SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant: ( X )
Filed by a Party Other than the Registrant: ( )
Check the appropriate box:
( ) Preliminary Proxy Statement
( ) Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
LOTUS PACIFIC, INC.
(Name of Registrant as Specified in its Charter)
Payment of Filling Fee (check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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March 31, 2000
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Lotus Pacific, Inc. (the "Company") on Friday, April 28, 2000, at 2:00 p.m.,
Eastern Time. The meeting will be held at 200 Centennial Avenue, Suite 201,
Piscataway, New Jersey 08854.
The accompanying Notice of Meeting and Proxy Statement describe the matters
to be considered and voted upon at the Meeting. In addition to consideration
of these matters, there will be a report to the stockholders on the affairs of
the Company, and stockholders will have an opportunity to discuss matters of
interest concerning the Company.
It is important that your shares be represented, whether or not you plan to
attend the Meeting personally. To ensure that your vote will be received
and counted, please promptly complete, date and return your proxy in the
enclosed return envelope, whether or not you plan to attend the meeting in
person.
We look forward to seeing you at the Annual Meeting.
Sincerely yours,
By: /s/ James Yao
- -------------------------------
James Yao, Chairman of the Board
LOTUS PACIFIC, INC.
200 Centennial Avenue, Suite 201
Piscataway, New Jersey 08854
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held April 28, 2000
To the Stockholders of Lotus Pacific, Inc.:
NOTICE is hereby given that the Annual Meeting of Stockholders of Lotus
Pacific, Inc., a Delaware corporation (the "Company"), will be held at 200
Centennial Avenue, Suite 201, Piscataway, New Jersey, on Friday, April 28,
2000, at 2:00 p.m., Eastern Standard time, to consider and take action on
the following matters:
(1) To elect eight directors of the Company to serve until the next Annual
Meeting of the Shareholders and until their successors are elected and
qualified;
(2) To approve the Company's 2000 Equity Incentive Plan;
(3) To ratify the appointment of Schiffman Hughes Brown as the independent
auditors of the Company for the fiscal year ending June 30, 2000; and
(4) To conduct such other business as may properly come before the meeting
or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 23, 2000, as
the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting or any adjournments thereof.
MANAGEMENT REQUESTS ALL STOCKHOLDERS TO SIGN AND DATE THE ENCLOSED FORM OF
PROXY AND RETURN IT IN THE POSTAGE PAID, SELF-ADDRESSED ENVELOPE PROVIDED FOR
YOUR CONVENIENCE. PLEASE DO THIS WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING.
SHOULD YOU ATTEND IN PERSON, YOU MAY, IF YOU WISH, WITHDRAW YOUR PROXY AND VOTE
YOUR SHARES IN PERSON.
By Order of the Board of Directors
Gary Huang
Secretary
Piscataway, New Jersey
March 31, 2000
TABLE OF CONTENTS
Proxies and Voting at the Annual Meeting.................... 1
Proposal No. One: Election of Directors................... 3
Meetings and Committees of the Board of Directors........... 5
Compensation of Directors................................... 6
Executive Officers.......................................... 6
Proposal No. Two: Approval of the 2000 Equity Incentive Plan 9
Proposal No. Three: Ratification of Selection
of Independent Auditors .................................... 17
Security Ownership of Certain Beneficial Owners
and Management.............................................. 18
Executive Compensation....................................... 20
Compliance with Section 16(a) of the
Securities Exchange Act of 1934............................. 22
Other Matters Which May Come Before the Meeting.............. 22
Stockholder Proposals........................................ 22
LOTUS PACIFIC, INC.
PROXY STATEMENT
DATED MARCH 31, 2000
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD APRIL 28, 2000
Proxies and Voting at the Annual Meeting
The enclosed form of Proxy is solicited by the Board of Directors (the "Board
of Directors") of Lotus Pacific, Inc., a Delaware corporation (the "Company"),
in connection with the Annual Meeting of Stockholders of the Company to be held
at 200 Centennial Avenue, Suite 201, Piscataway, New Jersey 08854, on Friday,
April 28, 2000, at 2:00 p.m. Eastern Standard Time, and at any and all
adjournments or postponements thereof (the "Annual Meeting"). The cost of
solicitation, including the cost of preparing and mailing the Notice of Annual
Meeting of Stockholders and this Proxy Statement, is being paid by the Company.
In addition, the Company may reimburse brokers and other persons holding stock
in the name of nominees for their expenses incurred in sending proxy materials
to their principals and obtaining their proxies. The Company reserves the
right to have an outside solicitor conduct the solicitation of proxies and to
pay such solicitor for its services. In addition, certain officers, directors
and other representations of the Company may solicit proxies by telephone,
electronic means or facsimile. These persons will not receive any compensation
for such services.
Stockholders of record as of the close of business on March 23, 2000 (the
"Record Date"), are the only persons entitled to vote at the Annual Meeting.
As of that date, there were issued and outstanding 64,344,474 shares of the
Company's common stock, par value $.001 per share (the "Common Stock"), the
only securities outstanding of the Company entitled to vote at the Annual
Meeting. Each share of Common Stock outstanding entitles the holder thereof
to one vote. The presence, in person or by proxy, of the holders of a majority
of the outstanding shares of Common Stock entitled to vote at the Annual
Meeting will constitute a quorum. Abstentions and broker non-votes (i.e.,
shares of Common Stock represented at the Annual Meeting by proxies held by
brokers or nominees as to which (i) instructions have not been received from
the beneficial owners or persons entitled to vote and (ii) the broker or
nominee does not have discretionary voting power on a particular voting matter)
with respect to any proposal are counted as shares represented and voted at
the Annual Meeting only for the purpose of determining the number of shares
required to approve a proposal. However, shares of Common Stock represented
by proxies that withhold authority to vote for a nominee for election as a
director (including broker non-votes) will not be counted as a vote represented
at the Annual Meeting for the purpose of determining the number of votes
required to elect such nominee.
Any stockholder giving a proxy will have the right to revoke it at any time
prior to its exercise by giving written notice of revocation to the Company,
Attention: Secretary, by filing a new written appointment of a proxy with an
officer of the Company or by voting in person at the Annual Meeting.
Attendance at the Annual Meeting will not automatically revoke the proxy.
All shares represented by effective proxies will be voted at the Annual
Meeting. UNLESS OTHERWISE SPECIFIED IN THE PROXY (AND EXCEPT FOR BROKER
NON-VOTES AS DESCRIBED ABOVE), SHARES REPRESENTED BY EFFECTIVE PROXIES WILL
BE VOTED (I) FOR THE ELECTION OF JAMES YAO, JEREMY WANG, JOHNSON CHANG,
DAVID LEUNG, TOMSON DONG SHENG LI, GREG CHEN, JAMES LIU AND GARY HUANG AS
DIRECTORS, (II) FOR THE APPROVAL OF THE 2000 EQUITY INCENTIVE PLAN, (III) FOR
THE RATIFICATION OF SCHIFFMAN HUGHES BROWN AS THE COMPANY'S INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING JUNE 30, 2000, AND (IV) IN THE DISCRETION
OF THE PROXY HOLDERS WITH RESPECT TO SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE ANNUAL MEETING.
The Company's principal executive offices are located at 200 Centennial Avenue,
Suite 201, Piscataway, New Jersey 08854. This Proxy Statement and accompanying
form of Proxy will be first mailed to stockholders on or about April 3, 2000.
The Annual Report of the Company for the fiscal year ended June 30, 1999,
accompanies this Proxy Statement but is not part of the proxy soliciting
materials.
PROPOSAL ONE: ELECTION OF DIRECTORS
The number of directors is currently set at eight. Each director is elected
to serve until the next Annual Meeting of the stockholders and until such time
as the director's successor has been duly elected and qualified. The Board of
Directors has nominated James Yao, Jeremy Wang, Johnson Chang, David Leung,
Tomson Dong Sheng Li, Greg Chen, James Liu and Gary Huang as directors for
election to the Board of Directors at the Annual Meeting to serve until the
next Annual Meeting and until their successors have been duly elected and
qualified. Simon Gu, currently a director of the Company, is not standing for
re-election to the Board of Directors at the Annual Meeting.
The proxy holders intend to vote all proxies received by them in the
accompanying form for the nominees listed below unless otherwise instructed.
In the event any nominee is unable or declines to serve as a director at the
time of the Annual Meeting, the proxies will be voted for any substitute
nominee who may be designated by the current Board of Directors to fill the
vacancy. As of the date of this Proxy Statement, the Board of Directors is not
aware of any nominee who is unable or will decline to serve as a director. The
affirmative vote of a plurality of the shares of Common Stock represented and
entitled to vote at the Annual Meeting is necessary to elect the nominee.
Under the Company's Certificate of Incorporate and By-Laws, no cumulative
voting is permitted for the election of directors.
None of the directors are related.
Recommendation of the Board of Directors
The Board of Directors recommends a vote FOR the nominees listed herein.
