the duration of
each Option at the time of grant thereof and may extend the duration thereof
in its sole discretion; provided, however, that (i) all Options granted
hereunder shall expire not later than ten (10) years from the date of the
grant and (ii) every incentive stock option granted to a shareholder who owns
10% or more of the voting power in the Company, will expire not later than
five (5) years after the grant.
6.5 Vesting of Options. The Board of Directors will provide a vesting
schedule for each Option. Grants of incentive stock options are limited in
that the aggregate exercise price of all stock options, incentive and
otherwise, vesting in one employee in any single calendar year may not exceed
$100,000. There is no limit on vesting of non-qualified stock options.
6.6 Exercise of Options. Participants shall exercise Options by
delivery of (i) an irrevocable written notice, setting forth the exact number
of Shares subject to such exercise, and (ii) payment of the Exercise Price to
the Secretary of the Company (or, if so provided by the Company, to its
designated agent). A notice delivered via e-mail or telefax shall be deemed
a valid written notice hereunder. If the Option is being exercised by a person
other than the Participant, the Company or its designated agent may require
appropriate documentation authorizing such person to exercise the Option. No
Option may be exercised with respect to a fraction of a Share.
Options granted hereunder shall be exercisable at such times and
be subject to such terms, conditions, restrictions, and/or limitations, if
any, as the Board deems appropriate in each instance; such times, restrictions
and conditions need not be the same for each grant or for each Participant.
6.7 Payment. The Exercise Price shall be paid in full at the time of
exercise. No Shares shall be issued or transferred until full payment
therefor has been received.
Payment may be made:
(a) in cash, or
(b) unless otherwise provided by the Board at any time, and subject
to such additional terms and conditions and/or modifications as the Board or
the Company may impose from time to time, and further subject to suspension
or termination of this provision by the Board or the Company at any time, by:
(i) delivery of Shares owned by the Participant in partial (if in
partial payment, then together with cash) or full payment (if a fractional
Share remains after payment of the Exercise Price in full by previously owned
Shares, then the fractional Share shall be withheld for taxes); provided,
however, that as a condition to paying any part of the Exercise Price in
Stock, at the time of exercise of the Options, the Participant must establish
to the satisfaction of the Company that the Stock tendered to the Company has
been held by the Participant for a minimum of six (6) months preceding the
tender; or
(ii) if the Company has designated a stockbroker to act as the
Company's agent to process exercises of Option, the issuance of an exercise
notice, together with instructions to such stockbroker, irrevocably
instructing the stockbroker: (a) to sell immediately a sufficient portion of
the Shares to pay the Exercise Price of the Options being exercised and the
required tax withholding, and (b) to deliver on the settlement date the
portion of the proceeds of the sale equal to the Exercise Price and tax
withholding to the Company. When the stockbroker sells any Shares on behalf
of a Participant, the stockbroker is acting solely as the agent of the
Participant; the Company disclaims any responsibility for the actions of the
stockbroker in making any such sales. No Stock shall be issued until the
settlement date and until the proceeds (equal to the Option Price and tax
withholding) are paid to the Company.
If payment is made by delivery of Shares, the value of the Shares
delivered shall be equal to the Fair Market Value of the Shares on the day
preceding the date of exercise of the Option.
6.8 Termination of Employment. Unless otherwise provided by the
Board, the following limitations on exercise of Options shall apply upon
termination of Employment:
(a) Termination by Death or Disability. In the event the Employment
of a Participant terminates by reason of death or Disability, all outstanding
Options granted to that Participant shall immediately vest as of the date of
termination of Employment and may be exercised, if at all, on or before the
earlier of (i) expiration date of the Options pursuant to their terms and
(ii) three (3) years from the date of the termination of Employment.
(b) Retirement or Other Termination of Employment. If the Employment
of a Participant terminates for any reason other than the reasons set forth
in paragraph (a) above, all outstanding Options vested as of the effective
date of termination of Employment may be exercised, if at all, on or before
the earlier of (i) expiration date of the Options pursuant to their terms and
(ii) thirty (30) days from the date of the termination of Employment.
Notwithstanding anything to the contrary in paragraph (a) above, in the event
of the death of the Participant after the termination of Employment, his
Options shall be exercised in accordance with this paragraph (b).
(c) Options not Vested at Termination. Except as provided in
paragraph (a) above, all Options held by the Participant that are not vested
on or before the effective date of termination of Employment shall be
immediately forfeited to the Company (and shall once again become available
for grant hereunder).
