As filed with the Securities and Exchange Commission on October 13. 1999.
Registration No. 333-___________
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Empire Energy Corporation
-------------------------
(Exact name of registrant as specified in its charter)
Utah 87-0401761
---- ----------
(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
Empire Energy Corporation 1999 Stock Plan
-----------------------------------------
(Full Title of the Plan)
Norman L. Peterson
11011 King Street, Suite 260
Overland Park, Kansas 66210
---------------------------
(Name and address of agent for service)
913-469-5615
------------
(Telephone number, including area code, of agent for service)
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------
Proposed maximum Proposed maximum
Title of securities Amount to be offering price aggregate offering Amount of
to be registered registered(1) per unit price registration fee(2)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 1,000,000 $5.25 $5,250,000 $1,459.95
($.001 par value)
- ---------------------------------------------------------------------------------------------
</TABLE>
(1) The registration statement also includes an indeterminable number of
additional shares of Common Stock that may become subject to the Plan
pursuant to the anti-dilution provisions thereof.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457, based upon the average of the high and low prices for
the common stock on the OTC Electronic Bulletinboard on September 29, 1999.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
----------------------------------------
The following documents, which are on file with the Securities and Exchange
Commission, are incorporated by reference in the registration statement:
(1) Registrant's annual report on Form 10-KSB for the fiscal year ended
December 31, 1998;
(2) Registrant's quarterly reports on Form 10-QSB for the quarters ended
March 31, 1999 and June 30, 1999;
(3) Registrant's current report on Form 8-K dated March 15, 1999 together
with all exhibits thereto;
All documents subsequently filed by the Company pursuant to Section 15 (d)
of the Exchange Act of 1934 (the "Exchange Act") prior to the filing of a post
effective amendment that indicates that all securities offered have been sold or
which deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such documents.
Item 4. Description of Securities.
--------------------------
The Registrant is authorized to issued one class of securities, being
comprised of $.001 par value common stock.
The holders of the $.001 par value common stock of the Registrant stock
have traditional rights as to voting, dividends and liquidation. All shares of
common stock are entitled to one vote on all matters; there are no pre-emptive
rights and cumulative voting is not allowed. The common stock is not subject to
redemption and carries no subscription or conversion rights. In the event of
liquidation of the Registrant, the holders of common stock are entitled to share
equally in corporate assets after satisfaction of all liabilities.
Item 5. Interests of Named Experts and Counsel.
---------------------------------------
None
Item 6. Indemnification of Directors and Officers.
------------------------------------------
The Utah Revised Business Corporation Act, under which the Registrant is
incorporated, gives a corporation the power to indemnify any of its directors,
officers, employees, or agents who are sued by reason of their service in such
capacity to the corporation provided that the director, officer, employee, or
agent acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation.
<PAGE>
The Company's Articles of Incorporation do not directly address the subject
of indemnification directly. However, the Article XII of the Articles of
Incorporation, as amended, states that:
This Corporation shall be entitled to take advantage of any and all
provisions of the Utah Revised Business Corporation Act which was effective on
July 1, 1992, including the right to ...". It may be inferred from this
provision that the Corporation is permitted to indemnify its officers, directors
and other permitted persons as provided under the Utah Revised Business
Corporation Act.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or otherwise, the Registrant has
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable.
Item 7. Exemption from Registration Claimed.
------------------------------------
Not applicable.
Item 8. Exhibits.
---------
5.1 Opinion regarding legality of Allen G. Reeves, P.C.
23.1 Consent of Allen G. Reeves, P.C.
23.2 Consent of Robison, Hill & Co. Certified Public Accountants
99 1999 Stock Plan
Item 9. Undertakings.
-------------
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a) (3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or in the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represents a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
<PAGE>
Provided, however, that paragraph (1) (i) and (1) (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to section 13 or section 15 (d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(4) That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's annual report pursuant to section
13 (a) or section 15 (d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling person of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Overland Park, State of Kansas, on September 23,
1999.
EMPIRE ENERGY CORPORATION
By: /s/ Norman L. Peterson
--------------------------
Norman L. Peterson, President
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
Signatures Title Date
---------- ----- ----
/s/ Norman L. Peterson President, September 23, 1999
- ---------------------- Director, principal
Norman L. Peterson executive officer,
principal financial officer
/s/ John R. Dixon Vice-President, September 23, 1999
- ----------------- Director
John R. Dixon
/s/ John C. Garrison Secretary, Director September 23, 1999
- --------------------
John C. Garrison
/s/ John L. Hersma Director September 23, 1999
- ------------------
John L. Hersma
/s/ Elliott M. Kaplan Director September 23, 1999
- ---------------------
Elliott M. Kaplan
<PAGE>
EXHIBIT INDEX
Exhibit
Number
5 Opinion regarding legality
23.1 Consent of Allen G. Reeves, P.C.
23.2 Consent of Robison, Hill & Co. Certified Public Accountants
99 1999 Stock Plan
Exhibit 5
Allen G. Reeves, P.C.