The table below gives certain information concerning the nominees to the Board
of Directors:
<TABLE>
<CAPTION>
Name Age Year First Elected Position and Offices
Nominated Director Held with the Company
- ---------------- ------- -------------------- -----------------------
<S> <C> <C> <C>
James Yao 47 1997 Chairman of the Board
Jeremy Wang 45 1997 President and Director
Johnson Chang 46 1999 Director
David Leung 55 1997 Vice President and Director
Tomson Dong Sheng Li 42 2000 ---
Greg Chen 46 2000 ---
James Liu 46 1997 Vice President and Director
Gary Huang 45 1997 Secretary, Treasurer and Director
</TABLE>
NOMINEES FOR THE BOARD OF DIRECTORS
Mr. Yao has been Chairman of the Company's Board of Directors since January
1997. He also served as President of the Company from December 1996 to March
1999. He has over 16 years of business experience in multinational companies,
most recently with Yao Investment Corp. from January 1999 to present and Lotus
International Holdings Corp., where he has served as President since December
1996. Mr. Yao graduated from Miya Gawa University in Tokyo, Japan.
Mr. Wang was appointed President of the Company in March 1999. He was elected
as a Director of the Company in 1997. Prior to joining the Company, Mr. Wang
worked for AT&T from September 1991 to March 1999. Mr. Wang has an MS in
Engineering from the University of Virginia, and an MS in Computer Science from
the New Jersey Institute of Technology.
Mr. Chang has been a director of the Company since March 1999. Prior to that
time, he was General Manager of Shanghai Harmony from January 1996 to December
1998.
Mr. Leung has been a Director and Vice President of the Company since January
1997. Prior to joining the Company, he served as General Manager of Shenzhen
New Technology Development Co., Ltd. in Shenzhen, China from January 1993 to
March 1995. Mr. Leung is a director of Lotus International Holdings Corp.
since 1997. Mr. Leung had a BS degree from the Beijing Institute of
Technology.
Mr. Li is the Founder, Chairman and President of TCL Industries Holdings Group,
a telecommunications products and home electronics manufacturer in China.
Mr. Li was named "National Excellent Young Entrepreneur" in China in 1995.
Mr. Li has over 17 years of experience in various aspects of the electronics
industry, including the manufacture and sale of electronics products.
Previously, he served as general manager of TCL Electronics. He earned a BS
degree from Huanan Polytechnic University, Guangzhou, China.
Mr. Chen has been Chairman and Chief Executive Officer of TurboComm Tech. Inc.
since August 1998. TurboComm Tech, Inc. is a telecommunication equipment
manufacturer in Taiwan. He served as President of CIS Technology Inc. from
January 1995 to May 1998. Mr. Chen was Vice President of GVC Corporation of
Taiwan from January 1987 to December 1994. He holds a B.S. degree in
Engineering from National Chiao Tung University, Taiwan, Republic of China.
Mr. Liu has been a Director and Vice President of the Company since January
1997. Mr. Liu served as President of JBL International Inc., an apparel agent
in New York, New York, from January 1996 to the present. Mr. Liu is a director
of Lotus International Holdings Corp. He has with a BA degree from the
Nanjing University, China.
Mr. Huang has served as Corporate Secretary and Director of the Company since
January 1997 and Treasurer since March 2000. Prior to joining the Company,
Mr. Huang served as Senior Accountant/Financial Analyst at Rightiming
Electronics Corp. from January 1996 to January 1997. He holds an MBA in
finance from the University of New Haven and an MA in Economics from Yale
University.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held a total of nine meetings during the fiscal year
ended June 30, 1999. Each incumbent director attended at least 75% of the
aggregate number of meetings of the Board of Directors.
The Company has two standing committees: the Audit Committee and the
Compensation Committee. The Company does not have a standing nominating
committee. The functions customarily performed by a nominating committee are
performed by the full Board of Directors.
AUDIT COMMITTEE
The Audit Committee acts on behalf of the Board of Directors with respect
matters relating to the Company's independent public accountants, including
recommending to the Board of Directors the firm to be engaged as its
independent public accountants for the next fiscal year; reviewing with the
Company's independent public accountants the scope and results of its audit
and any related management letter; consulting with the independent public
accountants and management with regard to the Company's accounting methods
and adequacy of its internal accounting controls; approving the professional
services rendered by the independent public accountants; and reviewing the
independence of the independent public accountants. The Audit Committee
currently consists of Messrs. Wang, Leung and Chang. This Committee held six
meetings during the last fiscal year. Mr. Gu is not standing for reelection
to the Board of Directors at the Annual Meeting.
COMPENSATION COMMITTEE
The Compensation Committee reviews and makes recommendations to the Board of
Directors with respect to the appropriate compensation of directors and
executive officers of the Company and is responsible for administering all
the Company's employee benefit plans. The Compensation Committee currently
consists of Messrs. Wang, Gu and Chang. This Committee held two meetings
during the last fiscal year. Mr. Gu is not standing for reelection to the
Board of Directors at the Annual Meeting.
COMPENSATION OF DIRECTORS
Directors are not paid a fee for attending Board of Directors or committee
meetings, but are reimbursed for their travel expenses to and from the
meetings.
EXECUTIVE OFFICERS
The names of the current executive officers of the Company together with
certain biographical information for each of them is set forth below:
<TABLE>
<CAPTION>
Name Age Date Appointed Position
- ----------------- --------- ------------------- ----------------------
<S> <C> <C> <C>
James Yao 47 January 1997 Chairman and Director
Jeremy Wang 45 March 1999 President and Director
David Li 35 July 1999 Chief Financial Officer
David Leung 55 January 1997 Vice President and Director
James Liu 46 January 1997 Vice President and Director
Thomas V. White 47 March 1999 Vice President
Stefan H. Benger 33 March 1999 Vice President
Harold Tuan 46 March 1999 Vice President
Max Lu 46 January 1997 Vice President
De-Liang Wang 43 March 1999 Vice President
Richard Ho 45 March 1999 Vice President
C. Jeffrey Gull 36 March 1999 Vice President
Gary Huang 45 January 1997 secretary and Director;
March 2000 Treasurer
Huaya Lu Tung* 46 February 1999 Treasurer
</TABLE>
* Ms. Tung resigned as Treasurer of the Company in February 2000. Mr. Huang,
the Corporate Secretary, was appointed Treasurer in March 2000.
The following is a brief description of the principal occupation for at least
the past five years of each executive officer of the Company, other than those
who are also directors of the Company.
Mr. Li has been Chief Financial Officer of the Company since July 1999.
Mr. Li's professional experiences include being Chief Financial Officer at US
Business Network from November 1998 to July 1999, advising investment banking
clients on corporate financing and mergers and acquisitions at Donaldson,
Lufkin and Jenrette from September 1996 to November 1998, and managing venture
capital investments at Walden Group from January 1995 to June 1996. Mr. Li
received his MBA from the Wharton School at the University of Pennsylvania and
an MA from Columbia University.
Mr. White has been Vice President of the Company since March 1999. Before
joining the Company, Mr. White was President of U.S. Securities and Futures
Corp. ("USSF") from December 1995 to March 1999. Since the acquisition of USSF
by the Company, Mr. White has also been President of USSF, of which the Company
is now a 28% stockholder. Mr. White holds a BA degree in Business
Administration and Quantitative Analysis from Bernard Baruch College.
Mr. Benger has been Vice President of the Company since March 1999. Mr. Benger
has been the Chief Executive Officer and Chairman of Professional Market
Brokerage, Inc. ("PMB") since November 1995, and following the acquisition of
PMB by the Company in March 1999, he has continued to serve as President of
PMB, of which the Company is now a 28% stockholder.
Mr. Tuan was appointed Vice President of the Company and a director of TurboNet
Communications in March 1999. Mr. Tuan has over 20 years of research and
development experience in digital TV systems, Data-Over-Cable Systems, Signal
Processing and Communication Systems. Mr. Tuan founded TurboNet Communications
in February 1996 and currently serves as its Chief Executive Officer.
Mr. Lu was appointed Vice President of the Company in March 1999 and a director
of Arescom Inc. ("Arescom") (of which the Company is now the controlling
stockholder) in January 1999. Mr. Lu has more than 11 years of experience in
management, marketing and engineering in the computer and communication
industries. Lu currently serves as President of Arescom.
Mr. Wang has been Vice President of the Company since March 1999. Mr. Wang
served as Vice President of Regent Electronics Corp. from January 1996 to March
1999. Prior to that time, Mr. Wang was employed as a senior hardware at AT&T
Bell Laboratories from May 1990 to December 1995. He received his MS degree in
Electrical Engineering and Mechanical Engineering from the University of Texas
at Austin.
Mr. Ho has been Vice President of the Company since March 1999. Prior to
joining the Company, Mr. Ho was President of Rightiming Electronics Corp. from
January 1996 to March 1999. Mr. Ho received his BA in International Business
in 1986 in China.
Mr. Gull has been Vice President of the Company since March 1999. Prior to
joining the Company, he was the director of Asia Development for Nu Skin
International, Inc. for nine years.
All executive officers serve at the discretion of the Board of Directors. There
are no family relationships among the members of the Board of Directors and/or
any executive officers of the Company.
