SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
[Amendment No. ___________]
Filed by the Registrant [X]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
ARXA INTERNATIONAL ENERGY, INC.
(Name of Registrant as Specified in Its Charter)
_______________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
____________________________________________________________________
(2) Aggregate number of securities to which transactions applies:
____________________________________________________________________
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
____________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
____________________________________________________________________
(5) Total fee paid:
____________________________________________________________________
[X] 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.
(1) Amount previously paid:
____________________________________________________________________
(2) Form, Schedule or Registration Statement No.:
____________________________________________________________________
(3) Filing party:
____________________________________________________________________
(4) Date filed:
____________________________________________________________________
ARXA INTERNATIONAL ENERGY, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 31, 1996
To the shareholders of ARXA International Energy, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Arxa
International Energy, Inc. (the "Company") will be held at the Mariott World
Trade Center, 3 World Trade Center, New York, New York 10048, at 3:00 p.m., for
the following purposes:
1. To elect six directors to serve until the next annual meeting of
shareholders of the Company and until their successors have been
duly elected and qualified;
2. To ratify McManus & Co., P.C. as independent auditors of the Company
for the fiscal year ending January 31, 1997;
3. To consider and act upon a proposal to establish a Stock Option
Plan;
4. To consider and act upon a proposal to amend the Certificate of
Incorporation with respect to the Preferred Stock; and
5. The transaction of such other business as may properly come before
the meeting.
Only shareholders of record at the close of business on June 17, 1996, are
entitled to notice of and to vote at the meeting, or any adjournment thereof.
Shareholders unable to attend the Annual Meeting in person are requested
to read the enclosed Proxy Statement and then complete and deposit the Proxy
together with the power of attorney or other authority, if any, under which it
was signed or a notarized certified copy thereof with the Company's transfer
agent, Olde Monmouth Stock Transfer Co., Inc., 22 Claridge Drive, Middletown,
New Jersey 07748, at least 48 hours (excluding Saturdays, Sundays and statutory
holidays) before the time of the Annual Meeting or adjournment thereof or with
the chairman of the Annual Meeting prior to the commencement thereof.
Unregistered shareholders who received the Proxy through an intermediary must
deliver the Proxy in accordance with the instructions given by such
intermediary.
BY ORDER OF THE BOARD OF DIRECTORS
William J. Bippus, President
June 19, 1996
THE PROXY STATEMENT WHICH ACCOMPANIES THIS NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS CONTAINS MATERIAL INFORMATION CONCERNING THE MATTERS TO BE
CONSIDERED AT THE MEETING, AND SHOULD BE READ IN CONJUNCTION WITH THIS NOTICE.
ARXA INTERNATIONAL ENERGY, INC.
1331 LAMAR, SUITE 1375
HOUSTON, TEXAS 77010
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PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
--------------------
INTRODUCTION
This Proxy Statement is being furnished to shareholders in connection with
the solicitation of proxies by the Board of Directors of Arxa International
Energy, Inc. (the "Company") for use at the Annual Meeting of Shareholders (the
"Annual Meeting") to be held at the Mariott World Trade Center, 3 World Trade
Center, New York, New York 10048 and at any adjournments thereof for the purpose
of considering and voting upon the matters set forth in the accompanying Notice
of Annual Meeting of Shareholders (the "Notice"). This Proxy Statement and the
accompanying form of proxy are first being mailed to shareholders on or about
June 19, 1996. All costs of soliciting proxies will be borne by the Company.
The close of business on June 17, 1996, has been fixed as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. As of the record date, there were
6,536,120 shares of the Company's common stock, $.001 par value ("common
stock"), issued and outstanding. The presence, in person or by proxy, of a
majority of the outstanding shares of common stock on the record date is
necessary to constitute a quorum at the Annual Meeting. Each nominee for
director named in Item 1 must receive a plurality of the votes of the shares of
common stock present in person or represented by proxy (and entitled to vote at
the Annual Meeting) in order to be elected. The affirmative vote of the majority
of the shares of common stock present or represented by proxy (and entitled to
vote at the Annual Meeting) is required for the approval of Items 2 through 5
set forth in the accompanying Notice.
All shares represented by properly executed proxies, unless such proxies
have been previously revoked, will be voted at the Annual Meeting in accordance
with the directions set forth on such proxies. If no direction is indicated, the
shares will be voted (i) FOR THE ELECTION OF THE NOMINEES NAMED HEREIN, (ii) FOR
THE APPROVAL OF THE INDEPENDENT PUBLIC ACCOUNTANTS, (iii) TO AMEND THE
CERTIFICATE OF INCORPORATION WITH RESPECT TO THE PREFERRED STOCK, (iv) FOR
APPROVAL OF A STOCK OPTION PLAN, AND (v) FOR ANY OTHER PROPOSAL WHICH SHALL COME
BEFORE THE SHAREHOLDERS DURING THE ANNUAL MEETING. IF THE ENCLOSED PROXY IS
SIGNED AND RETURNED WITH NO SPECIFIED DESIGNATION, IT WILL BE VOTED FOR THE
ABOVE CAPTIONED PROPOSALS.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy (a) by the execution and submission of
a revised proxy, (b) by written notice to the Secretary of the Company or (c) by
voting in person at the Annual Meeting.
ITEM 1
ELECTION OF DIRECTORS
DIRECTOR NOMINEES
The directors are elected annually by the stockholders of the Company. The
Bylaws of the Company provide that the number of directors will be determined by
the Board of Directors, but shall not be less than six. The stockholders will
elect six directors for the coming year, and all the nominees (Messrs.
Schofield, Bippus, Fleschler, Stephens, Brovedani, and Abate) presently serve as
directors of the Company.
Although the Board of Directors of the Company does not contemplate that
any of the nominees will be unable to serve, if such a situation arises prior to
the Annual Meeting, the persons named in the enclosed Proxy will vote for the
election of such person(s) as may be nominated by the Board of Directors.
John O. Schofield (age 52) has served as chairman of the Board of
Directors since August 1995, and has served for over five years as president of
Duke Resources Corporation, Onyx Corp. and Schofield Oil Company. Mr. Schofield
has been active in the exploration and development of oil and gas properties for
more than 22 years. In 1977, Duke Resources Corporation, under the direction of
Mr. Schofield, received the "Wildcatter of the Year" award from the Illinois Oil
and Gas Association, and was again nominated to be a recipient for the same
award in 1991. Mr. Schofield is a certified petroleum engineer and is a member
of the Society of Petroleum Engineers. Mr. Schofield is currently a director of
the Illinois Oil and Gas Association and is a part director of the Independent
Producers Association of America for Indiana.
William J. Bippus (age 42) has served as president, chief executive
officer, and director of the Company since August 1995. Mr. Bippus was employed
by Marathon Petroleum Corporation from 1988 to July 1995. Most recently at
Marathon, Mr. Bippus had responsibilities in the world wide business development
unit evaluating acquisitions and entry opportunities in new areas. From 1992 to
1993, Mr. Bippus was responsible for Marathon's international non-operated
areas. From 1988 to 1992, Mr. Bippus worked for Marathon in Aberdeen, Scotland
and London, England as a senior geophysicist, reservoir development. From 1983
to 1987, Mr. Bippus was as senior geophysicist with Occidental Petroleum Corp.
in London. Mr. Bippus worked in the International Group of Cities Services
Petroleum Corp. from 1979 to 1983. Mr. Bippus holds Bachelor of Science and
Masters degrees in geology and geophysics from the University of Missouri-Rolla,
and is a Wyoming Board Registered Professional Geologist and the Society of
Exploration Geophysicists.