Attorney and Counselor at Law
900 Equitable Building
730 Seventeenth Street
Denver, Colorado 80202
(303) 534-6278 Fax (303 825-9147
September 29, 1999
Board of Directors
Empire Energy Corporation
11011 King Street, Suite 260
Overland Park, KS 66210
Re: Empire Energy Corporation
Registration Statement on Form S-8
Gentlemen:
We have acted as counsel to Empire Energy Corporation, a Utah corporation
(the "Company"), in connection with the preparation and filing with the United
States Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), of the Company's registration
statement on Form S-8 (together with all amendments, the "Registration
Statement"). This Registration Statement relates to the registration under the
Act of 1,000,000 shares of the Company's common stock, $.001 par value ("Common
Stock"), which may be issued pursuant to the Company's 1999 Stock Plan (the
"Plan").
In rendering this opinion, we have reviewed the Registration Statement, as
well as a copy of the Company's Articles of Incorporation and bylaws, each as
amended to date, and the Plan. We have also reviewed such documents and such
statutes, rules and judicial precedents as we have deemed necessary for the
opinions expressed herein.
As you are aware, no services to be performed and billed to you which are
in any way related to a "capital raising" transaction may be paid by the
issuance of Common Stock pursuant to the Plan.
<PAGE>
In rendering this opinion, ew have assumed the genuineness of all
signatures, the legal capacity of natural persons, the authenticity of documents
submitted to us as originals, the conformity to original documents of documents
submitted to us as certified or photostatic copies, and the authenticity of
originals of such copies.
Based upon and in reliance upon the foregoing, and subject to the
qualifications and limitations herein set forth, we are of the opinion that the
shares of Common Stock under the Plan have been duly and validly authorized and,
when issued and sold in the manner contemplated in the Plan (by award to persons
defined in the Plan as participants in the Plan of the Company, or any parent or
subsidiary thereof) and by the Registration Statement, will be validly issued,
fully paid and nonassessable.
This opinion is limited to the Utah Revised Business Corporation Act, and
we express no opinion with respect to the laws of any other jurisdiction.
This opinion may not be used, circulated, quoted or otherwise referred to
for any purpose without our prior written consent and may not be relied upon by
any person or entity other than the Company and its successors and assigns. This
opinion is based upon our knowledge of law and facts as of its date. We assume
no duty to communicate to you with respect to any matter which comes to our
attention hereafter.
Very truly yours,
Allen G. Reeves, P.C.
By: /s/ Allen G. Reeves
-----------------------
Exhibit 23.1
Allen G. Reeves, P.C.
Attorney and Counselor at Law
900 Equitable Building
730 Seventeenth Street
Denver, Colorado 80202
(303) 534-6278 Fax (303) 825-9147
September 29, 1999
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Re: Consent to be named in the S-8 Registration
Statement of Empire Energy Corporation (the
"Registrant") to be filed on or about October 5,
1999, covering the registration and issuance of up
to 1,000,000 shares of common stock to pursuant to
Registrant 1999 Stock Plan (the "Plan")
Ladies and Gentlemen:
I hereby consent to be named in the above referenced Registration
Statement, and to have my opinion appended as an exhibit thereto.
Very truly yours,
Allen G. Reeves, P.C.
By /s/ Allen G. Reeves
----------------------
Exhibit 23.2
Consent of Robison, Hill & Co.
[Letterhead of Robison, Hill & CO.]
October 4, 1999
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Re: Consent to be named in the S-8 Registration
Statement of Empire Energy Corporation (the
"Registrant") to be filed on or about October 5,
1999, covering the registration and issuance of up
to 1,000,000 shares of common stock to pursuant to
Registrant 1999 Stock Plan (the "Plan")
Ladies and Gentlemen:
We hereby consent to the use by reference of our report for the years ended
December 31, 1998 and 1997, dated February 3, 1999, in the above referenced
Registration Statement. We also consent to the use of our names as "Experts" in
such Registration Statement.
/s/ Robison, Hill & CO.
-----------------------
Robison, Hill & CO.
Certified Public Accountants
Salt Lake City, Utah
Exhibit 99 EMPIRE ENERGY CORPORATION
1999
STOCK PLAN
1. Purpose and Eligibility. This Stock Plan (the "Plan") is intended to
advance the interests of Empire Energy Corporation (the "Company") by enhancing
the ability of the Company to attract and retain qualified employees,
consultants, officers and directors by creating incentives and rewards for their
contributions to the success of the Company. This Plan will provide to: (a)
officers and other employees of the Company opportunities to purchase stock in
the Company pursuant to Options granted hereunder which qualify as incentive
stock Options ("ISOs") under Section 422A(b) of the Internal Revenue Code of
1986, as amended (the "Code"); (b) directors, officers, employees and
consultants of the Company opportunities to purchase stock in the Company
pursuant to Options granted hereunder which do not qualify as ISOs
("Non-Qualified Options") and to receive stock appreciation rights ("SARs")
pursuant to such Non-Qualified Options; (c) directors, officers, employees and
consultants of the Company awards of stock in the Company ("Awards"); (d)
directors, officers, employees and consultants of the Company opportunities to
make direct purchases of stock in the Company ("Purchases"); and (e) directors
of the Company who are not officers or employees of the Company with the
opportunities to purchase stock in the Company pursuant to Options granted
hereunder ("Non-Discretionary Options"). ISOs, Non-Discretionary Options,
Non-Qualified Options and Stock Appreciation Rights are referred to hereafter as
"Options". Options, Awards and authorizations to make Purchases are referred to
hereafter collectively as "Stock Rights".
