<PAGE>
As filed with the Securities and Exchange Commission on May 25, 1999.
Registration No. 001-09925
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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COPE, INC.
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(Exact name of registrant as specified in its charter)
Delaware 87-0427731
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
Grundstrasse 14, 6343 Rotkreuz, Switzerland
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(Address of Principal Executive Offices) (Zip Code)
COPE, INC. 1998 STOCK OPTION PLAN
----------------------------------------
(Full title of the plan)
Adrian Knapp
Grundstrasse 14
6343 Rotkreuz, Switzerland
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(Name and address of agent for service)
+4141 798-3344
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(Telephone number, including area code, of agent for service)
<TABLE>
<CAPTION>
Calculation of Registration Fee
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Proposed
maximum Proposed
Title of offering maximum
securities to be Amount to be price per aggregate Amount of
registered registered unit offering price registration fee
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<S> <C> <C> <C> <C>
Common Stock, 400,000 shs./(2)/ $30/(1)/ $12,000,000 $3,336
$.001 par value
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</TABLE>
(1) In accordance with Rules 457(c) and 457(h) under the Securities Act of
1933, as amended, we computed the registration fee on 400,000 shares of our
common stock underlying options based upon the average of the high and low
prices for our common stock on May 24, 1999.
(2) Pursuant to Rule 416, we are also registering the additional shares that
may become issuable pursuant to anti-dilution provisions of the various
options.
<PAGE>
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
COPE, INC.
Common Stock
------------------------------------------------
COPE 1998 STOCK OPTION PLAN
------------------------------------------------
400,000 Shares of Common Stock, $.001 Par Value
This Prospectus relates to the offer for sale from time to time of up to
400,000 shares of our common stock ($.001 par value per share) which includes
(i) shares of common stock we may issue from time to time to our employees,
officers, directors, consultants and independent contractors upon their exercise
of stock options granted to them under our 1998 Stock Option Plan ("Plan"), and
(ii) shares of common stock we issued to certain selling shareholders following
their exercise of stock options granted to them under the Plan. The purchase
price of the shares of common stock issued upon exercise of options granted
under our Plan will be determined from time to time based upon the market price
of the common stock in accordance with the terms of our Plan. The Purchase
price for the shares of common stock we issued to the selling shareholders upon
the exercise of their options was $8.40. We suggest that you retain this
Prospectus for further reference.
Investing in our common stock involves a high degree of risk. For a discussion
of certain factors you should consider in connection with any decision to
purchase shares in this offering please see "Risk Factors" beginning on page 1.
Neither the Securities and Exchange Commission nor any other regulatory body has
approved or disapproved these securities or passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
------------------------------------------------
This Prospectus only covers the sale of those shares purchased upon the exercise
of stock options granted under our Plan and those shares being offered by the
selling shareholders. This Prospectus does not cover the resales of those
shares. However, persons ordinarily may publicly resell the shares of common
stock acquired hereunder without registration under the Securities Act of 1933,
as amended (the "Act"). Our affiliates, however, may not publicly resell shares
acquired hereunder without compliance with Rule 144 promulgated under the Act or
registration under the Act.
------------------------------------
The date of this Prospectus is May 21, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
RISK FACTORS.................................................................. 1
- ------------
THE COMPANY................................................................... 6
- -----------
INFORMATION ABOUT OUR STOCK OPTION PLAN....................................... 7
- ---------------------------------------
Introduction............................................................. 7
General Purpose.......................................................... 7
ERISA.................................................................... 7
Shares Available......................................................... 7
Administration........................................................... 8
Eligibility.............................................................. 8
Grant of Options......................................................... 8
Exercise of Options...................................................... 8
Nontransferability....................................................... 9
Termination of Employment................................................ 9
Death or Disability...................................................... 9
Duration, Amendment and Termination...................................... 9
Options Outstanding...................................................... 10
FEDERAL INCOME TAX CONSEQUENCES............................................... 10
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U.S. Federal Law......................................................... 10
German Law............................................................... 12
Swiss Law................................................................ 13
SELLING SHAREHOLDERS.......................................................... 13
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PLAN OF DISTRIBUTION.......................................................... 14
- --------------------
USE OF PROCEEDS............................................................... 15
- ---------------
RESTRICTIONS ON RESALE........................................................ 15
- ----------------------
LEGAL MATTERS................................................................. 15
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EXPERTS....................................................................... 15
- -------
AVAILABLE INFORMATION......................................................... 15
- ---------------------
INCORPORATION OF DOCUMENTS BY REFERENCE....................................... 17
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</TABLE>
i
<PAGE>
PART I
Item 1. Plan Information
RISK FACTORS
------------
Investing in our common stock involves a high degree of risk. You should
carefully consider the following risk factors and the other information in this
prospectus before investing in our common stock. Our business and results of
operations could be seriously harmed by any of the following risks.
WE HAVE A LIMITED OPERATING HISTORY AND IS SUBJECT TO RISKS FREQUENTLY
ENCOUNTERED BY EARLY STAGE COMPANIES
We commenced business in 1991, however we did not begin to provide
enterprise data storage and security consulting services and solutions until
1994. Therefore, we have a limited operating history in our present line of
business. Investors must consider our business and prospects in light of the
risks typically encountered by companies in their early stages of development,
particularly those in rapidly evolving industries such as data storage. Some of
these risks, in addition to those risks discussed elsewhere in this "Risk
Factors" section, include:
. significant fluctuations in quarterly operating results;
. the intensely competitive market for data storage and information
management consulting services;
. the challenges encountered in expanding our sales, support and distribution
organization;
. the risks relating to the timely introduction of new products and product
enhancements; and
. the risks associated with the expansion of our operational infrastructure.
We discuss these and other risks in more detail below. We cannot be certain that
our business strategy will be successful or that we will successfully address
these risks.
FAILURE TO MEET FUTURE CAPITAL NEEDS MAY ADVERSELY AFFECT OUR BUSINESS
We believe that we will need significant additional working capital to
finance our continued growth. We believe that our existing capital resources
will be sufficient to meet our capital requirements for at least the next twelve
months. However, if our capital requirements vary materially from those
currently planned, we may require additional financing sooner than anticipated.
Additional financing may not be available when needed on terms favorable to us
or at all. If adequate funds are not available or are not available on
acceptable terms, we may be unable to develop or enhance our services, take
advantage of future opportunities or
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<PAGE>
respond to competitive pressures, which could materially adversely affect our
business, financial condition or results of operations.
OUR MARKETS ARE HIGHLY COMPETITIVE
The information management market is intensely competitive, highly
fragmented and characterized by rapidly changing technology and evolving
standards. Competitors vary in size and in the scope and breadth of the products
and services offered. Our major competitors are vendors of information
management software and hardware products, including Hewlett Packard, EMC Corp.,
Unisys Corp. and Compaq Computer Corp. We also experience significant
competition from other independent consulting and engineering firms.
Many of our current and potential competitors, particularly information
management software and hardware vendors, have significantly greater financial,
technical, marketing and other resources than us. As a result, they may be able
to respond more quickly to new or emerging technologies and changes in customer
requirements, or, in the case of vendors, to devote greater resources to the
development, promotion, sale and support of their products than us. We also
expect that competition will increase as a result of future software industry
consolidations, which have occurred in the information management market in the
past. In addition, current and potential competitors have established or may
establish cooperative relationships among themselves or with third parties.
Accordingly, it is possible that new competitors or alliances among competitors
may emerge and rapidly acquire significant market share. There can be no
assurance that we will be able to compete successfully against current or future
competitors or that competitive pressures faced by us will not materially
adversely affect our business, operating results or financial condition.
In addition to competition for client contracts, we also compete for
qualified technical engineers and consultants. Our future success depends in
significant part upon the continued service of our key technical personnel and
our continuing ability to attract and retain highly qualified technical
engineers and consultants. Competition for such personnel is intense, and there
can be no assurance that we can retain our key technical and managerial
employees or that we can attract, assimilate or retain other highly qualified
technical personnel in the future.
OUR BUSINESS WILL BE SUBSTANTIALLY DEPENDENT ON CERTAIN STRATEGIC RELATIONSHIPS
We do not develop or manufacture most of the products we sell to our
customers. Instead, we contract to deliver our information systems, including
most of the software and hardware, on a turn-key basis pursuant to fixed price
contracts. Accordingly, we are substantially dependent on several third party
product suppliers, particularly the manufacturers and distributors of the
software and hardware products we sell to our customers. Our agreements with
the third party product suppliers tend to be short term in nature and are
subject to termination by the supplier in certain instances. This risk is
further enhanced by the fact that we also compete with some of these third party
product suppliers in the provision of consulting services and solutions to the
European market. In the event a key supplier terminates its relationship with
us without notice, or should we be compelled to do the same, our operations may
be adversely affected.
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WE ARE SUBJECT TO THE RISKS ASSOCIATED WITH CURRENCY FLUCTUATIONS
Virtually all of our sales are denominated in Euros or Swiss Francs.