Sammy Fleschler (age 43) has served as secretary, treasurer and director
of the Company since August 1995. Mr. Fleschler has been a certified public
accountant since 1974. From 1974 to 1987, Mr. Fleschler was with Arthur Andersen
& Co., Seidman & Seidman BDO, and KMG Main Hurdman (since merged into KPMG Peat
Marwick). Since 1987, Mr. Fleschler has been a partner in Royall & Fleschler,
Certified Public Accountants, with Richard Royall, the chief financial officer
of the Company.
Gregory Stephens (age 35) has served as director of the Company since
August 1995. Mr. Stephens has been president and owner of Stephens Fabrication,
Inc. for over five years, and is a private investor.
Umberto Brovedani (age 60) has served as a director of the Company since
January 1995. Mr. Brovedani is an international oil and gas expert and has
served as a consultant based in Calgary, Alberta, Canada since 1993. From 1987
to 1993, Mr. Brovedani was general manager of the New Ventures and Exploration
Divisions of Canadian Occidental. During 1991, Mr. Brovedani was vice president
of Canadian Oxy Offshore Petroleum Ltd. Under Mr. Brovedani's leadership,
Canadian Occidental drilled a discovery well in a previously unexplored area of
Yeman. Today, this area is producing 150,000 barrels of oil per day, and is
estimated to contain in excess of 450 million barrels of oil. From 1986 to 1987,
Mr. Brovedani was resident manager of Occidental's Somalia operations. Political
problems forced Mr. Brovedani out of Somalia before his exploration program
could be completed. From 1986 to 1987, Mr. Brovedani was general manager of
CanOxy International Exploration. It was during this period that Mr. Brovedani
initiated the Yemen Permit acquisition. From 1983 to 1986, Mr. Brovedani was
senior exploration geologist, Occidental International Oil Company, London
responsible for North Sea activity. From 1974 to 1983, Mr. Brovedani held
various positions with AGIP SPA in Somalia, Italy, Nigeria, and Canada, and
Alaska. Mr. Brovedani has amassed over 35 years experience in international
exploration. Mr. Brovedani has worked almost every major oil producing basin in
the world. He has worked in many foreign countries, including many with
cultural, political, and economic difficulties. Mr. Brovedani was instrumental
in acquiring the Company's Tunisian interest. Mr. Brovedani is fluent in four
languages including Arabic. Mr. Brovedani is active in many exploration
professional societies and holds a Doctor of Geological Sciences degree from the
University of Milan, Italy.
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Thomas M. Abate (age 58) has served as a director since March 1994. Mr.
Abate is chairman of the board of Mega Holding Corp., the firm which was
instrumental in arranging for the acquisition of ARXA USA, Inc. by the Company
and the revitalization of the Company. Previously, Mr. Abate was a vice
president of Orvis Brothers, a stock brokerage firm which was a member of the
New York Stock Exchange. Mr. Abate has been in the stock brokerage business for
over five years.
BOARD OF DIRECTORS, COMMITTEES AND MEETINGS
The Board of Directors held two meetings during the fiscal year ended
January 31, 1996, and each director of the Company attended at least 75% of all
Board meetings. The Company maintains a Compensation Committee and each member
attended the committee meeting. Messrs. Abate, Bippus and Fleschler presently
serve as members of the Compensation Committee.
The Compensation Committee reviews and approves the remuneration
arrangements for the officers and directors of the Company and reviews and
recommends new executive compensation or stock plans in which the officers
and/or directors are eligible to participate.
DIRECTORS' FEES
Directors were not paid for attendance at Board of Directors meetings
during the fiscal year ending January 31, 1996. The Company does not compensate
any of its directors for their services to the Company, as directors. All
directors are entitled to reimbursement for reasonable travel expenses incurred
in attending such meetings.
REPORTS
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own beneficially more than ten percent of
the common stock of the Company, to file reports of ownership and changes of
ownership with the Securities and Exchange Commission. Copies of all filed
reports are required to be furnished to the Company pursuant to Section 16(a).
Based solely on the reports received by the Company, the Company believes that
the directors, executive officers, and greater than ten percent beneficial
owners complied with all applicable filing requirements during the fiscal year
ended January 31, 1996, except as follows. In August 1995, Sammy Fleschler
purchased 50,000 shares of common stock from William J. Bippus, and Richard R.
Royall purchased 25,000 shares of common stock from each of Messrs. Bippus and
Schofield. These transactions were not timely reported on Form 4 or Form 5. In
August 1995, Thomas M. Abate was issued 14,418 shares of common stock, a five
year warrant to purchase 13,840 shares of common stock at an exercise price of
$2.00 per share, and a five year warrant to purchase 13,840 shares of common
stock at an exercise price of $2.00 per share. These transactions were not
timely reported on Forms 3, 4 or 5. In January 1996, (i) Mr. Fleschler was
issued 144,541 shares of common stock and a five year warrant to purchase 41,703
shares of common stock at an exercise price of $2.00 per share for services
rendered, (ii) Mr. Royall was issued 144,541 shares of common stock and a five
year warrant to purchase 41,703 shares of common stock at an exercise price of
$2.00 per share for services rendered, (iii) Umberto Brovedani was issued
144,541 shares of common stock and a five year warrant to purchase 41,703 shares
of common stock at an exercise price of $2.00 per share for services rendered,
and (iv) Mr. Schofield sold 50,000 shares of common stock. These transactions
were not timely reported on Form 4 or Form 5.
VOTE REQUIRED
Approval of Item 1 requires the affirmative vote of a plurality of the
Company's outstanding shares of common stock present or represented by proxy
(and entitled to vote).
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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE ELECTION OF THE ABOVE DIRECTORS.
ITEM 2
RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors wishes to obtain from the shareholders a
ratification of the Board's action in appointing McManus & Co., P.C., as
independent public accountants of the Company, for the fiscal year ending
January 31, 1997.
The engagement of McManus & Co., P.C. for audit services has been approved
by the Board of Directors.
In the event the appointment of McManus & Co., P.C., as independent
auditors for fiscal year 1997, is not ratified by the shareholders, the adverse
vote will be considered as a direction to the Board of Directors to select other
auditors for the following year. However, because of the difficulty in making
any substitution of auditors so long after the beginning of the current year, it
is contemplated that the appointment for the fiscal year 1997 will be permitted
to stand unless the Board finds other good reason for making a change.
Representatives of McManus & Co., P.C. are expected to be present at the
meeting, will have an opportunity to make a statement if they so desire, and are
expected to be available to respond to appropriate questions.
VOTE REQUIRED
Approval of Item 2 requires the affirmative vote of a majority of the
Company's outstanding shares of common stock present or represented by proxy
(and entitled to vote).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE APPROVAL OF MCMANUS & CO., P.C. AS INDEPENDENT AUDITORS OF THE
COMPANY.
ITEM 3
APPROVAL OF AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION
WITH RESPECT TO THE PREFERRED STOCK
INTRODUCTION
The Company's Board of Directors has approved, and recommends that the
Company's shareholders approve a proposal which provides for an amendment to the
Certificate of Incorporation creating a "blank check" preferred stock.
The present Certificate of Incorporation provides for issuance of
2,000,000 shares of preferred stock. Article Four of the Certificate of
Incorporation requires certain restrictions when the Company issues preferred
stock. These restrictions include: (i) the payment of cumulative preferential
dividends, (ii) restrictions on the payment of dividends for common stock, (iii)
certain redemption provisions, (iv) certain liquidation provisions, and (v)
restrictions on corporate actions while the preferred stock is outstanding. The
Board of Directors proposes to eliminate these restrictions, thereby giving it
more flexibility in the issuance of preferred stock. Specifically, the Board of
Directors believes that the creation of a "blank check" preferred stock will
provide the Company greater flexibility to raise capital. The creation of a
"blank check" preferred stock may prevent a takeover or make a takeover more
difficult through the issuance of additional preferred stock with super-voting
rights or other provisions aimed to preclude or render more difficult a
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takeover attempt. Presently, the Board of Directors has no plans to issue any
additional shares of preferred stock. The Amended Article, as proposed, is
attached hereto as Exhibit A.