2. Administration of the Plan
a. The Plan shall be administered by the Board of Directors of the
Company (the "Board"). The Board may, in its discretion, delegate its powers
with respect to the Plan to an employee benefit plan committee or any other
committee (the "Committee"). The Committee shall consist of not fewer than three
members. Each of the members must be a "disinterested person" as that term is
defined in Rule 16b-3 adopted pursuant to the Securities Exchange Act of 1934
(the "Exchange Act"). A majority of the members of any such Committee shall
constitute a quorum, and all determinations of the Committee shall be made by
the majority of its members present at a meeting. Any determination of the
Committee under the Plan may be made without notice or meeting of the Committee
by a writing signed by all of the Committee members. Subject to ratification of
the grant or authorization of each Stock Right by the Board (but only if so
required by applicable state law), and subject to the terms of the Plan, the
Committee shall have the authority to (i) determine the employees of the Company
Corporations (from among the class of employees eligible under Paragraph 3 to
receive ISOs) to whom ISOs may be granted, and to determine (from among the
class of individuals and entities eligible under Paragraph 3 to receive
<PAGE>
Non-Qualified Options and Awards and to make Purchases) to whom Non-Qualified
Options, Awards and authorizations to make Purchases may be granted; (ii)
determine the time or times at which Options or Awards may be granted or
Purchases made; (iii) determine the exercise price of shares subject to each
Option which price for any ISO shall not be less than the minimum price
specified in Paragraph 7, and the purchase price of shares subject to each
Purchase; (iv) determine whether each Option granted shall be an ISO or a
Non-Qualified Option; (v) determine (subject to paragraph 9) the time or times
when each Option, except for non-discretionary Options, shall become
exercisable, the duration of the exercise period and when each Option shall
vest; (vi) determine whether restrictions such as repurchase options are to be
imposed on shares subject to Options, Awards and Purchases and the nature of
such restrictions, if any, and (vii) interpret the Plan and promulgate and
rescind the rules and regulations relating to it. The interpretation and
construction by the Committee of any provisions of the Plan or of any Stock
Right granted under it shall be final, binding and conclusive unless otherwise
determined by the Board. The Committee may from time to time adopt such rules
and regulations for carrying out the Plan as it may deem best.
b. The Committee may select one of its members as its chairman and
shall hold meetings at such time and places as it may determine. All references
in the Plan to the Committee shall mean the Board if no Committee has been
appointed. From time to time the Board may increase the size of the Committee
and appoint additional member thereof, remove members (with or without cause)
and appoint new members in substitution therefor, fill vacancies however caused
or remove all members of the Committee and thereafter directly administer the
Plan.
c. Stock rights may be granted to members of the Board, whether such
grants are in their capacity as directors, officers, or consultants. All grants
of Stock Rights to members of the Board shall be made in accordance with the
provisions of this Plan applicable to other eligible persons. Members of the
Board who are either (i) eligible for Stock Rights pursuant to the Plan or (ii)
have been granted Stock Rights may vote on any matters affecting the
administration of the Plan or the grant of any Stock Rights pursuant to the
Plan, except that no such member shall act upon the granting to himself of
discretionary Stock Rights but any such member may be counted in determining the
existence of a quorum at any meeting of the Board during which action is taken
with respect to the granting to him of Stock Rights.
<PAGE>
d. In addition to such other rights of indemnification as he may have
as a member of the Board, and with respect to administration of the Plan and the
granting of Options under it, each member of the Board and of the Committee
shall be entitled without further act on his part to indemnification from the
Company for all expenses (including advances in litigation expenses, the amount
of judgment and the amount of approved settlements made with a view to the
curtailment of costs of litigation, other than amounts paid to the Company
itself) reasonably incurred by him in connection with or arising out of any
action, suit or proceeding with respect to the administration of the Plan or the
granting of Options under it in which he may be involved by reason of his being
or having been a member of the Board or the Committee, whether or not he
continues to be such member of the Board or the Committee at the time of the
incurring of such expenses. A person shall only be indemnified if (i) he
conducted himself in good faith, (ii) he reasonably believed that his conduct
was for a purpose he reasonably believed to be in the interests of the
participants or beneficiaries of this Plan and (iii) in the case of any criminal
proceeding, he had no reasonable cause to believe that his conduct was unlawful.
Provided however, a director shall not be entitled to indemnification in
connection with a proceeding by or on behalf of the Company in which the
director is adjudged liable to the Company or in connection with any proceeding
charging improper personal benefit to the director in which the director is
found to be personally liable on the basis that personal benefit was improperly
received by him. Provided further that no right of indemnification under the
provisions set forth herein shall be available to any such member of the Board
or the Committee unless within 10 days after the later of institution of or
learning of any such action, suit or proceeding he shall have offered the
Company in writing the opportunity to handle and defend such action, suit or
proceeding at its own expense. The foregoing right of indemnification shall
inure to the benefit of the heirs, executors or administrators of each such
member of the Board or the Committee and shall be in addition to all other
rights to which such member of the Board or the Committee would be entitled to
as a matter of law, contract or otherwise. The indemnification provided by this
Section 2e shall only be made after the requirements of Section 145(d) of the
Delaware General Corporation Law (the "Law") have been complied with except that
the Company may pay for or reimburse reasonable expenses incurred by a director
who is a party to a proceeding in advance of the final disposition of the
proceeding in accordance with the requirement of Section 145(e) of the Law.