However, a significant amount of our cost of sales (i.e. hardware and software
purchases) are denominated in US dollars. Consequently, our cost of doing
business is directly affected by changes in the exchange rate amongst these
currencies. Although we typically enter into contracts designed to partially
mitigate the adverse effects of currency exchange fluctuations, changes in
currency rates in the future could have a material adverse affect on our
business and financial condition.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH THE EURO CONVERSION
On January 1, 1999, eleven of the fifteen member countries of the European
Union ("EU") established fixed conversion rates between their existing sovereign
currencies and the Euro, and adopted the Euro as their common legal currency.
We currently denominate many of our transactions in Euros. We have adopted our
information systems and practices to accommodate the Euro in those EU member
countries in which we offer our services. Euro conversion is expected to
generally increase cross-border price transparency among the participating
countries and result in a more competitive European market. We are uncertain as
to the effect, if any, that Euro conversion will have on our ability to sell our
products and services in the European market. Euro conversion could potentially
impact our pricing strategies and the demand for our services and products in
the European market, lead to increased competition within the European market
for the services and products sold by us, or impact our relationships with
vendors and licensors. As a result of competitive pressures, we could also
potentially be required to denominate future transactions in the Euro and incur
currency risk and conversion costs as a result. There can be no assurance that
Euro conversion will not have a material adverse effect on COPE's business,
financial condition and results of operations.
WE MUST KEEP PACE WITH THE RAPIDLY CHANGING PRODUCT REQUIREMENTS OF OUR
CUSTOMERS
Technology and customer needs change rapidly in the computer storage
industry, which requires ongoing technological development and the introduction
of new products. We believe our future success will depend, in part, on our
ability to anticipate and adapt to such changes and to offer, on a timely basis,
products and services that meet customer demands. Our inability to develop on a
timely basis new products and services or enhancements to existing products and
services, or the failure of such products and services or enhancements to
achieve market acceptance, could materially adversely affect our business,
financial condition and results of operations.
WE ARE SUBJECT TO RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS
A component of our long-term strategy is to expand into a number of
European markets. However, we may not be able to market, sell and deliver
successfully our services outside Germany, Switzerland, Austria and the other
areas presently served. In addition, we will be subject to certain risks
inherent in conducting business internationally, including:
. unexpected changes in regulatory requirements;
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<PAGE>
. export restrictions, tariffs and other trade barriers;
. problems in collecting accounts receivable;
. currency fluctuations;
. seasonal reductions in business activity; and
. potentially adverse tax consequences.
Any of these factors could adversely affect our international operations and
could have a material adverse effect on our current or future business, results
of operations and financial condition.
WE ARE SUBJECT TO THE RISKS ASSOCIATED WITH THE YEAR 2000 PROBLEM
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, many companies' software and computer systems
may need to be upgraded or replaced in order to comply with such "Year 2000"
requirements. Although we believe that our systems are Year 2000 compliant, we
do utilize third-party equipment and software that may not be Year 2000
compliant. Failure of such third-party equipment or software to operate properly
with regard to the Year 2000 and thereafter could require us to incur
unanticipated expenses to remedy any problems, which could have a material
adverse effect on our business and operating results.
WE ARE SUBSTANTIALLY DEPENDENT ON OUR KEY PERSONNEL
Our success depends to a significant degree upon the continued services of
Adrian Knapp, Chairman of the Board and Vice President and Stephan Isenschmid,
President and Chief Executive Officer. The loss of the services of any key
personnel could materially adversely affect our business, financial condition
and results of operations.
WE MAY FACE DIFFICULTIES MANAGING OUR GROWTH
We have a history of rapid growth. Our future operating results will depend
on our management's ability to manage growth, including, but not limited to,
hiring and retaining significant numbers of qualified employees, forecasting
revenues, controlling expenses and managing our assets. An unexpected decline in
the growth rate of revenues without a corresponding and timely reduction in
expense growth or a failure to manage other aspects of growth could have a
material adverse effect on our business, results of operations or financial
condition.
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WE HAVE NO IMMEDIATE PLANS TO PAY CASH DIVIDENDS
We have never declared or paid cash dividends on its capital stock and we
do not expect to declare or pay any cash dividends for the foreseeable future.
Earnings, if any, will be retained to fund development and expansion. Any future
determination to pay cash dividends will be at the discretion of the Board of
Directors and will be dependent upon our financial condition, results of
operations, capital requirements, general business condition and such other
factors as the Board of Directors may deem relevant.
WE DO NOT HAVE AN ACTIVE MARKET FOR OUR COMMON STOCK
Our common stock is traded on the OTC Bulletin Board under the symbol
"COPE." On May 21, 1999, the last reported sale price of the common stock on the
OTC Bulletin Board was $30.00 per share. However, we consider our common stock
to be "thinly traded" and any last reported sale prices may not be a true
market-based valuation of the common stock. Although we intend to list our
common stock on the NASDAQ National Market and the Neuer Markt, an active market
for our common stock may not develop. In addition, the stock market in general,
and the stocks of technology companies in particular, have experienced extreme
price and volume fluctuations that have often been unrelated or disproportionate
to the operating performance of such companies.
WE ARE SUBJECT TO CHANGES IN GOVERNMENT REGULATIONS
Our business, results of operations and financial condition could be
adversely affected if laws, regulations or standards relating to our products or
services were newly implemented or changed. See, "Business - Regulations."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate to
future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "except," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results may
differ materially. In evaluating these statements, you should specifically
consider various factors, including the risks outlined under "Risks Factors."
These factors may cause our actual results to differ materially from any
forward-looking statement. Although we believe that the expectations reflected
in the forward-looking statements are reasonable, we cannot guarantee future
results, levels of activity, performance or achievements. Moreover, neither we
nor any other person assumes responsibility for the accuracy and completeness of
the forward-looking statements. We are under no duty to update any of the
forward-looking statements after the date of this prospectus to conform such
statements to actual results or to changes in our expectations.
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<PAGE>
THE COMPANY
-----------
COPE, Inc. was incorporated in the State of Delaware in 1985 under the name
Harrier, Inc. On September 11, 1998, we changed our corporate name to COPE,
Inc. Our executive offices are located at Grundstrasse 14, 6343 Rotkreuz,
Switzerland; telephone +41 41 798 3344.
We are a provider of enterprise data storage and security consulting,
services and solutions to customers located primarily in Western Europe. Our
business consists of the analysis, design and implementation of storage and
security systems that integrate the software and hardware products that best
meet the identified objective. We generate revenue from three primary sources:
. providing consulting services in connection with the initial
analysis of a client's data storage or security needs and designing
of a system best suited to meet those needs;
. implementing the desired system by either reselling third party
hardware or selling one of our proprietary solutions; and
. providing ongoing consulting services in connection with the
maintenance of the system, including improving and adding to the
system to keep pace with the clients' changing needs and
improvements in technology.
We generally provide our data storage and security systems on a turn-key basis
and purchase for resale the software and hardware components made part of the
systems solutions. We resell software and hardware products offered by the
major vendors in the data storage and security industry, including:
. Advanced Digital Information . Legato Systems
. Ascend Communications . National Semicondctor
. Cisco Systems . Oracle
. Compaq Computer . Overland Data
. Data General . Storage Technolog
. EMC Corp . Sun Microsystems
. IBM . Veritas Software
Following our acquisition of Hicomp Software Systems GmbH on April 19, 1999, we
also offer our own proprietary storage software products, Hiback and Hibars. We
provide our information consulting services and solutions to a variety of
companies in the financial, insurance, pharmaceutical and telecommunication
industries located in Germany, Switzerland, and Austria.
Our goal is to become the leading independent provider of enterprise data
storage and security services and solutions in Western Europe. The key elements
of COPE's strategy are:
. Emphasize Consulting Services. By emphasizing the quality of our
consulting services, we believe that we can establish and foster a reputation in
Western Europe as a leading provider of enterprise data storage and security
consulting, services and solutions.
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<PAGE>
. Foster a Reputation for Independence. We intend to foster the
reputation and image of an independent organization firm dedicated exclusively
to providing storage and security consulting, services and solutions to the
enterprise data storage market only.
. Expand Through Targeted Acquisitions. We intend to aggressively
seek out and acquire high quality independent consulting firms throughout
Western Europe.
INFORMATION ABOUT OUR STOCK OPTION PLAN
---------------------------------------
Introduction
Set forth below is a summary of our 1998 Stock Option Plan (the "Plan"),
which highlights the principal features of that plan. In addition to our Plan,
we have also entered into stock option agreements with each of the individuals
who have been granted options. You may obtain a copy of the Plan and the form of
the stock option agreements by writing or calling our Chairman at the address
and phone number listed above.
