SECURITIES AND EXCHANGE COMMISSION
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
[X] Filed by the Registrant
[ ] Filed by a Party other than the Registrant
Check the Appropriate Box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
IFS INTERNATIONAL, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:________
2) Aggregate number of securities to which transaction applies:___________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
=======================================================================
-----------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:_______________________
5) Total fee paid:________________________________________________________
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:________________________________________________
2) Form, Schedule or Registration Statement No.:__________________________
3) Filing Party:__________________________________________________________
4) Date Filed:____________________________________________________________
Copies of all communications to:
Donald G. Johnson , Jr., Esq.
Pollet Law
10900 Wilshire Boulevard, Suite 500
Los Angeles, CA 90024
<PAGE>
December 10, 1998
To Our Stockholders:
The Annual Meeting of Stockholders of IFS International, Inc., a
Delaware corporation (the "Company") will be held at 10:00 a.m. on Thursday,
January 21, 1999, at the offices of the Company located at 300 Jordan Road,
Troy, New York.
Enclosed is the Company's Notice of the Annual Meeting of Stockholders,
Proxy Statement and Proxy Card. The enclosed Proxy Statement and Proxy Card
contain details concerning the business to come before the meeting, including
(i) the adoption of certain amendments to the Certificate of Incorporation and
Bylaws of the Company establishing a classified Board of Directors and related
matters; (ii) the ratification of a Stockholders' Rights Plan; (iii) the
approval of the 1998 IFS International, Inc. Stock Plan; (iv) amendment of the
Certificate of Designation regarding the Company's Series A Preferred Stock to
make the Series A Preferred Stock automatically convert to Common Stock on
January 31, 1999, instead of February 21, 2002 and to change the Conversion
Number from 1 share of Common Stock to 1.1 shares of Common Stock; (v) approval
of changing the name of the Company to "IFS Holdings, Inc."; (vi) the
ratification of the selection of Urbach Kahn & Werlin PC as the Company's
independent auditors for the fiscal year ending April 30, 1999; and (vii)
election of Directors of the Company. You should note that the Board of
Directors of the Company unanimously recommend a vote "FOR" each of the
aforesaid proposals.
If you were a record holder of the Company's common stock on December
9, 1998, you are eligible to vote with respect to these matters, either
personally at the meeting or by proxy. It is important that your shares be
voted, whether or not you plan to attend the meeting, to ensure the presence of
a quorum. For that reason we request that you sign and return the Proxy Card
now. A postage paid envelope is enclosed for your convenience in replying. If
you attend the meeting and wish to vote your shares personally, you may revoke
your proxy.
We look forward to reviewing the activities of the Company with you at
the meeting. We hope you can be with us.
Sincerely,
/s/ David L. Hodge
---------------------
David L. Hodge
President and
Chief Executive Officer
<PAGE>
IFS INTERNATIONAL, INC.
Rensselaer Technology Park
300 Jordan Road
Troy, New York 12180
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held January 21, 1999
To the Stockholders of IFS International, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
"Meeting") of IFS International, Inc., a Delaware corporation (the "Company"),
will be held at 10:00 a.m. local time, on Thursday, January 21, 1999, at the
offices of the Company located at 300 Jordan Road, Troy, New York, to consider
and to vote on the following matters as more fully described in the accompanying
Proxy Statement:
To approve the adoption of amendments to the Certificate of
Incorporation and Bylaws of the Company to implement the following
changes recommended by the Board of Directors: (A) the "Classified
Board Provisions": (i) reorganize the Board of Directors of the Company
into three classes of directors, with the directors in each class
serving three-year staggered terms; (ii) limit the minimum and maximum
number of authorized directors serving on the Board to five and nine
persons, respectively, (iii) require that any vacancies in the number
of directors of the Company be filled solely by the vote of a majority
of directors then in office, (iv) require that actions by stockholders
of the Company be taken only at an annual or special meeting and not by
written consent; and (v) require a two-thirds vote of the stockholders
of the Company to amend or repeal any of the foregoing amendments to
the Certificate of Incorporation and Bylaws of the Company; and (B) the
"General Update of Bylaws" to replace the present Bylaws with Bylaws
which will provide a more thorough and sophisticated treatment of
corporate governance matters;
To approve a Stockholders' Rights Plan;
To approve the 1998 IFS International, Inc. Stock Plan;
To approve amendment of the Certificate of Designation regarding the
Company's Series A Preferred Stock to make the Series A Preferred Stock
automatically convert to Common Stock on January 31, 1999, instead of
February 21, 2002 and to change the Conversion Number from 1 share of
Common Stock to 1.1 shares of Common Stock;
To approve changing the name of the Company to "IFS Holdings Inc.";
To ratify the selection of Urbach Kahn & Werlin PC as the Company's
independent auditors for the fiscal year ending April 30, 1999;
To elect seven Directors of the Company; and
To transact such other business as may properly come before the meeting
or any adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on December 9,
1998, as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Meeting and any adjourned meetings thereof.
All stockholders are cordially invited to attend the Meeting in person.
Your vote is important. Please fill in, date, sign and return the enclosed proxy
in the return envelope furnished for that purpose as promptly as possible,
whether or not you plan to attend the Meeting. Your promptness in returning the
proxy will assist in the expeditious and orderly processing of the proxies and
will assist in ensuring that a quorum is present or represented. If you return
your proxy, you may nevertheless attend the Meeting and vote your shares in
person if you wish. If you later desire to revoke your proxy for any reason, you
may do so in the manner described in the attached Proxy Statement.
By Order of the Board of Directors
/s/ John P. Singleton
-----------------------------------
John P. Singleton
Chairman of the Board
Dated: December 10, 1998
<PAGE>
IFS INTERNATIONAL, INC.
Rensselaer Technology Park
300 Jordan Road
Troy, New York 12180
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To Be Held January 21, 1999
VOTING AND PROXY
This Proxy Statement is furnished in connection with the solicitation of proxies
by the Board of Directors of IFS International, Inc. (the "Company") for use at
An Annual Meeting of Stockholders to be held at 10:00 a.m., local time, on
Thursday, January 21, 1999, at the principal executive offices of the Company
located at 300 Jordan Road, Troy, New York (the "Meeting"), and any adjournments
thereof. When such proxy is properly executed, dated and returned, the shares it
represents will be voted in accordance with any directions noted thereon. If no
specification is indicated, the shares will be voted "FOR" (i) adoption of
certain amendments to the Company's Certificate of Incorporation and Bylaws
establishing a classified Board of Directors and related matters and generally
updating the Bylaws; (ii) approval of the adoption of a Stockholders' Rights
Plan; (iii) approval of the 1998 IFS International, Inc. Stock Plan, (iv)
amendment of the Certificate of Designation regarding the Company's Series A
Preferred Stock to make the Series A Preferred Stock automatically convert to
Common Stock on January 31, 1999, instead of February 21, 2002 and to change the
Conversion Number from 1 share of Common Stock to 1.1 shares of Common Stock;
(v) approval of changing the corporate name to "IFS Holdings Inc"; (vi) the
ratification of the selection of Urbach Kahn & Werlin PC as the Company's
independent auditors for the fiscal year ending April 30, 1999; and, (vii) for
the named nominees to the Company's Board of Directors and for the terms
indicated. Any holder of record giving a proxy has the power to revoke it at any
time before it is voted by written notice to the Secretary of the Company, by
issuance of a later dated proxy, or by voting in person at the meeting.
At the close of business on December 9, 1998, the record date for determining
stockholders entitled to notice of and to vote at the Meeting, the total number
of shares of the Company's Common Stock and Series A Convertible Preferred Stock
(the "Preferred Stock") outstanding was 1,327,424 shares and 1,280,019 shares,
respectively. The Common Stock and Preferred Stock are the only classes of
securities of the Company entitled to vote, each share being entitled to one
non-cumulative vote. Only stockholders of record as of the close of business on
December 9, 1998, will be entitled to vote. A majority of the aggregate number
of shares of Common Stock and Preferred Stock outstanding and entitled to vote
must be present at the Meeting in person or by proxy in order to constitute a
quorum for the transaction of business. Abstentions and broker nonvotes will be
counted for purposes of determining the presence or absence of a quorum for the
transaction of business. Assuming the presence of a quorum, a plurality of the
aggregate votes cast by the holders of Common Stock and Preferred Stock voting
as a single group is required for the election of the named nominees to the
Board of Directors. A vote of a majority of the shares of Common Stock and
Preferred Stock outstanding, voting by class, is required to pass upon each of
the proposals which require amendment of the Company's Articles of Incorporation
(Proposals 1, 4 and 5). A vote of a majority of the shares of Common Stock
present and voting, in person or by proxy, at the Meeting and a vote of a
majority of the shares of Preferred Stock present and voting, in person or by
proxy, at the Meeting is required to pass upon each of the other matters
presented. Abstentions with respect to shares present and voting, in person or
by proxy, at the Meeting will be counted in tabulations of the votes cast,
except that broker nonvotes will not be counted. "Broker nonvotes" are proxies
received from brokers who, in the absence of specific voting instructions from
beneficial owners of shares held in brokerage name, have declined to vote such
shares in those instances where discretionary voting by brokers is permitted.
A list of stockholders entitled to vote at the Meeting will be available at the
Company's offices, 300 Jordan Road, Troy, New York for a period of ten days
prior to the Meeting and at the Meeting itself for examination by any
stockholder.
The Company will pay the expenses of soliciting proxies for the Meeting,
including the cost of preparing, assembling, and mailing the proxy solicitation
materials. Proxies may be solicited personally, or by mail or by telephone, by
directors, officers and regular employees of the Company who will not be
additionally compensated therefor, or by a proxy solicitation agent who is
compensated . The Company has engaged Shareholder Communications Corporation, 17
State Street, 28th Floor, New York, NY 10004, a proxy solicitation agent, to
solicit proxies on behalf of the Board of Directors. The estimated cost of such
services is $11,000. All expenses of preparing and soliciting such proxies will
be paid by the Company. It is anticipated that this Proxy Statement and
accompanying Proxy Card will be mailed on or shortly after December 10, 1998, to
all stockholders entitled to vote at the Meeting.
PROPOSAL NO. 1
ADOPTION OF CLASSIFIED BOARD PROVISIONS AND GENERAL UPDATE OF BYLAWS
The adoption of the Classified Board Provisions is intended to act as an
integrated approach to addressing the Board's concerns, as discussed below in
greater particularity, relative to maintaining management continuity and
stability as well as affording necessary time and flexibility to appropriately
respond to hostile tender offers. As such, the Classified Board Provisions are
intended to be approved as a whole, rather than in their constituent parts, in
order to enhance their effectiveness in meeting the Board's stated purpose. The
adoption of the Classified Board Provisions will require amendment of both the
Company's Certificate of Incorporation (also called the "Charter") and its
Bylaws. Copies of the proposed amendment to the Certificate of Incorporation is
attached as Appendix 1-A. The Certificate of Incorporation is also proposed to
be amended under other Proposals. As part of the process of updating the Bylaws
with reference to the Classified Board Provisions, the Board has approved
adoption of a new, updated form of Bylaws to replace the prior, more simplistic
form. A copy of the proposed amended Bylaws is attached as Appendix 1-B. While
some of the more significant aspects of the new Bylaws are described below, the
discussion is not exhaustive and each shareholder is encouraged to read the new
Bylaws in full.
Description of Classified Board Provisions
The following constitutes an analysis of each constituent part of the Classified
Board Provisions.
Establishment of Classified Board of Directors - Removal of Directors Only For
Cause.
As part of the Classified Board Provisions, section 15 of the Bylaws of the
Company would divide the Board into three classes of directors, namely, Class I,
Class II and Class III, with the number of directors in each class to be as
nearly equal as possible, and with each class to be elected for a three-year
term on a staggered basis. Insofar as the number of directors of the Company is
presently fixed at seven, each class would be comprised of two directors, except
that Class III would consist of three directors (See "Size of the Board of
Directors," below). Following the interim arrangement described below in
"Implementation of Classified Board Provisions," the directors of each class
will serve three-year terms, and the term of one class will expire each year.
The amended Certificate of Incorporation would not permit stockholders or
directors to remove directors without cause.
The current Bylaws of the Company provide that directors hold office until the
next annual meeting and until their successors are elected or qualified, or
until their earlier death, resignation or removal. The current Bylaws of the
Company further provide that directors may be removed from office with or
without cause by the vote of the holders of a majority of the Common Stock at a
special meeting thereof. The term cause is not defined in the Bylaws.
Delaware corporate law provides that a corporation's Certificate of
Incorporation and/or Bylaws may provide that the directors be divided into up to
three classes with each class to be initially elected for a period of one, two
or three years, as appropriate. Delaware corporate law further provides that, if
a corporation has a classified Board, the directors cannot be removed by the
shareholders except for cause unless such right is expressly granted in the
Certificate of Incorporation; the proposed amended Certificate of Incorporation
will not have such a provision allowing removal by shareholders other than for
cause.
Size of the Board of Directors.
As part of the Classified Board Provisions, the section 15 Bylaws of the Company
would provide that the Board shall consist of not fewer than five nor more than
nine members, with the exact number of directors to be fixed, within those
limitations, by a vote of a majority of the entire Board. Additionally, no
reduction in the size of the Board would shorten the term of an incumbent
director.
Currently, the Bylaws of the Company provide that the number of directors shall
be fixed by the affirmative vote of a majority of the Board of Directors or by
action of the stockholders of the Company. By action of the Board of Directors,
the present number of directors is fixed at seven.
Delaware law provides that the Board of Directors of a corporation shall consist
of one or more members, which number shall be fixed by the Bylaws of the
corporation, unless the Certificate of Incorporation of the corporation fixes
the number of directors, in which case a change in the number of directors may
be made only by amendment to the Certificate of Incorporation. The proposed
amended Certificate of Incorporation will not include such a provision.
Requirement that Vacancies in the Board of Directors be Filled Solely by the
Vote of a Majority of Directors then in Office.
As part of the Classified Board Provisions, section 18 of the Bylaws of the
Company would require any vacancies and newly created directorships to be filled
exclusively by vote of a majority of the directors then in office, or the sole
remaining director, and not by the stockholders unless the Board determines by
resolution that such vacancy should be filled by shareholder vote. In addition,
any director so appointed would hold office for a term expiring at the annual
meeting of stockholders at which the term of the class to which director is
appointed expires (rather than at the next annual meeting, as is presently the
case).
Currently, the Bylaws of the Company provide that any vacancies and newly
created directorships resulting from an increase in the authorized number of
directors may be filled by the vote of a majority of the directors then in
office, though less than a quorum, or the sole remaining director or by the
stockholders at the next annual meeting thereof.
Delaware corporate law provides that vacancies and newly created directorships
will be filled in the same manner as presently provided in the Bylaws of the
Company unless otherwise provided in a corporation's Certificate of
Incorporation or Bylaws.
Requirement that Actions by Stockholders be Taken Only at a Meeting of
Stockholders and not by Written Consent.
As part of the Classified Board Provisions, the Certificate of Incorporation and
the Bylaws of the Company will be amended to provide that stockholders may only
act at an annual or special meeting of stockholders duly called and to prohibit
action by written consent. Currently, the Company's Bylaws provide that
stockholders of the Company may take any action they otherwise could at a
meeting by written consent, without prior notice and without stockholder vote at
a meeting, so long as the written consent has been signed by holders of a number
of shares who could otherwise authorize such action at a meeting of
stockholders. Delaware corporate law provides that stockholders can take action
by written consent in the same manner as currently provided in the Company's
Bylaws unless otherwise provided in a corporation's Certificate of
Incorporation.
Requirement for Two-thirds Vote of the Stockholders of the Company to Amend or
Repeal any of the Foregoing Amendments.
As part of the Classified Board Provisions, the amended Certificate of
Incorporation of the Company would provide that stockholders may amend the
Classified Board Provisions only by a two-thirds affirmative vote of the shares
entitled to vote. Under Delaware corporate law, the power to amend, alter or
repeal provisions of a corporation's Certificate of Incorporation requires the
approval of both the Board of Directors and the holders of a majority of the
voting power of shares entitled to vote thereon. A corporation may provide in
its Certificate of Incorporation, however, for a higher percentage vote than is
otherwise required by law for any corporate action. Once such a supermajority
provision is adopted, Delaware corporate law requires an equally large
supermajority vote to amend, alter or repeal such provision. Currently, the
Certificate of Incorporation of the Company contains no supermajority vote
provisions.
Implementation of Classified Board Provisions; Designation of Directors to
Classes
Following approval of the Classified Board Provision proposal by the
stockholders of the Company, the Company would file a Certificate of Amendment
to the Certificate of Incorporation of the Company with the Delaware Secretary
of State incorporating the provisions set forth in Appendix 1-A, and, following
the approval by the Delaware Secretary of State of such filing, the Board would
make the conforming amendments to the Bylaws which are set forth in Appendix
1-B.
In order to place the classes of directors on a staggered basis for purposes of
annual elections, the directors in Classes I and II would initially hold office
for one and two-year terms, respectively. The directors in Class I, who will
initially serve a one-year term, will be eligible for re-election to a full
three-year term at the Annual Meeting of Stockholders to be held in 1999.
Directors in Class II, who will initially serve two-year terms, will be eligible
for re-election for full three-year terms at the Annual Meeting of Stockholders
to be held in 2000. Directors in Class III, who initially serve full three-year
terms, will be eligible for re-election for new three-year terms at the Annual
Meeting of Stockholders to be held in 2001. Thus, after the meeting to which
this Proxy Statement relates, stockholders will elect approximately one-third of
the directors at each Annual Meeting of Stockholders. Each director will serve
until a successor is duly elected and qualified or until his or her earlier
death, resignation or removal.
The Company will designate which directors will be appointed to each class.
Since the Board is presently comprised of seven directors, the Company has
designated that Arnold Wells and Per Olof Ezelius will serve in the first class
of directors who will initially hold a one-year term; DuWayne Peterson and Simon
Theobald will serve in the second class of directors who will initially hold a
two-year term; and Frank Pascuito, David Hodge and John Singleton will serve in
the third class of directors who will initially hold a full three-year term.
Objectives and Potential Effects of Classified Board Provisions
The Board of Directors believes that dividing the directors into three classes
and providing that directors will serve three-year terms rather than one-year
terms is in the best interests of the Company and its stockholders because it
should enhance the likelihood of continuity and stability in the Company's
management and in policies formulated by the Board. At any given time, at least
two-thirds of the directors will have at least one year of experience as
directors of the Company and with its business affairs and operations. New
directors would therefore be given an opportunity to become familiar with the
affairs of the Company and will be able to benefit from the experience of
co-members of the Board who have served for longer than one-year terms. Although
no problems have been experienced by the Company over the past five years with
respect to the continuity and stability of leadership and policy, the Board
believes that a classified Board would decrease the likelihood of such problems
in the future. The Board also believes that classification will enhance the
Company's ability to attract and retain well qualified individuals who are able
to commit the time and resources to understand the Company and its business
affairs and operations. The continuity and quality of leadership that results
from a classified Board should, in the opinion of the Board, create long-term
value for the stockholders of the Company.
The Board also believes that the Classified Board Provisions are in the best
interests of the Company and its stockholders because they should, if adopted,
reduce the possibility that a third party could effect a sudden or surprise
change in control of the Company's Board of Directors. With stockholder
approval, many companies have established classified boards or directors for
such purpose. At least two Annual Meetings of Stockholders, rather than one,
will be required to effect a change in a majority of Board members. The delay
afforded by the Classified Board Provisions would serve to ensure that the
Board, if confronted by a hostile tender offer, proxy contest or other surprise
proposal from a third party who has acquired a block of the Common Stock, will
have sufficient time to review the proposal, and appropriate alternatives to the
proposal, and to act in a manner which it believes to be in the best interests
of the Company and its stockholders.
If a potential acquirer were to purchase a significant or controlling interest
in the Company, such acquirer could, if the Board is not classified, quickly
obtain control of the Board and thereby remove the Company's management, which
could severely curtail the Company's ability to negotiate effectively with such
potential acquirer on behalf of all other stockholders. The threat of quickly
obtaining control of the Board could deprive the Board of the time and
information necessary to evaluate the proposal, to study alternative proposals,
and to help ensure that the best price is obtained in any transaction involving
the Company which may ultimately be undertaken. The proposed classification of
the Board is designed to reduce the vulnerability of the Company to an
unsolicited takeover proposal, particularly a proposal that does not contemplate
the acquisition of all of the Company's outstanding shares, or an unsolicited
proposal for the restructuring or sale of all or part of the Company.
The Classified Board Provisions do not expressly provide for the removal of
directors without cause for several reasons. First, allowing stockholders to
remove a director without cause could be used to subvert the protections
afforded by the creation of a classified Board. One method employed by takeover
bidders to obtain control of a board of directors is to acquire a significant
percentage of a corporation's outstanding shares through a tender offer or open
market purchases and to use the voting power of those shares to remove the
incumbent directors and replace them with nominees chosen by the takeover
bidder, who would be more willing to approve the terms of a merger or other
business combination on terms less favorable to the other stockholders of the
Company than those which would have been approved by the removed directors.
Requiring cause in order to remove a director precludes the use of this
strategy, thereby encouraging potential takeover bidders to obtain the
cooperation of the existing Board before attempting a takeover. Thus, the
absence of a provision allowing stockholders to remove a director without cause
is consistent with, and supportive of, the concept of a classified Board in its
intended effect of moderating the pace of a change in the Board of Directors of
the Company. Second, the Board believes that the Classified Board Provisions
will properly condition a director's continued service upon his or her ability
to serve rather than his or her position relative to a dominant stockholder.
Fixing a minimum and maximum number of directors also eliminates another method,
similar to that discussed in the previous paragraph, to subvert the protections
afforded by the creation of a classified Board. Instead of removing incumbent
directors and replacing them with nominees, as discussed above, a bidder could
place an amendment on the ballot at the annual meeting of stockholders to more
than double the number of directors, and achieve its objective of electing a
majority of the Board from the nominees chosen by the takeover bidder. Thus,
this provision is also consistent with, and supportive of, the concept of a
classified Board.
By taking action by written consent rather than at a meeting of stockholders, a
stockholder is not required to give notice of the proposed action to all
stockholders of the Company. Prohibiting stockholder action by written consent
should give all stockholders of the Company advance notice of, and the
opportunity to vote on, any proposed stockholder action, and should also prevent
the holders of a majority of the voting power of the Company from using the
written consent procedure to take stockholder action to the detriment of the
minority. Moreover, such notice would enable stockholders to take action,
including judicial action, in order to protect their interests before the
proposed stockholder action is taken.
Additionally, the elimination of stockholder action by written consent may
prevent untimely action in a context where stockholders might not have the full
benefit of the knowledge, advice and participation of the Company's management
and Board of Directors. Persons attempting unfriendly takeovers of corporations
have, for example, attempted to use written consent procedures in order to deal
directly with stockholders and avoid negotiations with the management and board
of directors of such corporations.
Prohibiting a stockholder or group of stockholders with less than two-thirds of
the outstanding voting stock from amending or repealing the Classified Board
Provisions is an essential part of the overall structure being proposed to
encourage individuals or groups who desire to propose takeover bids or similar
transactions to negotiate with the Board of Directors. This provision prevents a
stockholder with a majority of the voting power of the Company from subverting
the requirements of the Classified Board Provisions or any of them by repealing
them by a simple majority.
Again, the Classified Board Provisions are intended, in part, to encourage
persons seeking to acquire control of the Company to initiate such an
acquisition through arm's-length negotiations with the Board of Directors of the
Company. The Classified Board Provisions would not prevent a negotiated
acquisition of the Company with the cooperation of the Board, and a negotiated
acquisition could be structured in such a manner as to shift control of the
Board to representatives of the acquirer as part of the transaction.
Potential Disadvantages of Classified Board Provisions
The constituent parts of the Classified Board Provisions will operate in
complementary fashion, as intended, to generally delay, deter or impede changes
in control of the Board of Directors or the approval of certain stockholder
proposals which would have the result of effectuating changes in control of the
Board of Directors, even if a majority of the stockholders may believe such
change or actions to be in their best interests. For example, classifying the
Board operates to increase the amount of time required for stockholders to
obtain control of the Company without the cooperation or approval of the
incumbent Board, even if such stockholders hold or were to acquire a majority of
the voting power. Elimination of the right of stockholders to remove directors
without cause may make the removal of any director more difficult (unless cause
is readily apparent), even if a majority of the stockholders believe such
removal to be in their best interests, and even if the director's performance is
arguably subpar. Restricting stockholder action by written consent may have the
effect of delaying consideration of a stockholder proposal until the next annual
meeting. Requiring a two-thirds vote of stockholders to amend or repeal the
Classified Board Provisions could, in effect, give minority stockholders the
ability to veto the amendment or repeal of the Classified Board Provisions, even
if otherwise approved by a majority of stockholders. As a result, there is an
increased likelihood that the Classified Board Provisions could have the effect
of entrenching the Board of Directors and, since the Board has the power to
retain and discharge management, also entrenching management.
Additionally, one of the effects of the Classified Board Provisions may be to
discourage certain tender offers and other attempts to change control of the
Company, even though stockholders might feel such attempts would be beneficial
to them or the Company. Because tender offers for control usually involve a
purchase price higher than the prevailing market price, the Classified Board
Provisions may have the effect of preventing or delaying a bid for the Company's
shares which could be beneficial to the Company and its stockholders. Moreover,
since tender offers and other attempts to obtain control of a corporation would
often be accompanied by open market purchases in anticipation of such offers, as
well as other investment and speculative market activity that may tend to
increase the market price of or price volatility in the Company's stock,
stockholders could be deprived of certain opportunities to sell their shares in
the market at temporarily higher prices.
Even though the adoption of the Classified Board Provisions may have the
aforesaid potential disadvantages, the Board nevertheless believes that the
various protections afforded to the stockholders of the Company as discussed
above in great detail which will result from the adoption of the Classified
Board Provisions will materially outweigh such potential disadvantages.
At this time the Board knows of no offer to acquire control of the Company, nor
does it know of any effort to remove any director, either for cause or without
cause.
General Update of Bylaws
The proposed updated form of Bylaws provides for more thorough and sophisticated
treatment of corporate governance matters than the prior Bylaws. Most of the
changes pertain to routine corporate matters and would not be considered to be
material revisions. The proposed form of updated Bylaws is attached as Appendix
1-B, and each stockholder is encouraged to read them. The more significant
revisions are as follows:
Corporate Offices. The prior Bylaws did not provide for the location of Company
offices. The revised Bylaws (Sections 1 and 2) provide for the location of the
registered office to be in Dover, Delaware, and for the Board of Directors to
designate additional offices as they deem appropriate.
Annual Meeting of Shareholders. The revised Bylaws (Section 5) provides for
additional governance of the conduct of the annual meetings of the shareholders.
Section 5(b) limits business to be conducted at the annual meeting to that
business which has been properly brought before the meeting, which includes that
business described in the notice of the meeting, business brought before the
meeting by the Board of Directors, or brought before the meeting by a
stockholder in accordance with the procedures and requirements described in the
section. The procedures require the stockholder to give notice of the business
to the Company Secretary 60 to 90 days before the first anniversary of the prior
year's meeting, or if there was no such meeting or the meeting date has been
changed by more than 30 days, then 60 to 90 days before the actual meeting, or
if the public announcement of the meeting date is less than 70 days before the
date, then not later than 10 days after such date announcement. The stockholder
notice must include as to each matter the stockholder proposes to bring before
the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting; (ii) the name and address, as they appear on the
Company's books, of the stockholder proposing such business; (iii) the class and
number of shares of the Company then beneficially owned by the stockholder; (iv)
any material interest of the stockholder in such business; and (v) any other
information as is to be provided by the stockholder pursuant to Regulation 14A
under the Exchange Act of 1934, as amended (the "1934 Act" or the "Exchange
Act"), in his capacity as the proponent of a stockholder proposal. Section 5(c)
applies the same limitations and a similar notice procedure for determining
eligibility of persons for election as directors.