(d) Notwithstanding the foregoing, the Board may, in its sole
discretion, establish different terms and conditions pertaining to the effect
of termination of Employment, but no such modification shall shorten the terms
of Options issued prior to such modification.
6.9 Restrictions on Exercise and Transfer of Options. Unless
otherwise provided by the Board:
(a) During the Participant's lifetime, the Participant's Options
shall be exercisable only by the Participant or by the Participant's guardian
or legal representative. After the death of the Participant, an Option shall
be exercised only by the holder thereof (including, but not limited to, an
executor or administrator of the Participant's estate) or his guardian or
legal representative.
(b) No Option shall be transferable except: (i) in the case of the
Participant, only upon the Participant's death; and (ii) in the case of any
holder after the Participant's death, only by will or the applicable laws of
inheritance.
ARTICLE 7. RESTRICTED STOCK
7.1 Grant of Restricted Stock. The Board may grant, subject to the
terms and provisions hereof, at any time and from time to time, Shares of
Restricted Stock to Eligible Persons. Each Share of Restricted Stock will be
subject to such terms, conditions, restrictions, and/or limitations, if any,
as the Board deems appropriate. Such restrictions may include, by way of
example, but not limitation, restrictions on transferability of the Shares
and continued Employment of the Participant. In order to qualify a grant of
Restricted Stock under Section 162(m) of the Code, the Board may condition
vesting of the grant on the attainment of specific performance goals, using
the same criteria as described in Article 8 hereof for Performance Shares.
7.2 Form of Issuance of Restricted Stock. Each grant of Shares of
Restricted Stock may be issued in the form of a Restricted Stock Award
Agreement and/or may be recorded on the books and records of the Company for
the account of the Participant. The Board shall determine whether or not to
enter into a Restricted Stock Award Agreement with the recipient of a
Restricted Stock Award. The terms and conditions of a Restricted Stock Award
shall be set forth in the Restricted Stock Award Agreement, in a notice of
the Award to the Participant, on the Stock certificate representing the
Restricted Stock, in the resolution approving the Award, or in such other
manner as the Board shall deem appropriate.
7.3 Transferability. Except as otherwise provided in this Article 7,
the Shares of Restricted Stock granted hereunder may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the end of the
applicable Restriction Period established by the Board. The Restriction Period
may not be less than one year.
7.4 Other Restrictions. The Board shall impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted hereunder as it
may deem advisable including, without limitation, a requirement that
Participants pay a stipulated purchase price for each Share of Restricted
Stock and/or restrictions under applicable federal or state securities laws.
The Board may affix a legend to the certificates representing Restricted
Stock to give appropriate notice of such restrictions.
The Company shall also have the right to retain the certificates
representing Shares of Restricted Stock in the Company's possession until
such time as all conditions and/or restrictions applicable to such Shares
have been satisfied.
7.5 Removal of Restrictions. Except as otherwise provided in this
Article 7, Shares of Restricted Stock subject to each grant made hereunder
shall become freely transferable by the Participant after the last day of the
Restriction Period and completion of all conditions to vesting, if any. The
Board may, however, in its sole discretion, immediately waive all or part of
the restrictions and conditions with regard to all or part of the Shares held
by any Participant at any time.
7.6 Voting Rights, Dividends and Other Distributions. During the
Restriction Period, Participants holding Shares of Restricted Stock granted
hereunder may exercise full voting rights and shall receive all regular cash
dividends paid with respect to such Shares. The Board may, in its sole
discretion, subject other cash dividends and other distributions paid to
Participants with respect to Shares of Restricted Stock to the same
restrictions and conditions as the Shares of Restricted Stock with respect
to which they were paid; provided, however, that if any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions and conditions as the Shares of Restricted Stock with respect
to which they were paid.
7.7 Termination of Employment Due to Death or Disability. In the
event the Employment of a Participant terminates by reason of death or
Disability, all Restriction Periods and all restrictions imposed on
outstanding Shares of Restricted Stock held by the Participant shall
immediately lapse and the Restricted Stock shall immediately become fully
vested as of the date of termination of Employment, unless otherwise provided
by the Board prior to or at the time of the Award.
7.8 Termination of Employment for Other Reasons. If the Employment
of a Participant terminates for any reason other than those set forth in
Section 7.7 hereof, all Shares of Restricted Stock held by the Participant
that are not vested as of the effective date of termination of Employment
shall be immediately forfeited and returned to the Company.