General Purpose
Our Board of Directors adopted the Plan on August 14, 1998. The purpose of
the Plan is to provide our officers, directors, employees, consultants and
independent contractors added incentive for high levels of performance and
unusual efforts to increase our earnings. The Plan provides these individuals
with an opportunity to acquire, maintain and increase a proprietary interest in
our success. The Plan also encourages those employees to continue their
employment with us. We are permitted to grant two different types of options
under the Plan, incentive stock options ("ISO's") under Section 422 of the US
Internal Revenue Code of 1986, as amended (the "Code") and non-qualified stock
options ("NSO's"). Both of these types of options are discussed in greater
detail below.
ERISA
The Plan is not an "employee pension benefit plan" as defined in Section
3(2) of the US Employee Retirement Income Security Act ("ERISA") and is not
qualified as a profit sharing plan as described in Section 401 of the Code.
Shares Available
We have reserved a total of 400,000 shares of common stock for issuance
under the Plan. These shares may include authorized but unissued shares or
shares we reacquired at any time.
If a person fails to exercise an option granted under the Plan before it
expires or if an option terminates for any reason, we will be able to use the
shares which are subject to that option to grant further options under the Plan.
The number of shares of common stock reserved for issuance under the Plan
is subject to equitable adjustments for any recapitalizations, mergers,
consolidations, stock dividends, split-ups, combinations, exchanges or any other
similar changes which may be required to prevent dilution. Similarly, our Stock
Option Committee, which administers the Plan, in its sole discretion, may adjust
the number of shares a selected person is permitted to acquire if an increase or
decrease in the amount of outstanding capital stock occurs prior to that
person's exercise of an option granted pursuant to the Plan.
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<PAGE>
Administration
The Plan is administered by our Stock Option Committee ("Committee"), which
consists of our Board of Directors. The Committee members act in the capacity
of plan administrators. The Committee has the authority to determine who will
be granted options and the time or times those selected persons will be granted
and may exercise all or any part of those options. The Committee also determines
the number of shares to be subject to each option, the purchase price of the
shares of common stock covered by each option and the method of payment of such
price. The Committee also has the authority to construe and interpret the Plan,
decide all questions and settle all controversies and disputes which may arise
in connection with the Plan and prescribe, amend and rescind rules and
regulations relating to administration of the Plan.
Eligibility
Only our officers, employees and directors who are also our employees or
employees of any of our subsidiaries are eligible to receive grants of ISO's.
Our officers, employees and directors (whether or not they are also employees)
as well as our consultants, independent contractors or our other service
providers are eligible to receive grants of NSO's.
The Committee may consider any factors it believes will accomplish the
purpose of the Plan when it determines (i) the number of shares to be covered by
each option, (ii) the purchase price for such shares and the method of payment
of such price, (iii) the individuals who will receive options, (iv) the terms
and provisions of the option agreements, and (v) the times at which such options
shall be granted.
Grant of Options
The exercise price for the options granted under the Plan is specified in
each stock option agreement. The Plan does not specify any maximum or minimum
amount of options which may be granted to any person. However, the Code states
that ISO's may not be granted if the sum of (i) aggregate fair market value
(determined at the time the ISO's are granted) of the stock subject to all stock
options we granted under the Plan which are first exercisable during the same
calendar year plus (ii) the aggregate fair market value (determined at the time
the options are granted) of all stock subject to all other incentive stock
options we granted to such optionee which are exercisable for the first time
during such calendar year, exceeds $100,000.
ISO's may be exercised for a term up to ten (10) years from the date it is
granted. There is no limitation under the Plan on the term of NSO's. However,
if a person owns more than 10% of the total combined voting power of all classes
of our stock or the stock of our subsidiaries, that person's ISO's must expire
no later than five (5) years after the date it is granted.
Exercise of Options
ISO's
-----
The Committee shall determine the exercise price for each share which an
optionee is entitled to purchase under an ISO. The minimum exercise price for
an ISO shall be the fair market value per share on the date we grant the ISO.
For those persons who own more than ten percent (10%) of the total combined
voting power of all classes of our stock, including the stock of our
subsidiaries, the minimum exercise price for an ISO shall be one hundred ten
percent (110%) of the fair market value per share of common stock on the date we
grant the ISO
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NSO's
-----
The Committee shall determine the exercise price for each share which an
optionee is entitled to purchase under an NSO. The minimum exercise price for
an NSO shall be eighty-five percent (85%) of the fair market value per share on
the date we grant the NSO.
For both ISO's and NSO's, the Committee determines the fair market value of
the shares.
The Committee shall also determine the consideration and the method of
payment of the shares issued upon exercise of an option. The consideration may
consist of cash, shares of our common stock or such other consideration and
method of payment for the shares as may be permitted under applicable state and
federal laws.
Nontransferability
A person who receives options under the Plan may not transfer those options
during his or her lifetime. A person who receives options may transfer those
options after his or her death by will or under the laws of descent and
distribution.
Termination of Employment
If an employee who has received options ceases to be employed by, or ceases
to have a relationship with us or any of our subsidiaries for any reason other
than death, disability or cause, all options granted under the Plan will
terminate not later than three (3) months thereafter. If we have terminated his
or her employment with us or any of our subsidiaries for cause, all options
granted to him or her shall expire immediately. However, the Committee may, in
its sole discretion, waive the expiration of the Option within thirty (30) days
of his or her termination.
Death or Disability
If a holder of options dies or becomes disabled (as defined in Section
22(e)(3) of the Code) he or she (or his or her descendants) shall have six
months to purchase all or any part of the shares of common stock he or she was
entitled to purchase on the date his or her employment terminated due to his or
her death or disability. In no case, however, may the option holder exercise
options more than ten (10) years after the date the options were granted.
Duration, Amendment and Termination
Unless previously terminated, the Plan will terminate on August 14, 2008.
No options may be granted after that date under the Plan. (Options granted
before the Plan terminates but exercisable afterwards will not be affected). The
Committee may at any time and from time to time modify, amend, suspend or
terminate the Plan. However, the Committee may not:
. increase the maximum number of shares which may be purchased pursuant to
options granted under the Plan, either in the aggregate or by an option
holder, except in limited circumstances;
. change the designation of the class of employees eligible to receive ISO's
. extend the term of the Plan or the maximum option period under the Plan
. decrease the minimum ISO exercise price; or
. cause ISO's issued under the Plan to fail to meet the requirements of
incentive stock options under Section 422 of the Code.
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An option holder must consent to any amendment of the Plan which would adversely
affect his or her rights as an option holder.
Options Outstanding
As of May 21, 1999, we have granted under the Plan options to purchase a
total of 297,400 shares of common stock at exercise prices ranging from $8.40 to
$50.00 per share, to our employees, officers, directors and consultants. As of
May 21, 1999, options to purchase a total of 22,390 shares of common stock at an
exercise price of $8.40 have been exercised.
INCOME TAX CONSEQUENCES
-----------------------
This section of the Prospectus contains a discussion regarding the income
tax consequences of the Plan under US Federal, German and Swiss law. This
discussion is intended only as a broad discussion of the general rules under
income tax laws in these jurisdictions applicable to the grant and exercise of
options and the acquisition and disposition of common stock acquired pursuant to
the exercise of options. Specific situations may be subject to different rules
and may result in different tax consequences. You are strongly urged to consult
your tax advisor with specific reference to your tax situation.
US Federal Law
ISO's Under the Plan
--------------------
Grant and Exercise of ISO's. In general, an optionee realizes no income
upon the grant of Plan ISO's (assuming these options qualified as "incentive
stock options" under the Code when they were granted) or upon the exercise of
ISO's. But see, "Alternative Minimum Tax," below. The amount paid by the
optionee for the common stock received pursuant to the exercise of ISO's will
generally constitute his or her basis (or cost) for tax purposes. The holding
period for such common stock generally begins on the date the optionee exercises
ISO's. See below for a discussion of the exceptions to these general rules when
the optionee uses previously acquired stock of the Company to exercise ISO's.
Alternative Minimum Tax. Although no current taxable income is realized
upon the exercise of ISO's, Section 56(b)(3) of the Code provides that the
excess of the fair market value on the date of exercise of the common stock
acquired pursuant to such exercise over the option price is an item of tax
adjustment. As such, the exercise of ISO's may result in the optionee being
subject to the "Alternative Minimum Tax" for the year ISO's are exercised. The
"Alternative Minimum Tax" is calculated on a taxpayer's adjusted gross income,
subject to special adjustments, plus specified items of tax preference minus
specified itemized deductions. The resulting amount is the alternative minimum
taxable income.