Meetings of Stockholders. Pursuant to Section 6 of the proposed Bylaws, special
meetings of the stockholders can be called by: (i) the Chairman of the Board of
Directors; (ii) the Chief Executive Officer; or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption). The present Bylaws also authorize meetings called by
committees of the Board of Directors and by stockholders who own 10 % or more of
the Company's stock; these provisions would be deleted in the proposed Bylaws.
The present Bylaws require only a majority of a quorum of the Board of Directors
to approve the meeting, not a majority of the total number of authorized
directors. If the meeting is called other than by the Board of Directors, then a
written request must be made to the Board of Directors, which will then schedule
the meeting. Quorum. The present Bylaws set a quorum for a stockholder's meeting
as a majority of the shares of each class entitled to vote at the meeting. The
proposed Bylaws set the quorum at one-third of the outstanding shares entitled
to vote with reference to general matters, and a majority of each class entitled
to vote in situations in which the shares vote by separate classes
Joint Ownership of Stock. The proposed Bylaws provide rules for voting stock
which is jointly held. The prior Bylaws had no such provisions.
List of Stockholders. The proposed Bylaws provide for preparation of a list of
stockholders for each stockholders meeting. The present Bylaws have no
comparable provisions.
Quorum for Director's Meetings. Section 22 of the proposed Bylaws specifies that
a quorum for a meeting of the Board of Directors shall be one-third of the
authorized number of directors. The present Bylaws specify that a quorum is a
majority of the "entire Board"; it is not clear whether the "entire Board" is
the number of authorized directors or the number of directors then in office.
Indemnification of Directors, Officers, Employees and Agents. Article XI of the
proposed Bylaws requires, the Company to provide indemnification for its
directors and officers to the fullest extent permitted by Delaware law, and
authorizes, but does not require, the Company to provide indemnification of
other employees and agents of the Company. The present Bylaws have no comparable
provisions. No indemnification shall be provided in instances in which the
director, officer, employee or agent knowingly acts in bad faith or in a manner
which he or she did not believe to be in the best interests of the Company. The
bylaw provides for advance of the costs of litigation except in instances in
which the Board of Directors determines that there exist facts which clearly and
convincingly demonstrate that the person knowingly acted in bad faith or in a
manner which he or she did not believe to be in the best interests of the
Company. The provisions of the Article will give the directors and officers
enforceable rights to indemnification similar to those of a written contract.
The Company is authorized to purchase insurance to provide for such
indemnification.
Delaware law
Delaware law provides that before an amendment to the Certificate of
Incorporation may be submitted to stockholders for their vote, the Board of
Directors must adopt resolutions setting forth the proposed amendment and
declaring the advisability of the amendment. The Board has unanimously passed
the necessary resolutions and formally recommends an affirmative vote with
respect to this proposal.
Recommendation of the Board of Directors; Vote Required for Approval
The Board of Directors unanimously recommends that you vote (i) "FOR" the
proposal (item 1 on the Proxy Card) relating to the adoption of amendments to
the Certificate of Incorporation and Bylaws of the Company establishing the
Classified Board Provisions and updating the Bylaws. Proxies solicited by the
Board of Directors will be so voted unless stockholders specify otherwise. The
proposal to adopt the Classified Board Provisions and the General Update of the
Bylaws are part of the same proposal because the proposed revisions to the
Bylaws for both purposes are combined into a single proposed new form of Bylaws
and separate amendments are not proposed for each of these purposes. Adoption of
this proposal requires the affirmative vote of the holders of a majority of the
outstanding shares of Common Stock and Preferred Stock, voting by class.
PROPOSAL NO. 2
ADOPTION OF STOCKHOLDERS' RIGHTS PLAN
The stockholders are being asked to approve the IFS International, Inc.
Stockholders' Rights Plan (the "Rights Plan"), which was approved by the Board
of Directors on May 12, 1998.
The following description of the Rights Plan is qualified in its entirety by
reference to the full text of the Rights Plan. A copy of the full text of the
Rights Plan is attached as Appendix 2 to this Proxy Statement.
Description of Rights Plan
Pursuant to the terms of the Rights Plan, and subject to stockholder approval at
an annual or special meeting of stockholders, the Company declared a dividend
distribution of one Right for each outstanding share of Common Stock and Series
A Convertible Preferred Stock to stockholders of the Company of record at the
close of business on the business day which is 15 business days after the date
of shareholder approval (the "Record Date"). Each Right entitles the registered
holder to purchase from the Company one share of Common Stock at a price of $50
per share (the "Purchase Price"), subject to adjustment. The Purchase Price
shall be paid in cash by the holder of the Right. The description and the terms
of the Rights are set forth in the Rights Plan.
Initially, the Rights will be attached to all Common Stock and Series A
Convertible Preferred Stock certificates representing shares then outstanding,
and no separate Rights Certificates will be distributed. The Rights will
separate from the Common Stock and Series A Convertible Preferred Stock and a
Distribution Date will occur upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock and Series A
Convertible Preferred Stock (the "Stock Acquisition Date"), or (ii) 10 business
days following the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning 15% or more of such outstanding
shares of Common Stock and Series A Convertible Preferred Stock. Until the
Distribution Date, the Rights will be evidenced by Common Stock and Series A
Convertible Preferred Stock certificates and will be transferred with and only
with such certificates. New Common Stock certificates issued after the Rights
Plan is ratified by the stockholders of the Company will contain a notation
incorporating the Rights Plan by reference. The surrender for transfer of any
outstanding Common Stock and Series A Convertible Preferred Stock certificates
also will constitute the transfer of the Rights associated with the Common Stock
and Series A Convertible Preferred Stock represented by such certificates.
The Rights are not exercisable until the Distribution Date and will expire at
the close of business on the tenth anniversary of the Record Date unless earlier
redeemed by the Company, as described below.
As soon as practicable after the Distribution Date, Rights Certificates will be
mailed to holders of record of the Common Stock and Series A Convertible
Preferred Stock as of the close of business on the Distribution Date and,
thereafter, the separate Rights Certificates alone will represent the Rights.
Except as otherwise determined by the Board of Directors, only shares of Common
Stock and Series A Convertible Preferred Stock issued prior to the Distribution
Date will be issued with Rights.
Upon any Person becoming the beneficial owner of 15% or more of the then
aggregate outstanding shares of Common Stock and Series A Convertible Preferred
Stock (except pursuant to an offer for all outstanding shares of Common Stock
and Series A Convertible Preferred Stock that is determined by the Board of
Directors to be fair to and otherwise in the best interests of the Company and
its stockholders [a "Qualifying Tender Offer"]), each holder of a Right
thereafter will have the right to receive, upon exercise thereof, the number of
shares of Common Stock as shall equal the result obtained by (x) multiplying the
then current Purchase Price by the number of shares of Common Stock for which
such Right was exercisable immediately prior to the occurrence of such event and
(y) dividing that product by 50% of the market price per share of Common Stock.
Notwithstanding any of the foregoing, following the occurrence of such event,
all rights that are, or (under certain circumstances specified in the Rights
Plan) were beneficially owned by any Acquiring Person, will be null and void.
However, Rights are not exercisable following the occurrence of either of the
events set forth above until such time as the Rights are no longer redeemable by
the Company as set forth below.
For example, assume that a stockholder holds Rights to purchase 100 shares of
Common Stock and/or Series A Convertible Preferred Stock at the $50 Purchase
Price, and further assume that the Common Stock had a per share trading price of
$20 at the time of an event set forth in the preceding paragraph. As a result,
the holder would have the right to purchase 500 shares of Common Stock for the
aggregate purchase price of $5,000, or $10 per share. The 500 share figure is
determined by (x) multiplying the $50 Purchase Price by 100 (representing the
number of shares of Common Stock the holder was entitled to purchase by virtue
of the Rights), and (y) dividing that product by $10 (or 50% of the $20 market
price of the Common Stock).
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction in
which the Company is not the surviving corporation or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights which previously have been voided as set forth above) thereafter
shall have the right, upon payment of the Purchase Price (without giving effect
to the adjustments described in the two immediately preceding paragraphs), to
buy such number of shares of common stock of the acquiring company as shall
equal the result obtained by (x) multiplying the then current Purchase Price by
the number of shares of Common Stock for which such Rights were exercisable
immediately prior to the occurrence of such event and (y) dividing that product
by 50% of the market price per share of the common stock of the acquiring
company. The event set forth in this paragraph and in the preceding paragraph
are referred to as the "Triggering Events."
The Purchase Price payable, and the number of shares of the Common Stock
issuable, upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Common Stock, (ii) if
holders of the Common Stock are granted certain rights or warrants to subscribe
for the Common Stock or convertible securities at less than the current market
price of the Common Stock, or (iii) upon the distribution to holders of the
Common Stock of evidences of indebtedness or assets (excluding regular quarterly
cash dividends) or of subscription rights or warrants (other than those referred
to above).
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments amount to at least 1% of the Purchase Price. No
fractional shares of Common Stock will be issued and, in lieu thereof, an
adjustment in cash will be made based on the market price of the Common Stock on
the last trading date prior to the date of exercise.
The Company is only obligated to maintain authorized but unissued shares of
Common Stock for holders of Rights once a Distribution Event occurs. The Company
is permitted, however, if sufficient shares of unissued but authorized Common
Stock are not available to be purchased by holders of Rights, to distribute to
such holders, in lieu of Common Stock, other securities of the Company with
equivalent value to the Rights exercised, such as preferred stock, debt
instruments, or reduction in Purchase Price.
At any time until 10 days following the Stock Acquisition Date, the Company may
redeem the Rights in whole, but not in part, at a price of $.001 per Right,
payable in cash or shares of Common Stock. Under certain circumstances set forth
in the Rights Plan, the decision to redeem shall require the concurrence of a
majority of the Continuing Directors (as hereinafter defined). After the
redemption period has expired, the Company's rights of redemption may be
restated if an Acquiring Person reduces his or her beneficial ownership to 10%
or less of the aggregate outstanding shares of Common Stock and Series A
Convertible Preferred Stock in a transaction or series of transactions not
involving the Company. Immediately upon the action of the Board of Directors
ordering redemption of the Rights, with, where required, the concurrence of the
Continuing Directors, the Rights will terminate and the only right which the
holders of Rights will thereafter have will be to receive the $.001 redemption
price.
The term "Continuing Directors" means any member of the Board of Directors of
the Company who was a member of the Board prior to the date of the Rights Plan,
and any person who is subsequently elected to the Board if such person is
recommended or approved by a majority of the Continuing Directors, but shall not
include an Acquiring Person, or an affiliate or associate of an Acquiring
Person, or any representative of the foregoing.
Until a Right is exercised, the holder thereof, as such, will have no rights as
a stockholder of the Company, including, without limitation, the right to vote
or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for the Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth.
Any of the provisions of the Rights Plan may be amended by the Board of
Directors of the Company so long as the Rights are then redeemable including,
without limitation, the 15% stock acquisition threshold (but not, in general,
below 10%), the purchase price (but not by more than 50%), or Final Expiration
Date (but not by more than three additional years). When the Rights are not
redeemable, the provisions of the Rights Plan may be amended by the Board in
order to cure any ambiguity, to correct or supplement any provision which may be
inconsistent with any other provision or to make changes which do not affect
adversely the interests of holder of Rights; provided, however, that amendments
proposed to be made after a person becomes an Acquiring Person (other than
pursuant to a Qualifying Tender Offer) may be made only if approved by a
majority of the Continuing Directors.
The Company covenants in the Rights Plan to file a registration statement under
the Securities Act of 1933 with respect to shares of Common Stock purchasable
upon exercise of the Rights as soon as a Section 11(a)(ii) event occurs, or as
soon as required by law, and may temporarily suspend, for no more than 90 days,
the exercisability of the Rights to permit the registration statement to become
effective.
Objectives and Potential Effects of Rights Plan
The takeover activity of recent years has shown that a bidder interested in
acquiring the Company as cheaply as possible, together with professional
investors seeking a quick profit, could pursue a takeover of the Company at
times, on terms and at prices, which would not be in the best interests of the
Company and its stockholders and other constituents. These abusive tactics,
which could result in inequitable treatment of the stockholders of the Company,
include so called "two-tier tender offers," in which stockholders may be coerced
into either tendering their shares or accepting the risk of receiving "back-end"
compensation of substantially less value; "partial tender offers," in which
stockholders may be left holding stock of the Company with substantially lower
market value; tender offers "subject to financing;" and "creeping" acquisitions
in which control of the Company is sought by market and negotiated purchases. In
each case the acquirer would be acting in its own best interests - to purchase
control of the Company at the cheapest possible price - without regard to the
concerns of the Company and its other stockholders.
The purpose of the Rights Plan is to protect the Company and its stockholders
from these and other types of unsolicited acquisition tactics that the Board
believes could be coercive and unfair to the stockholders of the Company and not
in their best interests. As such, the Rights Plan is intended to complement the
Classified Board Provisions discussed above. At this time the Board knows of no
offer to acquire the Company and is not seeking any such offer. It has adopted
the Rights Plan as a cautionary matter for the reasons discussed below.
A major function of the Rights Plan is to give the Board a greater period of
time within which it can properly evaluate an acquisition offer. A second major
function of the Rights Plan is to induce a bidder for the Company to negotiate
with the Board and thus strengthen the Board's bargaining position vis-a-vis
such bidder. The Board, with its extensive knowledge of the Company and its
prospects, believes it is optimally situated to evaluate any bids for the
Company. The Rights Plan thus enables the Board, as elected representatives of
the stockholders of the Company, to better protect and further the interests of
the stockholders in the event of an acquisition proposal. The Board gains the
opportunity and additional time to determine if an offer reflects the full value
of the Company and is fair to all stockholders of the Company, and if not, to
reject the offer or to seek an alternative that meets these criteria.
The Board's objective is to hold firm to the Company's growth strategy and,
thus, to maximize long-term stock values for all stockholders. The Board has
confidence in its strategy and believes that the Company's recent record growth
in revenues and earnings supports its continuation. Despite these financial
results, certain analysts have stated that the price of the Common Stock, in
their opinion, should be higher, which opinion the Board shares after
considering the Company's business and prospects. Due to these circumstances the
Board believes that the Company may be both susceptible and vulnerable to
acquisition tactics which could be unfair to the stockholders of the Company and
not in their best interests, and that the stockholders of the Company should
have the protection of a Rights Plan. Even though a bidder may offer a premium
over the current market price of the Common Stock, that premium may not
necessarily recognize the intrinsic value of the Company. It is the judgment of
the Board that if an offer were made for the Company, the Rights Plan would
enable the Board to promote an outcome that is fair to all stockholders and
gives them full value for their stock. Here, as in all its actions, the Board's
objective is to serve the interests of the Company's stockholders as a whole
and, in particular, to maximize the long-term value of their investment, as
opposed to maximizing the interests of a few investors who, the Board is
concerned, may have as their only objective the realization of their own
short-term profits. The Rights Plan helps make this possible by enabling the
Board to focus on its objectives by reducing the risk of abusive or coercive or
unfair acquisition tactics.
Moreover, the Board believes that a bidder would, in all cases, be seeking its
own advantage and not that of the stockholders generally. In contrast to such a
bidder, the Board has a legal, fiduciary duty to all stockholders. The Rights
Plan will neither diminish this obligation nor change the relationship between,
or the respective rights of, the Board and the stockholders. The Board will
continue to direct the Company's business and remain responsible to the
stockholders; the stockholders will continue to possess the right to vote on
extraordinary transactions, such as mergers, major reorganizations and
liquidations, to decide whether to tender their shares if a tender offer is
made, and to decide how to vote a proxy.
In adopting the Rights Plan and submitting it for stockholder ratification the
Board has given careful and thoughtful consideration to the interests of the
stockholders of the Company and the effects of the Rights Plan on them. The
Board has also assessed both the current environment of corporate acquisitions
and the Company's particular circumstances and prospects and consulted with and
received the advice of outside legal counsel. In the course of that review, the
Board concluded that numerous means existed by which a bidder could obtain
control of the Company through tactics that may unfairly pressure the Company's
stockholders to sell their investments at less than full value and that the
Rights Plan was a prudent measure to counteract such means.
The Board's fiduciary duty to the stockholders of the Company dictates that it
evaluate the merits of each and every acquisition proposal presented to the
Board and seek to insure than any proposed business combination or acquisition
delivers full value to the stockholders. The Rights Plan is not intended to
prevent, and should not prevent, a well-financed acquisition offer providing a
price that reflects the full value of the Company, or otherwise deter a serious
bidder who wants to acquire the Company in a manner in which all stockholders
receive a price that reflects the full value of their stock. Furthermore, the
Rights Plan will not prevent a non-negotiated offer because, if the Board
determines that such an offer is in the best interests of all stockholders, the
Board can redeem the rights and thereby permit the offer to be consummated.
Experience demonstrates that acquisition offers have been made to many companies
that have adopted rights plans and board of directors of target companies have
determined to redeem these rights in connection with these acquisitions to allow
the acquisition offer to be consummated.
Potential Disadvantages of Rights Plan
The Rights Plan will substantially dilute both the voting and economic interests
of any person who attempts to acquire control of the Company without satisfying
the Board as to the fairness of their offer in relation to the interests of the
other stockholders of the Company. As a result, the Rights Plan would tend to
discourage certain tender offers and other attempts to acquire the Company or
change control of the Company, even though stockholders might feel such attempt
would be beneficial to them or the Company. In addition, the Rights Plan would
discourage tender offers, open market purchases in anticipation of tender
offers, and other investment and speculative market activity that may have the
effect of increasing the market price of or price volatility in the Company's
stock. As a result, stockholders could be deprived of certain opportunities to
sell their shares at temporarily higher prices.
Discouraging tender offers and other attempts to acquire the Company or change
control of the Company could have the effect of entrenching the Board of
Directors and, since the Board has the power to retain and discharge management,
also entrenching management.
The adoption of the Rights Plan is not violative of the Bylaws of the National
Association of Securities Dealers (the "NASD"), under whose NASDAQ National
Market System the Common Stock is traded. However, should a Trigger Event occur
under the Rights Plan, the effect of such provision may violate the prohibition
against stockholder disenfranchisement in the NASD Bylaws, which could lead to
the delisting of the Common Stock on NASDAQ. Many companies listed on NASDAQ (as
well as other stock exchanges) have stockholder rights plans that operate in the
same manner as the Rights Plan. To date, none of such plans have had their
operative provisions triggered, and none of the companies which have adopted
such plans has been delisted on NASDAQ (or such other stock exchanges).
Current Anti-takeover Mechanisms Available to the Company
Change of Control Provisions
Employment agreements for certain executive officers of the Company may be
terminated by the executive in the event of, among other things, the merger or
consolidation of the Company with another corporation as part of a sale or
transfer of a controlling interest (see "Employment Agreements With Named
Executive Officers," herein). Additionally, certain stock options held by
executive officers or directors may vest in the event of the sale of the capital
stock of the Company in connection with the sale or transfer of a controlling
interest in the Company (see "Compensation of Directors" and "Employment
Agreements With Named Executive Officers," herein). Such payment obligations in
each of such employment agreements or stock options would make it more expensive
for a potential acquirer to acquire the Company, or to change control of the
Board of Directors, and might discourage efforts to do so.Section 203 of the
Delaware General Corporation Law Certain statutory disincentives to takeovers
have been enacted under the Delaware Business Combination Act (the "Business
Combination Act"). Specifically, Section 203 of the Delaware General Corporation
Law generally restricts an interested stockholder (defined as a beneficial owner
of 15% or more of stock) from entering into a business combination with the
target company for a period of three years unless (i) the board of directors of
the target company approved the combination prior to acquisition of the 15%
interest, (ii) the interested stockholder acquires at least 85% of the stock of
the target company as part of the transaction in which 15% is acquired
(excluding stock owned by officers who are also directors and certain voting
stock held by employee benefit plans), or (iii) the board of directors
subsequently approves a combination by a majority vote and two-thirds of other
stockholders approve at a duly called stockholders meeting. A business
combination is defined as (x) a merger or consolidation requiring stockholder
approval, (y) the sale, lease, pledge, or other disposition of assets, including
by dissolution, having at least 50% of the entire value of assets of the
company, or (z) the proposed tender or exchange offer of 50% or more of the
voting stock of the target company. Although the Business Combination Act
affords a certain level of statutorily prescribed disincentives to hostile
bidders, there are numerous exceptions to the Combination Act, and there are
also numerous situations in which the Board believes a hostile bidder may be
encouraged to employ coercive or unfair acquisition tactics notwithstanding
these disincentives. For this reason, the Board believes that the protections
afforded by the proposal to adopt the Classified Board Provisions and the
proposal to approve the Rights Plan are necessary and advisable to protect the
interests of the Company and its stockholders.
Other Provisions
The Board has put on its agenda for future consideration at a time to be
determined the advisability of establishing certain procedures and time
limitations, to be incorporated into the Bylaws of the Company, relating to the
nominations for election to the Board of Directors. The Board has included
provisions for severance with certain of its executive officers and directors in
the event of a change in control of the Company in its employment agreements
with those officers. See: EXECUTIVE COMPENSATION - Employment Agreements, below.
Vote Required for Approval; Recommendation of the Board of Directors
The Board of Directors unanimously recommends that you vote "FOR" the
proposal (item 2 on the Proxy Card) to approve the Stockholders' Rights Plan.
Proxies solicited by the Board of Directors will be so voted unless stockholders
specify otherwise. Approval of the Stockholders' Rights Plan will require the
affirmative vote of the holders of a majority of the shares of Common Stock and
the Preferred Stock, voting by class, present in person or represented by proxy
and casting votes with respect to this proposal.
PROPOSAL NO. 3
APPROVAL OF 1998 IFS INTERNATIONAL, INC. STOCK PLAN
The stockholders are being asked to approve the 1998 IFS International, Inc.
Stock Plan (the "Plan"), which was approved by the Board of Directors on May 12,
1998. The purpose of the Plan is to provide the Company with a vehicle to
attract, compensate and motivate selected Eligible Persons (as such persons are
defined below), and to appropriately compensate them for their efforts, by
creating a broad-based stock plan which will enable the Company, in its sole
discretion and from time to time, to offer to or provide such Eligible Persons
with incentives or inducements in the form of Awards (as such term is defined
below), thereby affording such persons with an opportunity to share in potential
capital appreciation in the common stock, par value $0.001, of the Company
("Common Stock"). If approved, a total of 950,000 shares of Common Stock
("Plan Shares") will be available for issuance under the Plan; Stock
Appreciation Rights are included in this number. The Plan is intended as a
successor to the Company's 1996 Stock Option Plan, the last broad-based plan
approved by the stockholders of the Company. If the Plan is approved by the
Shareholders, the Company will offer to the holders of the 1996 Plan Options the
opportunity to exchange their 1996 Plan Options for 1998 Plan Options.
As of November 16, 1998, the Company had 300,000 shares subject to the existing
1996 Stock Option Plan. In connection with such succession described above, the
Company has authorized the exchange of the options to purchase 300,000 shares at
an exercise price of $1.25 for all of the 1996 outstanding Options under the
1996 Plan. The foregoing is conditioned on the 1996 Option holder exchanging the
outstanding 1996 Options for new Options. Because the exercise price of the 1996
Options are generally higher than the 1998 Plan Options granted, it is likely
all of the 1996 Options will be exchanged. If any 1996 Plan options are not
exchanged, then the 1996 Plan will be continued so long as the options remain
outstanding, then terminated; no additional options would be granted under the
1996 Plan after approval of the 1998 Plan by the Shareholders. The Company has
granted replacement options under the 1996 Plan with an exercise price of $1.25
per share to be issued in the event the 1998 Plan is not approved by the
shareholders.
As of November 16, 1998, there were commitments to grant Options for the
purchase of 529,000 shares of Common Stock under the 1998 Plan. Of these shares,
300,000 are shares subject to Options to be exchanged for outstanding 1996
Options at lower exercise prices, as described above, including 110,000 Options
to be issued to officers and directors. the Company has granted an additional
29,000 options at an exercise price of $1.25 pursuant to the 1998 Plan, of which
options to purchase 25,000 shares have been granted to one director. In
September, 1998, the Company granted, subject to Plan approval by shareholders,
an additional 200,000 Options under the 1998 Plan, with exercise prices ranging
from $1.25 to $2.81, to employees who are not officers or directors. If the 1998
Plan is not approved by the shareholders, all of these Options will be
outstanding and will become non-qualified options. An additional minimum of
75,000 shares of the 1998 Plan will be required to fulfill the Company's
obligations to David Hodge under his existing employment agreement. An
indeterminate number of shares may be issued to satisfy SAR awards in the
future. There presently are 175,000 SARs outstanding and commitments to issue an
additional 85,000 SARs pursuant to employment agreements. See: EXECUTIVE
COMPENSATION - Stock Option Plans and - Employment Agreements.
Holders of proxies solicited by this Proxy Statement will vote the proxies
received by them as directed on the proxy card or, if no direction is made, in
favor of the approval of the Plan. The Plan must be approved by the affirmative
vote of the holders of a majority of the outstanding shares of Common Stock
present in person or represented by proxy at the Annual Meeting, assuming that a
quorum is present.
The following description of the Plan is qualified in its entirety by reference
to the full text of the Plan, as well as the terms and conditions of any Award
Agreement governing the grant of an Award under the Plan. A copy of the full
text of the Plan is attached as Appendix 3 to this Proxy Statement.
Who May Receive Grants of Awards Under the Plan
Any Eligible Person may be granted an Award under the Plan. The term "Eligible
Person" means any person who, at the applicable time of the grant or award of an
Award under the Plan, is an employee, a director and/or a consultant or advisor
to the Company, or of any parent or subsidiary of the Company. The term "Awards"
refers to the following types of grants under the Plan: (i) an outright grant of
shares of Common Stock ("Grant Shares"); (ii) the grant of options ("Options")
to purchase shares of Common Stock ("Option Shares"); and (iii) the grant of
cash participation rights based upon potential capital appreciation in the
Common Stock ("Stock Appreciation Rights" or "SARs").
Grant Shares may be either fully vested, or subject to vesting or other
forfeiture conditions (in which latter event such Grant Shares are referred to,
until such time as such conditions lapse, as "Forfeitable Grant Shares").
Options granted may be either (i) "Incentive Options," which qualify under
Section 422 of the Internal Revenue Code of 1986 (the "Code") for preferable
income tax treatment, and are specifically granted as Incentive Options under
the Plan; or (ii) options not so eligible for such preferable income tax
treatment ("Non-Qualified Options"). Should a Recipient exercise an Option
through the tender of shares of Common Stock, certain Non-Qualified Options
known as "Replacement Options" may be granted entitling the Recipient to
purchase a number of Plan Shares equal to the number of shares of Common Stock
tendered in payment.
Incentive Options may only be granted to persons who are employees or who
provide bona fide consulting services to the Company or such Affiliate. No Award
may be granted to a consultant in connection with the provision of any services
incident to the raising of capital for the Company. An Eligible Person
ordinarily will be a natural person, such as in the case of employees, officers
or directors; however, an Eligible Person may also be an entity or fiduciary in
certain cases, such as a consultant or advisor which is a corporation,
partnership or limited liability company. Each Eligible Person who, at a
particular time, receives the grant of an Award under the Plan, is referred to
as a "Recipient."
As of May 12, 1998, the Company had a total of 99 employees, officers and
directors, all of whom are eligible to receive grants of Awards under the Plan.
Common Stock Available for Issuance Under Plan; Adjustments
A total of one million shares of Common Stock are authorized for issuance under
the Plan. Any shares of Common Stock which are reserved for issuance pursuant to
the terms of a pending Award, but are not issued because the terms and
conditions of the Award are not satisfied, or any shares of Common Stock which
are used by Recipients to pay all or part of the purchase price for an Award,
may again be used for Awards under the Plan. In the event of any change in the
Common Stock by reason of a stock dividend or distribution, recapitalization,
merger, consolidation, split-up, combination, exchange of shares or the like,
the Plan Administrator will, in its sole discretion, make appropriate
adjustments to the number of shares of Common Stock that may be issued under the
Plan or in connection with any Award.