PROPOSAL NO. TWO: APPROVAL OF THE 2000 EQUITY INCENTIVE PLAN
The Lotus Pacific, Inc. 2000 Equity Incentive Plan (the "Plan") is being
submitted for approval by the Company's stockholders at the 2000 Annual
Meeting. The purpose of the Plan is to provide incentives to attract, retain
and reward individuals of highest caliber as employees, directors and
consultants of the Company and its affiliates. The Board of Directors believes
that the Plan also will create in such persons a more direct interest in the
future success of the operations of the Company by relating incentive
compensation to increases in stockholder value so that the interests of those
participating in the Plan is more closely aligned with the interests of the
Company's stockholders. The proposed Plan was adopted by the Board of
Directors on March 21, 2000, subject to stockholder approval at the Annual
Meeting.
The following summary of the principal features of the Plan is qualified by
reference to the full text of the Plan, a copy of which is incorporated by
reference and attached as Appendix A. All capitalized terms not defined
below are referenced in the Plan itself.
TYPES OF AWARDS
Stock Awards under the Plan (collectively the "Stock Awards") may consist
of Incentive Stock Options, Nonstatutory Stock Options, stock appreciation
rights, stock bonuses and rights to acquire restricted stock.
ADMINISTRATION; AMENDMENT AND TERMINATION
The Plan is administered and interpreted by the Board of Directors of the
Company, unless and until the Board of Directors delegates administration to
a committee. The Board's broad powers include authority, within the limitations
provided in the Plan, to determine which persons eligible under the Plan shall
be granted Stock Awards, to determine the type, amount and terms and conditions
a Stock Award, and to construe and interpret and correct defects, omissions
and inconsistencies in the Plan and any agreement relating thereto.
The Board of Directors may at any time and from time to time amend, suspend
or terminate the Plan, in whole or in part, provided, however, that, unless
required by law, no amendment may impair the rights of a participant with
respect to outstanding Stock Awards without the participant's written consent.
Moreover, to the extent required by law, no amendment may be made, without
the approval of the stockholders.
The Board of Directors has the sole discretion to determine the employees,
including officers, directors and consultants of the Company and its
affiliates, to whom Stock Awards may be granted under the Plan and the manner
in which such Awards will vest. Options, stock appreciation rights,
restricted stock and stock bonus units are granted by the Board of Directors
to eligible persons in such numbers and at such times during the term of the
Plan as the Board of Directors shall determine, except that the maximum number
of shares subject to one or more Stock Awards is 3,000,000 shares of Common
Stock, and except further that Incentive Stock Options and stock appreciation
rights may be granted only to employees. In granting Stock Awards, the Board
of Directors will take into account such factors as it may deem relevant in
order to accomplish the Plan's purposes, including one or more of the
following: the extent to which performance goals have been met, the duties of
the respective employees, directors and consultants, and their present and
potential contributions to the Company's success.
The Plan will terminate on December 31, 2009, unless sooner terminated by the
Board of Directors.
ELIGIBILITY
Officers and other employees, directors and consultants of the Company and its
affiliates as determined by the Board of Directors are eligible to participate
in the Plan as follows:
Incentive Stock Options and Stock Appreciation Rights may be granted only to
officers and other employees of the Company. All other Stock Awards may be
granted to officers and employees, directors and consultants. No 10%
stockholder shall be eligible for the grant of an Incentive Stock Option
unless the exercise price of such Option is at least 110% of the Fair Market
Value of the Common Stock at the date of grant and such Option is not
exercisable after the expiration of five years from the date of grant.
SHARES RESERVED
The maximum number of shares that may be issued pursuant to Stock Awards under
the Plan shall not exceed in the aggregate 11,354,907 shares of Common Stock,
plus an annual increase to be added July 1 of each year beginning with July 1,
2001, equal to the least of the following amounts: (1) 5,000,000 shares,
(2) 4% of the Company's outstanding shares on such date calculated on a fully
diluted basis; and (3) an amount determined by the Board of Directors.
The shares issuable under the Plan may be made available either from the
Company's authorized but unissued Common Stock or from Common Stock reacquired
by the Company, including shares purchased in the open market. If any Stock
Awards, other than stock appreciations rights, shall, for any reason, expire or
otherwise terminate, in whole or in part, without having been exercised in
full (or vested in the case of restricted stock), the shares not acquired under
such Stock Award shall revert to and again become available for issue under the
Plan. Shares subject to stock appreciation rights exercised in accordance with
the Plan shall not be available for subsequent issuance. The Plan also
provides that if Common Stock acquired pursuant to an exercise of an option
granted under the Plan is, for any reason, repurchased by the Company under an
unvested share repurchase option provided under the Plan, the shares so
repurchased by the Company shall not revert to, and again, become available for
issuance under the Plan.
No one participant in the Plan may receive stock option grants or stock
appreciation rights for more than 3,000,000 shares of Common Stock in the
aggregate per calendar year. Stockholder approval of the Plan will also
constitute approval of that limit for purposes of Internal Revenue Code S
ection 162(m).
Options - Exercise Price, Term and Vesting Schedule. The options granted under
the Plan may be either Incentive Stock Options under the federal tax laws or
Nonstatutory Stock Options. The exercise price of each granted Incentive Stock
Option shall not be less than 100% of the fair market value per share of Common
Stock on the option grant date (provided such exercise price shall be at least
equal to 110% of fair market value in the case of an Incentive Stock Option
granted to a person who owns shares of Common Stock having more than 10% of the
voting power). The exercise price of a Nonstatutory Stock Option shall not be
less than 85% of the fair market value of a share of Common Stock on the date
of the option grant.
An option holder may exercise an option by written notice and payment of the
exercise price in (1) cash, or (2) at the decision of the Board of Directors at
the time of grant of the option (or subsequently in the case of a nonstatutory
stock option) by the delivery to the Company of other Common Stock according to
a deferred payment or other arrangement or in any other form of legal
consideration that may be acceptable to the Board of Directors. The shares
subject to each option may vest, and become exercisable, in periodic
installments over a specified period of service that may, but need not be,
equal periods.
The term of each option granted shall be no longer than 10 years (five years
in the case of an Incentive Stock Option granted to a person who owns Common
Stock having more than 10% of the voting power).
The following provisions apply in the event of an option holder's termination
of "continuous service" (i.e., employment). If the option holder's continuous
service is terminated for "Cause," as determined by the Board of Directors,
the option terminates immediately. If the option holder's continuous service
is terminated as a result of option holder's disability, the option may be
exercised for 12 months after the option holder terminates employment on
account of disability. If the option holder's continuous service is terminated
as a result of option holder's death while employed or in the 12 month period
referred to in the preceding sentence, or in the three month period referred
to in the next sentence, the option may be exercised for 18 months after the
option holder's death. If the option holder's continuous service of employment
is terminated for any reason other than Cause, disability or death, the option
may be exercise for three months after termination of option holder's
continuous service. In all cases, the option can be exercised only to the
extent it is vested at the time of termination of continuous service and only
during the term of the option.
The Plan further provides that an option grant may include a provision whereby
the option holder may elect at any time before the option holder's continuous
service terminates to exercise the option as to any part or all of the shares
subject to the option prior to the full vesting of the shares. Any shares
purchased but not yet vested may be subject to a repurchase option by the
Company or to any other restriction the Board of Directors may determine
appropriate.
The Board of Directors is also granted the authority to provide an option
holder with an additional option (a "re-load option") in the event the
option holder exercises the option, in whole or in part, by surrendering
other shares of Common Stock. Such re-load option shall be equal to the
umber of shares surrendered as part or all of the exercise price of such
option, have the same expiration date as the exercise date of the option which
gave rise to the re-load option, and have an exercise price equal to 100% of
the fair market value of the Common Stock subject to the re-load option on the
date of exercise of the original option. The Board of Directors is not
permitted to grant re-load options on a re-load option. In addition, any
grant of a re-load option is subject to the availability of shares under the
Plan and the limitations of Section 162(m) of the Internal Revenue Code.
Stock Appreciation Rights. The Board of Directors may grant stock
appreciation rights to participants, either in tandem with the grant of
options, concurrently or separately. The Board of Directors determines the
period during which a stock appreciation right may be exercised and the other
terms and conditions applicable to the stock appreciation right. A "Tandem
Stock Appreciation Right" is a stock appreciation right granted attached to
an option and is subject to the same terms and conditions applicable to the
particular option grant except that the Tandem Stock Appreciation Right
requires the holder to elect between the exercise of the underlying option
for shares of Common Stock and the surrender, in whole or in part, of the
option for an "appreciation distribution." Upon the exercise of a Tandem
Stock Appreciation Right, or the option itself, an equal reduction in the
number of shares subject to the corresponding option or stock appreciation
right will occur. A "Concurrent Stock Appreciation Right" is a stock
appreciation right granted appurtenant to an option and is subject to the
same terms and conditions applicable to the particular option grant, except
that the Concurrent Stock Appreciation Right is automatically exercised with
respect to the number of shares of Common Stock to which the Concurrent Right
pertains at the same time the underlying option is exercised. An "Independent
Stock Appreciation Right" is a stock appreciation right granted independent
of any option grant.
Upon the exercise of a stock appreciation right, a participant is entitled
to a payment equal to the number of shares of Common Stock as to which the
stock appreciation right is exercised times the excess of the fair market value
of a share of Common Stock on the date the stock appreciation right is
exercised over the fair market value of a share of Common Stock on the date the
stock appreciation right was granted (i.e., the exercise price per share).
The amount of appreciation distribution may be paid in cash or in shares of
Common Stock, in the sole discretion of the Board of Directors.