If the shares are disposed of in a "disqualifying disposition" -- that is,
within one year of exercise or two years from the date of the option grant-- in
the year in which the ISO is exercised, the maximum amount that will be included
as Alternative Minimum Tax income is the gain on the disposition of the ISO
stock. In the event there is a disqualifying disposition in a year other than
the year of exercise, the income on the disqualifying disposition will not be
considered income for Alternative Minimum Tax purposes. In addition, the basis
of the ISO stock for determining gain or loss for Alternative Minimum Tax
purposes will be the exercise price for the ISO stock increased by the amount
that Alternative Minimum Tax income was increased due to the earlier exercise of
the ISO. Alternative Minimum Tax incurred by reason of the exercise of the ISO
does not result, for regular income tax purposes, in an increase in basis of the
shares acquired upon exercise. The alternative minimum tax attributable to the
exercise of an ISO may be applied as a credit against regular tax liability in a
subsequent year, subject to certain
-10-
<PAGE>
limitations. The gain recognized upon a sale or exchange of shares acquired
through the exercise of the ISO's will be limited to the excess of the amount
received in the sale or exchange over the fair market value of the shares at the
time the ISO was exercised.
The application of the Alternative Minimum Tax for each optionee will
depend on such optionee's total income and deductions for the year of exercise.
As such, the extent to which, if any, the tax adjustment item generated by the
exercise of ISO's in conjunction with any other tax adjustment items or
alternative minimum tax adjustments may result in an Alternative Minimum Tax
liability for any optionee cannot be determined. Accordingly, each optionee
should consult his or her own tax counsel to determine the potential impact of
the Alternative Minimum Tax on his or her exercise of ISO's.
Employment and Holding Requirements of ISO's. The Code requires that the
optionee remain an employee of the Company or its subsidiaries at all times
during the period beginning on the date that the ISO's are granted and ending on
the day three (3) months (or one (1) year in the case of permanent and total
disability) before the date that each ISO is exercised. Under the Plan, upon
termination of employment for any reason other than cause, disability or death
the options terminate three (3) months after the termination date unless by
their terms the options terminate earlier. If termination occurs as a result of
disability or death, the options will expire one (1) year after such termination
unless they expire before that date by their terms. Therefore, if the options
constituted incentive stock options at grant, permissible exercises after
termination automatically meet the employment requirements.
In order for an optionee exercising ISO's to qualify for the income tax
free treatment set forth in the preceding section such optionee must not dispose
of the common stock acquired pursuant to the exercise of ISO's within two (2)
years from the date the ISO's were granted, nor within one (1) year after the
exercise of the ISO's. If the optionee meets these employment and holding
requirements, any future gain or loss realized and recognized from the sale or
exchange of the common stock should be long-term capital gain or loss, if the
stock is held as a capital asset. If the optionee disposes of the shares of
common stock acquired upon exercise of an ISO within two years from the granting
of options or one year after the exercise of options (collectively, an "early
disposition"), any gain will constitute, in the year of disposition, ordinary
compensation income to the extent of the excess of the fair market value of the
common stock on its acquisition date over the price paid for it by the optionee.
Any additional gain will be treated as capital gain. If the optionee disposes of
the shares of common stock at a loss, such loss will be a capital loss.
For purposes of this section, the transfer of common stock by reason of the
optionee's death does not constitute a disposition of the common stock. In
addition, the transferee of the common stock is not subject to the holding and
employment requirements.
If the Recipient disposes of options instead of exercising them, the
incentive stock option rules discussed herein have no application. The
recipient-transferor will recognize either long or short-term capital gain or
loss and the purchaser will not be subject to any of these rules.
NSO's Under the Plan
---------------------
In general, an optionee who receives an NSO realizes income either at the
date of grant or at the date of exercise, but not at both. Unless the NSO has a
"readily ascertainable fair market value" at the date of grant, the optionee
recognizes no income on the date of grant and the compensatory aspects are held
open until the NSO is exercised. In this case, upon exercise, the optionee will
have compensation income to the extent of the difference between the fair market
value of the stock at the time of exercise and the exercise price paid by the
optionee.
An NSO is deemed to have a "readily ascertainable fair market value" if (a)
the NSO's are actively traded on an established market or (b) the fair market
value can be measured with
-11-
<PAGE>
reasonable accuracy which means that (i) the NSO's are transferable, (ii) the
NSO's are exercisable immediately in full, (iii) the NSO's and underlying stock
are not subject to restrictions which have a significant effect on the NSO's
value and (iv) the fair market value of the "option privilege" is readily
ascertainable.
Exercise of Options Through Use of Previously Acquired Common Stock of the
--------------------------------------------------------------------------
Company
-------
Under the Plan, in some circumstances an optionee may be allowed to use
previously acquired common stock to exercise both ISO's and NSO's. Such
previously acquired common stock may include common stock acquired pursuant to
an earlier partial exercise of options. Generally the Internal Revenue Service
(the "Service") recognizes that an exchange of common stock for other common
stock does not constitute a taxable disposition of any shares of common stock.
The Service treats such exchanges as two transactions. First, to the extent of
the number of previously acquired shares of common stock, a share for share
exchange occurs with each new share of common stock ("Carryover shares")
succeeding to the cost basis and holding period of the old shares of common
stock. Second, the remaining new shares of common stock are deemed acquired at a
zero cost with their holding period commencing on the date of acquisition
("Noncarryover shares").
The foregoing rules generally apply to the use of previously acquired
common stock to acquire common stock under the Plan. An optionee may use common
stock owned at the date options are exercised to acquire common stock upon
exercise of the options. However, despite a "carryover" holding period, all of
the new shares of common stock are still subject to the holding requirements
discussed above. If optionee disposes of such common stock acquired pursuant to
the exercises of ISO's before the later of two years from the granting or one
year from exercise, an early disposition occurs first to the extent of the
Noncarryover shares and then to the extent of the Carryover shares.
In addition, if an optionee uses common stock acquired through a previous
partial exercise of options ("First Stock") to acquire new common stock through
an exercise of options ("Second Stock") before the First Stock has met the above
holding requirements, the First Stock will be treated as having been disposed of
in an early disposition. Therefore, the optionee will have to recognize ordinary
compensation to the excess of the fair market value of the First Stock on its
acquisition dates over its price paid. Despite the early disposition, any excess
gain is not recognized, but is deferred and carried over to the Second Stock. If
the First Stock is used to acquire other common stock which is not subject to
either the Plan, no early disposition will generally occur and the tax free
exchange rules may apply.
German Law
Both ISOs and NSOs receive the same tax treatment under German law. In
either case, the holder of the option does not realize income upon the issuance
of the option. However, upon the exercise of the option, the holder realizes
ordinary income, taxable at full rates, on the difference between the option
price and the market price on the date of exercise. Under German law, capital
gains on stock are tax-free if the investment has been held for at least 6
months. Accordingly, after incurring the initial tax burden upon exercise of
their options, option holders do not incur additional taxation on future gains
realized from share exchanges, assuming the requisite holding period is met.
-12-
<PAGE>
Swiss Law
Stock options are covered by Federal Tax Administration Circular Letters of
November 8, 1973, May 19, 1990, and April 30, 1997. Under Swiss law, the grant
of options under the Plan produces taxable income, so-called up-front taxation.
In determining the taxable base, in the absence of any restrictions in the Plan,
Swiss federal taxation will treat as taxable income the difference between the
fair market value of the common shares underlying the options on the date of
grant and the exercise price of the options. However, the exercise of the option
does not produce taxable income to the employee. Accordingly, if the exercise
price of the options is below fair market value on the date of grant, the
employee bears a risk of incurring tax at the moment of the issuance of the
option, and then having no deduction or credit should the shares either decline
in value after exercise of the option or before exercise of the option, in which
case the options would not be exercised.
Note that for Swiss residents, state income taxation is also applied. The
particular state tax implications should be verified by each optionee on an
individual basis.
SELLING SHAREHOLDERS
--------------------
The shares offered by this prospectus include up to 400,000 shares of our
common stock ($.001 par value per share) which includes (i) shares of common
stock we may issue from time to time to our employees, officers, directors,
consultants and independent contractors upon their exercise of stock options
granted to them under our 1998 Stock Option Plan ("Plan"), and (ii) shares of
common stock we issued to certain selling shareholders following their exercise
of stock options granted to them under the Plan.
The shares of common stock offered by this prospectus by the selling
shareholders represent (i) 275,010 shares of common stock underlying options
granted to the selling shareholders and (ii) 22,390 shares of common stock which
were acquired by the selling shareholders upon their exercise of options at an
exercise price of $8.40 per share. The selling shareholders are as follows:
<TABLE>
<CAPTION>
Name Shares owned Shares Shares Owned After
Prior to this Offered(1) this Offering(2)
Offering
<S> <C> <C> <C>
Adrian Knapp(3) 1,352,000 56,000(4) 1,296,000
Stephan Isenschmid(5) 1,352,000 56,000(4) 1,296,000
Markus Bernhard(6) 18,500 18,500(7) -0-
Markus Stalder(8) 1,000 1,000(9) -0-
Peter Koch (8) 17,000 1,000(9) 16,000
Kevin DeVito(8) 3,870 3,000(9) 870
Uwe Hinrichs 480,000 60,000(9) 420,000
Unnamed non-affiliates(10) 101,900 101,900(11) -0-
- --------------------------
</TABLE>
-13-
<PAGE>
(1) Pursuant to Rule 416 of the Securities Act of 1933, as amended, this
prospectus also covers such additional number of shares of common stock as
may become issuable upon exercise of the stock options held by the selling
shareholders as a result of stock splits, stock dividends and similar
transactions.