Administration of Plan
The Plan is administered exclusively by the Plan Administrator, which is defined
under the Plan as the Board of Directors of the Company or, to the extent
authorized pursuant to the Plan, a committee of two (2) or more members of the
Board or certain designated Director-Officers. The Board has designated the
Compensation Committee of the Board as the Plan Administrator. Subject to the
terms and conditions of the Plan, the Plan Administrator is empowered to
determine which persons are Eligible Persons; which Eligible Persons will be
recipients of Awards; the type of the Award; the time or times at which such
Awards shall be granted; the number of shares of Common Stock subject to each
Award; the time and manner in which each Award which is an Option may be
exercised, including the exercise price and option period; whether an Option or
Grant Shares are subject to vesting conditions; and all other terms and
conditions of Awards. The Plan Administrator has sole discretion to interpret
and administer the Plan, and its decisions regarding the Plan are final
Amendment and Termination of Plan; Modification of Awards
The Plan may be wholly or partially amended or otherwise modified, suspended or
terminated at any time and from time to time by the Board of Directors. Neither
the Board of Directors nor the Plan Administrator may materially impair any
outstanding Awards without the express consent of the Recipient. The Plan
Administrator may also modify the terms of outstanding Options or the vesting
conditions placed upon Forfeitable Grant Shares set forth in the Award
Agreement. However, such modifications may not impair the Recipient's rights
under the Award Agreement without the express consent of the Recipient.
Description of Awards
As stated above, the Plan Administrator is authorized, in general, to grant or
award to Eligible Persons either: (i) an outright grant of Grant Shares; (ii)
the grant of an Option to purchase Option Shares; or (iii) the grant of a Stock
Appreciation Right. Awards under the Plan will be evidenced by certificates or
agreements evidencing or confirming the grant of the Award in the form
prescribed from time-to-time by the Plan Administrator ("Award Agreements"),
namely, (i) a "Stock Award Agreement" in the case of the grant of Grant Shares;
(ii) a "Stock Option Certificate" in the case of the grant of an Option, and
(iii) an "SAR Agreement" in the case of the grant of Stock Appreciation Rights.
Each Award Agreement will contain more specific terms and conditions pertaining
to the grant of Awards to the Recipient as the Plan Administrator, in its sole
discretion, may determine to be appropriate. The Company reserves the right, in
its sole discretion, to evidence or confirm the grant of an Award in a written
employment or consulting agreement in lieu of the form of any of the foregoing
Award Agreements.
Grant Shares
Grant Shares may be awarded in the following different circumstances:
1. As a "bonus" or "reward" for services previously rendered and
otherwise compensated. This type of Award is comparable to a gift
since the Company has no legal obligation to grant the Grant
Shares, and would do so only in its discretion to recognize
extraordinary services.
2. As "compensation" for the previous performance or future
performance of services or attainment of goals. This type of Award
would commonly occur in a situation in which the Recipient enters
into an agreement with the Company to be paid Grant Shares (in lieu
of cash) for the provision of past or future services.
3. In "consideration" for the payment of a purchase price for the
Grant Shares. This alternative would ordinarily apply where the
Recipient desires to purchase the Common Stock (usually Forfeitable
Grant Shares at a discounted value as discussed below), and the
Company is willing to sell the Common Stock to the Recipient.
Where payment is required to purchase the Grant Shares, the purchase price shall
be such price (including at a premium or discount to the current fair market
value of the Common Stock) as determined by the Plan Administrator in its sole
discretion.
Forfeitable Grant Shares
Once Grant Shares are issued, the Plan Administrator reserves the right to
subject or condition the issuance of such shares to the satisfaction of certain
vesting conditions based on services to be provided by the Recipient after the
shares have been issued or the attainment of specific goals by the Recipient
after the shares have been issued. These vesting conditions must be expressly
set forth in the Award Agreement at the date of grant of the underlying Award.
In the event the Recipient does not satisfy the vesting conditions, the Company
may require the Recipient to forfeit any unvested Grant Shares. The Plan uses
the term "Forfeitable Grant Shares" to refer to Grant Shares which are subject
to such vesting conditions. There generally are no limitations on vesting
conditions the Plan Administrator may impose on Forfeitable Grant Shares.
In addition, whenever there is a forfeiture of Forfeitable Grant Shares, the
Company must pay the Recipient, within ninety (90) days of the forfeiture, an
amount equal to the higher of: (i) the Recipient's "original cost" to purchase
or acquire the forfeited Grant Shares; or (ii) the "book value" of such
forfeited Grant Shares as determined by the Company's independent certified
public accountant. Any payment for the forfeited Grant Shares shall be either in
cash or, if applicable, by cancellation of any debt originally incurred by the
Recipient in order to purchase the forfeited Grant Shares from the Company.
If the Plan Authority attaches vesting conditions to Forfeitable Grant Shares
which are based upon continued performance of services to the Company, then the
following special rules apply (unless otherwise expressly provided in the
underlying Award Agreement) in the event of Termination Of Recipient:
1. Unvested Forfeitable Grant Shares shall immediately vest (i.e.,
become non-forfeitable) in the event such termination: (A) is made
by the Recipient and constitutes Termination By Recipient For Good
Reason (as such term is defined in the Plan); or (B) such
termination is made by the Company but does not constitute
Termination By Company For Cause (as such term is defined in the
Plan). In these situations, the Recipient will be deemed fully
vested with respect to these previously unvested Forfeitable Grant
Shares.
2. Unvested Forfeitable Grant Shares shall become immediately
forfeitable in the event such termination: (A) is made by the
Recipient but does not constitute Termination By Recipient For Good
Reason; or (B) such termination is made by the Company and
constitutes Termination By Company For Cause.
Options
An "option" is the right, which continues over a period of time, to acquire
property on terms agreed upon by the parties. In the case of the Plan, it is the
right to acquire, over a period of time, shares of Common Stock, or Option
Shares, in exchange for the purchase price determined by the Company. The grant
of an Option to purchase Option Shares is a variation of the last (third)
alternative presented above, except that the purchase period extends for a
significantly longer period.
The Plan authorizes the issuance of two types of Options, namely, Incentive
Options and Non-Qualified Options. Unless expressly characterized upon grant as
an Incentive Option, all Options are considered to be Non-Qualified Options.
Incentive Options result, in general, in more favorable income tax consequences
than Non-Qualified Options (see "Certain Federal Income Tax Consequences"
below); however, they also contain more restrictive terms than those of
Non-Qualified Options.
The exercise or "Option Price" to purchase Option Shares shall be such price
(including at a premium or discount to the current fair market value of the
Common Stock) as determined by the Plan Administrator in its sole discretion. In
certain circumstances, however, the Option Price cannot be less than certain
amounts. For example, an Incentive Option cannot have an Option Price which is
less than 100% of the fair market value of the Common Stock on the date the
Incentive Option is granted (unless the Incentive Option is granted to a
Recipient who owns more than 10% of the total voting securities of the Company
on the date the Option is granted, in which case such Option Price cannot be
less than 110% of the fair market value of the Common Stock).
Options must be exercised during the period of time specified in the Award
Agreement. No Option may be exercised more than ten (10) years after the date
the Option is granted. An Incentive Option granted to a Recipient who owns more
than 10% of the total voting securities of the Company on the date the Option is
granted must be exercised no later than five (5) years after the date of grant.
Vesting of Options
The term "vest" means that a person has acquired absolute ownership in the right
to acquire property. In the case of a Recipient of an Option, the right to
exercise the Option in order to purchase the Common Stock may not be fully
vested at the time of grant of the Option. For example, the Plan Administrator
has the right to attach certain conditions to the Option, such as requiring the
Recipient to continue to provide services to the Company for a period of time or
to attain specified goals, before the right to exercise the Option will vest.
These "vesting conditions" must be expressly set forth in the Award Agreement.
In the event the Recipient does not satisfy the vesting conditions, the
Recipient will not be entitled to exercise the Option. There generally are no
limitations on vesting conditions the Plan Administrator may impose on Options.
If the Plan Authority attaches vesting conditions to an Option which are based
upon continued performance of services to the Company, then the following
special rules apply (unless otherwise expressly provided in the Award Agreement)
in the event of Termination of Recipient (as such term is defined in the Plan):
1. The expiration date for vested Options shall be the following applicable
date if earlier than the expiration date specified in the Option:
A. Thirty (30) days after the effective date of Termination
Of Recipient in the event such termination: (i) is made by
the Recipient and does not constitute Termination By
Recipient For Good Reason (as such term is defined in the
Plan); or (ii) such termination is made by the Company and
constitutes Termination By Company For Cause (as such term
is defined in the Plan) other than death or Disability of
the Recipient (as the term "Disability" is defined in the
Plan); or
B. Six (6) months after the effective date of Termination Of
Recipient in the event such termination: (i) is made by
the Recipient and constitutes Termination By Recipient For
Good Reason; (ii) such termination is made by the Company
but does not constitute Termination By Company For Cause;
or (iii) such termination is made by the Company by reason
of the death or Disability of the Recipient.
2. Unvested Options shall immediately vest in the event the
termination: (A) is made by the Recipient and constitutes
Termination By Recipient For Good Reason; or (B) the termination is
made by the Company but does not constitute Termination By Company
For Cause. In these situations, the Recipient will be deemed fully
vested with respect to these previously unvested Options.
3. The expiration date for unvested Options shall be upon Termination
Of Recipient if earlier than the expiration date specified in the
Option in the event the termination: (A) is made by the Recipient
but does not constitute Termination By Recipient For Good Reason;
or (B) the termination is made by the Company and constitutes
Termination By Company For Cause. In these situations, the
expiration date is immediately accelerated so that the Recipient
will effectively lose the Recipient's prospective right to exercise
these unvested Options.
Payment Terms for Grant Shares or Options
The Recipient shall purchase the Grant Shares, or exercise the Option, by
delivery of payment (where payment is required) in cash. The Plan Administrator
retains the right to require the Recipient to also deliver a Recipient's
Representative's Letter from an independent investment advisor. The Recipient's
Representative's Letter confirms that the Recipient's independent investment
advisor has reviewed the merits of the Award as an investment by the Recipient,
and such investment is suitable for the Recipient and he or she can bear the
risks of the investment. The Plan Administrator also retains the right, in its
sole discretion, to permit Grant Shares or Option Shares to be purchased by: (i)
the delivery of other shares of the Common Stock; (ii) the surrender or
relinquishment of rights to shares of the Common Stock; (iii) a reduction in the
amount of any Company liability to a Recipient; (iv) the delivery of a secured
full-recourse promissory note; or (v) a combination of the foregoing.
Stock Appreciation Rights
Stock Appreciation Rights may be granted in conjunction with, or may be
unrelated to, Options. A Stock Appreciation Right entitles the Recipient to
receive a payment, in cash or Plan Shares or a combination thereof, in an amount
equal to the excess of the fair market value of the Common Stock at the time of
exercise over the fair market value as of the date of grant. Stock Appreciation
Rights may be exercised during a period of time fixed by the Plan Administrator
not to exceed ten years after the date of grant. If a Stock Appreciation Right
is issued in tandem with an Option, the Stock Appreciation Right will be
canceled upon exercise of the Option. A Stock Appreciation right may be issued
subject to vesting conditions on a similar basis as an Option.
Assignment
Unless expressly provided in the applicable underlying Award Agreement, a
Recipient may not "Dispose" of Forfeitable Grant Shares, Options or Stock
Appreciation Rights without the prior written consent of the Company, which
consent the Company may withhold in its sole and absolute discretion. Since
Grant Shares (or Forfeitable Grant Shares which have become vested) do not
remain subject to further vesting conditions, there is no prohibition against
their assignment once they are issued (or become vested). The term "Dispose"
means any transfer which directly or indirectly changes legal or beneficial
ownership of such applicable Award, whether voluntary or by operation of law, or
with or without the payment or provision of consideration. This would include,
for example: (i) a sale, assignment, bequest or gift; (ii) any transaction that
creates or grants an option, warrant, or right to obtain an interest in the
applicable Award; (iii) any transaction that creates a form of joint ownership
in the applicable Award between the Recipient and one or more other persons;
(iv) any Disposition of the applicable Award to a creditor of the Recipient,
including the hypothecation, encumbrance or pledge thereof, or an attachment or
imposition of a lien; or (v) any distribution of the applicable Award by a
Recipient which is an entity to its stockholders, partners, co-venturers or
members, as the case may be, or any distribution thereof by a Recipient which is
a fiduciary such as a trustee or custodian to its settlers or beneficiaries.
United States Federal Income Tax Consequences For Persons Who Are Citizens Or
Residents Of The United States
The following summary discusses certain of the United States federal income tax
consequences to persons who are citizens or residents of the United States
associated with: (i) the grant of an Award under the Plan; (ii) the exercise of
an Option granted under the Plan; (iii) the disposition of Shares issued under
the Plan; and (iv) the exercise of Stock Appreciation Rights.
Options Non-Qualified Options
If the Recipient receives a grant of a Non-Qualified Option, the Recipient, if a
United States citizen or resident (a "U.S. Taxpayer"), will be taxed pursuant to
the rules of Section 83 of the Code. Non-Qualified Options are ordinarily known,
for tax purposes, as "non-qualified" or "non-statutory" options. Non-Qualified
Options are identified by the Plan as any Option other than an Option expressly
designated as an Incentive Option. Incentive Options are subject to different
and, in general, more favorable income tax consequences than Non-Qualified
Options (see "Incentive Options" below).
Under the rules of Section 83, the grant of non-statutory options to a Recipient
who is a U.S. Taxpayer is taxable at date of exercise, as opposed to date of
grant, unless certain technical requirements are satisfied. Upon the exercise of
a Non-Qualified Option, the Recipient generally must recognize compensation
income (which is taxable at ordinary income tax rates) equal to the "spread"
between the exercise price and the fair market value of the Common Stock on the
date of exercise.
In order to be taxable at date of grant pursuant to an election under Section
83(b) of the Code, the Non-Qualified Options must have a "readily ascertainable
fair market value," which is defined by the Internal Revenue Service as being an
option which, among other things, is actively traded on an established
securities market. Since the Company is not a Reporting Company, none of its
securities are listed for trading on any securities market. Accordingly,
Non-Qualified Options granted under the Plan will be taxable at date of
exercise. Thus, please note that Section 83(b) of the Code which, as discussed
below, is available to accelerate the timing of taxation of Forfeitable Grant
Shares, is not available to accelerate the taxation of Non-Qualified Options.
The amount and character of any gain or loss realized on a subsequent
disposition of Option Shares by the Recipient of a Non-Qualified Option who is a
U.S. Taxpayer generally would depend on, among other things, the length of time
such shares were held by the Recipient.
Incentive Options
Pursuant to Section 422 of the Code, if a Recipient who is a U.S. Taxpayer
receives the grant of an Incentive Option, the Recipient will not be considered
to have received taxable income upon either the grant of the Incentive Option or
its exercise (as is ordinarily the case with a Non-Qualified Option). Instead,
the Recipient will generally recognize taxable income (presumably as a capital
gain) upon the sale or other taxable disposition of the Option Shares acquired
by the exercise of the Incentive Option, on the full amount of the difference
between the amount realized and the option exercise price paid. Any loss upon
the taxable disposition of the Option Shares generally would be characterized as
a capital loss.
There are several special rules that a Recipient of Incentive Options who is a
U.S. Taxpayer must satisfy in order to receive the special income tax benefits
afforded under Section 422 of the Code. Failure to satisfy these conditions will
result in a partial or entire loss of the intended income tax benefits. These
rules are as follows:
1. Only the first $100,000 in Incentive Options granted in any one year
will be eligible for the more favorable tax treatment afforded to
options granted under the incentive stock option tax rules. Option
Shares granted in excess of this threshold amount shall be taxed as
Non-Qualified Options.
2. Should the Recipient sell or dispose of the Option Shares acquired
by exercise of the Incentive Option within either: (a) two years from
the date of grant of the Incentive Option, or (b)one year from the date
of transfer of the Option Shares to the Recipient upon the Recipient's
exercise of the Incentive Option (a "Disqualifying Disposition"), the
Recipient will be required to include the gain realized as ordinary
income to the extent of the lesser of: (i) the fair market value of the
Option Shares minus the option price; or (ii) the amount realized
minus the option price. Any gain in excess of these amounts,presumably,
will be treated as capital gain. Furthermore, Option Shares that the
Recipient acquires by surrendering Option Shares previously acquired
through the exercise of an Incentive Option will be treated as having
been acquired by the Recipient, for purposes of the one and two year
holding periods,as of the date the Incentive Option for the surrendered
Option Shares was originally exercised.
3. The Recipient must be an employee of the Company (or a subsidiary)
within the three-month period prior to the Recipient's exercise of the
Incentive Option in order to be eligible for Incentive Option income
tax benefits. This period is extended to one year in the event the
Recipient is permanently and totally disabled under Section 22(e)(3)
of the Code, which defines such disability as when the Recipient is
unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or which condition has lasted or can be
expected to last for a continuous period of not less than twelve (12)
months. Upon exercise of an Incentive Option by a Recipient who is a
U.S. Taxpayer, the alternative minimum taxable income of the Recipient
will be determined as if such Incentive Option were a Non-Qualified
Option in the manner described above. Accordingly, the Recipient will
be required to include as alternative minimum taxable income the excess
(if any) of the value of the Option Shares received upon exercise as
of the date such Option Shares are vested over the amount paid for such
shares. The Recipient would then be required to pay the greater of the
Recipient's regular or alternative minimum tax liability computed with
respect to such year. If the Option Shares so acquired are Disposed
of as part of a Disqualifying Disposition, there should be no "item of
tax preference" arising from the exercise of the Incentive Option.
Grant Shares
For purposes of the following discussion pertaining to federal income taxes, the
term "Non-forfeitable Grant Shares" shall refer to Grant Shares which are not
deemed to be Forfeitable Grant Shares under the terms of the Plan.
Non-forfeitable Grant Shares
If a Recipient who is a U.S. Taxpayer receives a grant of Non-forfeitable Grant
Shares, the Recipient will be taxed pursuant to the rules of Section 83 of the
Code and the interpretive regulations thereto promulgated by the Internal
Revenue Service. Pursuant to such rule, the Recipient must recognize
compensation income (which is taxable at ordinary income tax rates) equal to the
"spread" between the fair market value of the Non-forfeitable Grant Shares on
the date of grant and any consideration paid by the Recipient for such shares.
In the case where the Recipient receives Non-forfeitable Grant Shares as
"compensation" for the previous performance or future performance of services or
attainment of goals, the grant of such shares will be deemed payment of ordinary
compensation to the Recipient for the performance of such services. Accordingly,
the Recipient will recognize as compensation income an amount equal to the full
fair market value of such Non-forfeitable Grant Shares on the date of grant.
In the case where the Recipient receives Non-forfeitable Grant Shares as a
"bonus" or "reward" for services previously rendered and compensated, the
Recipient will not be required to pay any consideration for such shares, and
thus there will be no offset for consideration paid. Accordingly, the Recipient
will recognize as compensation income an amount equal to the full fair market
value of such Non-forfeitable Grant Shares on the date of grant.
In the case where the Recipient purchases Non-forfeitable Grant Shares, the
Recipient will be required to pay consideration for such shares, and there will
be an offset for consideration paid. Accordingly, the Recipient will recognize
as ordinary compensation income an amount equal to the full difference between
the fair market value of such Grant Shares on the date of grant and the
consideration paid by the Recipient for such shares.
Forfeitable Grant Shares
If a Recipient who is a U.S. Taxpayer receives a grant of Forfeitable Grant
Shares, the Recipient will also be taxed pursuant to the rules of Section 83 of
the Code. As stated above, the general tax rule is that the Recipient generally
must recognize compensation income (taxable at ordinary income tax rates) equal
to the "spread" between the fair market value of the Forfeitable Grant Shares on
the date of grant and any consideration paid by the Recipient for such shares.
However, since the Forfeitable Grant Shares are subject to certain vesting
conditions - that is, the Recipient's right to enjoy the full benefits of
ownership of the Forfeitable Grant Shares is conditioned on rendering further
services or is subject to other conditions that constitute a substantial risk of
forfeiture - then the Recipient would not recognize compensation income until
such time as the applicable conditions lapse or are satisfied, at which time the
Recipient would recognize ordinary compensation income equal to the "spread"
between the fair market value of the Forfeitable Grant Shares as of the date of
lapse or satisfaction of the underlying conditions and the amount of any
consideration paid by the recipient. For example, if the Forfeitable Grant
Shares are subject to the condition that the total number of such shares granted
will only vest one-third each year of continued provision of services by the
Recipient, then the Recipient will recognize one-third of the total number of
Forfeitable Grant Shares granted as taxable income on each of the one-, two- and
three-year anniversaries of the date of grant, based upon the respective fair
market value of such shares as of such vesting dates.
In the event of such vesting conditions, the Recipient may elect, pursuant to
the special (but somewhat complicated) rules of Section 83(b) of the Code, to
recognize compensation income at the time of grant of the Forfeitable Grant
Shares, even though the vesting conditions have not lapsed or been satisfied
(see "Section 83(b) Election" below).
The amount and character of any gain or loss realized on a subsequent
disposition of the Forfeitable Grant Shares by the Recipient generally would
depend on, among other things, whether such disposition occurred before or after
such Forfeitable Grant Shares vested, whether an election under Section 83(b) of
the Code with respect to such shares had been made, and the length of time such
shares were held by the Recipient.
Section 83(b) Election
In the event of the imposition of vesting conditions on Forfeitable Grant Shares
acquired by exercise of a Non-Qualified Option, the Recipient may elect,
pursuant to the special (but somewhat complicated) rules of Section 83(b) of the
Code, to recognize compensation income at the time of the grant of such
Forfeitable Grant Shares, even though the vesting conditions have not lapsed or
been satisfied. Thus, if the Recipient anticipates an increase in the fair
market value of such shares, the Recipient may accelerate the date of taxation
to the date of grant of the Forfeitable Grant Shares in order to limit the taxes
the Recipient pays to the spread at the date of grant. This may make sense in
the event the Recipient intends or is required to hold such shares for a long
period of time. Please note that the Section 83(b) election must be made within
30 days of receipt, as the case may be, of the Forfeitable Grant Shares, and
generally cannot be revoked. Please also note that, if the election is made, and
the Recipient subsequently forfeits the Forfeitable Grant Shares before they are
vested, the Recipient will not be eligible to recognize any loss on the
forfeiture except for the amount, if any, actually paid by the Recipient for
such shares. Due to the complexity of Section 83(b) of the Code, any Recipient
who receives Forfeitable Grant Shares should consult with such Recipient's tax
advisor regarding the advisability of making an election under Section 83(b).
Payment With Other Shares of Common Stock Owned by Recipient
The Recipient may, if permitted by the Plan Administrator or the terms of the
underlying Award Agreement, pay for Grant Shares or Option Shares through
delivery of already-owned shares of Common Stock in lieu of cash. In this case
differing tax consequences may result. In published rulings and proposed
regulations, the Internal Revenue Service has taken the position that: (i) to
the extent an equivalent number of shares is acquired, the Recipient will
recognize no gain and the Recipient's basis in the shares acquired upon such
exercise will be equal to the Recipient's basis in the surrendered shares; and
(ii) any additional shares acquired upon such exercise are compensation to the
Recipient taxable under the rules described above and the Recipient's basis in
any such additional shares is their then fair market value.
Stock Appreciation Rights
If a Recipient elects to receive in cash the appreciation inherent in the Stock
Appreciation right, the cash received will be ordinary income to the Recipient.
If a Recipient elects to receive the appreciation in the form of Plan Shares,
the shares will be taxable to the Recipient under Section 83 of the Code to the
extent of the difference between the fair market value of the Plan Shares
received and the amount which the Recipient pays for such shares.
Determination of Fair Market Value of Shares
As discussed above, taxation of Plan Shares is based upon the fair market value
of such shares at certain applicable dates. The appropriate fair market value
will be determined in accordance with the terms of the Plan.
In the event the Plan Shares constitute Non-forfeitable Grant Shares, the Plan
provides that the applicable fair market value of such shares, assuming the
Common Stock is then traded on the NASDAQ National Market System, will be equal
to the last sales price of the Common Stock on NASDAQ as of the applicable
valuation date.
In the event the Plan Shares constitute Forfeitable Grant Shares, the Plan
provides that the applicable fair market value of such shares will not be equal
to the NASDAQ trading price for the Common Stock since the Shares are not
immediately tradable. In this case the Recipient may discount the fair market
value from the NASDAQ trading price to reflect the impaired value of the
underlying vesting conditions. The amount of the impairment will, in general,
reflect the term and restrictions imposed by such vesting conditions. Pursuant
to the terms of the Plan, the Plan Administrator reserves the right in its sole
discretion to determine what the amount of the appropriate discount would be for
the Company's financial and income tax purposes, including the determination of
the basis for its compensation deduction for financial and income tax purposes
and, accordingly, the amount of payroll taxes the Company should withhold from
the Recipient.
The foregoing is only a summary of the effect of United States federal income
taxation upon Recipients who are U.S. Taxpayers, and does not purport to be a
complete description of such federal income consequences. The foregoing does not
address tax consequences attributable to the death of a Recipient, nor does it
discuss the income tax laws of any municipality, state or foreign country in
which the Recipient may reside.
The Board of Directors unanimously recommends that you vote "FOR" the proposal
(item 3 on the Proxy Card) approving the 1998 IFS International, Inc. Stock
Plan. Holders of proxies solicited by this Proxy Statement will vote the proxies
received by them as directed on the proxy card or, if no direction is made, in
favor of the proposed approval of the 1998 IFS International, Inc. Stock Plan.
Approval of the Stock Plan will require the affirmative vote of the holders of a
majority of the shares of Common Stock and the Preferred Stock, voting by class,
present in person or represented by proxy and casting votes with respect to this
proposal.
PROPOSAL NO. 4
APPROVAL OF AMENDMENT OF CERTIFICATE OF DETERMINATION CONCERNING SERIES A
PREFERRED STOCK.
The stockholders are being asked to approve amendment of the Certificate of
Designation regarding the Company's Series A Preferred Stock to make the Series
A Preferred Stock automatically convert to Common Stock on January 1, 1999,
instead of February 21, 2002 and to change the Conversion Number from 1 share of
Common Stock to 1.1 shares of Common Stock. A copy of the proposed amendment is
attached hereto as Appendix 4.
The Company believes that it would be beneficial to the Company and to
prospective investors to convert the Preferred Stock into Common Stock because
it would simplify the Company's capitalization structure. Historically, two
separate classes of stock has caused confusion in the investment community
and this confusion has hindered corporate financing activities. The Company
believes that combining the two classes into one would prevent this confusion.
The change of the Conversion Number from 1 share to 1.1 shares will have the
effect of causing the holders of the Preferred Stock to receive approximately
ten percent more stock upon conversion than they would under the present terms.
This increase is intended as an incentive to the holders of the Preferred Stock
to vote in favor of this proposal.
The Preferred shareholders currently have a liquidation preference of $5 per
share. Upon mandatory conversion, the holders of the Preferred Stock will
receive Common Stock and would no longer have any preferential liquidation
rights. In all matters other than the election of directors, the affirmative
vote of the Preferred stockholders is required for shareholder approval of any
corporate action. Upon mandatory conversion, the former holders of the Preferred
Stock would no longer have any special voting rights. The Certificate of
Designation regarding the Preferred Stock also contains provisions which adjust
the Conversion Number if the Company issues certain securities below the
conversion price of $5. Upon mandatory conversion, the former holders of the
Preferred Stock would no longer have the benefit of this dilution protection.
The Company believes the benefits of eliminating dual stock classes outweighs
the benefit of these rights.