Stock Bonus Awards. A stock bonus is an award of shares of Common Stock
granted by the Board under the Plan. The Board of Directors determines the
number of shares to be awarded, the terms and conditions, including vesting and
transferability, and the goals and objectives to be satisfied.
Restricted Stock Awards. The Board of Directors may grant a participant a
number of shares of restricted stock as it may determine in its sole discretion
subject to such terms and conditions, including vesting and transferability,
as the Board of Directors deems appropriate from time to time. The restrictions
may vary among awards and participants. Shares acquired under a restricted
stock award may be, but are not required to be, subject to a share
reacquisition option in favor of the Company, in accordance with a vesting
schedule to be determined by the Board of Directors. If a participant
terminates continuous services, all unvested shares of restricted stock may
be reacquired by the Company or all restrictions upon such shares may lapse,
as determined in each case by the Board of Directors.
Transferability. Except as may be otherwise permitted by the Board of
Directors, options, stock appreciation rights, stock bonuses and restricted
stock awards granted under the Plan are not transferable other than, in the
case of options, by will or by the laws of descent and distribution.
Changes in Capitalization. In the event any change is made to the
outstanding shares of Common Stock by reasons of any recapitalization, stock
dividend, stock split, combination of shares, exchange of shares or other
change in corporate structure effected without the Company's receipt of
consideration, appropriate adjustments will be made to (i) the maximum number
and/or class of securities issuable under the Plan, (ii) the limitation on the
maximum number and/or class of securities by which the share reserve is to
increase automatically each year, (iii) the maximum number and/or class of
securities for which any one person may be granted stock options or separately
exercisable stock appreciation rights under the Plan per calendar year, and
(iv) the number and/or class of securities and the exercise price per share
in effect under each outstanding Stock Award in order to prevent the dilution
or enlargement of benefits thereunder.
CHANGE IN CONTROL
In the event of a dissolution or liquidation of the Company, then Stock Awards
shall be terminated if not exercised prior to such event.
In the event of a sale of all or substantially all of the assets of the
Company, then all Stock Awards outstanding under the Plan shall continue in
full force and effect.
In the event of a merger or consolidation in which the Company is not the
surviving corporation, then any surviving corporation or acquiring corporation
shall assume any Stock Awards outstanding under the Plan or shall substitute
similar stock awards for those outstanding under the Plan.
In the event of a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding
the merger are converted by virtue of the merger into other property (whether
in the form of securities, cash or otherwise), then any acquiring corporation
shall assume any Stock Awards outstanding under the Plan or shall substitute
similar stock awards for those outstanding under the Plan.
In the event of either a merger or reverse merger in which the surviving
corporation, acquiring corporation or corporation controlling such surviving
or acquiring corporation refuses to assume such Stock Awards or to substitute
similar stock awards for those outstanding under the Plan, then with respect
to Stock Awards held by participants whose continuous service has not
terminated, the vesting of such Stock Awards and the time during which such
Stock Awards may be exercised shall be accelerated in full, and the Stock
Awards shall terminate if not exercised at or prior to such event.
AMENDMENT AND TERMINATION The Board of Directors may amend the Plan in any
respect at any time provided stockholder approval is obtained when necessary.
No amendment, however, can impair any option, stock appreciation right or
other Stock Award without the written consent of the participant. The plan
will terminate on December 31, 2009, unless sooner terminated by the Board
of Directors.
FEDERAL INCOME TAX CONSEQUENCES OF STOCK AWARDS UNDER THE PLAN OPTIONS The
following summary describes the U.S. federal income tax consequences of the
2000 Equity Incentive Plan. Options granted under the Plan may be either
incentive stock options which satisfy the requirement of Section 422 of the
Internal Revenue Code or non-statutory options which are not intended to meet
the requirements. The federal income tax treatment for the two types of
options differs as follows:
Incentive Options. No taxable income is recognized by the holder at the time
of the option grant, and no taxable income is generally recognized at the time
the option is exercised. The holder will, however, recognize taxable income
in the year in which the purchased shares are sold or otherwise made the
subject of a taxable disposition. For federal tax purposes, dispositions are
divided into two categories: (i) qualifying and (ii) disqualifying. A
"qualifying disposition" occurs if the sale or other disposition is made after
the holder has held the shares for more than two years after the option date
grant and more than one year after the exercise date. If either of these
holding periods is not satisfied, then a "disqualifying disposition" will
result.
Upon a qualifying disposition of the shares of Common Stock, the holder will
recognize long-term capital gain in an amount equal to the excess of (i) the
amount realized upon the sale or other disposition of the purchased shares over
(ii) the exercise price paid for the shares. If there is a disqualifying
disposition of the shares, then the excess of (i) the fair market value of the
shares on the exercise date over (ii) the exercise price paid for those shares
will be taxable as ordinary income to the holder. Any additional gain or loss
recognized upon the disposition will generally be taxable as a capital gain or
loss. Subject to any deduction limitation under Section 162(m) of the Internal
Revenue Code, the Company will be entitled to a deduction equal to the amount
of ordinary income recognized by a holder.
The holder must treat the excess of the fair market value of the Company
Common Stock on the date of exercise over the exercise price as an item of
adjustment for purposes of the alternative minimum tax. If the holder makes
a disqualifying disposition of shares in the same taxable year the incentive
stock option was exercised, there are no alternative minimum tax consequences.
If the holder makes a disqualifying disposition of the purchased shares, then
the Company will be entitled to an income tax deduction for the taxable year
in which such disposition occurs, equal to the excess of (i) the fair market
value of such shares on the option exercise date over (ii) the exercise price
paid for the shares. In no other instance involving incentive stock options
will the Company be allowed a deduction with respect to the Participant's
disposition of the purchased shares.
Non-Statutory Options. No taxable income is recognized by the holder upon
the grant of a non-statutory option. The holder will, in general, recognize
ordinary income, in the year in which the option is exercised, equal to the
excess of the fair market value of the purchased shares on the exercise date
over the exercise price paid for the shares, and the holder will be required
to satisfy the tax withholding requirements applicable to such income.
If the shares acquired upon exercise of the nonstatutory option are unvested
and subject to repurchase by the company in the event of the participant's
termination of service prior to vesting in those shares, then the participant
will not recognize any taxable income at the time of exercise but will have
to report as ordinary income, as and when the Company's repurchase right
lapses, an amount equal to the excess of (i) the fair market of the shares on
the date the repurchase right lapses over (ii) the exercise price paid for the
shares. If a Section 83(b) election is made, the participant will not
recognize any additional income as and when the repurchase right lapses. The
foregoing provisions may be applicable to Restricted Stock Awards in addition
to nonstatutory options.
The Company will be entitled to an income tax deduction equal to the amount
of ordinary income recognized by the participant with respect to the exercised
nonstatutory option. The deduction will, in general, be allowed for the taxable
year of the Company in which such ordinary income is recognized by the
participant.
Stock Appreciation Rights. The amount of any cash (or the fair market value of
the Common Stock) received upon the exercise of a stock appreciation right
under the 2000 Equity Incentive Plan will be includible in the employee's
ordinary income and, subject to satisfying applicable withholding requirements
and any deduction limitation under Section 162(m), deductible by the Company.
Restricted Stock Awards. Under Section 83(b) of the Internal Revenue Code,
an employee may elect to include in ordinary income, as compensation at the
time Restricted Stock is first issued, the excess of the fair market value of
such stock at the time of issuance over the amount paid, if any, by the
employee for such stock. Unless a Section 83(b) election is made, no taxable
income will generally be recognized by the recipient of a Restricted Stock
Award until such stock is no longer subject to the restrictions or the risk
of forfeiture. When either the restrictions or the risk of forfeiture lapses,
the employee will recognize ordinary income, and subject to satisfying
applicable withholding requirements and any deduction limitation under Section
162(m), the Company will be entitled to a deduction in an amount equal to the
excess of the fair market value of the Restricted Stock on the date of lapse
over the amount paid, if any, by the employee for such Stock. Absent a Section
83(b) election, any cash dividends or other distributions paid with respect to
the Restricted Stock prior to the lapse of the restrictions or risk of
forfeiture will be included in the employee's ordinary income as compensation
at the time of receipt.
Section 162(m). Section 162(m) of the Internal Revenue Code generally
disallows a federal income tax deduction to any publicly held corporation for
compensation paid in excess of $1 million per individual in any taxable year
to the chief executive officer or any of the four other most highly compensated
executive officers who are employed by the Company on the last day of the
taxable year. The Board of Directors' intention is and has been to comply with
the requirements of Section 162(m) unless the Board of Directors concludes that
such compliance would not be in the best interest of the Company or its
stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE 2000 EQUITY
INCENTIVE PLAN PROPOSED AS ABOVE.
PROPOSAL NO. THREE: RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has reappointed Schiffman Hughes Brown to be the
Company's independent auditors to audit the financial statements of the
Company for the year ending June 30, 2000. Ratification of the appointment of
Schiffman Hughes & Brown as the Company's independent auditors requires the
affirmative vote of a majority of shares of Common Stock present or
represented and entitled to vote at the Annual Meeting. A representative
of Schiffman Hughes Brown is not expected to attend the Annual Meeting.