VOTE REQUIRED
Approval of Item 3 requires the affirmative vote of a majority of the
Company's outstanding shares of common stock present or represented by proxy
(and entitled to vote).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS
VOTE "FOR" THE ADOPTION OF AN AMENDMENT TO THE CERTIFICATE OF INCORPORATION
WITH RESPECT TO THE PREFERRED STOCK.
ITEM 4
APPROVAL OF A STOCK OPTION PLAN
INTRODUCTION
The Company's Board of Directors has approved, and recommends that the
Company's shareholders approve a proposal which provides for the creation of a
stock option plan (the "Plan"), attached hereto as Exhibit B. The Board of
Directors believes that the Plan will foster and promote the financial success
of the Company and materially increase stockholder value by enabling eligible
key employees and others to participate in the long-term growth and financial
success of the Company.
The Company's Board of Directors adopted and approved the Plan in May
1996, subject to shareholder approval. A total of 1,000,000 shares of Common
Stock are currently reserved for issuance under the Plan. Upon shareholder
approval, the Plan will become effective.
At the Annual Meeting, the stockholders are being requested to approve the
Plan and the reservation for the shares thereunder.
The principal features of the Plan are described below:
GENERAL. The Plan authorizes the Compensation Committee to grant options
and rights to purchase shares of common stock ("Shares"). Options granted under
the Plan may either be "incentive stock options" as defined in Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), or nonqualified
stock options, as determined by the Compensation Committee.
STOCK SUBJECT TO THE STOCK PLAN. Subject to other provisions of the Stock
Plan, the maximum aggregate number of shares of common stock which may be
optioned and sold under the Stock Plan shall be 1,000,000 shares.
ADMINISTRATION. The Plan shall be administered by the Compensation
Committee. The Compensation Committee shall have the authority to: (i) determine
the employees and others to whom the awards shall be granted, (ii) make awards
in such form and amounts as it shall determine, (iii) impose such limitations
and conditions upon such awards as it shall deem appropriate, (iv) interpret the
Plan, prescribe, amend and rescind rules and regulations relating to it, (v)
determine the terms and provisions of the respective participants' agreements
(which need not be identical), and (vi) make such other determinations as it
deems necessary or advisable for the administration of the Plan.
ELIGIBILITY. The Plan provides that options may be granted to employees,
consultants and non-employee directors of the Company and its subsidiaries.
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TERMS AND CONDITIONS OF OPTIONS. Each option is to be evidenced by a stock
option agreement between the Company and the employee, consultant or
non-employee director to whom such option is granted, and is subject to the
following additional terms and conditions.
(a) EXERCISE PRICE. The exercise price of any non-qualified stock option
granted under the Plan shall be such price as the Compensation Committee shall
determine on the date on which such non-qualified stock option is granted;
provided, that such price may not be less than 85% of the fair market value of a
share of common stock on the date the option is granted. The exercise price of
any incentive stock option shall not be less than 100% of the fair market value
of a share of common stock on the date on which such incentive stock option is
granted; provided however, that incentive stock options may not be granted to
any owner of 10% or more of the total combined voting power of the Company and
its subsidiaries unless the exercise price is at least 110% of the fair market
value of a share of common stock on the date the option is granted, and (ii) the
option by its terms is not exercisable after the expiration of five years from
the date such incentive stock option is granted.
(b) TERM OF THE OPTION. Each stock option agreement will specify the term
of the option and the date when the option is to become exercisable. No option
shall be exercisable ten years from the date the option was granted. No
incentive stock option granted to a 10% shareholder shall be exercisable after
the expiration of five years from the date of the grant of said incentive stock
option. Each option shall be subject to earlier termination, expiration or
cancellation as provided under the Plan. No option may be exercised by any
person after the expiration of its term.
(c) TERMINATION OF EMPLOYMENT. (i) If the employment or consulting,
service or similar relationship of a participant with the Company shall
terminate for any reason other than cause, "permanent and total disability"
(within the meaning of Section 22(e)(3) of the Code) or the death of the
participant (a) options granted to such participant, to the extent that they
were exercisable at the time of such termination, shall remain exercisable until
the expiration of one month after such termination, on which date they shall
expire, and (b) options granted to such participant, to the extent that they
were not exercisable at the time of such termination, shall expire at the close
of business on the date of such termination; PROVIDED, HOWEVER, that no option
shall be exercisable after the expiration of its term.
(ii) If the employment or consulting, service or similar relationship of a
participant with the Company shall terminate on account of the "permanent and
total disability" (within the meaning of Section 22(e)(3) of the Code) or the
death of the participant (a) options granted to such participant, to the extent
that they were exercisable at the time of such termination, shall remain
exercisable until the expiration of one year after such termination, on which
date they shall expire, and (b) options granted to such participant, to the
extent that they were not exercisable at the time of such termination, shall
expire at the close of business on the date of such termination; PROVIDED,
HOWEVER, that no option shall be exercisable after the expiration of its term.
(iii) In the event of the termination of a participant's employment or
other relationship for cause, all outstanding options granted to such
participant shall expire at the commencement of business on the date of such
termination.
(d) NONTRANSFERABILITY OF OPTIONS. During the lifetime of a participant,
any option granted to him shall be exercisable only by him or by his guardian or
legal representative. No option shall be assignable or transferable, except by
will, by the laws of descent and distribution, or pursuant to certain domestic
relations orders. The granting of an option shall impose no obligation upon the
holder thereof to exercise such option or right.
(e) VALUE LIMITATION. To the extent that the aggregate fair market value
of common stock subject to incentive stock options exercisable for the first
time by a participant during any calendar year exceeds $100,000, such options
shall be treated as non-qualified stock options.
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ADJUSTMENTS UPON CHANGES IN CAPITALIZATION. The aggregate number or type
of shares of common stock with respect to which options may be granted
hereunder, the number or type of shares of common stock subject to each
outstanding option, and the exercise price per share for each such option may
all be appropriately adjusted, as the Compensation Committee may determine, for
any increase or decrease in the number of shares of issued common stock
resulting from a subdivision or consolidation of shares whether through
reorganization, recapitalization, consolidation, payment of a share dividend, or
other similar increase or decrease.
A. Subject to any required action by the stockholders, if the Company
shall be a party to a transaction involving a sale of substantially
all its assets, a merger, or a consolidation, any option granted
hereunder shall pertain to and apply to the securities to which a
holder of common stock would be entitled to receive as a result of
such transaction; PROVIDED, HOWEVER, that all unexercised options
under the Plan may be cancelled by the Company as of the effective
date of any such transaction by giving notice to the holders of such
options of its intention to do so, and by permitting the exercise of
such options during the 30-day period immediately after the date
such notice is given.
B. In the case of dissolution of the Company, every option outstanding
hereunder shall terminate; PROVIDED, HOWEVER, that each option
holder shall have 30 days' prior written notice of such event,
during which time he shall have a right to exercise his partly or
wholly unexercised options.
C. On the basis of information known to the Company, the Compensation
Committee shall make all determinations under this Section 8,
including whether a transaction involves a sale of substantially all
the Company's assets; and all such determinations shall be
conclusive and binding on the Company and all other persons.
D. Upon the occurrence of a change in control, the Compensation
Committee (as constituted immediately prior to the change in
control) shall determine, in its absolute discretion, whether each
option granted under the Plan and outstanding at such time shall
become fully and immediately exercisable and shall remain
exercisable until its expiration, termination or cancellation
pursuant to the terms of the Plan or whether each such option shall
continue to vest according to its terms.
AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors may at any
time suspend or discontinue the Plan or revise or amend it in any respect
whatsoever, PROVIDED, HOWEVER, that without approval of the holders of a
majority of the outstanding shares of common stock present in person or by proxy
at an annual or special meeting of stockholders, no revision or amendments shall
(i) increase the number of shares of common stock that may be issued under the
Plan, (ii) materially increase the benefits accruing to individuals holding
options granted pursuant to the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan.
VOTE REQUIRED
Approval of Item 4 requires the affirmative vote of a majority of the
Company's outstanding shares of common stock present or represented by proxy
(and entitled to vote).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE
"FOR" THE CREATION OF AN INCENTIVE STOCK OPTION PLAN.
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STOCK OWNERSHIP
The following table and notes thereto set forth certain information
regarding beneficial ownership of the Company's common stock as of June 17,
1996, by (i) each person known by the Company to beneficially own more than five
percent of the Company's common stock, (ii) each of the Company's directors,
(iii) all of the directors and the officers of the Company as a group, and (iv)
each named executive officer.
NAME AND ADDRESS SHARES OF COMMON STOCK PERCENT OF VOTING POWER
- ---------------- ---------------------- -----------------------
John O. Schofield 2,366,250(1) 33.5%
820 York Road,
Evansville, Indiana 47715
William J. Bippus 2,384,438(2) 33.8%
1331 Lamar, Suite 1375
Houston, Texas 77010
Gregory Stephens 700,000(3) 10.5%
411 Pebble Court
Russiaville, Indiana 46979
Sammy Fleschler 336,244(4) 5.0%
1331 Lamar, Suite 1375
Houston, Texas 77010
Umberto Brovedani 226,082(5) 3.4%
1311 Lamar, Suite 1375
Houston, Texas 77010
Robert J. Leslie 50,000(6) *
1311 Lamar, Suite 1375
Houston, Texas 77010
Thomas M. Abate 66,978(7) *
278-A New Drop Lane
Staten Island, New York 10306
All officers and directors 6,466,236(8) 79.1%
as a group (eight persons)
- ------------
* Less than one percent.
1. Includes a warrant for the purchase of 523,125 shares of common stock at a
purchase price of $2.00 per share, which expires in August 2000.
2. Includes a warrant for the purchase of 527,344 shares of common stock at a
purchase price of $2.00 per share, which expires in August 2000.
3. Includes a warrant for the purchase of 150,000 shares of common stock at a
purchase price of $2.00 per share, which expires in August 2000.
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4. Includes a warrant for the purchase of 41,703 shares of common stock at a
purchase price of $2.00 per share which expires in January 2001, and a warrant
for the purchase of 100,000 shares of common stock of the Company at a purchase
price of $2.00 per share which expires in August 2000.
5. Includes a warrant for the purchase of (i) 40,000 shares of common stock at a
purchase price of $2.00 per share which expires in August 2000 and (ii) 41,703
shares of common stock at a purchase price of $2.00 per share which expires in
January 2001.
6. Includes a warrant to purchase 50,000 shares of common stock at a purchase
price of $2.00 per share which expires in August 2000. 7. Includes warrants for
the purchase of 27,680 shares of common stock at a purchase price of $2.00 per
share. 8. Includes warrants to purchase 1,643,258 shares of Company stock.
EXECUTIVE COMPENSATION
The following table sets forth the information with respect to the chief
executive officer. No executive officer received total annual salary and bonus
for the fiscal year ended January 31, 1996, in excess of $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------- ------------------------
NAME AND PRINCIPAL FISCAL OTHER ANNUAL STOCK ALL OTHER
POSITION(1) YEAR SALARY COMPENSATION ISSUANCES OPTIONS COMPENSATION
- ------------------ ------ ------ ------------ --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
William J. Bippus, 1996 $75,000 - - - -
Chief Executive
Officer 1995 - - - - -
1994 - - - - -
</TABLE>
- ------------
(1) Mr. Bippus served as chief executive officer from August 1995. Prior
thereto, the Company was dormant and there was no chief executive officer during
the last three years.
The Company has entered into a five year employment contract with
William J. Bippus, its president and chief executive officer, at an annual
salary of $180,000. In addition, Mr. Bippus has been granted preemptive rights
to acquire any securities which may be issued by the Company. The employment
agreement may be terminated for cause.
OFFICERS AND KEY EMPLOYEES
NAME AGE OFFICE
---- --- ------
William J. Bippus 42 President and Chief Executive Officer of the
Company
Richard R. Royall 50 Chief Financial Officer of the Company
Sammy Fleschler 43 Secretary and Treasurer
Richard R. Royall has served as chief financial officer of the Company
since August 1995. Mr. Royall has been a certified public accountant since 1971.
From 1971 to 1985, Mr. Royall was with Haskins & Sells, Laventhol & Horwath, and
Bracken, Krutilek & Royall. In 1986, Mr. Royall practiced accounting as a sole
practitioner. Since 1987, Mr. Royall has been a partner in Royall & Fleschler,
certified public accountants, with Sammy Fleschler, a director, secretary and
treasurer of the Company. In addition to the foregoing, since 1978, Mr. Royall
has been actively involved in various aspects of oil and gas exploration in
privately held companies and trusts.
Messrs. Bippus' and Fleschler's biographies are set forth in Item 1,
Election of Directors.
- 9 -
CERTAIN TRANSACTIONS
In August 1995, the Company (then named Major League Enterprises, Inc.)
and the stockholders of ARXA USA, Inc. ("ARXA") executed a stock exchange
agreement whereby holders of all of the issued and outstanding shares of the
capital stock in ARXA exchanged such securities for 5,500,000 shares of the
common stock of the Company and five-year warrants for the purchase of 1,500,000
shares of the common stock of the Company for a purchase price of $2 per share
("Warrants"). The stockholders of ARXA included all of the directors of the
Company, except Thomas M. Abate and Sammy Fleschler. Pursuant to the terms of
the exchange, the following transactions occurred. Messrs. Bippus and Schofield
each received 2,062,500 shares of common stock of the Company for nominal
consideration, and Warrants to purchase 562,000 shares of common stock of the
Company for services rendered in connection with the exchange. Mr. Abate
received a fee of $71,000. Mr. Abate and his affiliate, Mega Holding Corp., each
received Warrants for the purchase of 13,840 shares of common stock for services
rendered in connection with the exchange. Mr. Royall purchased 25,000 shares of
common stock from each of Messrs. Bippus and Schofield for nominal
consideration, and the Company issued Mr. Royall five-year warrants to purchase
100,000 shares of common stock at a purchase price of $2.00 per share of the
Company for services rendered in connection with the exchange. Mr. Fleschler
purchased 50,000 shares of common stock from Mr. Bippus for nominal
consideration and the Company issued Mr. Fleschler five-year warrants to
purchase 100,000 shares of common stock of the Company at a purchase price of
$2.00 per share for services rendered in connection with the exchange. Mr.
Leslie received Warrants for the purchase of 50,000 shares of the common stock
for services rendered in connection with the exchange. Mr. Brovedani was issued
a Warrant to purchase 40,000 shares of common stock for services rendered.
In January 1996, (i) Mr. Fleschler was issued 144,541 shares of common
stock and a five year warrant to purchase 41,703 shares of common stock at an
exercise price of $2.00 per share for services rendered, (ii) Mr. Royall was
issued 144,703 shares of common stock and a five year warrant to purchase 41,541
shares of common stock at an exercise price of $2.00 per share for services
rendered, and (iii) Mr. Brovedani was issued 144,541 shares of common stock and
a five year warrant to purchase 41,703 shares of common stock at an exercise
price of $2.00 per share for services rendered.
Pursuant to non-competition agreements dated August 1995, by and between
ARXA and Gregory Stephens and Duke Resources Corporation, an affiliate of Mr.