(2) Assumes that all of the shares acquired upon exercise of the respective
stock options held by the selling stockholders covered by this prospectus
are sold in the offering.
(3) Our Chairman of the Board.
(4) Includes 2,000 shares of common stock underlying presently exercisable
options and 51,000 shares of common stock underlying options that are
subject to vesting. Also includes 3,000 shares of common stock granted in
April 1999 upon the exercise of options at an exercise price of $8.40.
(5) Our President, Chief Executive Officer and director.
(6) Our Chief Financial Officer.
(7) Includes 500 shares of common stock underlying presently exercisable
options and 12,000 shares of common stock underlying options that are
subject to vesting. Also includes 6,000 shares of common stock granted in
April 1999 upon the exercise of options at an exercise price of $8.40.
(8) One of our directors.
(9) Represents shares of common stock underlying options that are subject to
vesting.
(10) Includes certain non-affiliates, none of which is offering more than 1,000
shares of common stock by this prospectus.
(11) Includes 91,510 shares of common stock underlying options that are subject
to vesting. Also includes 10,390 shares of common stock granted in April
1999 upon the exercise of options at an exercise price of $8.40.
PLAN OF DISTRIBUTION
--------------------
The shares of common stock may be offered from time to time by the selling
shareholders or their donees, pledgees, transferees or other successors in
interest for resale by this prospectus in one or more transactions at fixed
prices, at market prices at the time of sale, at varying prices determined at
the time of sale or at negotiated prices. The selling shareholders may offer
their shares of common stock in one or more of the following transactions:
. in brokerage transactions;
. on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale;
. in the over-the-counter market;
. in private transactions;
. by pledge to secure debts and other transactions;
. a combination of any of the above transactions or by any other legally
available means.
The shares of common stock described in this prospectus may be sold from
time to time directly by the selling shareholders. The selling shareholders may
not sell all of the shares. The selling shareholders may transfer, devise, or
gift such shares by other means not described in this prospectus.
-14-
<PAGE>
To comply with the securities laws of various states and other
jurisdictions the common stock must be offered or sold only through registered
or licensed brokers or dealers. In addition, in various jurisdictions, the
common stock may not be offered or sold unless they have been registered or
qualified for sale or an exemption is available and complied with. In addition,
the selling shareholders and any other person participating in a distribution
will be subject to the Securities Exchange Act of 1934 which may limit the
timing of purchases and sales of common stock by the selling shareholders or any
other such person. These factors may affect the marketability of the common
stock and the ability of brokers or dealers to engage in market-making
activities.
USE OF PROCEEDS
---------------
We will receive the proceeds from the payment of the exercise price of the
options and these payments will be applied towards our working capital. We will
not receive any portion of the proceeds from the resale of the shares of common
stock acquired upon exercise of the stock options.
RESTRICTIONS ON RESALE
----------------------
We are subject to Section 16(b) of the Securities Exchange Act of 1934, as
amended. Section 16(b) allows us to recover any profit realized by any of our
officers or directors from any purchase and sale, or sale and purchase, of our
common stock within any period of less than six months. Further, our affiliates
who acquire shares of our common stock pursuant to an option described in this
prospectus will not be able to rely on this prospectus to resell those shares.
Accordingly, our affiliates who exercise options must insure that the resale of
their shares complies with an available exemption from the registration
provisions of the Federal securities law, such as Rule 144 under the Securities
Act of 1933, as amended.
LEGAL MATTERS
-------------
Our corporate attorneys, Oppenheimer Wolff & Donnelly LLP, Newport Beach,
California, will issue an opinion about the legality of the offered securities
for us.
EXPERTS
-------
ATAG Ernst & Young Ltd., independent auditors, have audited our
consolidated financial statements included in our annual report on Form 10-KSB
for the year ended December 31, 1998, as set forth in their report, which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our financial statements are incorporated by reference in reliance on
ATAG Ernst & Young Ltd.'s report, given on their authority as experts in
accounting and auditing.
Item 2. Registrant Information and Employee Plan Annual Information
AVAILABLE INFORMATION
---------------------
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. Our SEC filings are available to the public over the
Internet at the SEC's web site at
-15-
<PAGE>
http://www.sec.gov. You may also read and copy any document we file at the SEC's
offices located at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549. This Prospectus does not contain all the information set forth in the
Registration Statement and exhibits thereto which we have filed with the SEC
under the Act, to which reference is hereby made.
-16-
<PAGE>
INCORPORATION OF DOCUMENTS BY REFERENCE
---------------------------------------
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. Specifically,
we incorporate by reference the documents listed below and any future filings we
will make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
. Annual Report on Form 10-KSB for the year ended December 31, 1998;
. Quarterly Report on Form 10-QSB for the quarter ended March 31, 1999;
. Current Reports on Form 8-K filed with the SEC on March 12, 1999
You may request a copy of these filings, at no cost, by writing or
telephoning us at the following address: Markus Bernhard, Chief Financial
Officer, Grundstrasse 14, 6343 Rotkreuz, Switzerland; telephone 41 41 798 3333
This prospectus is part of a Registration Statement we filed with the SEC.
You should rely only on the information provided in this prospectus or
incorporated by reference. We have not authorized anyone else to provide you
with different information. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the front of the
document. We are not making an offer of these securities in any state where the
offer is not permitted.
-17-
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14 or 15(d) the Securities Exchange Act of 1934:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998
2. The Company's Quarterly Report on Form 10-QSB for the quarter ended
March 31, 1999
3. The Company's Current Report on Form 8-K filed with the SEC on March
12, 1999
You may request a copy of these filings at no cost by writing or
telephoning us at the following address: Markus Bernhard, Chief Financial
Officer, Grundstrasse 14, 6343 Rotkreuz, Switzerland; (4141) 798-3333.
Item 4. Description of Securities.
Inapplicable.
Item 5. Interests of Named Experts and Counsel.
Inapplicable.
Item 6. Indemnification of Directors and Officers.
Delaware Statutes
-----------------
Section 145 of the Delaware General Corporation Law, as amended, provides
for the indemnification of the Company's officers, directors, employees and
agents under certain circumstances as follows:
"(a) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he or she is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he
-18-
<PAGE>
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in subsections (a) and (b) of
this section. Such determination shall be made (1) by a majority vote of the
directors who are not parties to such action, suit or proceeding, even though
less than a quorum, or (2) if there are no such directors, or if such directors
so direct, by independent legal counsel in a written opinion, or (3) by the
stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.
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<PAGE>
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office.
(g) A corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his or her status as
such, whether or not the corporation would have the power to indemnify him
against such liability under this section.
(h) For purposes of this section, references to "the corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under this section with respect to the resulting or surviving
corporation as he or she would have with respect to such constituent corporation
if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the corporation" shall include any
service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
(k) The Court of Chancery is hereby vested with exclusive jurisdiction to
hear and determine all actions for advancement of expenses or indemnification
brought under this section or under any bylaw, agreement, vote of stockholders
or disinterested directors, or otherwise. The Court of Chancery may summarily
determine a corporation's obligation to advance expenses (including attorneys'
fees). (Last amended by Ch.261,L.'94,eff.7-1-94.)"
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<PAGE>
Certificate of Incorporation
- ----------------------------
The Company's Certificate of Incorporation provides that the directors of
the Company shall be protected from personal liability to the fullest extent
permitted by law. The Company's Bylaws also contain a provision for the
indemnification of the Company's directors (see "Indemnification of Directors
and Officers - Bylaws" below).
Bylaws
- ------
The Company's Bylaws provide for the indemnification of the Company's
directors, officers, employees, or agents under certain circumstances as
follows:
"7.1 Authorization For Indemnification. The Corporation may indemnify, in
---------------------------------
the manner and to the full extent permitted by law, any person (or the estate,
heirs, executors, or administrators of any person) who was or is a party to, or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the Corporation, and with respect to
any criminal action or proceeding, that he or she had reasonable cause to
believe that his or her conduct was unlawful.
7.2 Advance of Expenses. Costs and expenses (including attorneys' fees)
-------------------
incurred by or on behalf of a director or officer in defending or investigating
any action, suit, proceeding or investigation may be paid by the Corporation in
advance of the final disposition of such matter, if such director or officer
shall undertake in writing to repay any such advances in the event that it is
ultimately determined that he or she is not entitled to indemnification. Such
expenses incurred by other employees and agents may be so paid upon such terms
and conditions, if any, as the Board deems appropriate. Notwithstanding the
foregoing, no advance shall be made by the Corporation if a determination is
reasonably and promptly made by the Board by a majority vote of a quorum of
disinterested directors, or (if such a quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs) by independent legal
counsel in a written opinion, or by the stockholders, that, based upon the facts
known to the Board or counsel at the time such determination is made, (a) the
director, officer, employee or agent acted in bad faith or deliberately breached
his or her duty to the Corporation or its stockholders, and (b) as a result of
such actions by the director, officer, employee or agent, it is more likely than
not that it will ultimately be determined that such director, officer, employee
or agent is not entitled to indemnification.