Schiffman Hughes Brown is a member of the SEC Practice Section (SECPS) of
the AICPA Division for Accounting Firms Peer Review program.
The Board of Directors recommends a vote IN FAVOR OF the ratification of the
selection of Schiffman Hughes Brown. In the event that a majority of the
shares voted at the Annual Meeting do not vote to ratify the appointment, the
Board of Directors will reconsider its selection. Even if the selection is
ratified, the Board of Directors, in its discretion, may direct the appointment
of a different independent accounting firm at any time during the year if the
Board of Directors determine that such a change would be in the best interests
of the Company and its stockholders.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF SCHIFFMAN
HUGHES BROWN TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL
YEAR ENDING JUNE 30, 2000.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the number of shares
of Common Stock beneficially owned as of March 22, 2000, by (i) all holders of
shares of Common Stock (the "Stockholders") known by the Company to own
beneficially more than 5% of the outstanding shares of the Common Stock,
(ii) the executive officers of the Company named in the table under
"Compensation of Executive Officers", (iii) each director and nominee for
director of the Company and (iv) all directors and executive officers of
the Company as a group.
Name and Address of Number of Shares(1) Percent of
Beneficial Owner Beneficially Owned Common Stock (1)
- --------------------------------- -------------------- -----------------
TCL Industries Holdings (HK) Ltd. (2) 9,606,671 13.1%
13/F, TCL Tower
8 Tai Chung Road
Tsuen Wan, Hong Kong
Lotus International Holdings Corp.(3)(4) 7,679,999 10.5%
200 Centennial Avenue, Suite 201
Piscataway, NJ 08854
Yao Investment Corp. (5) 8,000,000 10.9%
200 Centennial Avenue, Suite 201
Piscataway, NJ 008854
Evolving Investment Limited (11) 8,000,000 10.9%
25G Block 10 Locwood Ct.
Kingswood Villas Yuen Long
NT, Hong Kong
Rightiming Electronics Corp. 6,000,000 8.2%
P.O. Box 186
Piscataway, NJ 08855-01
Directors and Executive Officers
- ---------------------------------
James Yao (3)(4)(5)(6) 15,859,999 21.6%
Jeremy Wang (7) 180,000 *
David Li 0 0
Huaya Lu Tung ** 0 0
David Leung (4)(8) 500,000 *
James Liu (3)(4)(9) 7,859,999 10.7%
Gary Huang 0 0
Johnson Chang 0 0
Tomson Dong Sheng Li 0 0
Greg Chen 0 0
Thomas V. White 0 0
Stefan H. Benger 500,000 *
Harold Tuan 862,156 1.2%
Max Lu 238,620 *
De-Liang Wang (10) 50,000 *
Richard Ho 10,000 *
C. Jeffrey Gull 4,800 *
All directors and executive officers
as a group (consisting of 17 persons)
(3)(5)(6)(7)(8)(9)(10) 18,385,575 25.0%
- -------------------------------------------------------
*Less than one (1) percent
** Ms. Tung resigned as Treasurer on February 7, 2000; her shares are excluded
from shares held by directors and executive officers as a group.
(1) Shares beneficially owned and percentage of ownership are based upon
64,344,474 shares of Common Stock issued and outstanding as of March 22, 2000
and 1,090,000 shares that may be acquired by exercise of stock options within
60 days of March 22, 2000, and warrants to purchase 8,000,000 shares of
Common Stock which are currently exercisable as March 22, 2000.
(2) TCL Industries Holdings (HK) Ltd. is an affiliate of TCL Holdings Group.
Mr. Tomson Dong Sheng Li, a nominee for election as a director of the Company,
is the Chairman and President of TCL Holdings Group. Mr. Li disclaims
beneficial ownership of these shares.
(3) Mr. James Yao, Chairman of the Board of Directors of the Company,
Mr. David Leung, Vice President and director of the Company, and Mr. James Liu,
Vice President and director of the Company, are directors of Lotus
International Holdings Corp. Mr. Yao and Mr. Liu are the majority stockholders
of Lotus International Holdings Corp. and have shared voting power and shared
dispositive power with respect to 7,679,999 shares. Mr. Leung has no voting
power and no dispositive power with respect to such shares.
(4) Lotus International Holdings Corp. also owns the 4,300 outstanding shares
of Series A Preferred Stock of the Company.
(5) Mr. James Yao is the sole stockholder of Yao Investment Corp. and has
sole voting power and dispositive power with respect to these shares of
Common Stock owned by Yao Investment Corp.
(6) Includes 180,000 shares subject to stock options that are currently
exercisable; 7,679,999 shares of Common Stock beneficially owned by Lotus
International Holdings Corp. and 8,000,000 shares of Common Stock beneficially
owned by Yao Investment Corp.
(7) Includes 180,000 shares subject to stock options that are currently
exercisable.
(8) Includes 500,000 shares subject to stock options that are currently
exercisable.
(9) Includes 180,000 shares subject to stock options that are currently
exercisable, and 7,679,999 shares of Common Stock beneficially owned by Lotus
International Holdings Corp.
(10) Includes 50,000 shares subject to stock options that are currently
exercisable.
(11) Evolving Investments Limited owns warrants to purchase 8,000,000 shares
of Common Stock which are currently exercisable.
In addition to the shares of Common Stock and Series A Preferred Stock issued
and outstanding, the Company issued stock options to purchase 1,090,000 shares
of Common Stock to certain directors and officers of the Company as part of
their compensation. All options are exercisable at $6.00 per share and will
expire in May 2002. As of March 22, 2000, no such stock options have been
exercised and all remain outstanding.
Robert Wang and John Wang are the principal stockholders of Rightiming
Electronics Corp., and are not related to Jeremy Wang and De-Liang Wang.
Jeremy Wang and De-Liang Wang are not related to each other.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth information concerning the
total compensation of the Company's Chief Executive Officer and the four other
highest paid executive officers for services rendered in all capacities to the
Company for the last three fiscal years ended June 30, 1999.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
----------------------------------------------- ----------------------------------------------------
Restricted Securities
Name and Principal Other Annual Stock Underlying LTIP All Other
Position Year Salary ($) Bonus ($) Compensation Award Options/SAR(1) Payouts Compensation
- --------------------- ------- ------------ ----------- -------------- ---------- --------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James Yao.......... 1999 68,000 --- --- --- --- --- ---
Chairman 1998 68,000 --- --- --- --- --- ---
1997 18,000 --- --- --- 180,000 --- ---
Jeremy Wang (2).... 1999 120,000 --- --- --- --- --- ---
President 1998 N/A --- --- --- --- --- ---
1997 N/A --- --- --- 180,000 --- ---
C. Jeffrey Gull(2). 1999 80,000 --- --- --- --- --- ---
Vice President
De-liang Wang (2).. 1999 80,000 --- --- --- --- --- ---
Vice President
David Li (2)....... 1999 80,000 --- --- --- --- --- ---
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Each of the outstanding options is currently exercisable at $6.00 per
share and expires on May 15 or May 30, 2002.
(2) Messrs. Jeremy Wang, C. Jeffrey Gull and De-liang Wang were appointed in
March 1999. David Li was appointed in July 1999. The salaries indicated are
their initial annual base salaries.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, its executive officers and persons who own more than 10% of the
Company's Common Stock to file reports regarding their share ownership and any
subsequent changes in that ownership with the SEC and the Company. As of the
date, none of the above-mentioned individuals and 10% holders have filed the
requisite reports. As of the date hereof, the Company is assisting such
individuals to file such reports promptly. All information required to be
filed in such reports on Form 3 has been disclosed, however, in this Proxy S
tatement.
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting other than stated in the Notice of Annual
Meeting. However, if any other matter should properly come before the Annual
Meeting it is the intention of the persons named in the enclosed proxy to vote
in accordance with their judgment on such matter.
STOCKHOLDER PROPOSALS
Stockholders are entitled to submit proposals on matters appropriate for
Stockholder action consistent with the regulations of the Securities and
Exchange Commission. If a shareholder intends to present a proposal at next
year's Annual Meeting of Stockholders, the proposal must be received by the
Secretary of the Company not later than July 29, 2000 in order to be included
in the Company's proxy statement and form of proxy relating to that Meeting.
Under the rules of the Securities and Exchange Commission, stockholders
submitting such proposals are required to have held shares of the Company's
Common Stock amounting to at least $1,000 in market value or one percent of
the Common Stock outstanding for at least one year prior to the date on which
such proposals are submitted. Further, such stockholders must continue to own
at least that amount of the Company's Common Stock through the date on which
the Annual Meeting is held.
By order of the Board of Directors
Gary Huang
Secretary
Piscataway, NJ
March 31, 2000
A copy of the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 1999, which was filed with the Securities and Exchange Commission,
including financial statements, schedules and a list of the exhibits, may be
obtained without charge by writing to Lotus Pacific, Inc., 200 Centennial
Avenue,Suite 201, Piscataway, NJ 08854, Attention: Corporate Secretary.
PROXY
LOTUS PACIFIC, INC.