In the recent past, the price differential in the public market between the
Common Stock and the Preferred Stock has sometimes been small, and in some
instances, the Common Stock has traded at slightly higher prices than the
Preferred Stock.
The Board of Directors unanimously recommends that you vote "FOR" the proposal
(item 4 on the Proxy Card) approving amendment of the Certificate of
Determination concerning the Series A Preferred Stock. Holders of proxies
solicited by this Proxy Statement will vote the proxies received by them as
directed on the proxy card or, if no direction is made, in favor of the proposed
approval of the amendment of the Certificate of Determination concerning the
Series A Preferred Stock. The amendment must be approved by the affirmative vote
of the holders of a majority of the outstanding shares of Common Stock and the
Preferred Stock, voting by class.
PROPOSAL NO. 5
APPROVAL OF CHANGE OF CORPORATE NAME TO IFS HOLDINGS INC.
The stockholders are being asked to approve the change of the name of the
Company to IFS Holdings, Inc., which was approved by the Board of Directors on
August 18, 1998. The purpose of the name change is to establish a clear
distinction between parent and subsidiary. The change would require amendment of
the Corporation's Certificate of Incorporation, as set forth in the proposed
amendment which is attached hereto as Attachment 1-A.
The Board of Directors unanimously recommends that you vote "FOR" the proposal
(item 5 on the Proxy Card) approving the change of the Company's name to IFS
Holdings Inc. Holders of proxies solicited by this Proxy Statement will vote the
proxies received by them as directed on the proxy card or, if no direction is
made, in favor of the proposed approval of the change of the Company's name to
IFS Holdings Inc. The amendment must be approved by the affirmative vote of the
holders of a majority of the outstanding shares of Common Stock and the
Preferred Stock, voting by class.
PROPOSAL NO. 6
APPROVAL OF THE SELECTION OF URBACH KAHN & WERLIN PC AS THE COMPANY'S
INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING APRIL 30, 1999.
The Board of Directors has selected Urbach Kahn & Werlin PC to audit the
accounts of the Company for the fiscal year ending April 30, 1999. Such firm,
which has served as the Company's independent auditor since April 1993, has
reported to the Company that none of its members has any direct financial
interest or material indirect financial interest in the Company.
A representative of Urbach Kahn & Werlin PC is expected to attend the meeting
and will be afforded the opportunity to make a statement and/or respond to
appropriate questions from stockholders.
The Board of Directors unanimously recommends that you vote "FOR" the proposal
(item 6 on the Proxy Card) approving the ratification of Urbach Kahn & Werlin PC
as the Company's independent auditors for the fiscal year ending April 30, 1999.
Holders of proxies solicited by this Proxy Statement will vote the proxies
received by them as directed on the proxy card or, if no direction is made, in
favor of the proposed approval of the ratification of Urbach Kahn & Werlin PC as
the Company's independent auditors. The ratification must be approved by the
affirmative vote of the holders of a majority of the shares of Common Stock and
the Preferred Stock, voting by class, present in person or represented by proxy
and casting votes with respect to this proposal.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Common Stock and Preferred Stock as of September 28, 1998, 1998
by (i) each stockholder known by the Company to be the beneficial owner of more
than 5% of the outstanding Common Stock and Preferred Stock, (ii) each director
of the Company, (iii) each Named Officer, and, (iv) all directors and executive
officers as a group. Except as otherwise indicated, the Company believes that
the beneficial owners of the Common Stock and Preferred Stock listed below,
based on information furnished by such owners, have sole investment and voting
power with respect to such shares, subject to community property laws where
applicable.
The table below does not reflect the number of shares of Common Stock which may
be acquired by an individual upon conversion of Preferred Stock which such
person may own.
Name and Address of Number Of Shares Percentage
Beneficial Owner Title of Class Beneficially Owned of Class
- ------------------------ ---------------- ------------------ -----------
Frank Pascuito....................Common 321,188(1) 22.9%
Rensselaer Technology Park
300 Jordan Road
Troy, NY 12180
Simon J. Theobald.................Common 58,953(2) 4.4%
Little Elms, 12 Green Lane,
Croxley Green, Rickmansworth,
Hertfordshire, WD3 3HR England
Arnold Wells......................Common 10,500(3) .8%
1100 Madison Avenue
New York, NY 10028
John P. Singleton.................Common 10,000(3) .8%
4331 Rosecliff Drive Preferred 11,000 .8%
Charlotte, NC 28277
DuWayne J. Peterson...............Common 17,700(3) 1.4%
225 South Lake Ave.
Pasadena, Ca. 91101
David L. Hodge....................Common 19,162(4) 1.5%
300 Jordan Road Preferred 5,000 .4%
Troy, NY 12180
Per Olof Ezelius..................Common 53,922(5) 4.2%
Nine Woodlawn Green Preferred 92,094 6.9%
Charlotte, NC 28217
John Shahda.......................Common 150,000 11.8%
30 S. Pearl Street
Albany, NY 12207
Charles J. Caserta................Common 320,259(6) 22.7%
17 Shadow Wood Way
Ballston Lake, NY 12019
All directors and executive
officers as a group (7 persons)...Common 491,425(7) 31.0%
Preferred 108,094 8.1%
- --------
(1) Includes 134,557 shares issuable upon exercise of stock options.
(2) Includes 58,933 shares issuable upon exercise of stock options.
(3) Includes 10,000 shares issuable upon exercise of stock options.
(4) Includes 19,162 shares issuable upon exercise of stock options.
(5) Includes 28,922 shares issuable upon exercise of stock options.
(6) On September 1, 1998, Mr. Charles J. Caserta co-founder of IFS
International, Inc., resigned from the Company as Director of Business
Development and a Director. At that time, Mr. Caserta and the Company
entered into a termination, severance and release agreement (the
"Termination Agreement"). As part of the Termination Agreement, the Company
is obligated to purchase from Mr. Caserta 180,723 shares of Common Stock and
options to acquire 139,536 shares of Common Stock. The Company will pay an
aggregate of $382,660 in connection with the purchase, $21,214 of which is
in consideration for Mr. Caserta's surrendering of options.
(7) Includes 271,574 shares issuable upon exercise of stock options.
ELECTION OF DIRECTORS
Seven directors are to be elected at the Meeting. The nominees proposed by the
Board of Directors are listed below. If the shareholders approve Proposal 1, the
Classified Board proposal, then there will be three classes of directors, each
class being elected to staggered three year terms, and the Board of Directors
will designate which directors initially will be appointed to each class. If the
proposal is approved, the Board will designated that Arnold Wells and Per Olof
Ezelius will serve in the first class of directors who will initially hold a
one-year term; DuWayne Peterson and Simon Theobald will serve in the second
class of directors who will initially hold a two-year term; and Frank Pascuito,
David Hodge and John Singleton will serve in the third class of directors who
will initially hold a full three-year term. In the event that any of the
foregoing persons are not elected a director, the Board will determine to which
class any other directors shall be assigned.
Information Concerning Nominees
The following table sets forth the positions and offices presently held with the
Company by each nominee, his age and his tenure as a director:
Positions Presently Held Director
Name Age with the Company Since
- ---------- ----- ------------------------- ------------
Frank A. Pascuito.......42 Chairman of the Board and Director 1989
David L. Hodge..........59 President, Chief Executive Officer
and Director 1997
Simon J. Theobald.......34 Senior Vice President of Worldwide
Sales & Marketing and Director 1994
Arnold Wells............78 Director 1986
John P. Singleton.......61 Director 1997
DuWayne J. Peterson.....66 Director 1997
Per Olof Ezelius........49 Director 1998
Frank A. Pascuito is currently Chairman of the Board. Mr. Pascuito was the Chief
Executive Officer and Chairman of the Board of the Company from 1989 to 1998.
Mr. Pascuito co-founded the Company's predecessor company, IFS International,
Inc. (formerly named Avant-Garde Computer Systems, Inc.), a New York corporation
engaged in the development and marketing of software (the "Predecessor"), in
1981 and served as its President until November 1987 and as its Vice President
of Product Planning until 1989. Prior to 1981, he was employed by NCR
Corporation's ATM software development team. As a consultant to NCR in 1979, he
assisted in the development and performed the installation of the first
on-line/off-line ATM system for NCR in the United States. Mr. Pascuito has over
ten years of operating and marketing experience in EFT system design, sales and
service. Mr. Pascuito is a graduate of the State University of New York at
Potsdam with a B.S. degree in Computer Science. He is active in several area
organizations dealing with technology, software, and world trade.
David L. Hodge has been President and CEO of the Company since February 1998.
Mr. Hodge has been a director of the Company since September 1997. Mr. Hodge is
a graduate of West Point, and has over 30 years experience in software
development. His last position was vice president in charge of product
development for the Cable and Broad band Solutions Group of Cincinnati Bell
Information Systems (CBIS). Prior to CBIS, Mr. Hodge held various senior
management positions at Ernst & Young, CBS/Newtrend, Anacomp and Great Western
Bank. Notable projects completed by Mr. Hodge include the development and
delivery for production of the client/server-based Precedent 2000 system
currently used to provide customer care and billing services to a large segment
of the Telecommunications personal communication systems (PCS) market, a
client/server based Centrex provisioning system for British Telecom in the
United Kingdom and several products for the banking industry for advanced
imaging and document management. In addition to his technical management
responsibilities at CBIS, Mr. Hodge led initial CBIS efforts to attain ISO 9000
compliance. This initiative led to the ISO 9000 certification of a major
international data system serving British Telecom.
Simon J. Theobald has been a director of the Company since December 1994 and was
the Director of Sales and Marketing of the European Division based in London
between 1992 and July, 1997 and has been Managing Director of Europe, Middle
East and Africa ("EMEA") since July, 1997. From 1986 to April 1992, he was
employed by Applied Communications Inc., a subsidiary of Transaction Systems
Architects, Inc. Mr. Theobald has more than fifteen years experience in the
electronic funds transfer industry. Mr. Theobald is a graduate of De-Havilland
College with qualifications in computer studies and technology.
Arnold Wells has been a director of the Company since 1986. Since 1976, Mr.
Wells has been a private investor and consultant in the health and
communications fields. Mr. Wells organized Wells Television (subsequently named
Wells National Services). In 1978, Mr. Wells formed WellsArt Limited, a company
which is engaged in the publishing and licensing work of prominent artists. Mr.
Wells is a graduate of Western Reserve University with a B.A. degree.
John P. Singleton has been a director of the Company since April 1997. In July
1997 he was appointed Chairman of its Executive Committee. Since 1992, Mr.
Singleton has been General Manager, Business Development of IBM/Integrated
Systems Solution Corporation. Between 1982-1992, he held several positions with
Security Pacific Corporation ranging from Senior Vice President Central
Information Group to Vice Chairman and Chief Operating Officer and member of the
Office of the Chairman. Mr. Singleton is a graduate of Arizona State University
with a B.S. degree in Business Management.
DuWayne J. Peterson has been a director of the Company since July 1997. Mr.
Peterson is President of DuWayne Peterson Associates, a consulting firm
specializing in the effective management of information technology. Prior to
forming his firm in 1991, he held the position of Executive Vice President,
Operations, Systems and Telecommunications at Merrill Lynch. Mr. Peterson holds
a B.S. degree from M.I.T. and an MBA from UCLA.
Per Olof Ezelius has been a director of the Company since May 1998. Mr. Ezelius
has held the office of President and CEO of NCI since October 1992. Since
starting with NCI in 1986 where he launched the European Sales operation, Mr.
Ezelius has also held positions of Vice President of Worldwide sales and Chief
Operating Officer. Prior to NCI, Mr. Ezelius held the position of Vice President
of Marketing and Project Management for Inter Innovation AB in Stockholm,
Sweden. Mr. Ezelius started his career in 1971 with systems design and
application software development for the first generation of programmable branch
automation systems.
Identification of Executive Officers (Excludes Executive Officers who are also
Directors)
Name Age Position(s) Principal Occupation
Carmen A. Pascuito 38 Controller/Secretary Carmen A. Pascuito has been
Secretary of the Company since
December 1996 and its Controller
since 1989. Mr. Pascuito joined
the Predecessor in 1985 as a
staff accountant and became its
Controller in 1988. Mr. Pascuito
is a graduate of Siena College
with a B.B.A. degree in
Accounting.
Frank A. Pascuito and Carmen A. Pascuito are brothers.
Executive officers are elected annually by the Company's Board of Directors to
hold office until the first meeting of the Company's Board of Directors
following the next annual meeting of stockholders and until their successors are
chosen and qualified.
Information Concerning the Board
The Board of Directors held 6 meetings during the year ended April 30, 1998.
The Company has appointed an audit committee consisting of Directors Arnold
Wells, John P. Singleton, and DuWayne J. Peterson. John P. Singleton and DuWayne
Peterson are independent directors.
The Company has also appointed an executive committee, a compensation
committee, an acquisition committee, and a strategic planning committee. The
members of the executive committee are Arnold Wells, Frank A. Pascuito, David L.
Hodge, DuWayne J. Peterson, and John P. Singleton. The members of the
compensation committee are David L. Hodge, DuWayne J. Peterson, and John P.
Singleton. The members of the acquisition committee are Frank A. Pascuito, John
P. Singleton, Simon J. Theobald, and Per Olof Ezelius. The members of the
strategic planning committee are Simon J. Theobald, John P. Singleton, Per Olof
Ezelius, and Frank A. Pascuito.
The Company does not have a nominating committee, charged with the search for
and recommendation to the Company's Board of Directors of potential nominees
for the Company's Board of Directors positions. These functions are performed
by the Company's Board of Directors as a whole.
Reporting Delinquencies
Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act")
requires the Company's officers and directors, and persons who own more than 10%
of the Company's Common Stock, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission. Officers, directors and
greater than 10% stockholders are required by regulations promulgated under the
Exchange Act to furnish the Company with copies of all Section 16(a) forms they
file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5
were required for those persons, the Company believes that during the fiscal
year ended April 30, 1998, no officer, director or greater than 10% beneficial
owner was late with his filings other than Messrs. John Shahda, who were late in
filing their respective Form 3.
EXECUTIVE COMPENSATION
The following table sets forth information concerning compensation paid or
accrued by the Company or its subsidiary for services rendered during the fiscal
years ended April 30, 1998, 1997 and 1996 by its Chief Executive Officer and
each of its executive officers whose compensation exceeded $100,000 during its
fiscal year end April 30, 1998.
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
-------------------------------- ------------
Other
Annual Securities
Name and Fiscal Compen- Underlying
Principal Position Year Salary Bonus sation Option(s)
----------------------- -------- ---------- -------- --------- -----------
David Hodge.............. 1998 $41,538 $ - $10,500(1) 60,000
President and CEO
Frank Pascuito........... 1998 114,810 50,000 - 18,722
Chairman 1997 94,061 (2) 50,305 - 87,485
1996 88,000 (2) - - -
Charles Caserta.......... 1998 119,759 - - 18,723
Vice President of 1997 102,132 (3) 70,984 - 92,463
Business Development 1996 90,794 (3) - - -
Simon Theobald........... 1998 206,408 - - 15,000
Senior Vice President 1997 183,790 - - 25,000
Worldwide Sales 1996 106,436 - - -
and Marketing
Per Olof Ezelius......... 1998 55,767 100,000 - 18,000
President and CEO/NCI 1997 - - - -
1996 - - - -
- --------
(1) Amount in Other Annual Compensation represents amounts paid for board member
fees prior to appointment of President and CEO.
(2) Does not include accrued interest of $2,367 and $5,706 for the fiscal years
ended April 30, 1997, 1996, respectively, for salaries earned but deferred. The
interest rate on such deferred salaries was 12% per annum.
See "Certain Relationships and Related Transactions."
(3) Does not include accrued interest of $2,899 and $6,862 for the fiscal years
ended April 30, 1997, 1996, respectively, for salaries earned but deferred. The
interest rate on such deferred salaries was 12% per annum.
See " Certain Relationships and Related Transactions."
Set forth below with respect to the executive officers set forth in the Summary
Compensation Table (the "Named Officers") is further information concerning
options to purchase Common Stock under the Company's stock option plans, and
employment agreements.
The following table sets forth all grants of stock options to
each of the named executive officers of the Company during the fiscal year ended
April 30, 1998.
Option Grants in Fiscal Year Ended April 30, 1998
Number of
Shares
of Common % of Total
Stock Options
Underlying Granted to
Options Employees in Per Share Expiration
Name Granted Fiscal Year Exercise Price Date
- ------- ----------- ----------- -------------- ----------
Frank A. Pascuito...........13,722 4.2 % $4.88 02/03/08
Charles J. Caserta (1)......13,723 4.2 % $4.88 02/03/08
David L. Hodge (2)..........10,000 3.1 % $1.51 09/09/07
David L. Hodge (2)..........30,000 9.3 % $1.51 03/09/08
David L. Hodge (2)..........20,000 6.2 % $1.51 03/08/08
Simon J. Theobald (2).......15,000 4.6 % $1.51 02/23/08
Per Olof Ezelius (2)........18,000 5.6 % $1.51 01/29/08
(1) Pursuant to the Termination Agreement with Mr. Caserta described in Certain
Relationships and Certain Transactions, these options were surrendered in
October, 1998.
(2) Assumes the approval by shareholders of the 1998 Stock Plan and the
subsequent exchange of 1996 Options for 1998 Options having an exercise
price of $1.25. If the 1998 Plan is not approved by the shareholders, these
options will remain outstanding as non-plan options or the 1996 options will
be modified.
The following table sets forth information as to options exercised by each
of the named executives during the fiscal year ended April 30, 1998, and the
value of in-the-money options held as of April 30, 1998.
<TABLE>
<CAPTION>
Option Exercises and Option Values
Number of Securities Value of Unexercised
Number of Shares Underlying Unexercised In-the-Money
of Common Stock Options as of April 30,1998 Options as of April 30, 1998(1)
Acquired on --------------------------- -------------------------------
Name Exercise Value Realized Exercisable Unexercisable Exercisable Unexercisable
- --------------- ---------------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David L. Hodge
President and CEO..........0 $0 12,370 47,630 $0 $0
Frank Pascuito,
Chairman...................12,445 $53,140 134,557 0 $69,238 $0
Charles Caserta,
Vice President of
Business Development......7,467 $31,884 139,536 0 $69,238 $0
Simon Theobald,
Senior Vice President
of Worldwide
Sales and Marketing......0 $0 52,589 22,411 $70,004 $11,696
Per Olof Ezelius,
President and CEO/NCI......0 $0 1,477 16,523 $0 $0
</TABLE>
(1) Based on a market price of $2.94 per share at April 30, 1998.
Employment Agreements
In May, 1998, the Company entered into employment agreements, or amended or
restated prior employment agreements (the "Employment Agreements") with each of
Messrs. David Hodge, Frank Pascuito and Simon Theobald (each an "Executive").
The initial term of Mr. Hodge's Employment Agreement extends from February
15, 1998 to February 14, 2001, and is automatically renewed annually thereafter.
Under Mr. Hodge's Employment Agreement, Mr. Hodge will receive (i) an annual
base salary of $200,000, subject to an increase commencing on June 1, 1998 based
on the increase in the consumer price index and periodic review after May 31,
1999; (ii) an annual bonus (which shall not exceed 50% of the annual base
salary) based on the achievement of performance goals agreed to by the Executive
and the Board; (iii) stock options granted immediately under the Plan for the
purchase of 50,000 shares of the Company's common stock and 25,000 shares on
each anniversary of the execution of the Agreement; (iv) stock appreciation
rights based on 30,000 shares of the Company's common stock to be granted
immediately and on each anniversary of the execution of this Agreement; (v) life
insurance or death benefits in the amount of $500,000; (vi) an annuity of
$40,000 per year for the joint lives of the Executive and his spouse. If the
Company is sold or transferred (as described in the Employment Agreement), even
if the Executive is not terminated, the Executive shall receive (on a "grossed
up" basis to cover taxes incurred) 6% of the first $10 million in consideration,
8% of the next $10 million, and 10% of any consideration received in excess of
$20 million.
The initial term of Mr. Pascuito's Employment agreement extends from January
1, 1997 to December 31, 1999. Automatically renewed annually thereafter for
consecutive one-year. Mr. Pascuito will receive (i) an annual base salary of
$130,000; (ii) a commission; (iii) an annual performance bonus; (iv) stock
options previously granted for the purchase of 75,000 shares of the Company's
common stock at $5.00 per share; (v) stock appreciation rights based on 10,000
shares of the Company's common stock to be granted immediately and on each
anniversary of the execution of this Agreement. If the Company is sold or
transferred (as described in the Employment Agreement even if the Executive is
not terminated, the Executive shall receive (on a "grossed up" basis to cover
taxes incurred) 4% of the first $10 million in consideration, 6% of the next $10
million, and 8% of any consideration received in excess of $20 million.
The initial term of Mr. Theobald's Employment Agreement extends from February
28, 1998 to December 31, 1999 and is automatically renewed annually thereafter.
Mr. Theobald will receive: (i) an annual base salary composed of a fixed portion
totaling $112,500 per year; (ii) a commission (iii) an annual performance bonus;
(iv) stock options (previously granted) for the purchase of 15,000 shares of the
Company's common stock; and (v) stock appreciation rights based on 5,000 shares
of the Company's common stock to be granted immediately and on each anniversary
of the execution of this Agreement. If the Company is sold or transferred (as
described in the Employment Agreement), even if the Executive is not terminated,
the Executive shall receive (on a "grossed up" basis to cover taxes incurred) 2%
of the first $10 million in consideration, 4% of the next $10 million, and 6% of
any consideration received in excess of $20 million.
Each of the three agreements provides automobile allowances and allowances for
club membership.
The Employment Agreement's of Messrs. Pascuito and Theobald, provide that
where a termination is for death or disability, the executive shall receive: his
annual fixed salary accrued and other benefits and compensation, but no less
than 6 months fixed salary. Additionally, all unvested stock options and SAR's
which have been or are scheduled to be granted pursuant to the Agreement shall
immediately vest. Where a termination is due to a "Change in Control," without
cause or by the Executive for good reason as defined in the Agreement provides
that the Company will pay compensation and certain allowances and benefits to
the Executive through the end of the then-applicable term.
The Employment Agreement of Mr. Hodge, provides that where the Agreement is
terminated due to death, disability or termination of the Company for "Cause,"
the Executive shall receive: 6 months of his annual salary, accrued compensation
and benefits to date plus other allowances. Where a termination is due to a
"Change in Control," without cause, or by the Executive for good reason, as
defined in the Agreement provides that the Company will pay compensation and
certain allowances and benefits to the Executive through the end of the then
applicable term. Additionally, all unvested stock options and SAR's which have
been or are scheduled to be granted pursuant to the Agreement shall immediately
vest.
Under the Employment Agreements a "Change in Control" includes (i) an
acquisition whereby immediately after such acquisition, a person holds
beneficial ownership of more than 50% of the total combined voting power of the
Company's then outstanding voting securities; (ii) if in any period of three
consecutive years after the date of the Employment Agreements, the then
incumbent board, ceases to constitute a majority of the Board for reasons other
than voluntary resignation, refusal by one or more Board members to stand for
election, or removal of one or more Board member for good cause; or (iii) the
Board of Directors or the stockholders of the Company approve (A) a merger,
consolidation or reorganization; (B) a complete liquidation or dissolution of
the Company; or (C) the agreement for the sale or other disposition of all or
substantially all of the assets of the Company.
On January 30, 1998, Mr. Per Olof Ezelius entered into an employment
agreement with Network Controls International, Inc. ("NCI") to serve as its
President and Chief Executive Officer for an initial term of three years and
three months, commencing January 30, 1998, and ending April 30, 2001 (the
"Original Employment Agreement"). On May 12, 1998, the Company entered into an
extension agreement (the "Extension Agreement") with Mr. Ezelius which provides
that the term of the covenant not to compete (as refereed to in the Original
Employment Agreement) is extended from a period of one-year to two-years
commencing from the expiration of the Original Employment Agreement. Such
Extension Agreement further provides that the Company grant to Mr. Ezelius: (i)
25,000 shares of common stock; (ii) 25,000 options to purchase Company common
stock (such exercise price being equal to the fair market value of such common
stock on May 12, 1998); and (iii) a cash bonus equal to $100,000.
The original employment agreement provides for Mr. Ezelius to receive an
annual base salary composed of a fixed portion totaling $150,000 per year and an
annual performance bonus.
The foregoing summaries are intended as general descriptions of the terms of
the Employment Agreements and the Extension Agreement, and are limited in their
entirety by the actual language of the Employment Agreements and the Extension
Agreement, which are included as Exhibits to this report.
Stock Option Plans
The Company has two option plans: the 1996 Stock Option Plan (the "1996
Plan") and the 1988 Stock Option Plan (the "1988 Plan"). It is intended that the
1998 Plan will replace the 1996 Plan. The Company has issued options under the
1996 Plan. At its May 12, 1998, meeting, the Board of Directors approved the
adoption of the 1998 Plan, subject to shareholder approval, and approved the
issuance of new options under the 1998 Plan to replace all of the outstanding
options under the 1996 plan, conditioned upon shareholder approval of the 1998
Plan and upon each option holder agreeing to cancel his or her options under the
1996 Plan upon issuance of options under the 1998 Plan. At its September 8,
1998, meeting, the Compensation Committee, which administers the 1998 Plan,
granted options under the 1999 Plan to replace all options granted under the
1996 plan, also conditioned upon shareholder approval of the 1998 Plan and upon
each option holder agreeing to cancel his or her options under the 1996 Plan
upon issuance of options under the 1998 Plan. The purchase price of stock under
such options is $1.25 per share, which was the market price of the stock on that
date. The options under the 1996 Plan have purchase prices substantially higher
than this price, ranging from $4.25 to $7.31. It is anticipated that all of the
option holders will wish to exchange their 1996 Plan options for 1998 Plan
options due to the lower purchase price under the latter options.
The 1996 Plan provides for the granting of options which are intended to
qualify either as incentive stock options ("Incentive Stock Options") within the
meaning of Section 422 of the Code or as options which are not intended to meet
the requirements of such section ("Nonstatutory Stock Options"). The total
number of shares of Common Stock reserved for issuance under the 1996 Plan is
300,000. Options to purchase shares may be granted under the 1996 Plan to
persons who, in the case of Incentive Stock Options, are key employees
(including officers) of the Company or any subsidiary of the Company, or, in the
case of Nonstatutory Stock Options, are key employees (including officers) or
nonemployee directors of, or nonemployee consultants to, the Company or any
subsidiary of the Company.
The 1996 Plan provides for its administration by the Board of Directors or a
committee chosen by the Board of Directors, which has discretionary authority,
subject to certain restrictions, to determine the number of shares issued
pursuant to Incentive Stock Options and Nonstatutory Stock Options and the
individuals to whom, the times at which and the exercise price for which options
will be granted.
The exercise price of all Incentive Stock Options granted under the 1996 Plan
must be at least equal to the fair market value of such shares on the date of
the grant or, in the case of Incentive Stock Options granted to the holder of
more than 10% of the Company's Common Stock, at least 110% of the fair market
value of such shares on the date of the grant. The maximum exercise period for
which Incentive Stock Options may be granted is ten years from the date of grant
(five years in the case of an individual owning more than 10% of the Company's
Common Stock). The aggregate fair market value (determined at the date of the
option grant) of shares with respect to which Incentive Stock Options are
exercisable for the first time by the holder of the option during any calendar
year shall not exceed $100,000.
The 1996 Plan provides for the issuance of options to purchase Common Stock
to key employees, officers, directors and consultants. As of April 30, 1998,
there were options outstanding to purchase 321,500 shares of Common Stock under
the 1996 Plan, of which 35,000 are subject to shareholder ratification. All
options are exercisable at prices ranging from $4.25 to $7.31 per share and
expire in various years between 2005-2008. As of April 30, 1998, there were no
options available for grant to purchase shares of Common Stock under the 1996
Plan.