Schofield, each of Mr. Stephens and Duke Resources Corporation agreed that for a
period of two years from the date thereof within the States of Michigan and
North Dakota they shall not lease oil and gas properties or generate oil or gas
prospects. The consideration for such agreements was a promissory note in favor
of Gregory Stephens in the amount of $102,662.94 and a promissory note in favor
of Duke Resources Corporation in the amount of $136,995.49. These promissory
notes were exchanged for 426,943 shares of the class A preferred stock January
1996, which preferred stock has a stated value of $1.00.
In August 1995, Duke Resources Corporation assigned to ARXA certain oil
and gas leases located in Calhoun County, Michigan and Billings County, North
Dakota, in exchange for promissory notes in the amount of $317,876.19 due
January 1996. Moveover, the Company is indebted to Gregory Stephens in the
amount of $56,693.95 due January 1996, as a result of the purchase of an
interest in the oil and gas lease located in Michigan and sold by Duke Resources
Corporation to the Company. To secure the obligations of the Company under these
promissory notes, the Company executed an escrow agreement and assignments of
oil and gas leases covering the oil and gas leases located in Billings County,
North Dakota and Calhoun County, Michigan. In January 1996, these promissory
notes were exchanged for 187,285 shares of the class A preferred stock and
promissory notes in the amount of $158,938 and $28,347, both due in July 1996
and bearing interest at the rate of eight percent per annum.
- 10 -
OTHER MATTERS
Management is not aware of any other matters to be presented for action
at the meeting. However, if any other matter is properly presented, it is the
intention of the persons named in the enclosed form of proxy to vote in
accordance with their best judgment on such matter.
GENERAL
A copy of the Annual Report on Form 10-K filed by the Company with the
Securities and Exchange Commission for its last fiscal year is available without
charge to shareholders upon written request to Mr.
Fleschler, Secretary, 1331 Lamar, Suite 1375, Houston, Texas 77010.
COST OF SOLICITATION
The Company will bear the cost of the solicitation of proxies from its
shareholders. In addition to the use of mail, proxies may be solicited by
directors, officers and regular employees of the Company in person or by
telephone or other means of communication. The directors, officers and employees
of the Company will not be compensated additionally for the solicitation, but
may be reimbursed for out-of-pocket expenses in connection with this
solicitation. Arrangements are also being made with brokerage houses and any
other custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of the Company, and the Company will reimburse
the brokers, custodians, nominees and fiduciaries for the reasonable
out-of-pocket expenses.
SHAREHOLDER PROPOSALS FOR NEXT MEETING
Proposals of shareholders intended to be presented at the next annual
meeting must be received by the Company for inclusion in the Company's proxy
statement and form of proxy relating to that meeting before February 19, 1997.
BY ORDER OF THE BOARD OF DIRECTORS
William J. Bippus, President
Houston, Texas
- 11 -
EXHIBIT A
ARTICLE FOUR
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 102,000,000 shares divided into
2,000,000 shares of preferred stock, par value $1.00 per share (the "Preferred
Stock") and 100,000,000 shares of common stock, par value $0.001 per share (the
"Common Stock"). Shares of such stock may be issued for such consideration and
for such corporate purposes as the board of directors may from time to time
determine.
The following is a statement of the designations and the powers,
preferences and rights and the qualifications, limitations or restrictions, of
the classes of the stock of the corporation.
PREFERRED STOCK
(a) "BLANK CHECK" ISSUANCE. Shares of Preferred Stock of the
Corporation may be issued from time to time in one or more classes or series,
each of which class or series shall have such distinctive designation or title
as shall be determined by the Board of Directors of the Corporation ("Board of
Directors") prior to the issuance of any shares thereof. Each such class or
series of Preferred Stock shall have such voting powers, full or limited, or no
voting powers, and such preferences and relative, participating, optional or
other special rights and such qualifications, limitations or restrictions
thereof, shall be stated in such resolution or resolutions providing for the
issue of such class or series of Preferred Stock as may be adopted from time to
time by the Board of Directors prior to the issuance of any shares thereof
pursuant to the authority hereby expressly vested in it, all in accordance with
the laws of the State of Delaware.
Subject to all of the rights of the Preferred Stock or any series
thereof described in appropriate certificates of designation, the holders of the
Common Stock shall be entitled to receive, when, as, and if declared by the
Board of Directors, out of funds legally available therefore, the dividends
payable in cash, common stock, or otherwise.
COMMON STOCK
(a) DIVIDENDS. Subject to the prior and superior rights of the
Preferred Stock with respect to which any such prior and superior rights are
provided in this Article Four or by
A-1
the board of directors as herein authorized, and on the conditions set forth in
the foregoing part of this Certificate of incorporation pertaining to the
Preferred Stock or in any resolution of the board of directors providing for the
issuance of any particular series of the Preferred Stock, and not otherwise,
such dividends (payable in cash, stock or otherwise) as may be declared and paid
on the Common Stock from time to time out of any funds legally available
therefor.
(b) VOTING RIGHTS. Each holder of Common Stock shall be entitled to one
vote for each share held and, except as otherwise provided herein or by law, the
Common Stock and the Preferred Stock having voting rights shall vote together as
a class. At each election for directors every stockholder entitled to vote at
such election shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be elected and
for whose election he has a right to vote. It is expressly prohibited for any
stockholder to cumulate his votes in any election of directors.
(c) LIQUIDATION OR DISSOLUTION. After payment shall have been made in
full to the holders of the Preferred Stock in the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, the remaining
assets and funds of the Corporation shall be distributed among the holders of
the Common Stock according to their respective shares.
DENIAL OF PREEMPTIVE RIGHTS
No stockholder of this Corporation shall by reason of his holding
shares of any class have any preemptive or preferential right to purchase or
subscribe to any shares of any class of this Corporation now or hereafter to be
authorized or any notes, debentures, bonds, or other securities convertible into
or carrying options or warrants to purchase shares of any class, now or
hereafter to be authorized, whether or not the issuance of any shares, or such
notes, debentures, bonds or other securities would adversely affect dividend or
voting rights of such stockholder, other than such rights, if any, as the board
of directors in its discretion may fix; and the board of directors may issue
shares of any class of this corporation, or any notes, debentures, bonds, or
other securities convertible into or carrying options or warrants to purchase
shares of any class, without offering any such shares of any class, either in
whole or in part, to the existing stockholders of any class.
A-2
EXHIBIT B
ARXA INTERNATIONAL ENERGY, INC.
STOCK OPTION PLAN
1. ADOPTION AND PURPOSE
ARXA International Energy, Inc., a Delaware corporation (the
"Company"), adopted its Stock Option Plan ("Plan") effective _________,
1996. The purpose of the Plan is to foster and promote the financial
success of the Company and materially increase stockholder value by
enabling eligible key employees and others to participate in the
long-term growth and financial success of the Company. The Plan is
intended to provide "incentive stock options" within the meaning of
that term under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), as well as non-qualified stock options. Any
proceeds of cash or property received by the Company for the sale of
ARXA International Energy, Inc. common stock, no par value (the "Common
Stock") pursuant to Options granted under this Plan will be used for
general corporate purposes.
2. ADMINISTRATION
2.1 The Plan shall be administered by a committee (the
"Compensation Committee") appointed by the Board of Directors
of the Company (the "Board") and composed of at least two
Board members. The Compensation Committee shall meet the plan
administration requirements described under Rule 16b-3(c)(2)
promulgated under the Securities Exchange Act of 1934, as
amended ("Exchange Act"), or any similar rule which may
subsequently be in effect. Any vacancy on the Compensation
Committee shall be filled by the Board.