STOCKHOLDERS' PROXY
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints James Yao and Jeremy Wang, with full power of
substitution, attorneys, agents and proxies to vote on behalf of the
undersigned at the Annual Meeting of Stockholders of Lotus Pacific, Inc. to be
held on Friday, April 28, 2000 at 2:00 p.m. or at any adjournment thereof:
1. Proposal to elect James Yao, Jeremy Wang, David Leung, Tomson Dong
Sheng Li, James Liu, Johnson Chang, Gary Chen and Gary Huang to serve as
directors until the next Annual Meeting of the stockholders and until their
successors have been duly qualified and elected.
( ) FOR all nominees listed above ( ) WITHHOLD AUTHORITY
(except as marked to the contrary below) to vote for all nominees
listed above
-------------------------------------------------------------------------
(Instruction: To Withhold Authority to Vote for Any Individual Nominee,
Write That Nominee's Name in the Space Provided Above)
2. Proposal to approve the 2000 Equity Incentive Plan of the Company
( ) FOR ( ) AGAINST ( ) ABSTAIN
3. Proposal to ratify the Board of Directors' selection of Schiffman Hughes
Brown to serve as the Company's independent auditors for the fiscal year
ending June 30, 2000.
( ) FOR ( ) AGAINST ( ) ABSTAIN
The Proxies are authorized to vote, in their discretion, upon such other
business as may properly come before the meeting.
--------------------------------
Signature
Dated: ____________, 2000 --------------------------------
Signature, if held jointly
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by the President or other authorized officer. If a
partnership, please sign in partnership name by an authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY
USING THE ENCLOSED ENVELOPE.
APPENDIX A
LOTUS PACIFIC, INC.
2000 EQUITY INCENTIVE PLAN
Effective March 21, 2000
1. PURPOSES................................................... 1
(a) Eligible Stock Award Recipients.................... 1
(b) Available Stock Awards............................. 1
(c) General Purpose.................................... 1
2. DEFINITIONS................................................ 1
3. ADMINISTRATION............................................. 4
(a) Administration by Board................................ 4
(b) Powers of Board 4 (c) Delegation to Committee.......... 5
4. SHARES SUBJECT TO THE PLAN. 5
(a) Share Reserve.......................................... 5
(b) Reversion of Shares to the Share Reserve .............. 5
(c) Source of Shares....................................... 6
5. ELIGIBILITY................................................ 6
(a) Eligibility for Specific Stock Awards.................. 6
(b) Ten Percent Stockholders............................... 6
(c) Section 162(m) Limitation.............................. 6
6. OPTION PROVISIONS.......................................... 6
(a) Term................................................... 6
(b) Exercise Price of an Incentive Stock Option............ 6
(c) Exercise Price of a Nonstatutory Stock Option.......... 6
(d) Consideration.......................................... 7
(e) Transferability of an Incentive Stock Option........... 7
(f) Transferability of a Nonstatutory Stock Option......... 7
(g) Vesting Generally...................................... 7
(h) Termination of Continuous Service...................... 7
(i) Disability of Optionholder............................. 8
(j) Death of Optionholder.................................. 8
(k) Extension of Termination Date.......................... 8
(l) Early Exercise......................................... 8
(m) Re-Load Options........................................ 8
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.............. 9
(a) Stock Bonus Awards..................................... 9
(b) Restricted Stock Awards................................ 10
(c) Stock Appreciation Rights.............................. 10
8. COVENANTS OF THE COMPANY................................... 12
(a) Availability of Shares................................. 12
(b) Securities Law Compliance.............................. 12
9. USE OF PROCEEDS FROM STOCK................................. 12
10. MISCELLANEOUS.............................................. 12
(a) Acceleration of Exercisability and Vesting............. 12
(b) Stockholder Rights..................................... 12
(c) No Employment or Other Service Rights.................. 12
(d) Incentive Stock Option $100,000 Limitation............. 13
(e) Investment Assurances.................................. 13
(f) Withholding Obligations................................ 13
11. ADJUSTMENTS UPON CHANGES IN STOCK.......................... 13
(a) Capitalization Adjustments............................. 13
(b) Change in Control--Dissolution or Liquidation.......... 14
(c) Change in Control--Asset Sale.......................... 14
(d) Change in Control--Merger or Consolidation in Which the
Company is Not the Surviving Corporation............... 14
(e) Change in Control--Reverse Merger...................... 14
12. AMENDMENT OF THE PLAN AND STOCK AWARDS..................... 14
(a) Amendment of Plan...................................... 14
(b) Stockholder Approval................................... 15
(c) Contemplated Amendments................................ 15
(d) No Impairment of Rights................................ 15
(e) Amendment of Stock Awards.............................. 15
13. TERMINATION OR SUSPENSION OF THE PLAN...................... 15
(a) Plan Term. 15 (b) No Impairment of Rights.............. 15
14. EFFECTIVE DATE OF PLAN..................................... 15
LOTUS PACIFIC, INC.
2000 EQUITY INCENTIVE PLAN
Adopted by the Board of Directors on March 21, 2000
Approved By Stockholders on ________, 2000
Effective March 21, 2000
1. PURPOSES.
(a) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) Available Stock Awards. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of
the following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) stock appreciation rights, (iv) stock bonuses and (v)
rights to acquire restricted stock.
(c) General Purpose. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to
secure and retain the services of new members of this group and to provide
incentives for such persons to exert maximum efforts for the success of the
Company and its Affiliates.
2. DEFINITIONS.
"Affiliate" means any parent corporation or subsidiary corporation of the
Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
"BOARD" means the Board of Directors of the Company.
"Cause" means that the Board determined in good faith that the Participant
has engaged in misconduct, including but not limited to: (i) the commission
of any felony or any crime involving moral turpitude or dishonesty; (ii) the
participation in a fraud or act of dishonesty against or adversely affecting
the Company; or (iii) the intentional, material violation of any contract
between the Company and the Participant, any statutory duty of the Participant
to the Company, or any policy of the Company which the Participant does not
correct within thirty (30) days after written notice to the Participant
thereof. The physical or mental disability of the Participant shall not
constitute "Cause."
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means a Committee appointed by the Board in accordance with
subsection 3(c).
"Common Stock" means the common stock of the Company.
"Company" means Lotus Pacific, Inc., a Delaware corporation.
"Concurrent Stock Appreciation Right" or "Concurrent Right" means a right
granted pursuant to subsection 7(c)(2) of the Plan.
"Consultant" means any person, including an advisor, (1) engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (2) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors of the Company who are not compensated by the Company for their
services as Directors or Directors of the Company who are paid a director's
fee or otherwise compensated by the Company solely for their services as
Directors.
"Continuous Service" means that the Participant's service with the Company or
an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board
or the chief executive officer of the Company, in that party's sole discretion,
may determine whether Continuous Service shall be considered interrupted in
military leave or any other personal leave.
"Covered Employee" means the chief executive officer and the four (4) other
highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
"Director" means a member of the Board of Directors of the Company.
"Disability" means the permanent and total disability of a person within the
meaning of Section 22(e)(3) of the Code.
"Employee" means any person employed by the Company or an Affiliate. Mere
service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company
or an Affiliate.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, as of any date, the value of the Common Stock
determined as follows: (i) if the Common Stock is listed on any established
stock exchange or traded on the Nasdaq National Market or the Nasdaq SmallCap
Market, the Fair Market Value of a share of Common Stock shall be the closing
sales price for such stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or market with the greatest
volume of trading in the Common Stock) on the last market trading day prior to
the day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable; or (ii) in the absence of such markets for
the Common Stock, the Fair Market Value shall be determined in good faith by
the Board.
"Incentive Stock Option" means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code and the regulations
promulgated thereunder.
"Independent Stock Appreciation Right" or "Independent Right" means a right
granted pursuant to subsection 7(c)(3) of the Plan.
"Non-Employee Director" means a Director of the Company who either (i) is
not a current Employee or Officer of the Company or its parent or a subsidiary,
does not receive compensation (directly or indirectly) from the Company or its
parent or a subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would not
be required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
"Nonstatutory Stock Option" means an Option not intended to qualify as an
Incentive Stock Option.
"Officer" means a person who is an officer of the Company within the meaning
of Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.
"Option" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
"Option Agreement" means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
"Optionholder" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
"Outside Director" means a Director of the Company who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation"
receiving compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an "affiliated
corporation" at any time, and is not currently receiving direct or indirect
remuneration from the Company or an "affiliated corporation" for services in
any capacity other than as a Director or (ii) is otherwise considered an
"outside director" for purposes of Section 162(m) of the Code.
"Participant" means a person to whom a Stock Award is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Stock Award.
"Plan" means this Lotus Pacific, Inc. 2000 Equity Incentive Plan.
"Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.
"Securities Act" means the Securities Act of 1933, as amended.
"Stock Appreciation Right" means any of the various types of rights which may
be granted under subsection 7(c) of the Plan.
"Stock Award" means any right granted under the Plan, including an Option,
a stock appreciation right, a stock bonus and a right to acquire restricted
stock.
"Stock Award Agreement" means a written agreement, including an Option
Agreement, between the Company and a holder of a Stock Award evidencing the
terms and conditions of an individual Stock Award grant. Each Stock Award
Agreement shall be subject to the terms and conditions of the Plan.
"Tandem Stock Appreciation Right" or "Tandem Right" means a right granted
pursuant to subsection 7(c)(i)(1) of the Plan.