-21-
<PAGE>
7.3 Insurance. The Corporation may purchase and maintain insurance on
---------
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise or as a member of any committee or similar
body against any liability asserted against him and incurred by him in any such
capacity, or arising out of his or her status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article or applicable law.
7.4 Non-exclusivity. The right of indemnity and advancement of expenses
---------------
provided herein shall not be deemed exclusive of any other rights to which any
person seeking indemnification or advancement of expenses from the Corporation
may be entitled under any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office. Any agreement for
indemnification of or advancement of expenses to any director, officer, employee
or other person may provide rights of indemnification or advancement of expenses
which are broader or otherwise different from those set forth herein."
Indemnity Agreements
- --------------------
The Company's Bylaws provide that the Company may indemnify directors,
officers, employees or agents to the fullest extent permitted by law and the
Company has agreed to provide such indemnification to its directors pursuant to
written indemnity agreements.
Item 7. Exemption from Registration Claimed.
Inapplicable.
Item 8. Exhibits.
Exhibit Number Description
- -------------- -----------
5.1 Opinion of Oppenheimer Wolff & Donnelly LLP re: legality of
shares.
10.22 COPE, Inc. 1998 Stock Option Plan
23.1 Consent of Oppenheimer Wolff & Donnelly LLP (filed as Exhibit
5.1 herein).
23.2 Consent of ATAG Ernst & Young Ltd.
Item 9. Undertakings.
A. The undersigned registrant hereby undertakes to file during any
period in which offers or sales of the securities are being made, a post-
effective amendment to this Registration Statement to include any material
information with respect to the plan of distribution not previously disclosed or
any material change to such information set forth in the Registration Statement.
-22-
<PAGE>
B. The undersigned registrant hereby undertakes that, for purposes
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.
C. The undersigned registrant hereby undertakes 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.
D. The undersigned registrant hereby undertakes 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 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.
E. 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. 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.
-23-
<PAGE>
SIGNATURES
----------
The Registrant
- --------------
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 on May 21, 1999.
COPE, INC.
a Delaware corporation
By: /s/ ADRIAN KNAPP
----------------------------
Adrian Knapp, Executive Vice
President
By: /s/ MARKUS BERNHARD
---------------------------
Markus Bernhard
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
Signature Title Date
- --------- ----- ----
<S> <C> <C> <C> <C> <C>
/s/ ADRIAN KNAPP Chairman of the Board, Executive May 21, 1999
- ----------------------
ADRIAN KNAPP Vice President and Director
/s/ STEPHAN ISENSCHMID President, Chief Executive Officer May 21, 1999
- ----------------------
STEPHAN ISENSCHMID and Director
/s/ MARKUS STALDER Director May 21, 1999
- ----------------------
MARKUS STALDER
/s/ PETER KOCH Director May 21, 1999
- ----------------------
PETER KOCH
/s/ KEVIN DEVITO Director May 21, 1999
- ----------------------
KEVIN DEVITO
</TABLE>
-24-
<PAGE>
EXHIBIT 5.1
OPPENHEIMER WOLFF & DONNELLY LLP
500 Newport Center Drive
Suite 700
Newport Beach, California 92660
(949) 719-6000
(949) 719-6040 (Fax)
May 25, 1999
COPE, Inc.
Grundstrasse 14
6343 Rotkreuz
Switzerland
Re: Registration Statement on Form S-8
----------------------------------
Gentlemen:
As counsel for COPE, Inc., a Delaware corporation (the "Company"), we have
examined its Certificate of Incorporation, as amended, Bylaws and such other
corporate records, documents and proceedings, and such questions of law as we
have deemed relevant for the purpose of this opinion. We have also, as such
counsel, examined the Registration Statement on Form S-8 of the Company as filed
with the Securities and Exchange Commission, covering the registration under the
Securities Act of 1933, as amended, of a total 400,000 shares of $.001 par value
common stock ("Common Stock"), including the exhibits and form of Prospectus
(the "Prospectus") pertaining thereto, and any amendments thereto (collectively,
the "Registration Statement").
Upon the basis of such examination, we are of the opinion that:
1. The Company is a corporation duly authorized and validly existing in
good standing under the laws of the State of Delaware, with all requisite power
to conduct the business described in the Registration Statement.
2. The shares of the Company's Common Stock registered pursuant to the
Registration Statement have been duly and validly authorized and, subject to the
payment therefor pursuant to the terms contemplated in the final Prospectus,
such shares of Common Stock will be duly and validly issued as fully paid and
non-assessable securities of the Company.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Oppenheimer Wolff & Donnelly LLP
<PAGE>
EXHIBIT 10.22
COPE, INC.
1998 STOCK OPTION PLAN
1. PURPOSE. The purpose of the COPE, Inc. 1998 Stock Option Plan
-------
(the "Plan") is to strengthen COPE, Inc., a Delaware corporation
("Corporation"), by providing to employees, officers, directors, consultants and
independent contractors of the Corporation or any of its subsidiaries (including
dealers, distributors, and other business entities or persons providing services
on behalf of the Corporation or any of its subsidiaries) added incentive for
high levels of performance and unusual efforts to increase the earnings of the
Corporation. The Plan seeks to accomplish this purpose by enabling specified
persons to purchase shares of the common stock of the Corporation, $.001 par
value, thereby increasing their proprietary interest in the Corporation's
success and encouraging them to remain in the employ or service of the
Corporation.
2. CERTAIN DEFINITIONS. As used in this Plan, the following words and
-------------------
phrases shall have the respective meanings set forth below, unless the context
clearly indicates a contrary meaning:
2.1 "Board of Directors": The Board of Directors of the
------------------
Corporation.
2.2 "Committee": The Committee which shall administer the Plan
---------
shall consist of the entire Board of Directors or a committee designated by the
entire Board.
2.3 "Fair Market Value Per Share": The fair market value per
---------------------------
share of the Shares as determined by the Committee in good faith. The Committee
is authorized to make its determination as to the fair market value per share of
the Shares on the following basis: (i) if the Shares are traded only otherwise
than on a securities exchange and are not quoted on the National Association of
Securities Dealers' Automated Quotation System ("NASDAQ"), but are quoted on the
Bulletin Board, either (a) the average of the daily closing prices of the Shares
over the thirty (30) trading days preceding the date of grant of an Option, or
(b) the closing sale price of the Shares on the date of grant; (ii) if the
Shares are traded on a securities exchange or on the NASDAQ, either (a) the
average of the daily closing prices of the Shares during the ten (10) trading
days preceding the date of grant of an Option, or (b) the daily closing price of
the Shares on the date of grant of an Option, or (iii) if the Shares are traded
only otherwise than as described in (i) or (ii) above, or if the Shares are not
publicly traded, the value determined by the Committee in good faith based upon
the fair market value as determined by completely independent and well qualified
experts.
2.4 "Option": A stock option granted under the Plan.
------
2.5 "Incentive Stock Option": An Option intended to qualify for
----------------------
treatment as an incentive stock option under Code Sections 421 and 422, and
designated as an Incentive Stock Option.
<PAGE>
2.6 "Nonqualified Option": An Option not qualifying as an Incentive
-------------------
Stock Option.
2.7 "Optionee": The holder of an Option.
--------
2.8 "Option Agreement": The document setting forth the terms
----------------
and conditions of each Option.
2.9 "Shares": The shares of common stock, $.001 par value,
------
$.001 par value of the Corporation.
2.10 "Code": The U.S. Internal Revenue Code of 1986, as amended.
----
2.11 "Subsidiary": Any corporation of which fifty percent (50%)
----------
or more of total combined voting power of all classes of stock of such
corporation is owned by the Corporation or another Subsidiary (as so defined).
3. ADMINISTRATION OF PLAN.
----------------------
3.1 In General. This Plan shall be administered by the
----------
Committee. Any action of the Committee with respect to administration of the
Plan shall be taken pursuant to (i) a majority vote at a meeting of the
Committee (to be documented by minutes), or (ii) the unanimous written consent
of its members.