3. Eligible Employees and Others.
a. ISOs may be granted to any employee of the Company. Those officers
and directors of the Company who are not employees may not be granted ISOs under
the Plan. Subject to compliance with Rule 16b-3 and other applicable securities
<PAGE>
laws, Non-Qualified Options, Awards and authorizations to make Purchases may be
granted to any director (whether or not an employee), officer, employee or
consultant of the Company. The Committee may take into consideration a
recipient's individual circumstances in determining whether to grant an ISO, a
Non-Qualified Option or an authorization to make a Purchase. Granting of any
Stock Right to any individual or entity shall neither entitle that individual or
entity to, nor disqualify him from participation in any other grant of Stock
Rights.
b. All directors of the Company who are not employees of the Company
may receive Non-Qualified Options (i) upon election or appointment to the Board
if not a member of the Board at the time this Plan is adopted by the Board; and
(ii) upon election to the Board after all stock grants and Options previously
granted have vested. The amount and terms of any such Non-Qualified Options
shall be determined by the Board in full compliance with the terms of the Plan.
(1) The exercise price of the Options shall be fair market value
on the date of grant as defined by Paragraph 7.
(2) The Options granted to each Director pursuant to this
subparagraph b shall vest in increments as the Board shall determine, provided
that the director is still serving as a director on the Company. To the extent
that any Options which have not been exercised do not vest, the Options shall
lapse and no longer be exercisable.
c. The Options shall be exercisable for a period of 5 years from the
date of grant.
4. Stock. The stock subject to Options, Awards and Purchases shall be
authorized but unissued shares of Common stock or shares of Common Stock
reacquired by the Company in any manner. The aggregate number of shares of
Common Stock which may be issued pursuant to the Plan is one million
(1,000,000), subject to adjustment as provided in Paragraph 15. Any such shares
may be issued as ISOs, Non-Qualified Options or Awards, or to persons or
entities making Purchases, so long as the number of shares so issued does not
exceed such number, as adjusted. If any Option granted under the Plan shall
expire or terminate for any reason without having been exercised in full or
shall cease for any reason to be exercisable in whole or in part, or if the
Company shall reacquire any unvested shares issued pursuant to Awards or
Purchases, the unpurchased shares subject to such Options and any unvested
shares so reacquired by the Company shall again be available for grants of Stock
Rights under the Plan.
5. Granting of Stock Rights. Stock Rights may be granted under the Plan at
any time on and after the date this Plan is approved by the Company's
shareholders, provided however that no ISO shall be granted more than 10 years
after the effective date of this Plan. The date of grant of a Stock Right under
the Plan will be the date of grant by the Committee unless otherwise specified
at the time it grants the Stock Right; provided, however, that such date shall
not be prior to the date on which the Committee acts to approve the grant. The
Committee shall have the right with the consent of the optionee, to convert an
ISO granted under the Plan to a Non-Qualified Option pursuant to Paragraph 18.
<PAGE>
6. Sale of Shares. Any shares of the Company's Common Stock granted
pursuant to an Award or acquired pursuant to a Purchase as set forth herein,
cannot be sold for at least six months after acquisition except in case of death
or disability. Nothing in this paragraph 6 shall be deemed to reduce the holding
period set forth under the applicable securities laws.
7. ISO Minimum Option Price and Other Limitations.
a. The exercise price per share specified in the stock option
agreement relating to each ISO granted under the Plan shall not be less than the
fair market value per share of Common Stock on the date of such grant. In the
case of an ISO to be granted to an employee owning stock which represents more
than 10 percent of the total combined voting power of all classes of stock of
the Company or any Related Corporation, the price per share specified in the
agreement relating to such ISO shall not be less than 110 percent of the fair
market value per share of Common Stock on the date of grant and such ISO shall
not be exercisable after the expiration of five years from the date of grant.
b. In no event shall the aggregate fair market value (determined at
the time an ISO is granted) of Common Stock for which ISOs granted to any
employee are exercisable for the first time by such employee during any calendar
year (under all stock option plans of the Company and any Related Corporation)
exceed $100,000.
c. If, at the time an Option is granted under the Plan, the Company's
Common Stock is publicly traded, "fair market value" shall be determined as of
the last business day for which the prices or quotes discussed in this sentence
are available prior to the date such Option is granted and shall mean:
(1) the average closing price of the Company's shares appearing
on the NASDAQ Smallcap if such shares are listed thereon or if not listed,
appearing on the National Associates of Securities Dealers, Inc.'s electronic
bulletin board; or
(2) If the Company's shares are not listed on the National
Association of Securities Dealers, Inc's electronic bulletin board, then the
average bid and asked price for the Company's shares as listed in the National
Quotation Bureau's "pink sheets", or
(3) if there are no listed bid and asked prices published in the
pink sheets, then the fair market value shall be based upon the average closing
bid and asked price as determined following a polling of all dealers making a
market in the Company's shares.
(4) By private determination of the Board based upon the assets,
net worth and other factors as the Board may deem relevant if (1), (2) or (3)
above are not applicable.