"Ten Percent Stockholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Company or of any of its Affiliates.
3. ADMINISTRATION.
(a) Administration by Board. The Board will administer the Plan unless
and until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time: which of the persons eligible under
the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock
Award shall be granted; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a
person shall be permitted to receive stock pursuant to a Stock
Award; and the number of shares with respect to which a Stock Award
shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan or in any
Stock Award Agreement, in a manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective.
(iii)To amend the Plan or a Stock Award as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of
the Company which are not in conflict with the provisions of the
Plan.
(v) Any interpretation of the Plan by the Board of any decision made by
it under the Plan shall be final and binding on all persons.
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and
the term "Committee" shall apply to any person or persons to whom
such authority has been delegated. If administration is delegated
to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the
Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee
at any time and revest in the Board the administration of the Plan.
(ii) Committee Composition when Common Stock is Publicly Traded. At such
time as the Common Stock is publicly traded, in the discretion of
the Board, a Committee may consist solely of two (2) or more Outside
Directors, in accordance with Section 162(m) of the Code, and/or
solely of two (2) or more Non-Employee Directors, in accordance with
Rule 16b-3. Within the scope of such authority, the Board or the
Committee may (i) delegate to a committee of one (1) or more members
of the Board who are not Outside Directors, the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered
Employees and are not expected to be Covered Employees at the time
of recognition of income resulting from such Stock Award or (b) not
persons with respect to whom the Company wishes to comply with
Section 162(m) of the Code and/or (ii) delegate to a committee of
one (1) or more members of the Board who are not Non-Employee
Directors the authority to grant Stock Awards to eligible persons
who are not then subject to Section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(a) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate 11,354,907
shares of Common Stock, plus an annual increase to be added July 1 of
each year beginning with July 1, 2001 equal to the least of the
following amounts (i) 5,000,000 shares, (ii) four percent (4%) of the
Company's outstanding shares on such date (rounded to the nearest whole
share and calculated on a fully diluted basis, that is assuming the
exercise of all outstanding stock options and warrants to purchase
common stock) and (iii) an amount determined by the Board.
(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full (or vested in the case of Restricted
Stock), the stock not acquired under such Stock Award shall revert to
and again become available for issuance under the Plan. Shares subject
to stock appreciation rights exercised in accordance with the Plan
shall not be available for subsequent issuance under the Plan. If any
Common Stock acquired pursuant to the exercise of an Option shall for
any reason be repurchased by the Company under an unvested share
repurchase option provided under the Plan, the stock repurchased by the
Company under such repurchase option shall not revert to and again
become available for issuance under the Plan.
(c) Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options and
Stock Appreciation Rights appurtenant thereto may be granted only to Employees.
Stock Awards other than Incentive Stock Options and Stock Appreciation Rights
appurtenant thereto may be granted to Employees, Directors and Consultants.
(b) Ten Percent Stockholders. No Ten Percent Stockholder shall be eligible
for the grant of an Incentive Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
the Common Stock at the date of grant and the Option is not exercisable after
the expiration of five (5) years from the date of grant.
(c) Section 162(m) Limitation. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no Employee shall be eligible
to be granted Options and/or Stock Appreciation Rights covering more than
three million (3,000,000) shares of the Common Stock during any calendar year.
6. OPTION PROVISIONS.
Each Option Agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and a separate certificate or certificates will be issued
for shares purchased on exercise of each type of Option. The provisions of
separate Options and Option Agreements need not be identical, but each Option
shall include (through incorporation of provisions hereof by reference in the
Option Agreement or otherwise) the substance of each of the following
provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable after
the expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred percent
(100%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, an Incentive Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of
Section 424(a) of the Code.
(c) Exercise Price of a Nonstatutory Stock Option. The exercise price
of each Nonstatutory Stock Option shall be not less than eighty-five percent
(85%) of the Fair Market Value of the stock subject to the Option on the date
the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of
Section 424(a) of the Code.
(d) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii)
at the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by delivery to the
Company of other Common Stock, according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or in any other
form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment, whether issuing a
promissory note or otherwise.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at no less than the minimum
rate of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts stated
to be interest under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who,
in the event of the death of the Optionholder, shall thereafter be entitled
to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory
Stock Option shall be transferable to the extent provided in the Option
Agreement. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing provisions of this subsection 6(f), the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of
the death of the Optionholder, shall thereafter be entitled to exercise the
Option.
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board
may deem appropriate. The vesting provisions of individual Options may vary.
The provisions of this subsection 6(g) are subject to any Option Agreement
provisions governing the minimum number of shares as to which an Option may
be exercised.
(h) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability or for Cause), the Optionholder may exercise his or her Option (to
the extent that the Optionholder was entitled to exercise it as of the date of
termination) but only within such period of time ending on the earlier of (i)
the date three (3) months following the termination of the Optionholder's
Continuous Service (or such longer or shorter period as may be specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement; provided, however, that the Board may in its
sole discretion extend the exercise period of any Option for up to thirty (30)
days after the exercise period specified in the Option Agreement. If, after
termination, the Optionholder does not exercise his or her Option within the
time specified herein, the Option shall terminate. In the event an
Optionholder's Continuous Service terminates for Cause, the Optionholder's
participation in the Plan shall immediately terminate and the Options shall
expire immediately upon such termination, unless extended in the sole
discretion of the Board.
(i) Disability of Optionholder. In the event an Optionholder's
Continuous Service terminates as a result of the Optionholder's Disability,
the Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise it as of the date of termination), but
only within such period of time ending on the earlier of (i) the date twelve
(12) months following such termination (or such longer or shorter period as
may be specified in the Option Agreement) or (ii) the expiration of the term
of the Option as set forth in the Option Agreement. If, after termination,
the Optionholder does not exercise his or her Option within the time specified
herein, the Option shall terminate.
(j) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by
the Optionholder's estate, by a person who acquired the right to exercise the
Option by bequest or inheritance or by a person designated to exercise the
option upon the Optionholder's death pursuant to subsection 6(e) or 6(f), but
only within the period ending on the earlier of (1) the date eighteen (18)
months following the date of death (or such longer or shorter period as may be
specified in the Option Agreement) or (2) the expiration of the term of such
Option as set forth in the Option Agreement. If, after death, the Option is
not exercised within the time specified herein, the Option shall terminate.
(k) Extension of Termination Date. An Optionholder's Option Agreement
may also provide that if the exercise of the Option following the termination
of the Optionholder's Continuous Service would be prohibited at any time solely
because the issuance of shares would violate the registration requirements
under the Securities Act, then the Option shall terminate no earlier than (i)
the expiration of the term of the Option set forth in subsection 6(a) or (ii)
the expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service (or such longer or shorter period as may be
specified in the Option Agreement) during which the exercise of the Option
would not be in violation of such registration requirements.
(l) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option. Any
unvested shares so purchased may be subject to an unvested share repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.
(m) Re-Load Options. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option
Agreement a provision entitling the Optionholder to a further Option (a
"Re-Load Option") in the event the Optionholder exercises the Option evidenced
by the Option Agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with the Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option shall (i) provide for a number of
shares equal to the number of shares surrendered as part or all of the exercise
price of such Option; (ii) have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) have an exercise price which is equal to one hundred percent
(100%) of the Fair Market Value of the Common Stock subject to the Re-Load
Option on the date of exercise of the original Option. Notwithstanding the
foregoing, a Re-Load Option shall be subject to the same exercise price and
term provisions heretofore described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board may designate at the time of the grant of the
original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred
thousand dollars ($100,000) annual limitation on exercisability of Incentive
Stock Options described in subsection 10(d) hereof and in Section 422(d) of
the Code. There shall be no Re-Load Options on a Re-Load Option. Any such
Re-Load Option shall be subject to the availability of sufficient shares
under subsection 4(a) and the "Section 162(m) Limitation" on the grants
of Options under subsection 5(c) and shall be subject to such other terms
and conditions as the Board may determine which are not inconsistent with
the express provisions of the Plan regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may change
from time to time, and the terms and conditions of separate stock bonus
agreements need not be identical, but each stock bonus agreement shall include
(through incorporation of provisions hereof by reference in the agreement or
otherwise) the substance of each of the following provisions:
(i) Consideration. A stock bonus shall be awarded in consideration for
past services actually rendered to the Company for its benefit.
(ii) Vesting. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share reacquisition option in
favor of the Company in accordance with a vesting schedule to be determined
by the Board.
(iii) Termination of Participant's Continuous Service. In the event
a Participant's Continuous Service terminates, the Company may reacquire any
or all of the shares of Common Stock held by the Participant which have not
vested as of the date of termination under the terms of the stock bonus
agreement.
(iv) Transferability. Rights to acquire shares under the stock bonus
agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the stock bonus agreement, as the Board shall
determine in its discretion, so long as stock awarded under the stock bonus
agreement remains subject to the terms of the stock bonus agreement.
(b) Restricted Stock Awards. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but
each restricted stock purchase agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price
shall not be less than eighty-five percent (85%) of the stock's Fair Market
Value on the date such award is made or at the time the purchase is
consummated.