2.2 Subject to the express provisions of the Plan, the
Compensation Committee shall have the sole and complete
authority to (i) determine key employees and others to whom
awards hereunder shall be granted, (ii) make awards in such
form and amounts as it shall determine, (iii) impose such
limitations and conditions upon such awards as it shall deem
appropriate, (iv) interpret the Plan, prescribe, amend and
rescind rules and regulations relating to it, (v) determine
the terms and provisions of the respective participants'
agreements (which need not be identical), and (vi) make such
other determinations as it deems necessary or advisable for
the administration of the Plan. The decisions of the
Compensation Committee on matters within their jurisdiction
under the Plan shall be conclusive and binding on the Company
and all other persons. No members of the Board or the
Compensation Committee shall be liable for any action taken or
determination made in good faith.
2.3 All expenses associated with the Plan shall be paid by the
Company or its Subsidiaries.
3. DEFINITIONS
3.1 "CAUSE" when used in connection with the termination of a
Participant's employment with the Company, shall mean the
termination of the Participant's employment by the Company by
reason of (i) the conviction of the Participant of a crime
involving moral turpitude by a court of competent jurisdiction
as to which no further appeal can be taken; (ii) the proven
commission by the Participant of an act of fraud upon the
Company; (iii) the willful and proven misappropriation of any
funds or property of the Company by the Participant; (iv) the
willful, continued and unreasonable failure by the Participant
to perform duties assigned to him and agreed to by him; (v)
the knowing engagement by the Participant in any direct,
material conflict of interest with the Company without
compliance with the Company's conflict of interest policy, if
any, then in effect; (vi) the knowing engagement by the
Participant, without the written approval of the Board of
Directors of the Company, in any activity which competes with
the business of the Company or which would result in a
material injury to the Company; or (vii) the knowing
engagement in any activity which would constitute a material
violation of the provisions of the Company's insider trading
policy or business ethics policy, if any, then in effect.
3.2 "CHANGE IN CONTROL" shall mean the occurrence of any of the
following events:
(i) any Person becomes, after the effective date of this
Plan, the "beneficial owner" (as defined in Rule
13d-3 promulgated under the Exchange Act), directly
or indirectly, of securities of the Company
representing 30% or more of the combined voting power
of the Company's then outstanding securities, unless
the Board (as constituted immediately prior to such
Change in Control) determines in its sole absolute
discretion that no Change in Control has occurred;
(ii) Individuals who constitute the Board on the effective
date of the Plan cease, for any reason, to constitute
at least a majority of the Board of Directors;
PROVIDED, HOWEVER, that any person becoming a
director subsequent to the effective date of the Plan
who was nominated for election by at least 662/3% of
the Board as constituted on the effective date of the
Plan (other than the nomination of an individual
whose initial assumption of office is in connection
with an actual or threatened election contest
relating to the election of the Board of Directors,
as such terms are used in Rule 14a-11 of Regulation
14A promulgated under the Exchange Act) shall be, for
purposes of this Plan, considered a member of the
Board as constituted on the effective date of the
Plan; or
(iii) the Board of Directors determines in its sole and
absolute discretion that there has been a Change in
Control of the Company.
3.3 "CONSULTANT" shall mean any person who is engaged by the
Company or any parent or Subsidiary of the Company to render
consulting services and is compensated for such consulting
services.
3.4 "CONTINUOUS SERVICE" shall mean the absence of any
interruption or termination of employment with or service to
the Company or any parent or Subsidiary of the Company that
now exists or hereinafter is organized or acquires the Company
for a period of 12 months. Continuous Service shall not be
considered interrupted in the case of sick leave, military
leave or any other leave of absence approved by the Company
provided that such interruption shall not be longer than 90
consecutive days.
3.5 "ELIGIBLE EMPLOYEE" shall mean an Employee that has provided
continuous service to the Company or to any parent or
Subsidiary of the Company that now exists or hereafter is
organized or acquires the Company.
3.6 "EMPLOYEE" shall mean any person employed on an hourly or
salaried basis by the Company or any parent or Subsidiary of
the Company that now exists or hereafter is organized or
acquires the Company.
3.7 The "FAIR MARKET VALUE" of a share of Common Stock on any date
shall be (i) the closing sales price on the immediately
preceding business day of a share of Common Stock as reported
on the principal securities exchange on which shares of Common
Stock are then
- 2 -
listed or admitted to trading or (ii) if not so reported, the
average of the closing bid and asked prices for a share of
Common Stock on the immediately preceding business day as
quoted on the National Association of Securities Dealers
Automated Quotation System ("Nasdaq") or (iii) if not quoted
on Nasdaq, the average of the closing bid and asked prices for
a share of Common Stock as quoted by the National Quotation
Bureau's "Pink Sheets" or the National Association of
Securities Dealers' OTC Bulletin Board System. If the price of
a share of Common Stock shall not be so reported, the Fair
Market Value of a share of Common Stock shall be determined by
the Compensation Committee in its absolute discretion. In no
event shall the Fair Market Value of any share of Common Stock
be less than its par value.
3.8 "INCENTIVE STOCK OPTION" shall mean an Option which is an
"incentive stock option" within the meaning of Section 422 of
the Code and which is identified as an Incentive Stock Option
in the agreement by which it is evidenced.
3.9 "NON-QUALIFIED STOCK OPTION" shall mean an Option which is not
an Incentive Stock Option and which is identified as a
Non-Qualified Stock Option in the agreement by which it is
evidenced.
3.10 "OPTION" shall mean an Option to purchase shares of Common
Stock of the Company granted pursuant to this Plan. Each
Option shall be identified either as an Incentive Stock Option
or a Non-Qualified Stock Option in the agreement by which it
is evidenced.
3.11 "SUBSIDIARY" shall mean a corporation (other than the Company)
in which the Company directly or indirectly controls 50% or
more of the combined voting power of all stock of that
corporation.
4. ELIGIBILITY
The Compensation Committee may grant Options to purchase Common Stock
under this Plan to Eligible Employees of the Company or its
Subsidiaries, as well as to non-employee directors and Consultants.
Employees of the Company, as well as non-employee directors and
Consultants who are granted Options pursuant to this Plan shall be
referred to as "Participants." The Compensation Committee shall
determine, within the provisions of the Plan, those persons to whom,
and the times at which, Options shall be granted. In making such
determinations, the Compensation Committee may take into account the
nature of the services rendered by such person, his or her present and
potential contributions to the Company's success, and such other
factors as the Compensation Committee in its discretion shall deem
relevant. Grants may be made to the same individual on more than one
occasion.
5. GRANTING OF OPTIONS
5.1 POWERS OF THE COMPENSATION COMMITTEE. The Compensation
Committee shall determine, in accordance with the provisions
of the Plan, the duration of each Option, the exercise price
of each Option, the time or times within which (during the
term of the Option) all or portions of each Option may be
exercised, and whether cash, Common Stock, or other property
may be accepted in full or partial payment upon exercise of an
Option.
5.2 NUMBER OF OPTIONS. As soon as practicable after the date an
individual is determined to be eligible under Section 4
hereof, the Compensation Committee may, in its discretion,
grant to such person a number of Options determined by the
Compensation Committee.
- 3 -
6. COMMON STOCK
Each Option granted under the Plan shall be convertible into one share
of Common Stock, unless adjusted in accordance with the provisions of
Section 8 hereof. Options may be granted for a number of shares not to
exceed, in the aggregate, 1,000,000 shares of Common Stock, subject to
adjustment pursuant to Section 8 hereof. For purposes of calculating
the maximum number of shares of Common Stock that may be issued under
the Plan, (i) all the shares issued (including the shares, if any,
withheld for tax withholding requirements) shall be counted when cash
is used as full payment for shares issued upon the exercise of an
Option, and (ii) shares tendered by a Participant as payment for shares
issued upon exercise of an Option shall be available for issuance under
the Plan. Upon the exercise of an Option, the Company may deliver
either authorized but unissued shares, treasury shares, or any
combination thereof. In the event that any Option granted under the
Plan expires unexercised, or is surrendered by a Participant for
cancellation, or is terminated or ceases to be exercisable for any
other reason without having been fully exercised, the Common Stock
subject to such Option shall again become available for new Options to
be granted under the Plan to any eligible person (including the holder
of such former Option) at an exercise price determined in accordance
with Section 7.2 hereof, which price may then be greater or less than
the exercise price of such former Option. No fractional shares of
Common Stock shall be issued, and the Compensation Committee shall
determine the manner in which fractional share value shall be treated.