3.2 Authority. Subject to the express provisions of this Plan,
---------
the Committee shall have the authority to: (i) construe and interpret the Plan,
decide all questions and settle all controversies and disputes which may arise
in connection with the Plan and to define the terms used therein; (ii)
prescribe, amend and rescind rules and regulations relating to administration of
the Plan; (iii) determine the purchase price of the Shares covered by each
Option and the method of payment of such price, individuals to whom, and the
time or times at which, Options shall be granted and exercisable and the number
of Shares covered by each Option; (iv) determine the terms and provisions of the
respective Option Agreements (which need not be identical); (v) determine the
duration and purposes of leaves of absence which may be granted to participants
without constituting a termination of their employment for purposes of the Plan;
and (vi) make all other determinations necessary or advisable to the
administration of the Plan. Determinations of the Committee on matters referred
to in this Section 3 shall be conclusive and binding on all parties howsoever
concerned. With respect to Incentive Stock Options, the Committee shall
administer the Plan in compliance with the provisions of Code Section 422 as the
same may hereafter be amended from time to time. No member of the Committee
shall be liable for any action or determination made in good faith with respect
to the Plan or any Option.
4. ELIGIBILITY AND PARTICIPATION.
-----------------------------
4.1 In General. Only officers, employees and directors who are also
----------
employees of the Corporation or any Subsidiary shall be eligible to receive
grants of Incentive Stock Options. Officers, employees and directors (whether or
not they are also employees) of the Corporation or any Subsidiary, as well as
consultants, independent contractors or other service providers of the
-2-
<PAGE>
Corporation or any Subsidiary shall be eligible to receive grants of
Nonqualified Options. Within the foregoing limits, the Committee, from time to
time, shall determine and designate persons to whom Options may be granted. All
such designations shall be made in the absolute discretion of the Committee and
shall not require the approval of the stockholders. In determining (i) the
number of Shares to be covered by each Option, (ii) the purchase price for such
Shares and the method of payment of such price (subject to the other sections
hereof), (iii) the individuals of the eligible class to whom Options shall be
granted, (iv) the terms and provisions of the respective Option Agreements, and
(v) the times at which such Options shall be granted, the Committee shall take
into account such factors as it shall deem relevant in connection with
accomplishing the purpose of the Plan as set forth in Section 1. An individual
who has been granted an Option may be granted an additional Option or Options if
the Committee shall so determine. No Option shall be granted under the Plan
after August 14, 2008, but Options granted before such date may be exercisable
after such date.
4.2 Certain Limitations. In no event shall Incentive Stock Options
-------------------
be granted to an Optionee such that the sum of (i) aggregate fair market value
(determined at the time the Incentive Stock Options are granted) of the Shares
subject to all Options granted under the Plan which are exercisable for the
first time during the same calendar year, plus (ii) the aggregate fair market
value (determined at the time the options are granted) of all stock subject to
all other incentive stock options granted to such Optionee by the Corporation,
its parent and Subsidiaries which are exercisable for the first time during such
calendar year, exceeds One Hundred Thousand Dollars ($100,000). For purposes of
the immediately preceding sentence, fair market value shall be determined as of
the date of grant based on the Fair Market Value Per Share as determined
pursuant to Section 2.3.
5. AVAILABLE SHARES AND ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
---------------------------------------------------------------
5.1 Shares. Subject to adjustment as provided in Section 5.2 below,
------
the total number of Shares to be subject to Options granted pursuant to this
Plan shall not exceed Four Hundred Thousand (400,000) Shares. Shares subject to
the Plan may be either authorized but unissued shares or shares that were once
issued and subsequently reacquired by the Corporation; the Committee shall be
empowered to take any appropriate action required to make Shares available for
Options granted under this Plan. If any Option is surrendered before exercise or
lapses without exercise in full or for any other reason ceases to be
exercisable, the Shares reserved therefore shall continue to be available under
the Plan.
5.2 Adjustments. As used herein, the term "Adjustment Event" means
-----------
an event pursuant to which the outstanding Shares of the Corporation are
increased, decreased or changed into, or exchanged for a different number or
kind of shares or securities, without receipt of consideration by the
Corporation, through reclassification, stock split, reverse stock split, stock
dividend, stock consolidation or otherwise. Upon the occurrence of an Adjustment
Event, (i) appropriate and proportionate adjustments shall be made to the number
and kind of shares and exercise price for the shares subject to the Options
which may thereafter be granted under this Plan, (ii) appropriate and
proportionate adjustments shall be made to the number and kind of and exercise
price for the shares subject to the then outstanding Options granted under this
Plan, and
-3-
<PAGE>
(iii) appropriate amendments to the Option Agreements shall be executed by the
Corporation and the Optionees if the Committee determines that such an amendment
is necessary or desirable to reflect such adjustments. If determined by the
Committee to be appropriate, in the event of an Adjustment Event which involves
the substitution of securities of a corporation other than the Corporation, the
Committee shall make arrangements for the assumptions by such other corporation
of any Options then or thereafter outstanding under the Plan. Notwithstanding
the foregoing, such adjustment in an outstanding Option shall be made without
change in the total exercise price applicable to the unexercised portion of the
Option, but with an appropriate adjustment to the number of shares, kind of
shares and exercise price for each share subject to the Option. The
determination by the Committee as to what adjustments, amendments or
arrangements shall be made pursuant to this Section 5.2, and the extent thereof,
shall be final and conclusive. No fractional Shares shall be issued under the
Plan on account of any such adjustment or arrangement.
6. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
6.1 Intended Treatment as Incentive Stock Options. Incentive Stock
---------------------------------------------
Options granted pursuant to this Plan are intended to be "incentive stock
options" to which Code Sections 421 and 422 apply, and the Plan shall be
construed and administered to implement that intent. If all or any part of an
Incentive Stock Option shall not be an "incentive stock option" subject to
Sections 421 or 422 of the Code, such Option shall nevertheless be valid and
carried into effect. All Options granted under this Plan shall be subject to the
terms and conditions set forth in this Section 6 (except as provided in Section
5.2) and to such other terms and conditions as the Committee shall determine to
be appropriate to accomplish the purpose of the Plan as set forth in Section 1.
6.2 Amount and Payment of Exercise Price.
------------------------------------
6.2.1 Exercise Price. The exercise price per Share for each
--------------
Share which the Optionee is entitled to purchase under a Nonqualified Option
shall be determined by the Committee. The exercise price per Share for each
Share which the Optionee is entitled to purchase under an Incentive Stock Option
shall be determined by the Committee but shall not be less than the Fair Market
Value Per Share on the date of the grant of the Incentive Stock Option;
provided, however, that the exercise price shall not be less than one hundred
ten percent (110%) of the Fair Market Value Per Share on the date of the grant
of the Incentive Stock Option in the case of an individual then owning (within
the meaning of Code Section 425(d)) more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation or of its
parent or Subsidiaries.
6.2.2 Payment of Exercise Price. The consideration to be paid
-------------------------
for the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Committee and may consist of promissory
notes, shares of the common stock of the Corporation or such other consideration
and method of payment for the Shares as may be permitted under applicable state
and federal laws.
6.3 Exercise of Options.
-------------------
-4-
<PAGE>
6.3.1 Each Option granted under this Plan shall be exercisable
at such times and under such conditions as may be determined by the Committee at
the time of the grant of the Option and as shall be permissible under the terms
of the Plan; provided, however, in no event shall an Incentive Stock Option be
exercisable after the expiration of ten (10) years from the date it is granted,
and in the case of an Optionee owning (within the meaning of Code Section
425(d)), at the time an Incentive Stock Option is granted, more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation or of its parent or Subsidiaries, such Incentive Stock Option shall
not be exercisable later than five (5) years after the date of grant.
6.3.2 An Optionee may purchase less than the total number of
Shares for which the Option is exercisable, provided that a partial exercise of
an Option may not be for less than One Hundred (100) Shares and shall not
include any fractional shares.
6.4 Nontransferability of Options. All Options granted under this
-----------------------------
Plan shall be nontransferable, either voluntarily or by operation of law,
otherwise than by will or the laws of descent and distribution, and shall be
exercisable during the Optionee's lifetime only by such Optionee.
6.5 Effect of Termination of Employment or Other Relationship.
---------------------------------------------------------
Except as otherwise determined by the Committee in connection with the grant of
Nonqualified Options, the effect of termination of an Optionee's employment or
other relationship with the Corporation on such Optionee's rights to acquire
Shares pursuant to the Plan shall be as follows:
6.5.1 Termination for Other than Death, Disability or Cause.
-----------------------------------------------------
If an Optionee ceases to be employed by, or ceases to have a relationship with,
the Corporation for any reason other than for death, disability or cause, such
Optionee's Options shall expire not later than three (3) months thereafter.
During such three (3) month period and prior to the expiration of the Option by
its terms, the Optionee may exercise any Option granted to him, but only to the
extent such Options were exercisable on the date of termination of his
employment or relationship and except as so exercised, such Options shall expire
at the end of such three (3) month period unless such Options by their terms
expire before such date. Notwithstanding the foregoing, in the event the
Optionee accepts a position with a business that competes directly or indirectly
with the Corporation, the Options shall terminate effective as of the Optionee's
acceptance of such position. The decision as to whether a termination for a
reason other than death, disability or cause has occurred, or the Optionee has
accepted a position with a competing business, shall be made by the Committee,
whose decision shall be final and conclusive, except that employment shall not
be considered terminated in the case of sick leave or other bona fide leave of
absence approved by the Corporation.