<PAGE>
8. Stock Appreciation Rights.
a. Stock appreciation rights may be granted by the Company under this
Plan upon such terms and conditions as the Committee may prescribe. A stock
appreciation right may be granted only in connection with a Non-Qualified Option
right previously granted or to be granted under this Plan. Each stock
appreciation right shall contain a provision that it shall become nonexercisable
and be forfeited if the related option right is exercised. "Stock Appreciation
right" as used in this Plan means a right to receive the excess of the fair
market value of a share of the Company's Common Stock on the date on which an
appreciation right is exercised over the option price provided for in the
related stock option and which is issued in consideration of services performed
for the Company or for its benefit by the optionee. Such excess is hereafter
called "the differential". "Option right" means the right to purchase shares of
the Company's Common Stock under a Non-Qualified Option granted under this Plan.
b. Stock appreciation rights shall be exercisable and be payable in
the following manner:
(1) A stock appreciation right shall be exercisable by the
optionee at any time the option to which it relates could be exercised. An
optionee wishing to exercise a stock option appreciation right shall give
written notice of such exercise to the Company addressed to the Company's
Secretary, which such notice shall be forwarded by the Company's Secretary to
the Committee. Upon receipt of such notice, the Committee shall determine
whether the optionee's stock appreciation rights shall be paid in cash or Common
Stock or a combination of cash and shares. Upon receipt of such notice, the
Company shall, without transfer or issue tax to the optionee or other person
entitled to exercise the stock appreciation rights, deliver to the person
exercising such right a certificate or certificates for shares of the Common
Stock which are issuable upon exercise of the stock appreciation right or cash
or a combination thereof as the case may be. The date the Company's Secretary
receives the written notice of exercise hereunder is referred to herein as the
exercise date.
(2) The exercise of a stock appreciation right shall
automatically result in the surrender of the related stock option right by the
grantee on a share for share basis to the extent shares under such related stock
option are used to calculate the shares or cash or combination thereof to be
received by such grantee upon the exercise of such stock appreciation right.
Shares covered by such surrendered option rights shall not be available for
granting further options under this Plan.
(3) The Committee may impose any other conditions it prescribes
upon the exercise of a stock appreciation right, which conditions may include a
condition that the stock appreciation right may only be exercised in accordance
with rules and regulations adopted by the Committee from time to time.
(4) Upon the exercise of a stock appreciation right and surrender
of the related option right, the Company shall give to the person surrendering
the related option right an amount equivalent to the differential, in cash or
<PAGE>
shares of the Company's Common Stock or any combination thereof as determined in
accordance with subdivision b (1) of this paragraph 8. The shares to be issued
upon the exercise of a stock appreciation right may consist either in whole or
in part of shares of the Company's authorized and issued Common Stock reacquired
by the Company and held in its treasury. No fractional share of Common Stock
shall be issued and the Committee shall determine whether cash shall be given in
lieu of such fractional share or whether such fractional share shall be
eliminated.
c. Notwithstanding any other provision of this Plan, the Committee may
from time to time determine, including at the time of exercise, the maximum
amount of cash or stock which may be given upon exercise of any stock
appreciation right in any year provided, however, that all such amounts shall be
paid in full no later than the end of the year immediately following the year in
which the optionee exercised such stock appreciation rights. Any determination
under this paragraph may be changed by the Committee from time to time provided
that no such change shall require the holder to return to the Company any amount
theretofore received or to extend the period within which the Company is
required to make full payment of the amount due as the result of the exercise of
the optionee's stock appreciation right.
d. Stock appreciation rights granted pursuant to this paragraph shall
terminate or expire as follows:
(1) Each stock appreciation right and all rights and obligations
thereunder shall expire on a date to be determined by the Committee, such date,
however, in no event to be later than ten years from the date on which the
related option right was granted.
(2) A stock appreciation right shall terminate and may no longer
be exercised upon the termination of the related option right.
9. Duration of Stock Rights. Subject to earlier termination as provided in
Paragraph 11 and 12, each Stock Right shall expire on the date specified in the
original instrument granting such Stock Right, (except with respect to any part
of an ISO that is converted into a Non-Qualified Option pursuant to Paragraph
18) provided, however, that such instrument must comply with Section 422A of the
Code with regard to ISOs granted to all employees and Rule 16b-3 of the Exchange
Act with regard to all Stock Rights granted to executive officers, directors and
10% stockholders of the Company.
10. Exercise of Options. Subject to the provisions of Paragraphs 3b and 11
through 15, each Option granted under the Plan shall be exercisable as follow:
a. The Options shall either be fully exercisable from the date of
grant or shall become exercisable thereafter in such installments as the
Committee may specify.
b. Once an installment becomes exercisable it shall remain exercisable
until expiration or termination of the Option, unless otherwise specified by the
Committee.