The 1988 Plan provides for the issuance of options to purchase Common Stock
to key employees, officers, directors and consultants. As of April 30, 1998,
there were options outstanding to purchase 227,635 shares of Common Stock under
the 1988 Plan. All options are exercisable at prices ranging from $.66 to $4.88
per share and expire in various years between 1997 - 2008. As of April 30, 1998,
there were no options available for grant to purchase shares of Common Stock
under the 1988 Plan.
The exercise price of all future option grants will be at least 85% of the
fair market value of the Common Stock on the date of grant.
Certain Relationships and Related Transactions
IFS has issued a purchase order for $259,600 to Euro-Tech International
("ETI") to obtain ISO 9000 registration. ETI is an Arizona based corporation
that specializes in guiding companies through the ISO 9000 certification
process. ISO 9000 is an established international business standard. ISO 9000
requires that the core processes of company's business is documented, understood
and followed by company personnel. ISO 9000 is becoming a standard for companies
in the global market. ETI is also a subsidiary of Tech Metrics International,
Inc. of which Mr. David L. Hodge, President and CEO of IFS International, Inc.
is a director.
Frank Pascuito deferred salaries for the five fiscal years ended April 30,
1995 in the aggregate amount of $60,765. Such deferred salaries bore interest at
the rate of 12% per annum until September 30, 1996, which interest aggregated
$31,013 as of such date and was also deferred. As of April 30, 1997, all
deferred salaries and interest have been paid.
Charles Caserta deferred salaries for the five fiscal years ended April 30,
1995 in the aggregate amount of $62,439. Such deferred salaries bore interest at
the rate of 12% per annum until September 30, 1996, which interest aggregated
$34,464 as of such date and was also deferred. As of April 30, 1997, all
deferred salaries and interest have been paid.
On January 30, 1998 the Company acquired all of the outstanding shares of
capital stock of NCI Holdings, Inc. ("Holdings"). Pursuant to the terms of the
Merger Agreement, Per Olof Ezelius ("Ezelius"), the sole beneficial owner of
Holdings' capital stock, received 87,094 shares (the "Base Consideration") of
Preferred Stock valued at $620,545. The number of shares was subject to
adjustment. In August, 1998, the Company waived any right to such adjustment.
The Company is obligated to register all of these shares of Preferred Stock
under the Securities Act of 1933. Fourteen thousand thirty five (14,035) shares
of the Base Consideration are being held in escrow to secure certain warranties,
representations, covenants and indemnifications made by Ezelius (the
"Indemnification Obligations").
The acquisition of Holdings was accounted for as a purchase.
Ezelius may receive additional shares of Preferred Stock (the "Additional
Shares") if the consolidated pre-tax profit of NCI exceeds certain levels during
each of the years ending April 30, 1999, 2000 and 2001 and during the three
years ending April 30, 2001. Any Additional Shares issued to Ezelius up to a
value of $200,000 will be held in escrow to further secure the Indemnification
Obligations. The Merger Agreement required Holdings to satisfy indebtedness to
former stockholders of Holdings and NCI arising pursuant to agreements for the
purchase of shares entered into in 1993 and 1995. Immediately prior to the
merger, the Company advanced $840,000 to Holdings, which was utilized to satisfy
existing indebtedness of Holdings as required by the Merger Agreement. Pursuant
to the terms of the Merger Agreement, Ezelius entered into a separate employment
agreement with NCI to serve as Chief Executive Officer of NCI for a period of 39
months, commencing January 30, 1998, at a base salary of $150,000 per year.
Ezelius also was granted options to purchase 18,000 shares of the Company's
Common Stock at $5.00 per share.
On September 1, 1998, Mr. Charles J. Caserta, co-founder of IFS International,
Inc., resigned from the Company as Director of Business Development and
a Director. At that time, Mr. Caserta and the Company entered into a
termination, severance and release agreement (the "Termination Agreement").
Mr. Caserta will perform services for IFS International, Inc. from time to
time for fees and commissions. Under the terms of the Termination Agreement,
the Company purchased from Mr. Caserta 180,723 shares of Common Stock at a price
of $361,446 ($2.00 per share) and paid him $21,214 for surrender of his stock
options to acquire 139,536 shares of Common Stock. The Company has resold the
stock to several individuals at $2.12 per share, a total of $382,660. Messrs.
John Singleton and DuWayne Peterson, directors of the Company, purchased
50,000 shares and 25,000 shares, respectively.
TRANSACTION OF OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors of the Company is
not aware of any matters other than those set forth herein and in the Notice of
Meeting of Stockholder that will come before the meeting. Should any other
matters arise requiring the vote of stockholders, it is intended that proxies
will be voted with respect thereto in accordance with the best judgment of the
person or persons voting the proxies.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the Company's 1999 Annual
Meeting of Stockholders pursuant to the provisions of Rule 14a-8 of the
Securities and Exchange Commission, promulgated under the Exchange Act, must be
received by the Company's offices in Troy, New York by June 20, 1999 for
inclusion in the Company's proxy statement and form of proxy relating to such
meeting.
FORM 10-KSB
A copy of the Company's Form 10-KSB is available at no charge upon written
request to its Investor Relations department at 300 Jordan Road, Troy, NY 12180.
<PAGE>
Appendix 1-A to Proxy Statement
Amendment to Articles of Incorporation
<PAGE>
Appendix 1-B to Proxy Statement
BYLAWS
OF
IFS INTERNATIONAL, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent.
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine, or the business of the corporation may require.
ARTICLE II
CORPORATE SEAL
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal -
Delaware." Said seal may be used by causing it, or a facsimile thereof, to be
impressed or affixed, or reproduced or otherwise attached.
ARTICLE III
STOCKHOLDERS MEETINGS
Section 4. Place of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
Section 5. Annual Meeting.
(a) The annual meeting of the stockholders of the corporation, for the
purpose of election of directors and for such other business as may lawfully
come before it, shall be held at such date and at such time as may be designated
from time to time by the Board of Directors.
(b) At an annual meeting of the stockholders, only such business shall
be conducted as has been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (i) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors; (ii) otherwise properly brought before the meeting by or at the
direction of the Board of Directors; or (iii) otherwise properly brought before
the meeting by a stockholder.
For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the Secretary of the corporation. To be timely, a stockholder's notice must be
delivered to or mailed and received at the principal executive offices of the
corporation not later than the close of business on the sixtieth (60th) day, and
not earlier than the close of business on the ninetieth (90th) day, prior to the
first anniversary of the preceding year's annual meeting; provided however, that
in the event that no annual meeting was held in the previous year, or the date
of the annual meeting has been changed by more than thirty (30) days from the
date contemplated at the time of the previous year's proxy statement, notice by
the stockholder to be timely must be received not earlier than the close of
business on the ninetieth (90th) day prior to such annual meeting, and not later
than the close of business on the later of the sixtieth (60th) day prior to such
annual meeting or, in the event public announcement of the date of such annual
meeting is first made by the corporation fewer than seventy (70) days prior to
the date of such annual meeting, the close of business on the tenth (10th) day
following the day on which public announcement of the date of such meeting is
first made by the corporation.
A stockholder's notice to the Secretary pursuant to this Section shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting: (i) a brief description of the business desired to be brought before
the annual meeting and the reasons for conducting such business at the annual
meeting; (ii) the name and address, as they appear on the corporation's books,
of the stockholder proposing such business; (iii) the class and number of shares
of the corporation then beneficially owned by the stockholder; (iv) any material
interest of the stockholder in such business; and (v) any other information as
is to be provided by the stockholder pursuant to Regulation 14A under the
Exchange Act of 1934, as amended (the "1934 Act" or the "Exchange Act"), in his
capacity as the proponent of a stockholder proposal. Notwithstanding the
foregoing, in order to include information with respect to a stockholder
proposal in the proxy statement and form of proxy for a stockholder's meeting,
stockholders must provide notice as required by the regulations promulgated
under the 1934 Act.
Notwithstanding anything in these bylaws to the contrary, no business shall
be conducted at any annual meeting except in accordance with the procedures set
forth in this paragraph (b). The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
paragraph (b), and, if he should so state, he shall so declare at the meeting
that any such business not properly brought before the meeting shall not be
transacted.
(c) Only persons who are confirmed in accordance with the procedures set
forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the corporation
may be made at a meeting of stockholders, by or at the direction of the Board of
Directors, or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting, who complies with the notice procedures
set forth in this paragraph (c). Such nominations, other than those made by or
at the direction of the Board of Directors, shall be made pursuant to timely
notice in writing to the Secretary of the corporation in accordance with the
provisions of paragraph (b) of this Section 5.
Such stockholder's notice shall set forth, as to each person, if any, whom
the stockholder proposes to nominate for election or reelection as a director:
(i) the name, age, business address and residence address of such person; (ii)
the principal occupation or employment of such person; (iii) the class and
number of shares of the corporation which are then beneficially owned by such
person; (iv) a description of all arrangements or understandings between the
stockholder and each nominee, and with any other person or persons (naming such
person or persons) pursuant to which the nominations are to be made by the
stockholder; and (v) any other information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise require pursuant to Regulation 14A under the 1934 Act (including
without limitation such person's written consent to being named in the proxy
statement as a nominee, and to serving as a director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 5. At the request of the Board of Directors,
any person nominated by a stockholder for election as a director shall furnish
to the Secretary of the corporation information required to be set forth in the
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with the procedures prescribed by
these bylaws, and if he should so determine, he shall so declare at the meeting,
and the defective nomination shall be disregarded.
(d) For purposes of this Section 5, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service, or in a document
publicly filed by the corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 or 15(d) of the Exchange Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors; (ii) the Chief Executive Officer; or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board of Directors for adoption), and shall be held at such place, on such
date, and at such time as the Board of Directors shall determine.
(b) If a special meeting is called by any person or persons other than
the Board of Directors, the request shall be in writing, specifying the
general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the Chairman of the Board of Directors, the Chief
Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than as specified in such notice.
The Board of Directors shall determine the time and place of such special
meeting, which shall be held not less than thirty-five (35) nor more than one
hundred twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote,
in accordance with the provisions of Section 7 of these bylaws. If the notice
is not given within sixty (60) days after the receipt of the request, the
person or persons requesting the meeting may set the time and place of the
meeting and give the notice. Nothing contained in this paragraph (b) shall be
construed as limiting, fixing, or affecting time when a meeting of
stockholders called by action of the Board of Directors may be held.
Section 7. Notice of Meetings. Except as otherwise provided by law or
the Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting, to each stockholder entitled to vote at such meeting, and
such notice shall specify the place, date, hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and all be waived by any stockholder by his
attendance thereat in person or by proxy; except when the stockholder attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Any stockholder so waiving notice of such meeting shall be bound by
the proceedings of any such meeting in all respects as if due notice thereof had
been given.
Section 8. Quorum. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these bylaws, the presence, in person or by proxy duly authorized, of the
holders of not less than one-third of the outstanding shares of stock entitled
to vote shall constitute a quorum for the transaction of business. In the
absence of a quorum, any meeting of stockholders may be adjourned, from time to
time, either by the chairman of the meeting or by vote of the holders of a
majority of the shares represented thereat, but no other business shall be
transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which
a quorum is present, may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum. Except as otherwise provided by law, the Certificate of Incorporation or
these bylaws, all action taken by the holders of a majority of the votes cast,
excluding abstentions, at any meeting at which a quorum is present, shall be
valid and binding upon the corporation; provided however, that directors shall
be elected by a plurality of the votes of the shares present, in person or
represented by proxy at the meeting and entitled to vote on the election of
directors.
Where a separate vote by a class or classes or series is required,
except where otherwise provided by statute or by the Certificate of
Incorporation or these bylaws, a majority of the outstanding shares of such
class or classes or series, present in person or represented by proxy, shall
constitute a quorum entitled to take action with respect to the vote on that
matter and, except where otherwise provided by statute or by the Certificate of
Incorporation or these bylaws, the affirmative vote of the majority (or a
plurality, in the case of the election of directors) of the votes cast,
including abstentions, by the holders of shares of such class or classes or
series, shall be the act of such class or classes or series.
Section 9. Adjournment and Notice of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from to time, either
by the chairman of the meeting or by the vote of a majority of the shares
casting votes, excluding abstentions. When a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and
place thereof are announced at the meeting at which the adjournment is taken. At
the adjourned meeting, the corporation may transact any business which might
have been transacted at the original meeting. If the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote at the meeting.
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 37 of
these bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An Agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation, unless the proxy provides for a
longer period.
Section 11. Joint Owners of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirely, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, then unless the Secretary is
given written notice to the contrary, and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have the following effect:
(a) if only one (1) votes, his act binds all; (b) if more than one (1) votes,
the act of the majority so voting binds all; (c) if more than one (1) votes, but
the vote is evenly split on any particular matter, each faction may vote the
securities in question proportionally, or may apply to the Delaware Court of
Chancery for relief, as provided in the General Corporation Law of Delaware,
Section 217(b). If the instrument filed with the Secretary shows that any such
tenancy is held in unequal interests, a majority or even-split for the purpose
of subsection (c) shall be a majority or even-split in interest.
Section 12. List of Stockholders. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at each meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 13. Action Without Meeting. No action shall be taken by the
stockholders except at an annual or special meeting of stockholders, called in
accordance with these bylaws, and no action shall be taken by the stockholders
by written consent.
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to make
such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and
procedures, and to do all such acts as, in the judgment of such chairman, are
necessary, appropriate or convenient for the proper conduct of the meeting;
including without limitation establishing an agenda or order of business for the
meeting, and rules and procedures for maintaining order at the meeting and the
safety of those present; limitations on participation in such meeting to
stockholders of record of the corporation and their duly authorized and
constituted proxies, and such other persons as the chairman shall permit;
restrictions on entry to the meeting after the time fixed for the commencement
thereof; limitations on the time allotted to questions or comments by
participants; and regulation of the opening and closing of the polls for
balloting on matters which are to be voted on by ballot. Unless and to the
extent determined by the Board of Directors or the chairman of the meeting,
meetings of stockholders shall not be required to be held in accordance with
rules of parliamentary procedure.
ARTICLE IV
DIRECTORS
Section 15. Number, Qualification, Election and Term of Office.
(a) The number of directors that shall constitute the entire Board of
Directors of the corporation shall be not less than three (3) nor more than
fifteen (15), as fixed from time to time by vote of a majority of the entire
Board of Directors; provided that no decrease in the number of directors shall
shorten the term of any incumbent directors. The exact number of directors
constituting the entire Board of Directors is presently fixed at five (5).
Directors need not be stockholders unless so required by the Certificate of
Incorporation. Except as otherwise provided by statute or the Certificate of
Incorporation or these Bylaws, the directors shall be elected at the annual
meeting of shareholders. Each director shall hold office until his successor
shall have been elected and qualified, or until his death, or until he shall
have resigned, or have been removed, as hereinafter provided by these Bylaws.
(b) The directors of the corporation shall be divided into three (3)
classes as nearly equal in size as practicable, which classes are hereby
designated as Class I, Class II and Class III. The term of office of the initial
Class I directors shall expire at the first regularly-scheduled annual meeting
of stockholders after the 1998 annual meeting of stockholders, or at any
adjournments thereof; the term of office of the initial Class II directors shall
expire at the second regularly-scheduled annual meeting of stockholders after
the 1998 annual meeting of stockholders, or at any adjournments thereof; and the
term of office of the initial Class III directors shall expire at the third
regularly-scheduled annual meeting of stockholders after the 1998 annual meeting
of stockholders, or at any adjournments thereof. For purposes hereof, the
initial Class I, Class II and Class III directors shall be those directors so
designated and elected at the 1998 annual meeting of stockholders , or any
adjournment thereof. The designation of said directors t Class I, Class II, and
Class III shall be by a majority vote of the Board of Directors or, if agreement
cannot be reached, by length of prior service on the Board. At each annual
meeting of stockholders after the 1998 annual meeting of stockholders or any
adjournment thereof, directors to replace those of the Class whose terms expire
at such annual meeting shall be elected to hold office until the third
succeeding annual meeting of stockholders and until their respective successors
have been duly elected and qualified. If the number of directors is hereafter
changed, any newly-created directorships or decrease in the number of
directorships shall be so apportioned among the classes so as to make all the
classes as nearly equal in number as practicable.
(c) Any decrease in the number of directors constituting the Board of
Directors shall be effective at the time of the next succeeding annual meeting
of stockholders unless there shall be vacancies in the Board of Directors, in
which case such decrease may become effective at any time prior to the next
succeeding annual meeting of stockholders to the extent of the number of such
vacancies. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Section 16. Failure to Elect Directors at Annual Stockholders' Meeting.
If for any reason the stockholders fail to elect directors at an annual meeting
of stockholders, then the terms of the incumbent directors each shall be
extended by one year in office.
Section 17. Powers.The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 18. Vacancies. Unless otherwise provided in the Certificate of
Incorporation, or unless the Board of Directors determines by resolution that
any vacancies or newly created directorships shall be filled by stockholder
vote, then any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes, and any newly created
directorships resulting from any increase in the number of directors be filled
only by the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the directorship in question until such director's successor
shall have been elected and qualified. A vacancy on the Board of Directors shall
be deemed to exist under this bylaw in the case of the death, removal or
resignation of any director.
Section 18. Resignation. Any director may resign at any time, by
delivering a written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors effective at a future
date, a majority of the directors then in office, including those who have so
resigned, shall have power to fill such vacancy or vacancies, the vote thereon
to take effect when such resignation or resignations become effective, and each
director so chosen shall hold office for the unexpired portion of the term of
the director replaced, whose place shall be vacated and until his successor
shall have been duly elected and qualified,
Section 20. Removal. Subject to the Certificate of Incorporation, any
director may be removed only for cause, as determined by:
(a) the affirmative vote of the holders of 2/3 of the outstanding
shares of the Corporation then entitled to vote; or
(b) the affirmative and unanimous vote of all of the directors of the
Corporation, excluding the vote of the directors to be removed.
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors shall
be held immediately before or after the annual meeting of stockholders, and at
the place where such stockholders' meeting is held. No notice of an annual
meeting of the Board of Directors shall be necessary, and such meeting shall be
held for the purpose of appointing officers and transacting such other business
as may lawfully come before it.
(b) Regular Meetings. Except as otherwise provided herein, regular
meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware, which place has been designated by resolution of the Board of
Directors, or by the written consent of all directors.
(c) Special Meetings. Unless otherwise restricted by the Certificate of
Incorporation, special meetings of the Board of Directors may be held at any
time and place with or without the State of Delaware, whenever called by the
Chairman of the Board, the President or any two of the directors.
(d) Telephone Meetings. Any member of the Board of Directors, or of any
committee thereof, may participate in a meeting by means of conference telephone
or communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting by such means shall
constitute presence in person at such meeting.
(e) Notice of Meetings. Notice of the time and place of all special
meetings of the Board of Directors shall be made orally or in writing, by
telephone, facsimile, telegraph or telex during normal business hours at least
twenty four (24) hours before the date and time of the meeting or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting, and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) Waiver Of Notice. The transaction of all business at any meeting of
the Board of Directors, or any committee thereof, however called or noticed, or
wherever held, shall be as valid as though had at a meeting duly held after
regular call and notice, if a quorum is present and if, either before or after
the meeting, each of the directors not present shall sign a written waiver of
notice. All such waivers shall be filed with the corporate records or made a
part of the minutes of the meeting.
Section 22. Quorum and Voting.
(a) Unless the Certificate of Incorporation requires a greater number,
and except with respect to indemnification questions arising under Section 43
hereof, for which a quorum shall be one-third of the exact number of directors
fixed from time to time in accordance with the Certificate of Incorporation, a
quorum of the Board of Directors shall consist of a majority of the exact number
of directors fixed from time to time by the Board of Directors in accordance
with the Certificate of Incorporation; provided, however at any meeting, whether
a quorum be present or otherwise, a majority of the directors present may
adjourn from time to time until the time fixed for the next regular meeting of
the Board of Directors, without notice other than by announcement at the
meeting.
(b) At each meeting of the Board of directors at which a quorum is present,
all questions and business shall be determined by the affirmative vote of a
majority of the directors present, unless a different vote is required by law,
the Certificate of Incorporation or these bylaws.
Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of directors or
committee, as the case may be, consent thereto writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 24. Fees and Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed
sum and expenses of attendance, if any, for attendance at each regular or
special meeting of the Board of Directors and at any meeting of a committee of
the Board of Directors. Nothing herein contained shall be construed to
preclude any director from serving the corporation in any other capacity as an
officer, agent, employee, or otherwise and receiving compensation therefor.
Section 25. Committees.
(a) Executive Committee. The Board of Directors may by resolution passed by
a majority of the whole Board of Directors appoint an Executive Committee to
consist of one (1) or more members of the Board of Directors. The Executive
Committee, to the extent permitted by law and provided in the resolution of the
Board of Directors, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
corporation, including without limitation the power or authority to declare a
dividend; to authorize the issuance of stock and to adopt a certificate of
ownership and merger; and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority with reference to amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the Board
of Directors, fix the designation and any of the preferences or rights of such
shares relating to dividends, redemption, dissolution, any distribution of
assets of the corporation or the conversion into, or the exchange of such shares
of any other class or classes, or any other series of the same or any other
class or classes of stock of the corporation, or fix the number of shares of any
series of stock or authorize the increase or decrease of the shares of any
series); adopting an agreement of merger or consolidation; recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's, property and assets; recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution; or amending the
bylaws of the corporation.
(b) Other Committees. The Board of Directors may from time to time, by
resolution passed by a majority of the whole Board of Directors, appoint such
other committees as may be permitted by law. Such other committees appointed by
the Board of Directors shall consist of one (1) or more members of the Board of
Directors and shall have such powers and perform such duties as may be
prescribed by the resolution or resolutions creating such committees, but in no
event shall such committee have the powers denied to the Executive Committee in
these bylaws.
(c) Term. Each member of a committee of the Board of Directors shall serve
a term on the committee co-extensive with such member's term on the Board of
Directors. The Board of Directors, subject to the provisions of subsections (a)
or (b) of this bylaw, may at any time increase or decrease the number of members
of a committee, or terminate the existence of a committee. The membership of a
committee shall terminate on the date of a director's death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time, for any reason, remove any individual committee
member, and the Board of Directors may fill any committee vacancy created by
death, resignation or removal, or increase the number of members of the
committee. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not they
constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting, in the place of any such absent or disqualified
member.
(d) Meetings. Unless the Board of Directors shall otherwise provide,
regular meetings of the Executive Committee or any other committee appointed
pursuant to this Section 25 shall be held at such times and places as are
determined by the Board of Directors, or by any such committee. When notice of
the time and place of regular meetings has been given to each member of such
committee, no further notice of such regular meetings need be given thereafter.
Special meetings of any such committee may be held at any place which has been
determined from time to time by such committee, and may be called by any
director who is a member of such committee, upon written notice to the members
of such committee of the time and place of such special meeting, given in the
manner provided for the giving of written notice to members of the Board of
Directors of the time and place of special meetings of the Board of Directors.
Notice of any special meeting of any committee may be waived in writing at any
time before or after the meeting, and will be waived by any director by
attendance thereat, except when the director attends such special meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. A majority of the authorized number of members of any such committee
shall constitute a quorum for the transaction of business, and the act of a
majority of those present at any meeting at which a quorum is present shall be
the act of such committee.
Section 26. Organization. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President, or if the President is absent, the most senior Vice
President or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the chairman of the meeting, shall act as secretary of the meeting,
ARTICLE V
OFFICERS
Section 27. Officers Designated. The officers of the corporation
shall include, if and when designated by the Board of Directors: the Chairman of
the Board of Directors, the Chief Executive Officer, the President, one or more
Vice Presidents, the Secretary, the Chief Financial Officer, the Treasurer, and
the Controller, all of whom shall be elected at the annual organizational
meeting of the Board of Direction. The Board of Directors may also appoint one
or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers, and
such other officers and agents, with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time, unless specifically
prohibited therefrom by law. The salaries and other compensation of the officers
of the corporation shall be fixed by or in the manner designated by the Board of
Directors.
Section 28. Tenure and Duties of Officers.
(a) General. All officers shall hold office at the pleasure of the Board of
Directors and until their successors have been duly elected and qualified,
unless sooner removed. Any officer elected or appointed by the Board of
Directors may be removed at any time by the Board of Directors. If the office of
any officer becomes vacant for any reason, the vacancy may be filled by the
Board of Directors.
(b) Duties of Chairman of the Board of Directors. The Chairman of the Board
of Directors, when present, shall preside at all meetings of the stockholders
and the Board of Directors. The Chairman of the Board of Directors shall perform
other duties commonly incident to his office, and shall also perform such other
duties and have such other powers as the Board of Directors shall designate from
time to time. If there is no President, then the Chairman of the Board of
Directors shall also serve as the Chief Executive Officer of the corporation and
shall have the powers and duties prescribed in paragraph (c) of this Section 28.
(c) Duties of President. The President shall preside at all meetings of the
stockholders and at all means of the Board of Directors, unless the Chairman of
the Board of Directors has been appointed and is present. Unless some other
officer has been elected Chief Executive Officer of the corporation, the
President shall be the Chief Executive Officer of the corporation and shall,
subject to the control of the Board of Directors, have general supervision,
direction and control of the business and officers of the corporation. The
President shall perform other duties commonly incident to his office and shall
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time.
(d) Duties of Vice Presidents. The Vice Presidents may assume and perform
the duties of the President in the absence or disability of the President or
whenever the office of President is vacant. The Vice Presidents shall perform
other duties commonly incident to their office(s), and shall also perform such
other duties and have such other powers as the Board of directors or the
President shall designate from time to time.
(e) Duties of Secretary. The Secretary shall attend all meetings of the
stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him under
these bylaws, and other duties commonly incident to his office, and shall also
perform such other duties and have such other powers as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other power as the Board of Directors or the President shall
designate from time to time.
(f) Duties of Chief Financial Officer. The Chief Financial Officer shall
keep or cause to be kept the books of account of the corporation in a thorough
and proper manner and shall render statements of the financial affairs of the
corporation in such form and as often as required by the Board of Directors or
the President. The Chief Financial Officer, subject to the order of the Board of
Directors, shall have custody of all funds and securities of the corporation.
The Chief Financial Officer shall perform other duties commonly incident to his
office, and shall also perform such other duties and have such other powers as
the Board of Directors or the President shall designate from time to time. The
President may direct the Treasurer or any Assistant Treasurer, or the Controller
or any Assistant Controller to assume and perform the duties of the Chief
Financial Officer in the absence or disability of the Chief Financial Officer,
and each Treasurer and Assistant Treasurer and each Controller and Assistant
Controller shall perform other duties commonly incident to his office, and shall
also perform such other duties and have such other powers as the Board of
Directors or the President shall designate from time to time.
Section 29. Delegation of Authority. The Board of Directors may
from time to time delegate the powers or duties of any officer to any other
officer or agent, notwithstanding any provision hereof.
Section 30. Resignation Any officer may resign at any time by
giving written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 31. Removal. Any officer may be removed from office at any
time, either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING
OF SECURITIES OWNED BY THE CORPORATION
Section 32. Execution of Corporate Instrument. The Board of
Directors, in its discretion, may determine the method and designate the
signatory officer or officers, or other person or persons, to execute on behalf
of the corporation any corporate instrument or document; or to sign on behalf of
the corporation the corporate name without limitation, or to enter into
contracts on behalf of the corporation, except where otherwise provided by law
or these bylaws, and such execution or signature shall be binding upon the
corporation.
Unless otherwise specifically determined by the Board of Directors or
otherwise required by law, promissory notes, deeds of trust, mortgages and other
evidences of indebtedness of the corporation, and other corporate instruments or
documents which require the corporate seal, and certificates of shares of stock
owned by the corporation, shall be executed, signed or endorsed by the Chairman
of the Board of Directors, or the President or any Vice President, and by the
Secretary or Treasurer or any Assistant Secretary or Assistant Treasurer. All
other instruments and documents requiring the corporate signature, but not
requiring the corporate seal, may be executed as stated above, or in such other
manner as may be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositories on funds to
the credit of the corporation, or in special accounts of the corporation, shall
be signed by such person or persons as the Board of Directors may authorize.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation by any contract or engagement, or to pledge
its credit or to render it liable for any purpose or for any amount.