ARTICLE 8. PERFORMANCE SHARES
8.1 Grants of Performance Shares. The Board may grant, subject to
the terms hereof, Performance Shares to Eligible Persons at any time and from
time to time. A Performance Share is equivalent in value to a Share. Awards
of Performance Shares are contingent; they may be converted into shares of
Common Stock only if specific performance goals set forth in paragraph 8.3
hereof are achieved over a period of not less than one year. The Board shall
determine, in its sole discretion, the number of Performance Shares awarded
to each Participant.
8.2 Performance Period. The Performance Period for Performance Shares
is the period over which the Performance Goals are measured. The Board shall
set the Performance Period for each Award; provided, however, that an Award
may not have a Performance Period of less than one year.
8.3 Performance Goals. For each Award of Performance Shares, the Board
shall establish performance objectives ("Performance Goals") for the Company,
based on the Performance Criteria and other factors set forth below.
Performance Goals shall include payout tables, formulas or other standards
to be used in determining the extent to which the Performance Goals are met,
and, if met, the number of Performance Shares distributed to Participants in
accordance with Section 8.5 hereof. All Performance Shares that may not be
converted under the Performance Goals or for any other reason after the end
of the Performance Period, or are reduced by the Board under Section 8.5
hereof, shall be canceled at the time they would otherwise be distributable.
When the Board designs an Award to qualify under Section 162(m) of the Code,
the Board shall establish the Performance Goals for the respective Performance
Shares prior to, or within 90 days of, the beginning of the service relating
to such Performance Goal, and not later than after 25% of such period of
service has elapsed. For all other Awards, the Performance Goals must be
established before the end of the respective Performance Period.
(a) The Board may use, in its sole discretion, the following
Performance Criteria or any combination thereof:
(1) FINANCIAL PERFORMANCE OF THE COMPANY. Such financial performance may be
based on net income generated, reduced debt-to-equity ratio, increased working
capital, higher profits and/or value added (e.g., after-tax cash operating
profit less depreciation less capital charges).
(2) OPERATING PERFORMANCE OF THE COMPANY. Such operating performance may be
measured in terms of sales, costs, the market share of a product, returns on
net assets, returns on assets, returns on capital, profit margins, and/or
operating revenues, expenses or earnings.
(3) PERFORMANCE OF COMMON STOCK. Such performance may be measured in terms
of price, return on stockholders' equity, total stockholders' return (e.g.,
stock price appreciation plus dividends, assuming the reinvestment of
dividends), and/or earnings per share.
(b) In its determination of whether, or the extent to which,
Performance Goals are met, the Board shall, except to the extent it may
otherwise provide, disregard the following events, if they occur during a
Performance Period and directly affect such determination:
- changes in accounting principles;
- extraordinary items;
- changes in tax laws affecting net income and/or value added;
- natural disasters, including floods, hurricanes, and earthquakes; and
- intentionally inflicted damage to the property of the Company.
The Board shall make no such adjustment to the extent such adjustment would
cause the Performance Shares to fail to satisfy the performance-based
exemption of Section 162(m) of the Code.
8.4 Dividend Equivalents on Performance Shares. Unless limited by
the Board, Participants may receive, for each Performance Share awarded to
the Participant, a cash payment in an amount equal to the dividend payable on
one Share on the record date for the dividend and not converted, distributed
or canceled.
8.5 Form and Timing of Payment of Performance Shares. As soon as
practicable after the applicable Performance Period has ended and all other
conditions (other than actions of the Board) to the conversion and
distribution of a Performance Share Award have been satisfied (or, if
applicable, at such other time determined by the Board at or before the
establishment of the Performance Goals for such Performance Period), the
Board shall determine whether, and the extent to which, the Performance Goals
were met for the applicable Performance Shares. If Performance Goals have been
met, then the number of Performance Shares to be converted into Stock and
distributed to the Participants shall be determined in accordance with the
Performance Goals for such Awards, subject to any limits imposed by the Board.
Performance Shares shall be converted as soon as reasonably administratively
possible following the determination of the number of Shares to which the
Participant is entitled. At any time prior to the distribution of the
Performance Shares, the Board shall, unless it provides otherwise, have the
authority to reduce or eliminate the number of Performance Shares to be
converted.