<PAGE>
c. Each Option or installment, once it becomes exercisable, may be
exercised at any time or from time to time, in whole or in part, for up to the
total number of shares with respect to which it is then exercisable.
d. The Committee shall have the right to accelerate the date of
exercise of any installment of any Option; provided that the Committee shall not
accelerate the exercise date of any installment of any Option granted to any
employee as an ISO (and not previously converted into a Non-Qualified Option
pursuant to Paragraph 18) if such acceleration would violate the annual vesting
limitation contained in Section 422A(d) of the Code as described in Paragraph
7(b). The date of exercise of all Options shall accelerate in the event of any
of the following: (i) the Company is to merge or consolidate with or into any
other corporation or entity except a transaction where the Company is the
surviving corporation or change of domicile merger or similar transaction exempt
from registration under the Securities Act of 1933, (ii) the sale of all or
substantially all of the Company's assets, (iii) the sale of at least 90% of the
outstanding Common Stock of the Company to a third party (subparagraphs (i),(ii)
and (iii) collectively referred to as an "Acquisition"); or (iv) the Company is
dissolved. Upon a minimum of 20 days prior written notice to the optionees, the
exercisability of such Options shall commence two business days prior to the
earlier of the scheduled closing of an Acquisition or proposed dissolution or
the actual closing of an Acquisition or proposed dissolution.
e. All Options and stock grants shall be subject to any vesting
requirements imposed by the Committee. In the event of any Acquisition or
dissolution of the Company, all unvested Options and stock grants shall
immediately vest two business days prior to the earlier of the scheduled closing
of the Acquisition or proposed dissolution or the actual closing of the
Acquisition or proposed dissolution and a minimum of 20 days notice of such
vesting shall be give to the holders of such Options and unvested shares of
Common Stock.
11. Termination of Employment. Subject to any greater restrictions or
limitations as may be imposed by the Committee upon the granting of any ISO, if
an ISO optionee ceases to be employed by the Company other than by reason of
death or disability as defined in Paragraph 12, no further installments of his
ISOs shall become exercisable or vest, and his ISOs shall terminate on the day
three months after the day of the termination of his employment, but in no event
later than on their specified expiration dates, except to the extent that such
ISOs (or unexercised installments thereof) have been converted into
Non-Qualified Options pursuant to Paragraph 18. Employment shall be considered
as continuing uninterrupted during any bona fide leave of absence (such as those
attributable to illness, military obligations or governmental service) provided
that the period of such leave does not exceed 90 days or, if longer, any period
during which such optionee's right to re-employment is guaranteed by statute. A
leave of absence with the written approval of the Company's Board shall not be
considered an interruption of employment under the Plan, provided that such
written approval contractually obligates the Company to continue employment of
the optionee after the approved period of absence. ISOs granted under the Plan
shall not be affected by any change of employment within or among the Company so
long as the optionee continues to be an employee of the Company.
<PAGE>
12. Death or Disability. Subject to any greater restrictions or limitations
as may be imposed by the Committee upon the granting of any ISO:
a. If an ISO optionee ceases to be employed by the Company by reason
of his death, any ISO of his may be exercised to the extent of the number of
shares with respect to which he could have exercised it on the date of his
death, by his estate, personal representative or beneficiary who has acquired
the ISO by will or by the laws of descent and distribution, at any time prior to
the earlier of the ISO's specified expiration date or three months from the date
of the optionee's death.
b. If an ISO optionee ceases to be employed by the Company by reason
of his disability, he shall have the right to exercise any ISO held by him on
the date of termination of employment to the extent of the number of shares with
respect to which he could on the earlier of the ISO's specified expiration date
or one year from the date of the termination of the optionee's employment. For
the purposes of the Plan, the term "disability" shall mean "permanent and total
disability" as defined in Section 22 (e)(3) of the Code or successor statute.
13. Assignability. No Option granted to an executive officer or director of
the Company or beneficial owner of 10% or more of the Company's equity
securities registered pursuant to Section 12 of the Securities Exchange Act of
1934 and no ISO shall be assignable or transferable by the grantee except by
will or by laws of descent and distribution and during the lifetime of the
grantee each Option shall be exercisable only by him, his guardian or legal
representative.
14. Terms and Conditions of Options. Options shall be evidenced by
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in Paragraph 7 through 13 hereof and may contain such other
provisions as the Committee deems advisable which are not inconsistent with the
Plan, including restrictions applicable to shares of Common Stock issuable upon
exercise of Options. In granting any Non-Qualified Option, the Committee may
specify that such Non-Qualified Option shall be subject to the restrictions set
forth herein with respect to ISOs, or to such other termination and cancellation
provisions as the Committee may determine. The Committee may from time to time
confer authority and responsibility on one or more of its own members and/or one
or more officers of the Company to execute and deliver such instruments. The
proper officers of the Company are authorized and directed to take any and all
action necessary or advisable from time to time to carry out the terms of such
instruments.
15. Adjustments. Upon the occurrence of any of the following events, an
optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided unless otherwise specifically provided in the
written agreement between the optionee and the Company relating to such Option:
a. If the shares of Common Stock shall be subdivided or combined into
a greater or smaller number of shares or if the Company shall issue any shares
of Common Stock as a stock dividend on its outstanding Common Stock, the number
<PAGE>
of shares of Common Stock deliverable upon the exercise of Options shall be
appropriately increased or decreased proportionately, and appropriate
adjustments shall be made in the purchase price per share to reflect such
subdivision, combination or stock dividend.
b. If the Company is to be consolidated with or acquired by another
entity pursuant to an Acquisition, the Committee or the board of directors of
any entity assuming the obligations of the Company hereunder (the "Successor
Board") shall, as to outstanding Options not exercised pursuant to Paragraph 9,
either (i) make appropriate provision for the continuation of such Options by
substituting on an equitable basis for the shares then subject to such Options
the consideration payable with respect to the outstanding shares of Common Stock
in connection with the Acquisition; or (ii) terminate all Options in exchange
for a cash payment equal to the excess of the fair market value of the shares
subject to such Options over the exercise price thereof.