Section 33. Voting of Securities Owned by the Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President or any Vice President.
ARTICLE VII
SHARES OF STOCK
Section 34. Form and Execution of Certificates. Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the name
of the corporation by the Chairman of the Board of Directors, or the President
or any Vice President and by the Treasurer or Assistant Treasurer or the
Secretary or Assistant Secretary, certifying the number of shares owned by him
in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have ceased
to be such officer, transfer agent, or registrar before such certificate is
issued, it may be issued with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue. Each certificate shall state
upon the face or back thereof, in full or in summary, all of the powers,
designations, preferences and rights, and the limitations or restrictions of the
shares authorized to be issued or shall, except as otherwise required by law,
set forth on the face or back a statement that the corporation will furnish,
without charge to each stockholder who so requests, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof; and the qualifications, limitations or
restrictions of such preferences and/or rights. Within a reasonable time after
the issuance or transfer of uncertificated stock, the corporation shall send to
the registered owner thereof a written notice containing the information
required to be set forth or stated on certificates pursuant to this section or
otherwise required by law, or a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof; and the qualifications, limitations or
restrictions of such preferences and/or rights. Except as otherwise expressly
provided by law the rights and obligations of the holders of certificates
representing stock of the same class and series shall be identical.
Section 35. Lost Certificates. A new certificate or certificates shall
be issued in place of any certificate or certificates issued by the corporation
and alleged to have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. The corporation may require, as a condition precedent
to the issuance of a new certificate or certificates, that the owner of such
lost, stolen or destroyed certificate or certificates, or his legal
representative, to advertise the same in such manner as it shall require or to
give the corporation a surety bond in such form and amount as it may direct, as
indemnity against any claim that may be made against the corporation with
respect to the certificate alleged to have been lost, stolen or destroyed.
Section 36. Transfers.
(a) Transfers of record of shares of stock of the corporation shall be made
only upon its books by the holders thereof, in person or by attorney duly
authorized, and upon the surrender of a properly endorsed certificate or
certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation; and to restrict the transfer of shares of stock of the
corporation of any one or more classes owned by such stockholders in any manner
not prohibited by the General Corporation Law of Delaware.
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders which are
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall not be more than sixty (60) nor less than ten (10) days before the date of
such meeting. If no record date is fixed by the Board of Directors, the record
date for determining stockholders entitled to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held. A determination
of stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or the stockholders entitled to exercise any rights with respect to any
change, conversion or exchange of stock, or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted, and which record date shall be no more than sixty (60) days prior to
such action. If no record date is fixed, the record date for determining
stockholders for any such purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto.
Section 38. Registered Stockholders. The corporation shall be entitled
to recognize the exclusive right of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
Section 39. Execution of Other Securities. All bonds, debentures and
other corporate securities of the corporation, (other than stock certificates
covered in Section 34), may be signed by the Chairman of the Board of Directors,
the President or any Vice President, or such other person as may be authorized
by the Board of Directors, and the corporate seal impressed thereon or a
facsimile of such seal imprinted thereon and attested by the signature of the
Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer
or an Assistant Treasurer; provided, however, that where any such bond,
debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons relating
to any such bond, debenture or other corporate security, authenticated by a
trustee as stated above, shall be signed by the Treasurer or an Assistant
Treasurer of the corporation, or such other person as may be authorized by the
Board of Directors, or shall bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signatures shall
appear thereon or on any such interest coupon, shall have ceased to be such
officer before the bond, debenture or other corporate security so signed or
attested shall have been delivered, such bond, debenture or other corporate
security nevertheless may be adopted by the corporation and issued and
delivered, as though the person who signed the same or whose facsimile signature
shall have been used thereon had not ceased to be such officer of the
corporation.
ARTICLE IX
DIVIDENDS
Section 40. Declaration of Dividends. Dividends upon the capital stock
of the corporation, subject to any applicable provision of the Certificate of
Incorporation, if any, may be declared by the Board of Directors pursuant to law
at any regular or special meeting. Dividends may be paid in cash, in property,
or in shares of the capital stock, subject to the provisions of the Certificate
of Incorporation.
Section 41. Dividend Reserve. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors may from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
ARTICLE X
FISCAL YEAR
Section 42. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
ARTICLE XI
INDEMNIFICATION
Section 43. Indemnification of Directors, Executive Officers, Other
Officers, Employees and Other Agents.
(a) Directors and Officers. The corporation shall indemnify its directors
and officers to the fullest extent not prohibited by the Delaware General
Corporation Law; provided, however, that the corporation may modify the extent
of such indemnification by individual contracts with its directors and officers
and, provided, further, that the corporation shall not be required to indemnify
any director or officer in connection with any proceeding (or part thereof)
initiated by such person unless (i) such indemnification is expressly required
to be made by law; (ii) the proceeding was authorized by the Board of Directors
of the corporation; (iii) such indemnification is provided by the corporation,
in its sole discretion, pursuant to the powers vested in the corporation under
the Delaware General Corporation Law; or (iv) such indemnification is required
to be made under subsection (d) below.
(b) Employees and Other Agents. The corporation shall have power to
indemnify its employees and other agents as set forth in the Delaware General
Corporation Law.
(c) Expense. The corporation shall advance to any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, if such person is a party by reason of the fact that he is or was
a director or officer of the corporation, or is or was serving at the request of
the corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all
reasonable expenses incurred by any director or officer in connection with such
proceeding upon receipt of an undertaking by or on behalf of such person to
repay said amounts if it should be determined ultimately that such person is not
entitled to be indemnified under this bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this bylaw, no advance shall be made by the corporation to an
officer of the corporation (except by reason of the fact that such officer is or
was a director of the corporation in which event this paragraph shall not apply)
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to the proceeding; or (ii) if such quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made, demonstrate
clearly and convincingly that such person acted in bad faith, or acted in a
manner that such person did not believe to be in, or believed to be opposed to
the best interests of the corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and officers
under this bylaw shall be deemed to be contractual rights, and to be effective
to the same extent and as if provided for in a contract between the corporation
and the director or officer. Any right to indemnification or advances granted by
this bylaw to a director or officer shall be enforceable by or on behalf of the
person holding such right in any court of competent jurisdiction if: (i) the
claim for indemnification or advances is denied, in whole or in part; or (ii) no
disposition of such claim is made within ninety (90) days of request therefor.
The claimant in such enforcement action, if successful in whole or in part,
shall be entitled to be paid in addition the expense of prosecuting his or her
claim. In connection with any claim for indemnification, the corporation shall
be entitled to raise as a defense to any such action that the claimant has not
met the standard of conduct that make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed. In connection with any claim for advances by an officer of the
corporation (except in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which the officer is a party by reason of
the fact that such officer is or was a director of the corporation), the
corporation shall be entitled to raise a defense as to any such action based on
clear and convincing evidence that such person acted in bad faith or in a manner
that such person did not believe to be in or believed to be opposed to the best
interests of the corporation; or with respect to any criminal action or
proceeding, that such person acted without reasonable cause to believe that his
conduct was lawful. Neither the failure of the corporation (whether through its
Board of Directors, independent legal counsel or its stockholders) to have made
a determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the corporation (whether through its Board of Directors,
independent legal counsel or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action, or create
a presumption that claimant has not met the applicable standard of conduct. In
any suit brought by a director or officer to enforce a right to indemnification
or to an advance of expenses hereunder, the burden of proving that the director
or officer is not entitled to be indemnified, or is not entitled to such advance
of expenses, under this Article XI or otherwise, shall be on the corporation.
(e) Non-Exclusivity of Rights. The rights conferred on any person by this
bylaw shall not be exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, the bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in any other capacity while holding office. The corporation is
specifically authorized to enter into individual contracts with any or all of
its directors, officers, employees or agents with respect to indemnification and
advances, to the fullest extent not prohibited by the Delaware General
Corporation Law.
(f) Survival of Rights. The rights conferred on any person by this bylaw
shall continue as to a person who has ceased to be a director, officer, employee
or other agent, and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(g) Insurance. To the fullest extent permitted by the Delaware General
Corporation Law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this bylaw.
(h) Amendments. Any repeal or modification of this bylaw shall only be
prospective, and shall not affect the rights under this bylaw which were in
effect at the time of the alleged occurrence of any action or omission to act
that is the cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this bylaw or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each director and officer to the full extent not
prohibited by any applicable portion of this bylaw that shall not have been
invalidated, or by any other applicable law.
(j) Certain Definitions. For the purposes of this bylaw, the following
definitions shall apply:
(i) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation,
prosecution, defense, settlement, arbitration and appeal of, and the
giving of testimony in, any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative.
(ii) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness
fees, fines, amounts paid in settlement or judgment and any other costs
and expenses of any nature or kind incurred in connection with any
proceeding.
(iii) The term the "corporation" shall include, in addition to
the resulting corporation, any constituent corporation (including, any
constituent of a constituent) absorbed in a consolidation or merger
which, if its separate existence had continued, would have had power
and authority to indemnify its directors, officers, and employees or
agents, so that any person who is or was a director, officer, employee
or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer,
employee or agent or another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the
provisions of this bylaw with respect to the resulting or surviving
corporation as he would have with respect to such constituent
corporation, if its separate existence had continued.
(iv) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without
limitation, situations where such person is serving at the request of
the corporation as, respectively, a director, executive officer,
officer, employee, trustee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
(v) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes
assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include
any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee
benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in manner he reasonably believed to be in the
interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this bylaw.
ARTICLE XII
NOTICES
Section 44. Notices.
(a) Notice to Stockholders. Whenever, under any provisions of these bylaws,
notice is required to be given to any stockholder, it shall be given in writing,
duly deposited in the United States mail, postage prepaid, and addressed to his
last known post office address as shown by the stock record of the corporation
or its transfer agent.
(a) Notice to directors. Any notice required to be given to any director
may be given by the method stated in subsection (a), or by facsimile, telex or
telegram, except that notice other than one which is delivered personally shall
be sent to such address as such director shall have filed in writing with the
Secretary, or, in the absence of such filing, to the last known post office
address of such director.
(c) Affidavit of Mailing. An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall, in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail as provided above,
shall be deemed to have been given as at the time of mailing; and all notices
given by facsimile, telex or telegram shall be deemed to have been given as of
the sending time recorded at the time of transmission.
(e) Methods of Notice. It shall not be necessary that the same method of
giving notice be employed with respect to all directors, but one permissible
method may be employed with respect to any one or more, and any other
permissible method or methods may be employed with respect to any other or
others.
(f) Failure to Receive Notice. The period or limitation of time within
which any stockholder may exercise any option or right, or enjoy any privilege
or benefit, or be required to act, or within which any director may exercise any
power or right, or enjoy any privilege, pursuant to any notice sent to such
stock holder or director in the manner provided above, shall not be affected or
extended in any manner by the failure of such stockholder or such director to
receive such notice.
(g) Notice to Person with Whom Communication Is Unlawful. Whenever notice
is required to be given, under any provision of law or of the Certificate of
Incorporation or the bylaws of the corporation, to any person with whom
communication is unlawful, the giving of such notice to such person shall not be
required, and there shall be no duty to apply to any governmental authority or
agency for a license or permit to give such notice to such person. Any action or
meeting which shall be taken or held without notice to any such person (with
whom communication is unlawful) shall have the same force and effect as if such
notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate shall state,
if such is the fact and if notice is required, that notice was given to all
persons entitled to receive notice except such persons with whom communication
was unlawful.
(h) Notice to Person with Undeliverable Address. Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or the bylaws of the corporation, to any stockholder to whom: (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between the two consecutive annual meetings; or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed to such person at his
address as shown on the records of the corporation, and have subsequently been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.
ARTICLE XIII
AMENDMENTS
Section 45. Amendments. Subject to paragraph (h) of Section 43 of the
bylaws, the bylaws may be altered or amended, or new bylaws may be adopted by
the active vote of at least sixty-six and two-thirds percent (66-2/3 %) of the
voting power of all of the then outstanding shares of the voting stock. The
Board of Directors shall also have the power to adopt amend, or repeal bylaws,
subject to any limitations under the General Corporation Law of Delaware.
ARTICLE XIX
LOANS TO OFFICERS
Section 46. Loans to Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan guarantee or other assistance may
be with or without interest, and may be unsecured or secured, in such manner as
the Board of Directors shall approve, including without limitation a pledge of
shares of stock of the corporation. Nothing in these bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
<PAGE>
Appendix 2 to Proxy Statement
IFS INTERNATIONAL, INC.
(a Delaware Corporation)
and
AMERICAN STOCK TRANSFER & TRUST COMPANY, INC.
Rights Agent
STOCKHOLDERS' RIGHTS PLAN
dated as of May 12, 1998
<PAGE>
STOCKHOLDERS' RIGHTS PLAN
Stockholders' Rights Plan, dated as of May 12, 1998 (the "Plan"),
between IFS International, Inc., a Delaware corporation (the "Company"), and
American Stock Transfer & Trust Company, Inc., a New York corporation (the
"Rights Agent").
WHEREAS, on May 12, 1998 (the "Rights Declaration Date"), the Board of
Directors of the Company authorized and declared an dividend distribution of one
(1) Right for each share of common stock, par value $0.001, of the Company (the
"Common Stock") outstanding at the close of business on the Record Date and has
authorized the issuance of one Right (as such number may hereinafter be adjusted
pursuant to the provisions of section 11(p) hereof) for each share of Common
Stock issued between the Record Date (whether originally issued or delivered
from the Company's treasury) and the Distribution Date, each Right initially
representing the right to purchase one share of Common Stock upon the terms and
subject to the conditions hereinafter set forth (the "Rights"); the "Record
Date" shall be the fifteenth business day following the date on which this Plan
is approved by the shareholders of the Company.
WHEREAS, the Board of Directors expressly made the adoption of the Plan
contingent upon subsequent approval of the stockholders of the Company at an
annual or special meeting of stockholders, and, if this Plan is not so approved
by the stockholders, this Plan shall be null and void ab initio and of no
further force and effect.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS
For purposes of this Plan, the following terms have the
meanings indicated:
(a) "Acquiring Persons" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of fifteen percent (15%) or more of the shares of Common Stock
then outstanding. Notwithstanding the foregoing, the term "Acquiring Person"
shall not include:
(i) The Company, any Subsidiary of the Company, any
employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan, or
(ii) Any Person who or which, together with
Affiliates and Associates of such Person, would be an Acquiring Person
solely by reason of: (A) being the Beneficial Owner of shares of Voting
Stock of the Company, the Beneficial Ownership of which was acquired by
such Persons pursuant to any action or transaction or series of related
actions or transactions approved by the Board of Directors (provided,
however that at the time of such approval of the Board of Directors
there are then in office not less than two Continuing Directors (as
such term is hereinafter defined) and such action or transaction or
series of related actions or transactions are approved by a majority of
the Continuing Directors then in office) before such Person otherwise
became an Acquiring Person or (B) a reduction in the number of issued
and outstanding shares of Voting Stock of the Company pursuant to a
transaction or a series of related transactions approved by the Board
of Directors (provided that at the time of such approval of the Board
of Directors there are then in office not less than two Continuing
Directors and such transaction or series of related transactions are
approved by a majority of the Continuing Directors then in office);
provided, further, however, that in the event such Person described in
the foregoing clause (ii) does not become an Acquiring Person by reason
of subclause (A) or (B) of said clause (ii), such Person shall
nonetheless become an Acquiring Person in the event such Person
thereafter acquires Beneficial Ownership of an additional one percent
(1%) of the Voting Stock of the Company, unless the acquisition of such
additional Voting Stock would not result in such Person becoming an
Acquiring Person by reason of subclause (A) or (B) of subclause (ii).
(b) "Act" shall mean the Securities Act of 1933, as amended.
(c) "Affiliate" and "Associates" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act.
(d) A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own," any securities:
(i) Which such Person or any of such Persons'
Affiliates or Associates, directly or indirectly, has the right to
acquire (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding (whether or not in writing) or upon the exercise of
conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," (A) securities
rendered pursuant to a tender or exchange offer made by such Person or
any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, or (B) securities
issuable upon exercise or Rights at any time prior to the occurrence of
a Triggering Event, or (C) securities issuable upon exercise of Rights
from and after the occurrence of a Triggering Event which Rights were
acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to section 3(a)
or section 22 hereof (the "Original Rights") or pursuant to section
11(i) hereof in connection with an adjustment made with respect to any
Original Rights;
(ii) Which such Person or any of such Person's
Affiliates or Associates, directly or indirectly, has the right to vote
or dispose of or has "beneficial ownership" of (as determined pursuant
to Rule 13d-3 of the General Rules and Regulations under the Exchange
Act), including pursuant to any agreement, arrangement or
understanding, whether or not in writing; provided, however, that a
Person shall not be deemed the "Beneficial Owner" of, or to
"beneficially own," any security under this subsection 1(d)(ii) as a
result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises
solely from a revocable proxy given in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the
applicable provisions of the General Rules and Regulations under the
Exchange Act, and (B) is not also then reportable by such Person on
Schedule 13D under the Exchange Act (or any comparable or successor
report); or
(iii) Which are beneficially owned, directly or
indirectly, by any Person (or any Affiliate or Associate thereof) with
which such Person (or any of such Person's Affiliates or Associates)
has any agreement, arrangement or understanding (whether or not in
writing), for the purpose of acquiring, holding, voting (except
pursuant to a revocable proxy as described in the proviso to subsection
1(d)(ii)) or disposing of any voting securities of the Company.
Notwithstanding anything in this section 1(d) to the contrary,
none of the Company's directors, officers or financial advisers shall be deemed
a "Beneficial Owner" of, or to "beneficially own," any securities of the Company
owned by any other director, officer or financial adviser of the Company by
virtue of such Persons acting in their capacities as such, including in
connection with the formulation and publication of the Board of Director's
recommendation of its position, and actions taken in furtherance thereof, with
respect to an acquisition proposal relating to the Company or a tender or
exchange offer for the Common Shares of the Company.
Further notwithstanding anything in this section 1(d) to the
contrary, a Person engaged in the business of underwriting securities shall not
be deemed a "Beneficial Owner" of, or to "beneficially own," any securities
acquired in good faith in a firm commitment underwriting until the expiration of
forty (40) days after the date of such acquisition.
(e) "Business day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
(f) "Close of business" on any given date shall mean 5:00
p.m., New York time.
(g) "Common Stock" shall mean the common stock, par value
$0.001, of the Company, except that "Common Stock" when used with reference to
any Person other than the Company shall mean the capital stock of such Person
with the greatest voting power, or the equity securities or other equity
interest having power to control or direct the management, of such Person.
(h) "Continuing Director" shall mean: (i) any member of the
Board of Directors of the Company, while such Person is a member of the Board,
who is not an Acquiring Person or an Affiliate or Associate of an Acquiring
Person, or a representative of an Acquiring Person or any such Affiliate or
Associate, and was a member of the Board prior to the date of this Plan, or (ii)
any Person who subsequently becomes a member of the Board, while such Person is
a member of the Board, who is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or a representative of an Acquiring Person or
any such Affiliate or Associate, if such Person's nomination for election or
election to the Board is recommended or approved by a majority of the Continuing
Directors.
(i) "Current market price" shall have the meaning set forth in
section 11(d) hereof.
(j) "Distribution Date" shall have the meaning set forth in
section 3(a) hereof.
(k) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended and in effect on the date of this Plan.
(l) "Expiration Date" shall have the meaning set forth in
section 7(a) hereof.
(m) "Final Expiration Date" shall have the meaning set forth
in section 7(a) hereof.
(n) "Person" shall mean any individual, firm or corporation,
partnership or other entity.
(o) "Principal Party" shall have the meaning set forth in
section 13(b) hereof.
(p) "Purchase Price" shall have the meaning set forth in
section 4(a) hereof.
(q) "Redemption Price" shall have the meaning set forth in
section 23(a) hereof.
(r) "Rights" shall have the meaning set forth in the WHEREAS
clause at the beginning of this Plan.
(s) "Rights Certificates" shall have the meaning set forth in
section 3(a) hereof.
(t) "Section 11(a)(ii) Event" shall mean any event described
in section 11(a)(ii) hereof.
- -----------------
(u) "Section 13 Event" shall mean any event described in
clauses (x), (y) or (z) of section 13(a) hereof.
(v) "Stock Acquisition Date" shall mean the first date of
public announcement (which, for purposes of this definition, shall include, a
report filed pursuant to the Exchange Act) by the Company or an Acquiring Person
that an Acquiring Person has become such.
(w) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(x) "Trading Day" shall have the meaning set forth in section
11(d) hereof.
(y) "Triggering Event" shall mean any Section 11(a)(ii) Event
or any Section 13 Event.
2. APPOINTMENT OF RIGHTS AGENT
The Company hereby appoints the Rights Agent to act as agent
for the Company in accordance will the terms and conditions hereof, and the
Rights Agent hereby accepts such appointment. The Company may from time-to-time
appoint such Co-Rights Agents as it may deem necessary or desirable.
3. ISSUANCE OF RIGHTS CERTIFICATE
(a) Provision of Rights Certificate. Until the earlier of: (i)
the close of business on the tenth (10th) day after the Stock Acquisition Date
(or, if the tenth (10th) day after the Stock Acquisition Date occurs before the
Record Date, the close of business on the Record Date), or (ii) the close of
business on the tenth (10th) business day (or such later date as may be
determined by action of the Board of Directors {but only if at the time of such
determination by the Board of Directors there are then in office not less than
two Continuing Directors and such action is approved by a majority of the
Continuing Directors then in office} prior to such time as any Person becomes an
Acquiring Person) after the date that a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person or entity
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would be the Beneficial Owner of fifteen
percent (15%) or more of the shares of Common Stock then outstanding (the
earlier of (i) or (ii) being herein referred to as the "Distribution Date"), (x)
the Rights will be evidenced (subject to the provisions of section 3(b)) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the close of business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of Exhibit A hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of rights per share of Common Stock has been made pursuant to section
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with section 14(a) hereof) so that Rights Certificates representing
only whole number of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(b) Provision of Summary of Rights. As promptly as practicable
following the Record Date, the Company will send a copy of a Summary of Rights,
in substantially the form attached hereto, as Exhibit B (the "Summary of
Rights"), by first-class, postage prepaid mail, to each recorded holder of the
Common Stock as of the close of business on the Record Date, at the address of
such holder shown on the records of the Company; provided, however, the Company
shall not be required to send a copy of the Summary of Rights to any
stockholders who have received a copy of this Plan in connection with any proxy
materials delivered to such stockholders which materials seek such stockholders'
approval of this Plan. With respect to certificates for the Common Stock
outstanding as of the Record Date, until the Distribution Date, the Rights will
be evidenced by such certificates for the Common Stock and the registered
holders of the Common Stock shall also be the registered holders of the
associated Rights. Until the earlier of the Distribution Date or the Expiration
Date, the transfer of any certificates representing shares of Common Stock in
respect of which Rights have been issued shall also constitute the transfer of
the Rights associated with such shares of Common Stock.
(c) Legend. Rights shall be issued in respect of all shares of
Common Stock which are issued after the Record Date but prior to the earlier of
the Distribution Date or the Expiration Date. Certificates representing such
shares of Common Stock shall also be deemed to be certificates for Rights, and
shall bear the following legend:
"THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER
HEREOF TO CERTAIN RIGHTS AS SET FORTH IN THE STOCKHOLDERS'
RIGHTS PLAN DATED AS OF MAY ____, 1998 (THE "RIGHTS PLAN")
BETWEEN IFS INTERNATIONAL, INC. (THE "COMPANY") AND AMERICAN
STOCK TRANSFER & TRUST COMPANY, INC (THE "RIGHTS AGENT"), THE
TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND
A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICES OF THE
COMPANY. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE
RIGHTS PLAN, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE
CERTIFICATES AND WILL NO LONGER BE EVIDENCED BY THIS
CERTIFICATE. THE RIGHTS AGENT WILL MAIL TO THE HOLDER OF THIS
CERTIFICATE A COPY OF THE RIGHTS PLAN, AS IN EFFECT ON THE
DATE OF MAILING, WITHOUT CHARGE PROMPTLY AFTER THE RECEIPT OF
A WRITTEN REQUEST THEREFOR. UNDER CERTAIN CIRCUMSTANCES SET
FORTH IN THE RIGHTS PLAN, RIGHTS ISSUED TO, OR HELD BY, ANY
PERSON WHO IS, WAS OR BECOMES AN ACQUIRING PERSON OR ANY
AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE DEFINED IN
THE RIGHTS PLAN), WHETHER CURRENTLY HELD BY OR ON BEHALF OF
SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL AND
VOID."
With respect to such certificates containing the foregoing
legend, until the earlier of (i) the Distribution Date or (ii) the Expiration
Date, the Rights associated with the Common Stock represented by such
certificates shall e evidenced by such certificates alone and registered holders
of Common Stock shall also be the registered holders of the associated Rights,
and the transfer of any of such certificates shall also constitute the transfer
of the Rights associated with the Common Stock represented by such certificates.
4. FORM OF RIGHTS CERTIFICATES
(a) General. The Rights Certificates (and the forms of
election to purchase and of assignment to be printed on the reverse thereof)
shall be substantially in the form set forth in Exhibit A hereto and may have
such marks of identification or designation an such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Plan, or as may be required to comply
with any applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange on which the Rights may from
time-to-time be listed, or to conform to usage. Subject to the provisions of
section 11 and section 22 hereof, the Rights Certificates, whenever distributed,
shall be dated as of the Record Date and on their face shall entitle the holders
thereof to purchase such number of shares of Common Stock as shall be set forth
therein at the price set forth therein (such exercise price per share, the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Held by Acquiring Person. Any Rights Certificate issued
pursuant to section 3(a) or section 22 hereof that represents Rights
beneficially owned by: (i) an Acquiring Person or any Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any Person with whom
such Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has a primary purpose or effect avoidance of section 7(e) hereof, and any
Rights Certificate issued pursuant to section 6 or section 11 hereof, and any
Rights Certificate issued pursuant to section 6 or section 11 hereof upon
transfer, exchange, replacement or adjustment of any other Rights Certificate
referred to in this sentence, shall contain (to the extent feasible) the
following legend:
"THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING
PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS
SUCH TERMS ARE DEFINED IN THE RIGHTS PLAN). ACCORDINGLY, THIS
RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION
7(E) OF SUCH RIGHTS PLAN."
5. COUNTERSIGNATURE AND REGISTRATION
(a) Execution. The Rights Certificates shall be executed on
behalf of the Company by its Chairman of the Board, its President or any Vice
President, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested by the
Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature. The Rights Certificates shall be manually countersigned by
the Rights Agent and shall not be valid for any purpose unless so countersigned.
In case any officer of the Company who shall have signed any of the Rights
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such officer
of the Company; and any rights Certificates may be signed on behalf of the
Company by any person who, at the actual date of the execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of the execution of this Plan any such person
was not such an officer.
(b) Maintenance of Books. Following the Distribution Date, the
Rights Agent will keep or cause to be kept, at its principal office or offices
designated as the appropriate place for surrender of Rights Certificates upon
exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the name and addresses of
the respective holders of the Rights Certificates, the number of Rights
evidenced on its face by each of the Rights Certificates, and the date of each
of the Rights Certificates.
6. TRANSFER, SPLIT UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHTS
CERTIFICATES
(a) Transfer, Split Up, Combination and Exchange of Rights.