8.6 Termination of Employment Due to Death or Disability. If the
Employment of a Participant terminates by reason of death or Disability, the
Participant shall receive, unless the Board provides otherwise prior to or
at the time of an Award, a distribution of all outstanding Performance Shares
calculated as if all unfinished Performance Periods had ended with 100% of
the Performance Goals achieved, payable in the year following the date of
termination of Employment.
8.7 Termination of Employment for Other Reasons. If the Employment of
a Participant terminates for any reason other than those set forth in Section
8.6 above, the number of Performance Shares to be converted and distributed
shall be based upon the achievement of the Performance Goals and in accordance
with all other terms of the Award and the Plan; provided, however, that the
Participant may not receive more than a prorated payout of all Performance
Shares, based on the portions of the respective Performance Periods that have
been completed.
8.8 Nontransferability. Performance Shares may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or applicable laws of inheritance.
ARTICLE 9. EMPLOYEE MATTERS
9.1 Employment Not Guaranteed. Nothing in the Plan shall interfere
with, or limit in any way, the right of the Company to terminate any
Participant's Employment at any time; or confer upon any Participant any
right to continue in the employ of the Company.
9.2 Participation. No Eligible Person shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to
be selected to receive a future Award.
9.3 Claims and Appeals. Any claim under the Plan by a Participant or
anyone claiming through a Participant shall be presented to the Board. Any
person whose claim under the Plan has been denied may, within sixty (60) days
after receipt of notice of such denial, submit to the Board a written request
for review of the decision denying the claim. The Board shall determine
conclusively all questions arising in the administration of the Plan for all
parties.
ARTICLE 10. AMENDMENT, MODIFICATION, AND TERMINATION
10.1 Amendment, Modification, and Termination. The Board shall have
the exclusive right to alter, amend or revoke the Plan or any part thereof at
any time and from time to time; provided, however, that the Board may not,
without the approval of the holders of a majority of the voting Shares, make
any alteration or amendment to the Plan, changing the aggregate number of
Shares that may be issued under the Plan, extend the term of the Plan, or
change the Eligible Persons or class of Eligible Persons. The Board may at
any time suspend or terminate the Plan in whole or in part.
10.2 Awards Previously Granted. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.
ARTICLE 11. WITHHOLDING
11.1 Tax Withholding. The Company shall deduct or withhold an amount
sufficient to satisfy federal, state, and local taxes (including the
Participant's employment tax obligations) required by law to be withheld with
respect to any taxable event arising or resulting from this Plan ("Withholding
Taxes").
11.2 Share Withholding. With respect to withholding required upon the
exercise of Options, upon the lapse of restrictions on Restricted Stock, upon
the distribution of Performance Shares in the form of Stock, or upon any other
taxable event hereunder involving the transfer of Stock to a Participant, the
Company shall withhold Stock having a Fair Market Value on the date the tax
is to be determined in an amount equal to the Withholding Taxes on such Stock.
Any fractional Share remaining after the withholding shall be withheld as
additional federal withholding.
Unless otherwise determined by the Board, when the method of payment
for the Exercise Price is from the sale by a stockbroker, pursuant to Section
6.7(b)(ii) hereof, of the Stock acquired through the Option exercise, then the
tax withholding shall be satisfied out of the proceeds. For administrative
purposes in determining the amount of taxes due, the sale price of such Stock
shall be deemed to be the Fair Market Value of the Stock.
Prior to the end of any Performance Period a Participant may elect to
have a greater amount of Stock withheld from the distribution of Performance
Shares to pay withholding taxes; provided, however, that the Board may
prohibit or limit any individual election or all such elections at any time.
11.3 Payment In Lieu of Share Withholding. Whenever the Company is
required to withhold Stock pursuant to Section 11.2 above, the Participant
may, in lieu of all or part of such withholding, remit to the Company an
amount in cash sufficient to satisfy the federal, state and local withholding
tax requirements or may direct the Company to withhold from other amounts
payable to the Participant, including salary.
ARTICLE 12. SUCCESSORS
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether
the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business and/or assets of the Company.
ARTICLE 13. LEGAL CONSTRUCTION
13.1 Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed
and enforced as if the illegal or invalid provision had not been included.
13.2 Requirements of Law. The grant of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
13.3 Securities Law Compliance. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision
of the Plan or action by the Board fails to comply with a condition of Rule
16b-3 or its successors, it shall not apply to the Insiders or transactions
thereby.
13.4 Governing Law. To the extent not preempted by federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with, and
governed by, the laws of the State of Delaware.
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