(ii) Consideration. The purchase price of stock acquired pursuant to
the restricted stock purchase agreement shall be paid in one or a combination
of the following forms: (i) in cash or by check at the time of purchase;
(ii) at the discretion of the Board, according to a deferred payment
arrangement using a promissory note or other similar arrangement with the
Participant; or (iii) in any other form of legal consideration that may be
acceptable to the Board in its discretion; provided, however, that at any time
that the Company is incorporated in Delaware, payment of the Common Stock's
"par value," as defined in the Delaware General Corporation Law, shall not
be made by deferred payment.
(iii) Vesting. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.
(iv) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the
terms of the restricted stock purchase agreement.
(v) Transferability. Rights to acquire shares under the restricted
stock purchase agreement shall be transferable by the Participant only upon
such terms and conditions as are set forth in the restricted stock purchase
agreement, as the Board shall determine in its discretion, so long as stock
awarded under the restricted stock purchase agreement remains subject to the
terms of the restricted stock purchase agreement.
(c) Stock Appreciation Rights.
(i) Authorized Rights. The following three types of stock appreciation
rights shall be authorized for issuance under the Plan:
(1) Tandem Rights. A "Tandem Right" means a stock appreciation right
granted appurtenant to an Option which is subject to the same terms and
conditions applicable to the particular Option grant to which it pertains
with the following exceptions: The Tandem Right shall require the holder
to elect between the exercise of the underlying Option for shares of Common
Stock and the surrender, in whole or in part, of such Option for an
appreciation distribution. The appreciation distribution payable on the
exercised Tandem Right shall be in cash (or, if so provided, in an equivalent
number of shares of Common Stock based on Fair Market Value on the date of
the Option surrender) in an amount up to the excess of (A) the Fair Market
Value (on the date of the Option surrender) of the number of shares of
Common Stock covered by that portion of the surrendered Option in which the
Optionholder is vested over (B) the aggregate exercise price payable for
such vested shares.
(2) Concurrent Rights. A "Concurrent Right" means a stock appreciation
right granted appurtenant to an Option which applies to all or a portion of
the shares of Common Stock subject to the underlying Option and which is
subject to the same terms and conditions applicable to the particular Option
grant to which it pertains with the following exceptions: A Concurrent Right
shall be exercised automatically at the same time the underlying Option is
exercised with respect to the particular shares of Common Stock to which the
Concurrent Right pertains. The appreciation distribution payable on an
exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of Common Stock based on Fair Market Value on the
date of the exercise of the Concurrent Right) in an amount equal to such
portion as determined by the Board at the time of the grant of the excess of
(A) the aggregate Fair Market Value (on the date of the exercise of the
Concurrent Right) of the vested shares of Common Stock purchased under the
underlying Option which have Concurrent Rights appurtenant to them over (B)
the aggregate exercise price paid for such shares.
(3) Independent Rights. An "Independent Right" means a stock appreciation
right granted independently of any Option but which is subject to the same
terms and conditions applicable to a Nonstatutory Stock Option with the
following exceptions: An Independent Right shall be denominated in share
equivalents. The appreciation distribution payable on the exercised
Independent Right shall be not greater than an amount equal to the excess
of (a) the aggregate Fair Market Value (on the date of the exercise of the
Independent Right) of a number of shares of Company stock equal to the number
of share equivalents in which the holder is vested under such Independent
Right, and with respect to which the holder is exercising the Independent
Right on such date, over (b) the aggregate Fair Market Value (on the date of
the grant of the Independent Right) of such number of shares of Company stock.
The appreciation distribution payable on the exercised Independent Right shall
be in cash or, if so provided, in an equivalent number of shares of Common
Stock based on Fair Market Value on the date of the exercise of the Independent
Right.
(ii) Relationship to Options. Stock appreciation rights appurtenant to
Incentive Stock Options may be granted only to Employees. The "Section 162(m)
Limitation" provided in subsection 5(c) shall apply as well to the grant of
stock appreciation rights.
(iii) Exercise. To exercise any outstanding stock appreciation right, the
holder shall provide written notice of exercise to the Company in compliance
with the provisions of the Stock Award Agreement evidencing such right.
Except as provided in subsection 5(c) regarding the "Section 162(m)
Limitation," no limitation shall exist on the aggregate amount of cash
payments that the Company may make under the Plan in connection with the
exercise of a stock appreciation right.
8. COVENANTS OF THE COMPANY.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and sell shares
of Common Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award or to take similar actions under applicable law. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems
necessary for the lawful issuance and sale of stock under the Plan, the Company
shall be relieved from any liability for failure to issue and sell stock upon
exercise of such Stock Awards unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Stockholder Rights. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares
subject to such Stock Award unless and until such Participant has satisfied
all requirements for exercise of the Stock Award pursuant to its terms.
(c) No Employment or Other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant or other holder of Stock Awards any right to continue to serve
the Company or an Affiliate in the capacity in effect at the time the Stock
Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or
without Cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate, (iii) the service of
a Consultant as a director of an Affiliate pursuant to the Bylaws of the
Affiliate, and any applicable provisions of the corporate law of the state in
which the Affiliate is incorporated or (iv) the service of a Director pursuant
to the Bylaws of the Company, and any applicable provisions of the corporate
law of the state in which the Company is incorporated.
(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options
or portions thereof which exceed such limit (according to the order in which
they were granted) shall be treated as Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (ii)
to give written assurances satisfactory to the Company stating that the
Participant is acquiring the stock subject to the Stock Award for the
Participant's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (1)
the issuance of the shares upon the exercise or acquisition of stock under the
Stock Award has been registered under a then currently effective registration
statement under the Securities Act or (2) as to any particular requirement, a
determination is made by counsel for the Company that such requirement need
not be met in the circumstances under the then applicable securities laws.
The Company may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.
(f) Withholding Obligations. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common Stock
otherwise issuable to the participant as a result of the exercise or
acquisition of stock under the Stock Award; or (iii) delivering to the Company
owned and unencumbered shares of the Common Stock.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) Capitalization Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Stock Award, without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving
the receipt of consideration by the Company), the Plan will be appropriately
adjusted in the class(es) and maximum number of securities subject to the Plan
pursuant to subsections 4(a) and 4(b) and the maximum number of securities
subject to award to any person pursuant to subsection 5(c), and the outstanding
Stock Awards will be appropriately adjusted in the class(es) and number of
securities and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board, the determination of
which shall be final, binding and conclusive. (The conversion of any
onvertible securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.)
(b) Change in Control--Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, then such Stock Awards shall be
terminated if not exercised (if applicable) prior to such event.
(c) Change in Control--Asset Sale. In the event of a sale of all or
substantially all of the assets of the Company, then all Stock Awards
outstanding under the Plan shall continue in full force and effect.
(d) Change in Control--Merger or Consolidation in Which the Company is
Not the Surviving Corporation. In the event of a merger or consolidation in
which the Company is not the surviving corporation, then any surviving
corporation or acquiring corporation shall assume any Stock Awards outstanding
under the Plan or shall substitute similar stock awards (including stock award
to acquire the same consideration paid to the stockholders in the transaction
described in this subsection 11(d)) for those outstanding under the Plan. In
the event any surviving corporation or acquiring corporation refuses to assume
such Stock Awards or to substitute similar stock awards for those outstanding
under the Plan, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the vesting of such Stock Awards (and,
if applicable, the time during which such Stock Awards may be exercised) shall
be accelerated in full, and the Stock Awards shall terminate if not exercised
(if applicable) at or prior to such event.
(e) Change in Control--Reverse Merger. In the event of a reverse merger in
which the Company is the surviving corporation but the shares of Common Stock
outstanding immediately preceding the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, then any acquiring corporation (or a corporation which directly or
indirectly controls such an acquiring corporation) shall assume any Stock
Awards outstanding under the Plan or shall substitute similar stock awards
(including a stock award to acquire the same consideration paid to the
stockholders in the transaction described in this subsection 11(e)) for those
outstanding under the Plan. In the event any acquiring corporation or
corporation controlling such an acquiring corporation refuses to assume such
Stock Awards or to substitute similar stock awards for those outstanding under
the Plan, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the vesting of such Stock Awards (and,
if applicable, the time during which such Stock Awards may be exercised) shall
be accelerated in full, and the Stock Awards shall terminate if not exercised
(if applicable) at or prior to such event.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) Amendment of Plan. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule
16b-3 or any Nasdaq or securities exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.
(c) Contemplated Amendments. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems necessary or advisable
to provide eligible Employees with the maximum benefits provided or to be
provided under the provisions of the Code and the regulations promulgated
thereunder relating to Incentive Stock Options and/or to bring the Plan and
/or Incentive Stock Options granted under it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan
unless (i) the Company requests the consent of the Participant and (ii) the
Participant consents in writing.
(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on December 31, 2009. No
Stock Awards may be granted under the Plan while the Plan is suspended or after
it is terminated.
(b) No Impairment of Rights. Rights and obligations under any Stock Award
granted while the Plan is in effect shall not be impaired by suspension or
termination of the Plan, except with the written consent of the Participant.
14. EFFECTIVE DATE OF PLAN.
This Plan shall become effective as of March 21, 2000, but no Stock Award
shall be exercised (or, in the case of a stock bonus, shall be granted) unless
and until this Plan has been approved by the stockholders of the Company, which
approval shall be within twelve (12) months after the date the Plan is adopted
by the Board.