c. In the event of a recapitalization or reorganization of the Company
(other than a transaction described in subparagraph b above) pursuant to which
securities of the Company or of another corporation are issued with respect to
the outstanding shares of Common Stock, an optionee upon exercising an Option
shall be entitled to receive for the purchase price paid upon such exercise the
securities he would have received if he had exercised his Option prior or such
recapitalization or reorganization.
d. Notwithstanding the foregoing, any adjustments made pursuant to
subparagraphs a, b or c with respect to ISOs shall be made only after the
Committee, after consulting with counsel for the Company, determines whether
such adjustments would constitute a "modification" of such ISOs (as that term is
defined in Section 425(h) of the Code) or would cause any adverse tax
consequences for the holders of such ISOs. If the Committee determines that such
adjustments made with respect to ISOs would constitute a modification of such
ISOs it may refrain from making such adjustments.
e. Except as expressly provided herein, no issuance by the Company of
shares of Common Stock of any class or securities convertible into shares of
Common Stock of any class shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares subject to Options.
No adjustments shall be made for dividends or other distributions paid in cash
or in property other than securities of the Company.
f. No fractional share shall be issued under the Plan and the optionee
shall receive from the Company cash in lieu of such fractional shares.
g. Upon the happening of any of the foregoing events described in
subparagraphs a, b or c above, the class and aggregate number of shares set
forth in Paragraph 4 hereof that are subject to Stock Rights which previously
have been or subsequently may be granted under the Plan shall also be
appropriately adjusted to reflect the events described in such subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this Paragraph 15 and, subject to Paragraph 2, its determination
shall be conclusive. If any person or entity owning restricted Common Stock
<PAGE>
obtained by exercise of a Stock Right made hereunder receives shares or
securities or cash in connection with a corporate transaction described in
subparagraphs a, b and c above as a result owning such restricted Common Stock,
such shares or securities or cash shall be subject to all of the conditions and
restrictions applicable to the restricted Common Stock with respect to which
such shares or securities or cash were issued, unless otherwise determined by
the Committee or the Successor Board.
16. Means of Exercising Stock Rights.
a. A Stock Right (or any part or installment thereof) shall be
exercised by giving written notice to the Company at its principal office
address. Such notice shall identify the Stock Right being exercised and specify
the number of shares as to which such Stock Right is being exercised,
accompanied by full payment of the purchase or exercise price therefor either
(i) in United States dollars in cash or by check; (ii) at the discretion of the
Committee, through delivery of shares of Common Stock having a fair market value
equal as of the date of the exercise to the cash exercise price of the Stock
Right; (iii) at the discretion of the Committee, by delivery of the grantee's
personal recourse note bearing interest payable not less than annually at no
less than 100% of the lowest applicable federal rate, as defined in Section
1275(d) of the Code, or (iv) at the discretion of the Committee, by any
combination of (i), (ii) and (iii) above. If the Committee exercises its
discretion to permit payment of the exercise price of an ISO by means of the
methods set forth in clauses (ii), (iii) or (iv) of the preceding sentence, such
discretion shall be exercised in writing at the time of the grant of the ISO in
question. The holder of Stock right shall not have the rights of a shareholder
with respect to the shares covered by his Stock Right until the date of issuance
of a stock certificate to him for such shares. Except as expressly provided
above in Paragraph 15 with respect to changes in capitalization and stock
dividends, no adjustment shall be made for dividends or similar rights for which
the record date is before the date such stock certificate is issued.
b. Each notice of exercise shall, unless the Option shares are covered
by a then current registration statement under the Securities Act of 1933, as
amended (the "Act"), contain the optionee's acknowledgment in form and substance
satisfactory to the Company that (i) such Option shares are being purchased for
investment and not for distribution or resale (other than a distribution or
resale which, in the opinion of counsel satisfactory to the Company, may be made
without violating the registration provision of the Act), (ii) the optionee has
been advised and understands that (1) the Option shares have not been registered
under the Act and are "restricted securities" within the meaning of Rule 144
under the Act and are subject to restrictions on transfer and (2) the Company is
under no obligation to register the Option shares under the Act or to take any
action which would make available to the optionee any exemption from such
registration, and (iii) such Option shares may not by transferred without
compliance with all applicable federal and state securities laws. Not
withstanding the above, should the Company be advised by counsel that issuance
of shares should be delayed pending registration under federal or state
securities laws or the receipt of an opinion than an appropriate exemption
therefrom is available, the Company may defer exercise of any option granted
hereunder until either such event has occurred.
17. Terms and Amendment of Plan. This Plan was adopted by the Board on
March 24, 1999 and if not approved by the holders of at least a majority of all
shares present in person and by proxy and entitled to vote therein at a meeting
<PAGE>
of the stockholders of the Company within 12 months from the date of the Plan's
adoption by the Board, no ISOs may be granted pursuant to the Plan. Nor shall
the Plan in such event conform to Rule 16b-3 promulgated under the Securities
Exchange Act of 1934. This Plan shall have no expiration date, provided however
that no ISOs shall be granted more than 10 years after the Plan's effective
date. The Board may terminate or amend the Plan in any respect at any time.