7. REQUIRED TERMS AND CONDITIONS OF OPTIONS
7.1 AWARD OF OPTIONS. The Compensation Committee may, from time to
time and subject to the provisions of the Plan and such other
terms and conditions as the Compensation Committee may
prescribe, grant to any Participant in the Plan one or more
Incentive Stock Options or Non-Qualified Stock Options to
purchase for cash or shares the number of shares of Common
Stock allotted by the Compensation Committee. However, subject
to the provisions of Sections 7.4 and 7.5, Incentive Stock
Options may be granted only to Eligible Employees. The date an
Option is granted shall mean the date selected by the
Compensation Committee as of which the Compensation Committee
allots a specific number of shares to a Participant pursuant
to the Plan.
7.2 EXERCISE PRICE. The exercise price of any Non-Qualified Stock
Option granted under the Plan shall be such price as the
Compensation Committee shall determine on the date on which
such Non-Qualified Stock Option is granted; provided, that
such price may not be less than 85% of the Fair Market Value
of a share of Common Stock on the date the Option is granted.
Except as provided in Section 7.4 hereof, the exercise price
of any Incentive Stock Option granted under the Plan shall be
not less than 100% of the Fair Market Value of a share of
Common Stock on the date on which such Incentive Stock Option
is granted.
7.3 TERM AND EXERCISE. Each Option shall be exercisable on such
date or dates, during such period and for such number of
shares of Common Stock as shall be determined by the
Compensation Committee on the day on which such Option is
granted and set forth in the agreement evidencing the Option;
PROVIDED, HOWEVER, that (A) no Option shall be exercisable
after the expiration of 10 years from the date such Option was
granted, and (B) no Incentive Stock Option granted to a 10%
shareholder as set forth in Section 7.4 hereof shall be
exercisable after the expiration of five years from the date
such Incentive Stock Option was granted, and, PROVIDED,
FURTHER, that each Option shall be subject to earlier
termination, expiration or cancellation as provided in the
Plan. Each Option shall be exercisable in whole or in part
with respect to whole shares of Common Stock. The partial
exercise of an Option shall not cause the expiration,
termination or cancellation of the remaining portion thereof.
- 4 -
On the partial exercise of an Option, the agreement evidencing
such Option shall be returned to the Participant exercising
such Option together with the delivery of the certificates
described in Section 7.7 hereof.
7.4 TEN PERCENT SHAREHOLDER. Notwithstanding anything to the
contrary in this Plan, Incentive Stock Options may not be
granted to any owner of 10% or more of the total combined
voting power of the Company and its Subsidiaries unless (i)
the exercise price is at least 110% of the Fair Market Value
of a share of Common Stock on the date the Option is granted,
and (ii) the Option by its terms is not exercisable after the
expiration of five years from the date such Incentive Stock
Option is granted.
7.5 MAXIMUM AMOUNT OF OPTION GRANT. To the extent that the
aggregate Fair Market Value (determined on the date the Option
is granted) of Common Stock subject to Incentive Stock Options
exercisable for the first time by a Participant during any
calendar year exceeds $100,000, such Options shall be treated
as Non-Qualified Stock Options.
7.6 METHOD OF EXERCISE. An Option shall be exercised by delivering
notice to the Company's principal office, to the attention of
its Secretary, no fewer than five business days in advance of
the effective date of the proposed exercise. Such notice shall
be accompanied by the agreement evidencing the Option, shall
specify the number of shares of Common Stock with respect to
which the Option is being exercised and the effective date of
the proposed exercise, and shall be signed by the Participant.
The Participant may withdraw such notice at any time prior to
the close of business on the business day immediately
preceding the effective date of the proposed exercise, in
which case such agreement shall be returned to the
Participant. Payment for shares of Common Stock purchased upon
the exercise of an Option shall be made on the effective date
of such exercise either (i) in cash, by certified check, bank
cashier's check or wire transfer or (ii) subject to the
approval of the Compensation Committee, in shares of Common
Stock owned by the Participant and valued at their Fair Market
Value on the effective date of such exercise, or partly in
shares of Common Stock with the balance in cash, by certified
check, bank cashier's check or wire transfer. Any payment in
shares of Common Stock shall be effected by the delivery of
such shares to the Secretary of the Company, duly endorsed in
blank or accompanied by stock powers duly executed in blank,
together with any other documents and evidences as the
Secretary of the Company shall require from time to time.
7.7 DELIVERY OF STOCK CERTIFICATES. Certificates for shares of
Common Stock purchased on the exercise of an Option shall be
issued in the name of the Participant and delivered to the
Participant as soon as practicable following the effective
date on which the Option is exercised; PROVIDED, HOWEVER, that
such delivery shall be effected for all purposes when the
stock transfer agent of the Company shall have deposited such
certificates in the United States mail, addressed to the
Participant.
8. ADJUSTMENTS
8.1 The aggregate number or type of shares of Common Stock with
respect to which Options may be granted hereunder, the number
or type of shares of Common Stock subject to each outstanding
Option, and the exercise price per share for each such Option
may all be appropriately adjusted, as the Compensation
Committee may determine, for any increase or decrease in the
number of shares of issued Common Stock resulting from a
subdivision or consolidation of shares whether through
reorganization, recapitalization, consolidation, payment of a
share dividend, or other similar increase or decrease.
- 5 -
8.2 Subject to any required action by the stockholders, if the
Company shall be a party to a transaction involving a sale of
substantially all its assets, a merger, or a consolidation,
any Option granted hereunder shall pertain to and apply to the
securities to which a holder of Common Stock would be entitled
to receive as a result of such transaction; PROVIDED, HOWEVER,
that all unexercised Options under the Plan may be cancelled
by the Company as of the effective date of any such
transaction by giving notice to the holders of such Options of
its intention to do so, and by permitting the exercise of such
Options during the 30-day period immediately after the date
such notice is given.
8.3 In the case of dissolution of the Company, every Option
outstanding hereunder shall terminate; PROVIDED, HOWEVER, that
each Option holder shall have 30 days' prior written notice of
such event, during which time he shall have a right to
exercise his partly or wholly unexercised Options.
8.4 On the basis of information known to the Company, the
Compensation Committee shall make all determinations under
this Section 8, including whether a transaction involves a
sale of substantially all the Company's assets; and all such
determinations shall be conclusive and binding on the Company
and all other persons.
8.5 Upon the occurrence of a Change in Control, the Compensation
Committee (as constituted immediately prior to the Change in
Control) shall determine, in its absolute discretion, whether
each Option granted under the Plan and outstanding at such
time shall become fully and immediately exercisable and shall
remain exercisable until its expiration, termination or
cancellation pursuant to the terms of the Plan or whether each
such Option shall continue to vest according to its terms.
9. OPTION AGREEMENTS
Each award of Options shall be evidenced by a written agreement,
executed by the Participant and the Company, which shall contain such
restrictions, terms and conditions as the Compensation Committee may
require in accordance with the provisions of this Plan. Option
agreements need not be identical. The certificates evidencing the
shares of Common Stock acquired upon exercise of an Option may bear a
legend referring to the terms and conditions contained in the
respective Option agreement and the Plan, and the Company may place a
stop transfer order with its transfer agent against the transfer of
such shares. If requested to do so by the Compensation Committee at the
time of exercise of an Option, each Participant shall execute a
certificate indicating that he is purchasing the Common Stock under
such Option for investment and not with any present intention to sell
the same.