6.5.2 Death or Disability. If an Optionee ceases to be
--------------------
employed by, or ceases to have a relationship with, the Corporation by reason of
death or disability, such Optionee's Options shall expire not later than six (6)
months thereafter. During such six (6) month period and prior to the expiration
of the Option by its terms, the Optionee may exercise any Option granted to him,
but only to the extent such Options were exercisable on the date the Optionee
ceased to be employed by, or ceased to have a relationship with, the Corporation
by reason of death or disability and except as so exercised, such Options shall
expire at the end of such six (6) month period unless
-5-
<PAGE>
such Options by their terms expire before such date. The decision as to whether
a termination by reason of death or disability has occurred shall be made by the
Committee, whose decision shall be final and conclusive.
6.5.3 Termination for Cause. If an Optionee's employment by,
---------------------
or relationship with, the Corporation is terminated for cause, such Optionee's
Option shall expire immediately; provided, however, the Committee may, in its
sole discretion, within thirty (30) days of such termination, waive the
expiration of the Option by giving written notice of such waiver to the Optionee
at such Optionee's last known address. In the event of such waiver, the Optionee
may exercise the Option only to such extent, for such time, and upon such terms
and conditions as if such Optionee had ceased to be employed by, or ceased to
have a relationship with, the Corporation upon the date of such termination for
a reason other than death, disability or cause. Termination for cause shall
include termination for insubordination, malfeasance or gross misfeasance in the
performance of duties or conviction of illegal activity in connection therewith
or any conduct detrimental to the interests of the Corporation or a Subsidiary.
The determination of the Committee with respect to whether a termination for
cause has occurred shall be final and conclusive.
6.6 Withholding of Taxes. As a condition to the exercise, in whole
--------------------
or in part, of any Options the Board of Directors may in its sole discretion
require the Optionee to pay, in addition to the purchase price of the Shares
covered by the Option an amount equal to any Federal, state or local taxes that
may be required to be withheld in connection with the exercise of such Option.
6.7 No Rights to Continued Employment or Relationship. Nothing
-------------------------------------------------
contained in this Plan or in any Option Agreement shall obligate the Corporation
to employ or have another relationship with any Optionee for any period or
interfere in any way with the right of the Corporation to reduce such Optionee's
compensation or to terminate the employment of or relationship with any Optionee
at any time.
6.8 Time of Granting Options. The time an Option is granted,
------------------------
sometimes referred to herein as the date of grant, shall be the day the
Corporation executes the Option Agreement; provided, however, that if
appropriate resolutions of the Committee indicate that an Option is to be
granted as of and on some prior or future date, the time such Option is granted
shall be such prior or future date.
6.9 Privileges of Stock Ownership. No Optionee shall be entitled to
-----------------------------
the privileges of stock ownership as to any Shares not actually issued and
delivered to such Optionee. No Shares shall be purchased upon the exercise of
any Option unless and until, in the opinion of the Corporation's counsel, any
then applicable requirements of any laws or governmental or regulatory agencies
having jurisdiction and of any exchanges upon which the stock of the Corporation
may be listed shall have been fully complied with.
6.10 Securities Laws Compliance. The Corporation will diligently
--------------------------
endeavor to comply with all applicable securities laws before any Options are
granted under the Plan and before any Shares are issued pursuant to Options.
Without limiting the generality of the foregoing, the Corporation may require
from the Optionee such investment representation or such agreement, if
-6-
<PAGE>
any, as counsel for the Corporation may consider necessary or advisable in order
to comply with the Securities Act of 1933 as then in effect, and may require
that the Optionee agree that any sale of the Shares will be made only in such
manner as is permitted by the Committee. The Committee in its discretion may
cause the Shares underlying the Options to be registered under the Securities
Act of 1933, as amended, by the filing of a Form S-8 Registration Statement
covering the Options and Shares underlying such Options. Optionee shall take any
action reasonably requested by the Corporation in connection with registration
or qualification of the Shares under federal or state securities laws.
6.11 Option Agreement. Each Incentive Stock Option and Nonqualified
----------------
Option granted under this Plan shall be evidenced by the appropriate written
Stock Option Agreement ("Option Agreement") executed by the Corporation and the
Optionee in a form substantially the same as the appropriate form of Option
Agreement attached as Exhibit I or II hereto (and made a part hereof by this
reference) and shall contain each of the provisions and agreements specifically
required to be contained therein pursuant to this Section 6, and such other
terms and conditions as are deemed desirable by the Committee and are not
inconsistent with the purpose of the Plan as set forth in Section 1.
7. PLAN AMENDMENT AND TERMINATION.
------------------------------
7.1 Authority of Committee. The Committee may at any time
----------------------
discontinue granting Options under the Plan or otherwise suspend, amend or
terminate the Plan and may, with the consent of an Optionee, make such
modification of the terms and conditions of such Optionee's Option as it shall
deem advisable; provided that, except as permitted under the provisions of
Section 5.2, the Committee shall have no authority to make any amendment or
modification to this Plan or any outstanding Option thereunder which would: (i)
increase the maximum number of shares which may be purchased pursuant to Options
granted under the Plan, either in the aggregate or by an Optionee (except
pursuant to Section 5.2); (ii) change the designation of the class of the
employees eligible to receive Incentive Stock Options; (iii) extend the term of
the Plan or the maximum Option period thereunder; (iv) decrease the minimum
Incentive Stock Option price or permit reductions of the price at which shares
may be purchased for Incentive Stock Options granted under the Plan; or (v)
cause Incentive Stock Options issued under the Plan to fail to meet the
requirements of incentive stock options under Code Section 422. An amendment or
modification made pursuant to the provisions of this Section 7 shall be deemed
adopted as of the date of the action of the Committee effecting such amendment
or modification and shall be effective immediately, unless otherwise provided
therein, subject to approval thereof (1) within twelve (12) months before or
after the effective date by stockholders of the Corporation holding not less
than a majority vote of the voting power of the Corporation voting in person or
by proxy at a duly held stockholders meeting when required to maintain or
satisfy the requirements of Code Section 422 with respect to Incentive Stock
Options, and (2) by any appropriate governmental agency. No Option may be
granted during any suspension or after termination of the Plan.
7.2 Ten (10) Year Maximum Term. Unless previously terminated by the
--------------------------
Committee, this Plan shall terminate on August 14, 2008, and no Options shall be
granted under the Plan thereafter.
-7-
<PAGE>
7.3 Effect on Outstanding Options. Amendment, suspension or
-----------------------------
termination of this Plan shall not, without the consent of the Optionee, alter
or impair any rights or obligations under any Option theretofore granted.
8. EFFECTIVE DATE OF PLAN. This Plan shall be effective as of August 14,
----------------------
1998, the date the Plan was adopted by the Board of Directors, subject to the
approval of the Plan by the affirmative vote of a majority of the issued and
outstanding Shares of common stock of the Corporation represented and voting at
a duly held meeting at which a quorum is present within twelve (12) months
thereafter. The Committee shall be authorized and empowered to make grants of
Options pursuant to this Plan prior to such approval of this Plan by the
stockholders; provided, however, in such event the Option grants shall be made
subject to the approval of both this Plan and such Option grants by the
stockholders in accordance with the provisions of this Section 8.
9. MISCELLANEOUS PROVISIONS.
------------------------
9.1 Exculpation and Indemnification. The Corporation shall indemnify
-------------------------------
and hold harmless the Committee from and against any and all liabilities, costs
and expenses incurred by such persons as a result of any act, or omission to
act, in connection with the performance of such persons' duties,
responsibilities and obligations under the Plan, other than such liabilities,
costs and expenses as may result from the gross negligence, bad faith, willful
conduct and/or criminal acts of such persons.
9.2 Governing Law. The Plan shall be governed and construed in
-------------
accordance with the laws of the State of Delaware and the Code.
9.3 Compliance with Applicable Laws. The inability of the
-------------------------------
Corporation to obtain from any regulatory body having jurisdiction authority
deemed by the Corporation's counsel to be necessary to the lawful issuance and
sale of any Shares upon the exercise of an Option shall relieve the Corporation
of any liability in respect of the non-issuance or sale of such Shares as to
which such requisite authority shall not have been obtained.
-8-
<PAGE>
Exhibit 23.2
CONSENT OF THE INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-8 No. 33.00000) pertaining to the COPE, Inc. 1998
Stock Option Plan and to the incorporation by reference therein of our report
dated March 26, 1999 except as to Note 18 for which the date is April 19, 1999,
with respect to the consolidated financial statements of COPE, Inc. included in
its Annual Report (Form 10-KSB) for the year ended December 31, 1998, filed with
the Securities and Exchange Commission.
ATAG Ernst & Young Ltd.
K. McCabe Y. Vontobel
Zurich, Switzerland
May 21, 1999