Subject to the provisions of section 4(b), section 7(e) and section 14 hereof,
at any time after the close of business on the Distribution Date, and at or
prior to the close of business on the Expiration Date, any Rights Certificate or
Certificates may be transferred, split up, combined or exchanged for another
Rights Certificate or Certificates, entitling the registered holder thereof to
purchase a like number of shares of Common Stock as the Rights Certificate or
Certificates surrendered then entitled such holder (or former holder in the case
of a transfer) to purchase. Any registered holder desiring to transfer, split
up, combine or exchange any Rights Certificate or Certificates shall make such
request in writing delivered to the Rights Agent and shall surrender the Rights
Certificate or Certificates to be transferred, split up, combined or exchanged
at the principal office or offices of the Rights Agent designated for such
purpose. Neither the Rights Agent nor the Company shall be obligated to take any
action whatsoever with respect to the transfer of any such surrender Rights
Certificate until the registered holder shall have completed and signed the
certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to section 4(b), section 7(e) and section 14 hereof,
countersign and deliver to the Person entitled thereto a Rights Certificate or
Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer, split up, combination or exchange of
Rights Certificates.
(b) Loss, Theft, Destruction or Mutilation. Upon receipt by
the Company and the Rights Agent of evidence reasonably satisfactory to them of
the loss, theft, destruction or mutilation of a Rights Certificate, and, in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to them, and reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will execute
and deliver a new Rights Certificate of like tenor to the Rights Agent for
counter signature and delivery to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed or mutilated.
7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE OF RIGHTS
(a) Exercise of Rights. Subject to section 7(e) hereof, the
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein including, without limitation, the
restrictions on exercisability set forth in section 9(c) and section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of shares of Common Stock as to which such surrendered Right
are then exercisable, at or prior to the earlier of: (i) the close of business
on the date which is the tenth anniversary of the Record Date, (the "Final
Expiration Date"), or (ii) the time at which the Rights are redeemed as provided
in section 23 hereof (the earlier of (i) and (ii) being herein referred to as
the "Expiration Date").
(b) Purchase Price. The Purchase Price for each share of
Common Stock pursuant to the exercise of a Right shall initially be Fifty
dollars ($ 50.00), and shall be subject to adjustment from time-to-time as
provided in section 11 and section 13(a) hereof and shall be payable in
accordance with section 7(c) below.
(c) Delivery of Rights Certificates. Upon receipt of a Rights
Certificate representing exercisable Rights, with the form of election to
purchase and the certificate duly executed, accompanied by payment, with respect
to each Right so exercised, of the Purchase Price per one share of Common Stock
to be purchased as set forth below, and an amount equal to any applicable
transfer tax, the Rights Agent shall, subject to section 20(k) hereof, thereupon
promptly: (i) (A) requisition from any transfer agent of the shares of Common
Stock (or make available, if the Rights Agent is the transfer agent for such
shares) certificates for the total number of shares of Common Stock to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company shall have elected to
deposit the total number of shares of Common Stock issuable upon exercise of the
Rights hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of shares of Common Stock as are to
be purchased (in which case certificates for the shares of Common Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company will direct the depositary agent to comply
with such request, (ii) requisition from the Company the amount of cash, if any,
to be paid in lieu of fractional shares in accordance with section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, and (iv) after receipt thereof, deliver such cash, if any, to or upon
the order of the registered holder of such Rights Certificate. The payment of
the Purchase Price shall be made in cash or by certified bank check or bank
draft payable to the Company.
(d) Partial Exercise. In case the registered holder of any
Rights Certificate shall exercise less than all the Rights evidenced thereby, a
new Rights Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent and delivered to, or upon the
order of, the registered holder of such Rights Certificate, registered in such
name or names as may be designated by such holder, subject to the provisions of
section 14 hereof.
(e) Rights Held by Acquiring Person. Notwithstanding anything
in this Plan to the contrary, from and after the first occurrence of a Section
11(a)(ii) Event, any Rights beneficially owned by: (i) an Acquiring Person or an
Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred Rights or (B) a transfer
which the Board of Directors of the Company has determined is part of a plan,
arrangement or understanding which has a primary purpose or effect the avoidance
of this section 7(e), shall become null and void without any further action and
no holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Plan or otherwise. The Company shall
use all reasonable efforts to ensure that the provisions of this section 7(e)
and section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights Certificates or other Persons as a result of its failure to
make any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees hereunder.
(f) Satisfactory Evidence of Exercise. Notwithstanding
anything in this Plan to the contrary, neither the Rights Agent nor the Company
shall be obligated to undertake any action with respect to a registered holder
upon the occurrence of any purported exercise as set forth in this section 7
unless such registered holder shall have (i) completed and signed the
certificate contained in the form of election to purchase set forth on the
reverse side of the Rights Certificate surrendered for such exercise, and (ii)
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request.
8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES
All Rights Certificates surrendered for the purpose of
exercise, transfer, split up, combination or exchange shall, if surrendered to
the Company or any of its agents, be delivered to the Rights Agent for
cancellation or in canceled form, or, if surrendered to the Rights Agent, shall
be cancelled by it, and no Rights Certificates shall be issued in lieu thereof
except as expressly permitted by any of the provisions of this Plan. The Company
shall deliver to the Rights Agent for cancellation and retirement, and the
Rights Agent shall so cancel and retire, any other Rights Certificate purchased
or acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all canceled Rights Certificates to the Company, or shall,
at the written request of the Company, destroy such canceled Rights
Certificates, and in such case shall deliver a certificate of destruction
thereof to the Company.
9. RESERVATION AND AVAILABILITY OF CAPITAL STOCK
(a) Reservation of Capital Stock. The Company covenants and
agrees that, from and after the Distribution Date, it will cause to be reserved
and kept available out of its authorized and unissued shares of Common Stock not
reserved for another purpose the number of shares of Common Stock that, as
provided in this Plan, will be sufficient to permit the exercise in full of all
outstanding Rights; provided, however, that the Company shall not be required to
reserve and keep available shares of Common Stock or other securities sufficient
to permit the exercise in full of all outstanding Rights pursuant to the
adjustments set forth in section 11(a)(ii) or section 13 hereof unless the
Rights become exercisable pursuant to such adjustments.
(b) Listing on Stock Exchange. So long as the shares of Common
Stock issuable and deliverable upon the exercise of the Rights may be listed on
any national securities exchange, the Company shall use its best efforts to
cause, from and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed on such exchange upon official notice of
issuance upon such exercise.
(c) Registration. The Company shall use its best efforts to:
(i) file, as soon as required by law following the Distribution Date, a
registration statement under the Act, with respect to the securities purchasable
upon exercise of the rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing, and
(iii) cause such registration statement to remain effective (with a prospectus
at all times meeting the requirements of the Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities, and
(B) the date of the expiration of the Rights. The Company will also take such
action as may be appropriate under, or to ensure compliance with, the securities
or "blue sky" laws of the various states in connection with the exercisability
of the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date set forth in clause (i) of the first
sentence of this section 9(c), the exercisability of the Rights in order to
prepare and file such registration statement and permit it to become effective.
Upon any such suspension, the Company shall issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as well as
a public announcement at such time as the suspension is no longer in effect.
Notwithstanding any provision of this Plan to the contrary, the Rights shall not
be exercised in any jurisdiction unless the requisite qualification in such
jurisdiction shall have been obtained.
(d) Fully Paid; Non-Assessable. The Company covenants and
agrees that it will take all such action as may be necessary to ensure that all
shares of Common Stock delivered upon exercise of Rights shall, at the time of
delivery of the certificates for such shares (subject to payment of the Purchase
Price) be duly and validly authorized and issued and fully paid and
nonassessable.
(e) Transfer Taxes and Charges. The Company further covenants
and agrees that it will pay when due and payable any and all federal and state
transfer taxes and charges which may be payable in respect of the issuance or
delivery of the Rights Certificates and of any certificates for a number of
shares of Common Stock upon the exercise of Rights. The Company shall not,
however, be required to pay any transfer tax which may be payable in respect of
any transfer or delivery of Rights Certificates to a Person other than, or the
issuance or delivery of a number of shares of Common Stock in respect of a name
other than that of, the registered holder of the Rights Certificates evidencing
Rights surrendered for exercise or to issue or deliver any certificates for a
number of shares of Common Stock in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificate at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
10. COMMON STOCK RECORD DATE
Each Person in whose name any certificate for a number of
shares of Common Stock (or other securities, as the case may be) is issued upon
the exercise of Rights shall for all purposes be deemed to have become the
holder of record of such shares of Common Stock represented thereby on, and such
certificates shall be deemed to have become the record holder of such shares on,
and such certificate shall be dated, the date upon which the Rights Certificate
evidenced such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Common Stock
transfer books of the Company are closed, such Person shall be dated, the next
succeeding Business Day on which the Common Stock transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceeding of the Company except as provided herein.
11. ADJUSTMENT OF PURCHASE PRICE, NUMBER AND KIND OF SHARES OR
NUMBER OF RIGHTS
The Purchase Price, the number and kind of shares covered by
each Right and the Number of Rights outstanding are subject to adjustment from
time-to-time as provided in this section 11.
(a) Certain Events.
(i) Stock Dividend, Subdivision, Combination or
Reclassification. In the event the Company shall at any time after the
date of this Plan: (A) declare a dividend on the Common Stock payable
in shares of Common Stock, (B) subdivide the outstanding Common Stock,
(C) combine the outstanding Common Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in the
reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation), except as
otherwise provided in this section 11(a) and section 7(e) hereof, the
Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Common Stock
issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to
receive, upon payment of the Purchase Price then in effect, the
aggregate number and kind of shares of Common Stock which, if such
Right had been exercised immediately prior to such date and at a time
when the Common Stock transfer books of the Company were open, such
holder would have owned upon such exercise and be entitled to receive
by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment
under both this section 11(a)(i) and section 11(a)(ii) hereof, the
adjustment provided for in this section 11(a)(i) shall be in addition
to, and shall be made prior to, any adjustment required pursuant to
section 11(a)(ii) hereof.
(ii) Reduction in Purchase Price in the Event of Stock
Acquisition. In the event that any Person shall, at any time after the
Rights Declaration Date (as defined in the WHEREAS clause at the
beginning of this Plan), become an Acquiring Person, unless the event
causing such person to become an Acquiring Person is an acquisition of
shares of Common Stock pursuant to a tender offer or an exchange offer
for all outstanding shares of Common stock at a price and on terms
determined by at least a majority of the members of the Board of
Directors who are not officers of the Company (provided that at the
time of such determination of the Board of Directors there are then in
office not less than two Continuing Directors and such determination is
also made by a majority of the Continuing Directors then in office),
after receiving advice from one or more investment banking firms, to be
(a) at a price which is fair to stockholders (taking into account all
factors which such members of the Board deem relevant including,
without limitation, prices which could reasonably be achieved if the
Company or its assets were sold on an orderly basis designed to realize
maximum value) and (b) otherwise in the best interests of the Company
and its stockholders (a "Qualifying Tender Offer"), then, subject to
the last sentence of section 23(a) and except as otherwise provided in
this section 11, each holder of a Right (except as provided in section
7(e) hereof) shall thereafter have the right to receive, upon exercise
thereof, the number of shares of Common Stock as shall equal the result
obtained by (x) multiplying the then current Purchase Price by the
number of shares of Common Stock for which a Right was exercisable
immediately prior to the first occurrence of the Section 11(a)(ii)
Event and (y) dividing that product by fifty percent (50%) of the
current market price (as determined pursuant to section 11(d) hereof)
per share of the Common Stock on the date of the occurrence of such
Section 11(a)(ii) Event.
(b) Grant of Subscription Rights. In case the Company shall
fix a record date for the issuance of rights, options or warrants to all holders
of Common Stock entitling them to subscribe for or purchase (for a period
expiring within forty-five (45) calendar days after such record date) Common
Stock (or shares having the same rights, privileges and preference as the shares
of Common Stock ["equivalent common stock"]) or securities convertible into
Common Stock or equivalent common stock at a price per share of Common Stock or
per share of equivalent common stock (or having a conversion price per share, if
a security convertible into Common Stock or equivalent common stock) less than
the current stock market price as determined pursuant to section 11(d) hereof)
per share of Common Stock on such record date, the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
such record date, plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock and/or equivalent
common stock so to be offered (and/or the aggregate initial conversion price of
the convertible securities so to be offered) would purchase at such current
market price, and the denominator of which shall be the number of shares of
Common Stock outstanding on such record date, plus the number of additional
shares of Common Stock and/or equivalent common stock to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible). In case such subscription price may be paid
by delivery of consideration part or all of which may be in a form other than
cash, the value of such consideration shall be as determined in good faith by
the Board of Directors of the Company, whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of the Rights. Shares of Common Stock owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) Distribution of Property. In case the Company shall fix a
record date for a distribution to all holders of Common Stock (including any
such distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets (other that a dividend in
Common Stock, but including any dividend payable in stock other than Common
Stock) or subscription rights or warrants (excluding those referred to in
section 11(b) hereof), the Purchase Price to be in effect after such record date
shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
current market price (as determined pursuant to section 11(d) hereof) per share
of Common Stock on such record date, less the fair market value (as determined
in good faith by the Board of Directors of the Company, whose determination
shall be described in a statement filed with the Rights Agent) of the portion of
the cash, assets or evidences of indebtedness so to be distributed or of such
subscription rights or warrants applicable to a share of Common stock, and the
denominator of which shall be such current market price (as determined pursuant
to section 11(d) hereof) per share of Common Stock. Such adjustments shall be
made successively whenever such a record date is fixed, and in the event that
such distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
(d) Determination of Market Price. For the purpose of any
computation herein, the "current market price" per share of Common Stock on any
date shall be deemed to be the average of the daily closing prices per share of
such Common Stock for the thirty (30) consecutive Trading Days (as such term is
hereinafter defined) immediately prior to such date; provided, however, that in
the event that the current market price per share of the Common Stock is
determined during a period following the announcement by the issuer of such
Common Stock of: (A) a dividend or distribution of such Common Stock payable in
shares of such Common Stock or securities convertible into shares of such Common
Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and prior to the expiration of the
requisite thirty (30) Trading Day period after the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification, then, and in each such case, the "current market price"
shall be properly adjusted to take into account ex-dividend trading. The closing
price for each day shall be the last quoted price or, if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the Nasdaq National Market or such other system then in use, or, if
on any such date the shares of Common Stock are not quoted by Nasdaq, the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported by Nasdaq or, if the shares of Common Stock are not listed or admitted
to trading on Nasdaq, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the shares of Common Stock are listed or admitted
to trading or, if the shares of Common Stock are not listed or admitted to
trading on any national securities exchange, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Common Stock selected by the Board of Directors of the Company. If on any such
date no market maker is making a market in the Common Stock, the fair value of
such shares on such date as determined in good faith by the Board of Directors
of the Company shall be used. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading is open for the transaction of business or, if
the shares of Common Stock are not listed or admitted to trading on any national
securities exchange, a Business Day. If the Common Stock is not publicly held or
not so listed or traded, "current market price" per share shall mean the fair
value per share as determined in good faith by the Board of Directors of the
Company, whose determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes.
(e) De Minimus Adjustments. Anything herein to the contrary
notwithstanding, no adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least one percent
(1%) in the Purchase Price; provided, however, that any adjustments which by
reason of this section 11(e) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this section 11 shall be made to the nearest cent or to the nearest
one-thousandth of a share of Common Stock or other share as the case may be.
Notwithstanding the first sentence of this section 11(e), any adjustment
required by this section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) Adjustments Upon Section 11(a)(ii) or Section 13 Events.
If as a result of an adjustment made pursuant to section 11(a)(ii) or section
13(a) hereof, the holder of any Right thereafter exercised shall become entitled
to receive any shares or fraction of a share of capital stock other than Common
Stock, thereafter the number or fraction of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time-to-time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
sections 11(a), , , , , , , , and , and the provisions of sections , , , and
hereof with respect to the Common Stock shall apply on like terms and to any
such other shares.
(g) Evidence of Adjustments. All rights originally issued by
the Company subsequent to any adjustment made to the Purchase Price hereunder
shall evidence the right to purchase, at the adjusted Purchase Price, the number
of shares of Common Stock purchasable from time-to-time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Calculation of Adjusted Rights to Purchase Common Stock.
Unless the Company shall have exercised its election as provided in section
11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in section 11(b) and section 11(c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that fraction of a share (or
number of shares) of Common Stock (calculated to the nearest one-thousandth)
obtained by (i) multiplying (x) the number of shares covered by a Right
immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.
(i) Adjustment in Rights in Lieu of Shares. The Company may
elect on or after the date of any adjustment of the Purchase Price to adjust the
number of Rights, in lieu of any adjustment in the number of shares of Common
Stock purchasable upon the exercise of a Right. Each of the Rights outstanding
after the adjustment in the number of Rights shall be exercisable for the number
of shares of Common Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
one-thousandth) obtained by dividing the Purchase Price in effect immediately
prior to adjustment of the Purchase Price by the Purchase Price in effect
immediately after adjustment of the Purchase Price. The Company shall make a
public announcement of its election to adjust the number of Rights, indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment to be made. This record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if the Rights Certificate has been
issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this section 11(i), the Company shall, as
promptly as practicable, cause to be distributed to holders of record of Rights
Certificates on such record date Rights Certificates evidencing, subject to
section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such adjustment, or, at the option of the Company, shall cause to
be distributed to such holders of record in substitution and replacement for the
Rights Certificates held by such holders of record in substitution and
replacement for the Rights Certificate held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new Rights
Certificates evidencing all the Rights to which such holders shall be entitled
after such adjustment. Rights Certificates so to be distributed shall be issued,
executed and countersigned in the manner provided for herein (and may bear, at
the option of the Company, the adjusted Purchase Price) and shall be registered
in the names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) No Requirement to Amend Rights Certificates. Irrespective
of any adjustment or change in the Purchase Price or the fraction of a share (or
number of shares) of Common Stock issuable upon the exercise of the Rights, the
Rights Certificates theretofore and thereafter issued may continue to express
the Purchase Price per share and the number of shares which were expressed in
the initial Rights Certificates issued hereunder.
(k) Reduction Below Stated or Par Value. Before taking any
action that would cause an adjustment reducing the Purchase Price below the then
stated or par value, if any, of the number of shares of Common Stock issuable
upon exercise of the Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue such number of fully paid and nonassessable shares of
Common Stock at such adjusted Purchase Price.
(l) Deferral of Adjustment. In any case in which this section
11 shall require that an adjustment in the Purchase Price be made effective as
of a record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercise after
such record date the number of shares of Common Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of shares of Common Stock and other capital stock or securities of
the Company, if any, issuable upon such exercise on the basis of the Purchase
Price in effect prior to such adjustment; provided, however, that the Company
shall deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares (fractional or
otherwise) or securities upon the occurrence of the event requiring such
adjustment.
(m) Reductions in Purchase Price. Anything in this section 11
to the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this section 11, as and to the extent that in their good faith
judgement the Board of Directors of the Company shall determine to be advisable
in order that any (i) consolidation or subdivision of the Common Stock, (ii)
issuance wholly for cash of any shares of Common Stock at less than the current
market price, (iii) issuance wholly for cash of shares of Common Stock or
securities which by their terms are convertible into or exchangeable for shares
of Common Stock, (iv) stock dividends, or (v) issuance of rights, options or
warrants referred to in this section 11, hereafter made by the Company to
holders of its Common Stock shall not be taxable to such stockholders.
(n) Covenant Not to Consolidate, Merger or Transfer or Sell
Assets or Earning Power. The Company covenants and agrees that is shall not, at
any time after the Distribution Date, (i) consolidate with any other Person
(other than a Subsidiary of the Company in an transaction which complies with
section 11(o) hereof), (ii) merge with or into any other Person (other than a
Subsidiary of the Company in a transaction which complies with section 11(o)
hereof), or (iii) sell or transfer (or permit any Subsidiary to sell or
transfer), in one transaction, or a series of related transactions, assets or
earning power aggregating more than fifty percent (50%) of the assets or earning
power of the Company and its Subsidiaries (taken as a whole) to any other Person
or Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger or sale there are any
rights, warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates.
(o) Covenant Not to Diminish or Eliminate Rights. The Company
covenants and agrees that, after the Distribution Date, it will not, except as
permitted by section 23 or section 26 hereof, take (or permit any Subsidiary to
take) any action if at the time such action is taken it is reasonably
foreseeable that such action will diminish substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.
(p) Proportionate Adjustments. Anything in this Plan to the
contrary notwithstanding, in the event that the Company shall at any time after
the Rights Declaration Date and prior to the Distribution Date: (i) declare a
dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common stock, or (iii) combine
the outstanding shares of Common Stock into a small number of shares, the number
of Rights associated with each share of Common stock then outstanding, or issued
or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction, the numerator which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event, and the denominator of which shall be the
total number of share of Common Stock outstanding immediately following the
occurrence of such event.
(q) Substitution of Common Stock Equivalents. In lieu of
issuing shares of Common Stock in accordance with section 11(a)(ii) hereof, the
Board of Directors may, and, in the event that the number of shares of Common
Stock which are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights is not sufficient to permit the exercise in full of the Rights in
accordance with section 11(a)(ii) hereof, the Board of Directors shall, to the
extent permitted by applicable law and any material agreements then in effect to
which the Company is a party, (A) determine the value of the shares of Common
Stock (the "Adjustment Shares") issuable upon the exercise of a Right
immediately after the adjustments provided for in section 11(a)(ii) (the
"Current Value") and (B) with respect to each Right (other than Rights which
have become void pursuant to the provisions hereof), make adequate provision to
substitute for any or all such Adjustment Shares, upon payment of the applicable
Purchase, Price, (1) cash, (2) other equity securities of the Company
(including, without limitation, shares, or units of shares of preferred stock
which, by virtue of having dividend, voting and liquidation rights substantially
comparable to those of the Common Stock, are deemed in good faith by the Board
of Directors to have substantially the same value as shares of Common Stock
[such shares or units of shares of preferred stock are herein called "Common
Stock equivalents"]), (3) debt securities of the Company, (4) other assets, (5)
a reduction of the Purchases Price, or (6) any combination of the foregoing
having a value which, when added to the value of the shares of Common Stock
actually issued upon exercise of such Right, shall have an aggregate value equal
to the Current Value, where such aggregate value has been determined in good
faith by the Board of Directors based upon the advice of a nationally recognized
independent investment banking firm selected in good faith by the Board of
Directors; provided, however, that if the Company shall not have made adequate
provision to deliver value pursuant to clause (B) above within thirty (30) days
following the date (the "Section 11(a)(ii) Trigger Date") which is the later of
(a) the first occurrence of a Section 11(a)(ii) Event and (b) the date on which
the Company's right of redemption pursuant to section 23(a) expires, then the
Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, shares of Common
Stock (to the extent available) and then, if necessary, cash, which shares and
cash have an aggregate value equal to the excess of (x) the Current Value over
(y) the Purchase Price times the number of one and one-half shares of Common
Stock for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event. If, upon the occurrence of a Section
11(a)(ii) Event, the number of shares of Common Stock that are authorized by the
Company's Restated Certificate of Incorporation but not outstanding or reserved
for issuance for purposes other than upon exercise of the Rights are not
sufficient to permit exercise in full of the Rights in accordance with section
11(a)(ii) hereof, and if the Board of Directors shall determine in good faith
that it is likely that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights, then, if the Board
of Directors so elects, the thirty (30) day period set forth above may be
extended to the extent necessary, but not more than ninety (90) days after the
Section 11(a)(ii) Trigger Date, in order that the Company may seek stockholder
approval for the authorization of such additional shares (such thirty (30) day
period, as it may be extended, is herein called the "Substitution Period"). To
the extent that the Company determines that some action must be taken pursuant
to the first or second sentence of this section 11(q), the Company (1) shall
provide, subject to section 11(a)(ii) hereof and the last sentence of this
section 11(q), that such action shall apply uniformly to all outstanding Rights
and (2) may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such first sentence and to determine the value thereof. In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For purposes
of this section 11(q), the value of the Common Stock shall be the Current market
price per share of the Common Stock on the Section 11(a)(ii) Trigger Date and
the per share or per unit value of any "Common Stock equivalent" shall be deemed
to equal the current market price per share of the Common Stock on such date.
The Board of Directors may, but shall not be required to, establish procedures
to allocate the right to receive Common Stock upon the exercise of the Rights
among holders of Rights pursuant to this section 11(q).
12. CERTIFICATE OF ADJUSTED PURCHASE PRICE OR NUMBER OF SHARES
Whenever an adjustment is made as provided in section 11 and
section 13 hereof, the Company shall (a) promptly prepare a certificate setting
forth such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent, and with the transfer agent
for the Common Stock, a copy of such certificate, and (c) mail a brief summary
thereof to each holder of a Rights Certificate (or, if prior to the Distribution
Date, to each holder of a certificate representing shares of Common Stock) in
accordance with section 25 hereof. The Rights Agent shall be fully protected in
relying and on any such certificate on any adjustment therein contained.
13. CONSOLIDATION, MERGER OR SALE OR TRANSFER OF ASSETS OR EARNING
POWER
(a) Reduction of Purchase Price in the Event of Consolidation,
Merger, or Sale or Transfer of Assets or Earning Power. In the event that,
following the Stock Acquisition Date, directly or indirectly, (x) the Company
shall consolidate with, or merge with and into, any other Person (other than a
Subsidiary of the Company in a transaction which complies with section 11(o)
hereof), and the Company shall not be the continuing or surviving corporation of
such consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction which complies with section 11(o) hereof) shall
consolidate with, or merge with or into, the Company, and the Company shall be
the continuing or surviving corporation of such consolidation or merger and, in
connection with such consolidation or merger, all or part of the outstanding
shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer) in one transaction or a series of related transactions,
assets or earning power aggregating more than fifty percent (50%) of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company in
one or more transactions each of which complies with section 11(o) hereof),
then, and in each such case, proper provisions shall be made so that: (i) each
holder of a Right, except as provided in section 7(e) hereof, shall thereafter
have the right to receive, upon the exercise thereof at the then current
Purchase Price (disregarding any adjustment of the Purchase Price pursuant to
section 11(a)(ii) hereof) in accordance with the terms of this Plan, such number
of validly authorized and issued, fully paid, nonassessable and freely tradeable
shares of Common Stock of the Principal Party (as such term is hereinafter
defined), not subject to any liens, encumbrances, rights of first refusal or
other adverse claims, as shall be equal to the result obtained by (1)
multiplying the then current Purchase Price by the number of shares of Common
Stock for which a Right is exercisable immediately prior to the first occurrence
of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred prior to
the first occurrence of a Section 13 Event, multiplying the number of shares for
which a right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to
such first occurrence), and dividing that product (which, following the first
occurrence of a Section 13 Event, shall be referred to as the "Purchase Price"
for each Right and for all purposes of this Plan) by (2) fifty percent (50%) of
the current market price (determined pursuant to clause (i) of section 11(d)
hereof) per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Plan; (iii) the
term "Company" shall thereafter be deemed to refer to such Principal Party, it
being specifically intended that the provisions of section 11 hereof shall apply
only to such Principal Party following the first occurrence of a Section 13
Event; (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common
Stock) in connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of section 11(a)(ii) hereof shall be of no effect following the first occurrence
of any Section 13 Event.
(b) Definition of Principal Party. The term "Principal Party"
shall mean: (i) in the case of any transaction described in clause (x) or (y) of
the first sentence of section 13(a), the Person that is the issuer of any
securities into which shares of Common Stock of the Company are converted in
such merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and (ii) in the case of
any transaction described in clause (z) of the first sentence of section 13(a),
the Person that is the party receiving the greatest portion of the assets or
earning power transferred pursuant to such transaction or transactions;
provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect Subsidiary of another Person the Common Stock of which is
and has been so registered "Principal Party" shall refer to such other Person;
and (2) in case such Person is a Subsidiary, directly or indirectly, o more than
one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.