However, if not approved by the stockholders on or before March 23, 2000
approval of the stockholders must be obtained within 12 months before or after
the Board adopts a resolution authorizing any of the following actions: (a)
increase of the total number of shares that may be issued under the Plan (except
by adjustment pursuant to Paragraph 15); (b) modification of the provisions of
Paragraph 3 regarding eligibility for grants of ISOs; and (c) any other act
requiring stockholder approval under Rule 16b-3 (or successor rule) promulgated
under the Securities Exchange Act of 1934. Except as provided herein or as
specified in the original instrument granting such Stock Right, no action of the
Board or stockholders may alter or impair the rights of a grantee, without his
consent, under any Stock Right previously granted to him.
18. Conversion of ISOs into Non-Qualified Options; Termination of ISOs The
Committee, at the written request of any optionee, may in its discretion take
such actions as may be necessary to convert such optionee's ISOs (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such ISOs, regardless of whether the optionee is an employee of
the Company or a Related Corporation at the time of such conversion. Such
actions may include, but not be limited to, extending the exercise period or
reducing the exercise period of the appropriate installments of such Options. At
the time of such conversion, the Committee (with the consent of the optionee)
may impose such conditions on the exercise of the resulting Non-Qualified
Options as the Committee in its discretion may determine, provided that such
condition shall not be inconsistent with this Plan. Nothing in the Plan shall be
deemed to give any optionee the right to have such optionee's ISOs converted
into Non-Qualified Options, and no such conversion shall occur until and unless
the Committee takes appropriate action. The Committee, with the consent of the
optionee, may also terminate any portion of any ISO that has not been exercised
at the time of such termination.
19. Application of Funds. The proceeds received by the Company from the
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
20. Government Regulations. The Company's obligation to sell and deliver
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
21. Withholding of Additional Income Taxes. Upon the exercise of a
Non-Qualified Option, the granting or vesting of an Award, the Purchase of
Common Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in Paragraph 22) the Company, in accordance with Section
3402(a) of the Code may require the optionee, award recipient or purchaser to
<PAGE>
pay additional withholding taxes in respect of the amount that is considered
compensation includable in such person's gross income. The Committee in its
discretion may condition (i) the exercise of any Option; (ii) the granting or
vesting of an award; or (iii) the making of a purchase of Common Stock for less
than its fair market value on the payment of such withholding taxes.
To the extent that the Company is required to withhold taxes for federal
income tax purposes in connection with the exercise of any Option, the optionee
shall have the right to elect to satisfy such withholding requirement by (i)
paying the amount of the requires withholding tax to the Company; (ii)
delivering to the Company shares of its Common Stock previously owned by the
optionee; or (iii) having the Company retain a portion of the shares covered by
the Option exercise. The number of shares to be delivered to or withheld by the
Company times the fair market value of such shares shall equal the cash of
required to be withheld. To the extent that the Participant elects to either
deliver or have withheld shares of the Company's Common Stock, the Board, or the
Committee, may require him to make such election only during certain periods of
time as may be necessary to comply with appropriate exemptive procedures
regarding the "short-swing" profit provisions of Section 16(b) of the Securities
Exchange Act of 1934 or to meet certain Code requirements.
22. Notice of Company of Disqualifying Disposition. Each employee who
receives an ISO must agree to notify the Company in writing immediately after
the employee makes a Disqualifying Disposition of any Common Stock acquired
pursuant to the exercise of an ISO. A Disqualifying Disposition is any
disposition (including any sale) of such Common Stock before the later of (i)
two years after the date of employee was granted the ISO or (ii) one year after
the date the employee acquired Common Stock by exercising the ISO. If the
employee has died before such stock is sold, these holding period requirements
do not apply and no Disqualifying Disposition can occur thereafter.
23. Continued Employment. The grant of an Option pursuant to the Plan shall
not be construed to imply or to constitute evidence of any agreement, express or
implied, on the part of the Company to retain the optionee in the employ of the
Company or Related Corporation, as a member of the Company's board of directors
or in any other capacity, whichever the case may be.
24. Bonuses or Loans to Exercise Options. If requested by any person to
whom a grant of a Stock Right has been made, the Company may loan such person or
guarantee a bank loan to such person for the purpose of paying for the shares of
the Common Stock. If requested by any person to whom a grant of a Stock Right
has been made, the Company may loan such person, guarantee a bank loan to such
person, or pay such person additional compensation equal to the amount of money
necessary to pay the federal income taxes incurred as a result of the grant of
the Stock Rights or the Exercise of any Options, assuming that such person is in
the maximum federal income tax bracket six months from the time of grant or
exercise and assuming that such person has no deductions which would reduce the
amount of such tax owed. The tax loan shall be made or tax offset bonus paid on
or before April 15th of the year following the year in which the amount of tax
is determined, and any loan shall be made on such terms as the Company or
lending bank determines.
25. Governing Law; Construction. The validity and construction of the Plan
and the instruments evidencing Stock Rights shall be governed by the laws of the
State of Kansas. In construing this Plan, the singular shall include the plural
and the masculine gender shall include the feminine and neuter, unless the
context otherwise requires.