10. LEGAL AND OTHER REQUIREMENTS
10.1 The Company shall be under no obligation to effect the
registration pursuant to the Securities Act of 1933, as
amended, of any shares of Common Stock to be issued hereunder
or to effect similar compliance under any state laws.
Notwithstanding anything herein to the contrary, the Company
shall not be obligated to cause to be issued or delivered any
certificates evidencing shares of Common Stock pursuant to the
Plan unless and until the Company is advised by its counsel
that the issuance and delivery of such certificates is in
compliance with all applicable laws, regulations of
governmental authority and the requirements of any securities
exchange on which shares of Common Stock are traded. The
Compensation Committee may require, as a condition of the
issuance and delivery of certificates evidencing shares of
Common Stock pursuant to the terms hereof, that the recipient
of such shares make such covenants, agreements and
representations, and that such
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certificates bear such legends, as the Compensation Committee,
in its sole discretion, deems necessary or desirable. The
exercise of any Option granted hereunder shall only be
effective at such time as counsel to the Company shall have
determined that the issuance and delivery of shares of Common
Stock pursuant to such exercise is in compliance with all
applicable laws, regulations of governmental authorities and
the requirements of any securities exchange on which shares of
Common Stock are traded. The Company may, in its sole
discretion, defer the effectiveness of any exercise of an
Option granted hereunder in order to allow the issuance of
shares of Common Stock pursuant thereto to be made pursuant to
registration or an exemption from registration or other
methods for compliance available under federal or state
securities laws. The Company shall inform the Participant in
writing of its decision to defer the effectiveness of the
exercise of an Option granted hereunder. During the period
that the effectiveness of the exercise of an Option has been
deferred, the Participant may, by written notice, withdraw
such exercise and obtain the refund of any amount paid with
respect thereto.
10.2 With respect to persons subject to Section 16 of the
Securities Exchange Act of 1934, as amended ("Exchange Act"),
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 provisions of the Plan or
action by the Compensation Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law
and deemed advisable by the Compensation Committee. Moreover,
in the event the Plan does not include a provision required by
Rule 16b-3 to be stated therein, such provision (other than
one relating to eligibility requirements, or the price and
amount of Options) shall be deemed automatically to be
incorporated by reference into the Plan insofar as
Participants subject to Section 16 are concerned. The
Compensation Committee may at any time impose any limitations
upon the exercise, delivery and payment of any Option which,
in the Compensation Committee's discretion, are necessary in
order to comply with Section 16(b) and the rules and
regulations thereunder.
10.3 A Participant shall have no rights as a stockholder with
respect to any shares covered by an Option, or exercised by
him, until the date of delivery of a stock certificate to him
for such shares. No adjustment, other than pursuant to Section
8 hereof, shall be made for dividends or other rights for
which the record date is prior to the date such stock
certificate is delivered.
11. NON-TRANSFERABILITY
During the lifetime of a Participant, any Option granted to him shall
be exercisable only by him or by his guardian or legal representative.
No Option shall be assignable or transferable, except by will, by the
laws of descent and distribution, or pursuant to certain domestic
relations orders. The granting of an Option shall impose no obligation
upon the holder thereof to exercise such Option or right.
12. NO CONTRACT OF EMPLOYMENT
The adoption of this Plan or the grant of any Option shall not be
construed as giving a Participant the right to continued employment
with the Company or any Subsidiary of the Company. Furthermore, the
Company or any Subsidiary of the Company may at any time dismiss a
Participant from employment, free from any liability or claim under the
Plan, unless otherwise expressly provided in the Plan or any Option
agreement.
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13. EFFECT OF TERMINATION OF EMPLOYMENT
13.1 If the employment or consulting, service or similar
relationship of a Participant with the Company shall terminate
for any reason other than Cause, "permanent and total
disability" (within the meaning of Section 22(e)(3) of the
Code) or the death of the Participant (a) Options granted to
such Participant, to the extent that they were exercisable at
the time of such termination, shall remain exercisable until
the expiration of one month after such termination, on which
date they shall expire, and (b) Options granted to such
Participant, to the extent that they were not exercisable at
the time of such termination, shall expire at the close of
business on the date of such termination; PROVIDED, HOWEVER,
that no Option shall be exercisable after the expiration of
its term.
13.2 If the employment or consulting, service or similar
relationship of a Participant with the Company shall terminate
on account of the "permanent and total disability" (within the
meaning of Section 22(e)(3) of the Code) or the death of the
Participant (a) Options granted to such Participant, to the
extent that they were exercisable at the time of such
termination, shall remain exercisable until the expiration of
one year after such termination, on which date they shall
expire, and (b) Options granted to such Participant, to the
extent that they were not exercisable at the time of such
termination, shall expire at the close of business on the date
of such termination; PROVIDED, HOWEVER, that no Option shall
be exercisable after the expiration of its term.
13.3 In the event of the termination of a Participant's employment
or other relationship for Cause, all outstanding Options
granted to such Participant shall expire at the commencement
of business on the date of such termination.
14. INDEMNIFICATION OF COMPENSATION COMMITTEE
In addition to such other rights of indemnification as they may have as
members of the Board or the Compensation Committee, the members of the
Compensation Committee shall be indemnified by the Company against the
reasonable expenses, including attorneys' fees actually and necessarily
incurred in connection with the defense of any action, suit or
proceeding (or in connection with any appeal therein), to which they or
any of them may be a party by reason of any action taken or failure to
act under or in connection with the Plan or any Option granted
hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal counsel
selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters
as to which it shall be adjudged in such action, suit or proceeding
that such Compensation Committee member is liable for gross negligence
or misconduct in the performance of his duties; provided that within 60
days after institution of any such action, suit or proceeding a
Compensation Committee member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.
15. WITHHOLDING TAXES
Whenever the Company proposes or is required to issue or transfer
shares of Common Stock under the Plan, the Company shall have the right
to require the Participant to remit to the Company an amount sufficient
to satisfy any federal, state and/or local withholding tax requirements
prior to the delivery of any certificate or certificates for such
shares. Alternatively, the Company may issue or transfer such shares of
Common Stock net of the number of shares sufficient to satisfy the
withholding tax requirements. For withholding tax purposes, the shares
of Common Stock shall be valued on the date the withholding obligation
is incurred.
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16. NEWLY ELIGIBLE EMPLOYEES
Except as otherwise provided herein, the Compensation Committee shall
be entitled to make such rules, regulations, determinations and awards
as it deems appropriate in respect of any employee who becomes eligible
to participate in the Plan.
17. TERMINATION AND AMENDMENT OF PLAN
The Board of Directors may at any time suspend or discontinue the Plan
or revise or amend it in any respect whatsoever, PROVIDED, HOWEVER,
that without approval of the holders of a majority of the outstanding
shares of Common Stock present in person or by proxy at an annual or
special meeting of stockholders, no revision or amendments shall (i)
increase the number of shares of Common Stock that may be issued under
the Plan, except as provided in Section 8 hereof, (ii) materially
increase the benefits accruing to individuals holding Options granted
pursuant to the Plan or (iii) materially modify the requirements as to
eligibility for participation in the Plan.
18. GENDER AND NUMBER
Except when otherwise indicated by the context, words in the masculine
gender when used in the Plan shall include the feminine gender and vice
versa, and the singular shall include the plural and the plural shall
include the singular.
19. GOVERNING LAW
The Plan, and all agreements hereunder, shall be construed in
accordance with and governed by the laws of the State of Delaware.
20. EFFECTIVE DATE OF PLAN
The effective date of the Plan is _____________, 1996. The Plan, each
amendment to the Plan, and each Option granted under the Plan is
conditioned on and shall be of no force or effect until approval of the
Plan and each amendment of the Plan by the holders of a majority of the
shares of Common Stock of the Company.
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