(c) Covenant of Principal Party to Provide Supplemental
Agreement. The Company shall not consummate any such consolidation, merger, sale
or transfer unless the Principal Party shall have s sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
section 13 and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in section 13(a) and section 13(b) hereof and
further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in section 13(a), the
Principal Party will:
(i) prepare and file a registration statement under
the Act, with respect to the Rights and the securities purchasable upon
exercise of the Rights on an appropriate form, and will use its best
efforts to cause such registration statement to (A) become effective as
soon as practicable after such filing and (B) remain effective (with a
prospectus at all times meeting the requirements of the Act) until the
Expiration Date; and
(ii) will deliver to holders of the Rights historical
financial statements for the Principal Party and each of its Affiliates
which comply in all respects with the requirements for registration on
Form 10 under the Exchange Act.
The provisions of this section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in section 13(a).
(d) Qualifying Tender Offer. Notwithstanding anything in this
Plan to the contrary, section 13 shall not be applicable to a transaction
described in clauses (x) and (y) of section 13(a) if (i) such transaction is
consummated with a Person or Persons who acquired shares of Common Stock
pursuant to a tender offer or exchange offer for all outstanding shares of
Common Stock which complies with the provisions of section 11(a)(ii) hereof (or
a wholly owned Subsidiary of any such Person or Persons); (ii) the price per
share of Common Stock offered in such transaction is not less than the price per
share of Common Stock paid to all holders of shares of Common Stock whose shares
were purchased pursuant to such tender offer or exchange offer; and (iii) the
form of consideration being offered to the remaining holders of shares of Common
Stock pursuant to such transaction is the same as the form of consideration paid
pursuant to such tender offer or exchange offer. Upon consummation of any such
transaction contemplated by this section 13(d), all Rights hereunder shall
expire.
14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES
(a) Cash in Lieu of Fractional Rights. The Company shall not
be required to issue fractions of Rights, except prior to the Distribution Date
as provided in section 11(p) hereof, or to distribute Rights Certificates which
evidence fractional rights. In lieu of such fractional Rights, there shall be
paid to the registered holders of the Rights Certificates with regard to which
such fractional Rights would be otherwise be issuable, an amount in cash equal
to the same fraction of the current market value of a whole Right. For purposes
of this section 14(a), the current market value of a whole Right shall be the
closing price of the Rights for the Trading Day immediately prior to the date on
which such fractional Rights would have been otherwise issuable. The closing
price of the Rights for any day shall be the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by Nasdaq or such other over-the-counter system then in use,
or on any such date the Rights are not quoted by any such organization, the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on such principal national stock
exchange on which the Rights are listed or admitted to trading, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on such principal national securities exchange, or if the
Rights are not listed or admitted to trading on any national securities
exchange, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
(b) Cash in Lieu of Fractional Shares. The Company shall not
be required to issue fractions of shares of Common Stock upon exercise of the
Rights or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of fractional shares of Common Stock the Company may pay to the
registered holders of Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of a share of Common Stock. For purposes of this section 14(b), the
current market value of a share of Common Stock shall be the closing price of a
share of Common Stock (as determined pursuant to section 11(d) hereof) for the
Trading Day immediately prior to the date of such exercise.
(c) Waiver of Right Holder. The holder of a Right by the
acceptance of the Rights expressly waives his right to receive any fractional
Rights or any fractional shares of Common Stock upon exercise of a Right, except
as permitted by this section 14.
15. RIGHTS OF ACTION
All rights of action in respect of this Plan, excepting the
rights of action given to the Rights Agent under section 18 hereof, are vested
in the respective registered holders of the Rights Certificates (and, prior to
the Distribution Date, the registered holders of the Common Stock); and any
registered holder of any Rights Certificate (or, prior to the Distribution Date,
of the Common Stock), without the consent of the Rights Agent or of the holder
of any other Rights Certificate (or, prior to the Distribution Date, of the
Common Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company to
enforce, or otherwise act in respect of, his right to exercise the Rights
evidenced by such Rights Certificate and in this Plan. Without limiting the
foregoing or any remedies available to the holders of the Rights, the holders of
the Rights would not have an adequate remedy at law for any breach of this Plan
and shall be entitled to specific performance of the obligations hereunder and
injunctive relief against actual or threatened violations of the obligations
hereunder of any Person subject to this Plan.
16. AGREEMENT OF RIGHTS HOLDERS
Every holder of a Right by accepting of the same consents and
agrees with the Company and the Rights Agent and with every other holder of a
Right that:
(a) Prior to the Distribution Date, the Rights will
be transferable only in connection with the transfer of Common Stock;
(b) After the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office or offices of the Rights Agent designated for such
purposes, duly endorsed or accompanied by a proper instrument of transfer and
with the appropriate forms and certificates fully executed;
(c) Subject to section 6(a) and section 7(b) hereof, the
Company and the Rights Agent may deem and treat the person in whose name a
Rights Certificate (or, prior to the Distribution Date, the associated Common
Stock certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) Notwithstanding anything in this Plan to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Plan by reason of any preliminary or permanent injunction
or other order, decree or ruling issued by a court of competent jurisdiction or
by a governmental, regulatory or administrative agency or commission, or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining performance of such
obligations; provided, however, the Company must use its best efforts to have
any such order, decree or ruling lifted or otherwise overturned as soon as
possible.
17. HOLDER OF RIGHTS CERTIFICATE NOT DEEMED A STOCKHOLDER
No holder, as such, of any Rights Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose the holder of
the fraction of a share (or number of shares) of Common Stock or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in section 24 hereof), or to receive dividends
or subscription rights, or otherwise, until the Right or Rights evidenced by
such Rights Certificate shall have been exercised in accordance with the
provisions hereof.
18. CONCERNING THE RIGHTS AGENT
(a) Compensation; Indemnity; Limitation on Liability. The
Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time-to-time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this Plan in
the exercise and performance of its duties hereunder. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, or expense, incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for anything done or omitted by the
Rights Agent in connection with the acceptance and administration of this Plan,
including the costs and expenses of defending against any claim of liability in
the premises. Anything in this Plan to the contrary notwithstanding, in no event
shall the Rights Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including, but not limited to, lost profits) even
if the Rights Agent has been advised of the likelihood of such loss or damage
and regardless of the form of action.
(b) Reliance. The Rights Agent shall be protected and shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in connection with its administration of this Plan in reliance upon any
Rights Certificate or certificate for Common Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement, or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons or otherwise upon the advice of counsel as set forth in
section 20(a) hereof.
19. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT
(a) Merger or Consolidation. Any corporation into which the
rights Agent or any successor Rights Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Rights Agents or any successor Rights Agent shall be a party, or any
corporation succeeding to the corporate trust business of the Rights Agent or
any successor Rights Agent, shall be the successor to the Rights Agent under
this Plan without the execution or filing of any paper or any further action on
the part of any of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of section 21 hereof. In case at the time such successor Rights Agent
shall succeed to the agency created by this Plan, any of the Rights Agent may
adopt the countersignature of a predecessor Rights Agent and deliver such Rights
Certificate so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or in
the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
this Plan.
(b) Use of Prior Name. In case at any time the name of the
Rights Agent shall be changed and at such time any of the Rights Certificates
shall have been countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights Certificates so
countersigned; and in case at that time any of the Rights Certificates shall not
have been countersigned, the Rights Agent may countersign such Rights
Certificates either in its prior name or in its changed name; and in all such
cases such Rights Certificate shall have the full force provided in the Rights
Certificates and in this Plan.
20. DUTIES OF RIGHTS AGENT
The Rights Agent undertakes the duties and obligations imposed
by this Plan upon the following terms and conditions, by all of which the
Company and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
(a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action
taken or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Plan
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the Vice Chairman of the Board, if any, the President,
any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Plan in reliance
upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its
own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of
any of the statements of fact or recitals contained in this Plan or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Plan or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Plan or in any Rights Certificate; nor
shall it be responsible for any adjustment required under the provisions of
section 11 or section 13 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock to
be issued pursuant to this Plan or any Rights Certificate or as to whether any
shares of Common Stock will, when so issued, be validly authorized and issued,
fully paid and nonassessable.
(f) The Company agrees that it will perform, execute
acknowledge and deliver or cause to be performed, executed, acknowledged and
delivered all such further and other acts, instruments and assurances as may
reasonably be required by the Rights Agent for the carrying out or performing by
the Rights Agent of the provisions of this Plan.
(g) The Rights Agent is hereby authorized and directed to
accept instructions will respect to the performance of its duties hereunder from
the Chairman of the Board, the Vice Chairman of the Board, if any, the
President, any Vice President, the Secretary, any Assistant Secretary, the
Treasurer or any Assistant Treasurer of the Company, and to apply to such
officers for advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered to be taken by it in good faith
in accordance with instructions of any such officer or for any delay in waiting
for this instructions.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Plan. Nothing herein shall preclude the Rights Agent from acting in
any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agent, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorney or agents or for any loss to the Company resulting from any such
act, default, neglect or misconduct; provided, however, reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Plan shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if there shall be reasonable grounds for believing that repayment of such funds
or adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Rights Certificate surrendered to
the Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause (1) and/or (2)
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
21. CHANGE OF RIGHTS AGENT
The Rights Agent or any successor rights Agent may resign and
be discharged from its duties under this Plan upon sixty (60) days' notice in
writing mailed to the Company, and to each transfer agent of the Common Stock,
by registered or certified mail, and to the holders of the Rights Certificates
by first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon sixty (60) days' notice in writing, mailed to the Rights Agent
or successor Rights Agent, as the case may be, and to the transfer agent of the
Common Stock, by registered or certified mail, and to the holders of the Rights
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Company shall appoint a
successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of sixty (60) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Rights Certificate (who shall, with such notice, submit his Rights Certificate
for inspection by the Company), then any registered holder of any Rights
Certificates may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of any state of the United
States, in good standing, which is authorized under such laws to exercise
corporate trust powers and is subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least one hundred million dollars
($100,000,000). After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
22. ISSUANCE OF NEW RIGHTS CERTIFICATES
Notwithstanding any of the provisions of this Plan or of the
Rights to the contrary, the Company may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the Purchase Price and the
number or kind or class of shares or other securities or property purchasable
under the Rights Certificates made in accordance with the provisions of this
Plan. In addition, in connection with the issuance or sale of shares of Common
Stock following the Distribution Date and prior to the redemption or expiration
of the Rights, the Company (a) shall, with respect to shares of Common Stock so
issued or sold pursuant to the exercise of stock options or under any employee
plan or arrangement, or upon the exercise, conversation or exchange of
securities hereinafter issued by the Company, and (b) may, in any other case, if
deemed necessary or appropriate by the Board of Directors of the Company, issue
Rights Certificates representing the appropriate number of Rights in connection
with such issuance or sale; provided, however, that (i) no such Rights
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
23. REDEMPTION AND TERMINATION
(a) Redemption of Rights. The Board of Directors of the
Company may, at its option, at any time prior to the earlier of (i) the close of
business on the tenth (10th) day following the Stock Acquisition Date (or, if
the Stock Acquisition Date shall have occurred prior to the Record Date, the
close of business on the tenth (10th) day following the Record Date) subject to
extension by the Company pursuant to section 26 hereof, or (ii) the Final
Expiration Date, redeem all but not less than all the then outstanding Rights at
a redemption price of $.001 per Right, as such amount may be appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the "Redemption Price") and the Company may, at its option, pay
the Redemption Price either in shares of Common Stock (based on the "current
market price", as defined in section 11(d) hereof, of the shares of Common Stock
at the time of redemption) or cash; provided, however, if the Board of Directors
of the Company authorizes redemption of the Rights in either of the
circumstances set forth in clauses (1) and (2) below, then there must be
Continuing Directors then in office and such authorization shall require the
concurrence of a majority of such Continuing Directors: (1) such authorization
occurs on or after the time a Person becomes an Acquiring Person, or (2) such
authorization occurs on or after the date of a change (resulting from a proxy or
consent solicitation) in a majority of the directors in office at the
commencement of such solicitation of any Person who is a participant in such
solicitation has stated (or, if upon the commencement of such solicitation, a
majority of the Board of Directors of the Company has determined in good faith)
that such person (or any of its Affiliates or Associates) intends to take, or
may consider taking, any action which would result in such Person becoming an
Acquiring Person or which would cause the occurrence of a Triggering Event
unless, concurrent with such solicitation, such Person (or one or more of its
Affiliates or Associates) is making a cash tender offer pursuant to a Schedule
14D-1 (or any successor form) filed with the Securities and Exchange Commission
for all outstanding shares of Common Stock not beneficially owned by such Person
(or by its Affiliates or Associates); provided further, however, that if,
following the occurrence of a Stock Acquisition Date and following the
expiration of the right or redemption hereunder but prior to any Triggering
Event, (1) a Person who is an Acquiring Person shall have transferred or
otherwise disposed of a number of shares of Common Stock in one transaction or a
series of transactions, not directly or indirectly involving the Company or any
of its Subsidiaries, which did not result in the occurrence of a Triggering
Event such that such Person is thereafter a Beneficial Owner of ten percent
(10%) or less of the outstanding shares of Common Stock, and (2) there are no
other Persons, immediately following the occurrence of the event described in
clause (1), who are Acquiring Persons, then the right of redemption shall be
reinstated and thereafter be subject to the provisions of this section 23.
Notwithstanding anything contained in this Plan to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired.
(b) Effectiveness; Notice. Immediately upon the action of the
Board of Directors of the Company ordering the redemption of the Rights,
evidence of which shall have been filed with the Rights Agent and without any
further action and without any notice, the right to exercise the Rights will
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price for each Right so held. Promptly after the action
of the Board of Directors ordering the redemption of the Rights, the Company
shall give notice of such redemption to the Rights Agent and the holders of the
then outstanding Rights by mailing such notice to all such holders at each
holder's last address as it appears upon the registry books of the Right Agent
or, prior to the Distribution Date, on the registry books of the Transfer Agent
for the Common Stock; provided, however, that the failure to give, or any defect
in, any such notice shall not affect the validity of such redemption. Any notice
which is mailed in the manner herein provided shall be deemed given, whether or
not the holder receives the notice. Each such notice of redemption will state
the method by which the payment of the Redemption Price will be made.
24. NOTICE OF CERTAIN EVENTS
(a) General. In case the Company shall propose, at any time
after the Distribution Date, (i) to pay any dividend payable in stock of any
class to the holders of Common Stock or to make any other distribution to the
holders of Common Stock (other than a regular quarterly cash dividend out of
earnings or retained earnings of the Company), or (ii) to offer to the holders
of Common Stock rights or warrants to subscribe for or to purchase any
additional shares of Common Stock or shares of stock of any class or any other
securities, rights or options, or (iii) to effect any reclassification of its
Common Stock (other than a reclassification involving only the subdivision of
outstanding shares of Common Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of more than fifty percent (50%) of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company and/or any of its Subsidiaries in one or more transactions each
of which complies with section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with section 25 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Common
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Common Stock
for purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Common Stock
whichever shall be the earlier.
(b) Section 11(a)(ii) Events. In case any other events set
forth in section 11(a)(ii) hereof shall occur, then, in any such case, (i) the
Company shall as soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and in accordance with section 25 hereof, a
notice of the occurrence of such event, which shall specify the event and the
consequences of the event to holders of Rights under section 11(a)(ii) hereof,
and (ii) all references in the preceding section to Common Stock shall be deemed
thereafter to refer, if appropriate, to other securities.
25. MANNER OF NOTICES
Notices or demands authorized by this Plan to be given or made
by the Rights Agent or by the holder of any Rights Certificate to or on the
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid addressed (until another address is filed in writing with the Rights
Agent) as follows:
IFS International, Inc.
Rensselaer Technology Park
300 Jordan Road
Troy, New York 12180
Attention: Chief Executive Officer
Copy to:
Pollet & Woodbury, a Law Corporation
10900 Wilshire Boulevard, Suite 500
Los Angeles, California 90024
Attention: Andrew F. Pollet, Esq.
Subject to the provisions of section 21, any notice or demand
authorized by this Plan to be given or made by the Company or by the holder of
any Rights Certificate to or on the Rights Agent shall be sufficiently given or
made if sent by first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:
American Stock Transfer & Trust Company, Inc.
New York, New York
Attention: Vice President, Stock Transfer
Notices or demands authorized by this Plan to be given or made
by the Company or the Rights Agent to the holder of any Rights Certificate (or,
if prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage pre-paid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
26. SUPPLEMENTS AND AMENDMENTS
(a) Before Rights Redeemable. For as long as the Rights are
then redeemable and except as provided in section26(c), the Company may in its
sole and absolute discretion, and the Rights Agent shall if the Company so
directs, supplement or amend any provision of this Plan without the approval of
any holders of the Rights or the Common Stock (notwithstanding their approval or
ratification of this Plan) including, without limitation: (i) lowering the
thresholds set forth in section1(a) and section 3(a) to not less than the
greater of (x) the sum of .001% and the largest percentage of the outstanding
shares of Common Stock then known by the Company to be beneficially owned by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any Subsidiary of the Company, or any Person or
entity organized, appointed or established by the Company for or pursuant to the
terms of any such plan) and (y) ten percent (10%); (ii) fixing a Final
Expiration Date later than the date set forth in section 7(a) hereof (but not to
exceed three {3} years in addition to the date initially specified in said
Section); or (iii) increasing the Purchase Price (but not by an amount exceeding
fifty percent (50%) or the original Purchase Price), as it may be adjusted
pursuant to the terms of this Plan.
(b) After Rights Redeemable. At any time when the Rights are
not then redeemable and except as provided in section 26(c), the Company may,
and the Rights Agent shall if the Company so directs, supplement or amend this
Plan without the approval of any holders of Rights Certificates in order (i) to
cure any ambiguity, (ii) to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, (iii)
to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable, provided, however, that: (1) no such supplement or
amendment pursuant to clause (iii) above shall (A) lengthen any time period
relating to when Rights may be redeemed at such time as the Rights are not then
redeemable, or (B) lengthen any other time period unless such lengthening is for
the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights; and (2) no such supplement or amendment
pursuant to clause (iv) above shall materially adversely affect the interest of
the holders of Rights Certificates as such.
(c) After Person Becomes Acquiring Person. Notwithstanding
anything contained in this Plan to the contrary, supplements or amendments may
be made after the time that any Person becomes an Acquiring Person (other than
pursuant to a Qualifying Tender Offer) only if at the time of the action of the
Board of Directors approving such supplement or amendment there are then in
office not less than two Continuing Directors and such supplement or amendment
is approved by a majority of the Continuing Directors then in office.
(d) Supplement or Amendment by Rights Agent. Upon the delivery
of a certificate from an appropriate officer of the Company which states that
the proposed supplement or amendment is in compliance with the terms of this
section 26, the Rights Agent shall execute such supplement or amendment.
27. SUCCESSORS
All the covenants and provisions of this Plan by or for the
benefit of the Company or the Rights Agent shall bind and inure to the benefit
of their respective successors and assigns hereunder.
28. DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS
For all purposes of this Plan, any calculation of the number
of shares of common Stock outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules
and Regulations under the Exchange Act. The Board of Directors of the Company
(with, where specifically provided for herein, the concurrence of the Continuing
Directors) shall have the exclusive power and authority to administer this Plan
and to exercise all rights and powers specifically granted to the Board (with,
where specifically provided for herein, the concurrence of the Continuing
Directors) or to the Company, or as may be necessary or advisable in the
administration of this Plan, including, without limitation, the right and power
to (i) interpret the provisions of this Plan and (ii) make all determinations
deemed necessary or advisable for the administration of this Plan. All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board (with, where specifically provided for herein, the
concurrence of the Continuing Directors) in good faith, shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject the Board or the Continuing
Directors to any liability to the holders of the Rights.
29. BENEFITS OF PLAN
Nothing in this Plan shall be construed to give to any Person
other than the Company, the Rights Agent and the registered holders of the
Rights Certificates (and, prior to the Distribution Date, registered holders of
the Common Stock) any legal or equitable right, remedy or claim under this Plan;
but this Plan shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the registered holders of the Rights Certificates (and, prior
to the Distribution Date, registered holders of the Common Stock).
30. SEVERABILITY
If any term, provision, covenant or restriction of this Plan
is held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Plan shall remain in full force and effect and shall in no
way be affected, impaired or invalidated; provided, however, that
notwithstanding anything in this Plan to the contrary, if any such term,
provision, covenant or restriction is held by such court or authority to be
invalid, void or unenforceable and the Board of Directors of the Company
determines in its good faith judgment that severing the invalid language form
this Plan would adversely affect the purpose or effect of this Plan, the right
of redemption set forth in section 23 hereof shall be reinstated and shall not
expire unit the close of business on the tenth (10th) day following the date of
such determination by the Board of Directors. Without limiting the foregoing, if
any provision requiring that a determination be made by less than the entire
Board (or at a time or with the concurrence of a group of directors consisting
of less than the entire Board) is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, such determination shall
then be made by the Board in accordance with applicable law and the Company's
Certificate of Incorporation and By-laws.
31. GOVERNING LAW
This Plan, each Right and each Rights Certificate issued
hereunder shall be deemed to be a contract made under the laws of the State of
Delaware and for all purposes shall be governed by and construed in accordance
with the laws of such State applicable to contracts made and to be performed
entirely within such State, except that the rights and obligations of the Rights
Agent shall be governed by the laws of the State of New York.
32. COUNTERPARTS
This Plan may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
33. DESCRIPTIVE HEADINGS
Descriptive headings of the several Sections of this Plan are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Plan to be duly
executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: IFS INTERNATIONAL, INC.
By: By:
Name: Name:
Title: Secretary Title: President
and
Chairman
of the
Board
Attest: [[STOCK TRANSFER
AGENT NAME]]
By: By:
Name: Name:
Title: Title:
<PAGE>
Exhibit A
[Form of Rights Certificate]
Certificate No. R - ____________________________________________ (_____________)
Rights
NOT EXERCISABLE AFTER MAY ____, 200___ OR EARLIER IF REDEEMED
BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS SET
FORTH IN THE STOCKHOLDERS' RIGHTS PLAN. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON (AS SUCH TERM IS DEFINED IN THE STOCKHOLDERS' RIGHTS
PLAN) AND ANY SUBSEQUENT HOLDER OF THE RIGHTS MAY BECOME NULL
AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE
ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
STOCKHOLDERS' RIGHTS PLAN). ACCORDINGLY, THIS RIGHTS
CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL
AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF
SUCH PLAN.]1
RIGHTS CERTIFICATE
IFS INTERNATIONAL, INC.
This certifies that _________________________________________, or
registered assigns, is the registered owner of the number of Rights set forth
above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Stockholders' Rights Plan, dated as of May 12,
1998 (the "Rights Plan"), between IFS International, Inc., a Delaware
corporation (the "Company"), and American Stock Transfer & Trust Company, Inc, a
New York corporation (the "Rights Agent"), to purchase from the Company at any
time prior to 5:00 p.m. (New York time) on February __, 2001 at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one (1) fully paid, non-assessable share of common stock, par
value $0.001 (the "Common Stock"), of the Company, at a purchase price of Fifty
dollars ($50.00) per share (the "Purchase Price"), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase and
related Certificate duly executed. The Purchase Price shall be paid in cash. The
number of Rights evidenced by this Rights Certificate (and the number of shares
which may be purchased upon exercise thereof) set forth above, and the Purchase
Price per share set forth above, and the number and Purchase Price as of
____________, 199_, based on the Common Stock as constituted at such date.
Upon the occurrence of a Section 11(a)(ii) Event (as such term is
defined in the Rights Plan), if the Rights evidenced by this Rights Certificate
are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate
of any such Acquiring Person (as such terms are defined in the Rights Plan),
(ii) a transferee of any such Acquiring Person, Associate or Affiliate, or (iii)
under certain circumstances specified in the Rights Plan, a transferee of person
who, after such transfer, became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.
As provided in the Rights Plan, the Purchase Price and the number and
kind of shares of Common Stock or other capital stock or other securities, which
may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events, including Triggering Events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Plan, which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which Rights Plan
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the holders of the Rights Certificates, which limitations of rights
include the temporary suspension of the exercisability of such Rights under the
specific circumstances set forth in the Rights Plan. Copies of the Rights Plan
are on file at the above-mentioned office of the Rights Agent and are also
available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the principal office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of shares of Common Stock as the Rights
evidenced by the Rights Certificate or Rights Certificates surrendered shall
have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Plan the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $.001 per Right at any time prior to the earlier of the close of
business on (i) the tenth (10th) day following the Stock Acquisition Date (as
such time period may be extended pursuant to the Rights Plan) and (ii) the Final
Expiration Date. Under certain circumstances set forth in the Rights Plan, the
decision to redeem shall require the concurrence of a majority of the Continuing
Directors. After the expiration of the redemption period, the company's right of
redemption may be reinstated if an Acquiring Person reduces his beneficial
ownership to ten percent (10%) or less of the outstanding shares of Common Stock
in a transaction or series of transactions not involving the Company.
No fractional shares of Common Stock will be issued upon the exercise
of any Right or Rights evidenced hereby, but in lieu thereof a cash payment will
be made, as provided in the Rights Plan.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Common
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights Plan
or herein be construed to confer upon the holder hereof, as such, any of the
rights of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Plan), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Plan.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal.
IFS INTERNATIONAL, INC.
Dated: By:
Title:
Attest:
Dated: By:
Secretary
AMERICAN STOCK TRANSFER & TRUST COMPANY, INC.
Dated: By:
Title:
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if
such holder desires to transfer the Rights
Certificate.)
FOR VALUE RECEIVED, _________________________________________ hereby
sells, assigns and transfers unto (print name and address of transferee)
_________________________________________ this Rights Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint _________________________________________ Attorney, to transfer the
within Rights Certificate on the books of the within-named Company, with full
power of substitution.
Dated: __________________, 19_____
--------------------------
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) This Rights Certificate is is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Plan); and
(2) After due inquiry and to the best knowledge of the undersigned, it
did did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.
Dated: _____________________, 19___
Signature
Signature Guaranteed:
Notice
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented by the Rights
Certificate.)
To: IFS International, Inc.
The undersigned hereby irrevocably elects to exercise
_______________________ ________________________________________
(________________) Rights represented by this Rights Certificate to purchase the
shares of Common Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other person which may be issuable upon the
exercise of the Rights) and requests that certificates for such shares be issued
in the name of and delivered to: (Please insert name, address, and social
security or other identifying number)
- --------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to: (Please insert name, address, and
social security or other identifying number)
- --------------------------------------------------------------------------------
Dated: _____________________, 19___
Signature
Signature Guaranteed:
Certificate
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) The Rights evidenced by this Rights Certificate are are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
pursuant to the Rights Plan); and
(2) After due inquiry and to the best knowledge of the undersigned, it
did did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.
Dated: _____________________, 19___
Signature
Signature Guaranteed:
Notice
The signature to the foregoing Election to Purchase and Certificate
must correspond to the name as written upon the fact of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.
<PAGE>
Exhibit B
SUMMARY OF RIGHTS TO PURCHASE COMMON STOCK
On May 12, 1998, the Board of Directors of IFS International, Inc. (the
"Company") unanimously adopted a resolution approving the immediate
effectiveness of a Stockholders' Rights Plan (the "Rights Plan"), subject to
subsequent approval of the Rights Plan by the stockholders of the Company at an
annual or special meeting of stockholders of the Company. On _______________,
1999 the stockholders of the Company approved the adoption of the Plan.
Pursuant to the terms of the Rights Plan, the Company declared a
dividend distribution of one Right for each outstanding share of Common Stock to
stockholders of the Company of record (the "Record Date") at the close of
business on the fifteenth business day following approval of the Rights Plan by
the stockholders of the Company. Each Right entitles the registered holder to
purchase from the Company one share of Common Stock at a price of $ 50.00 per
share (the "Purchase Price"), subject to adjustment. The Purchase Price shall be
paid in cash. The description and the terms of the Rights are set forth in the
Rights Plan.
Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. The Rights will separate from the Common Stock and a
Distribution Date will occur upon the earlier of (i) 10 days following a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of Common Stock (the "Stock
Acquisition Date"), or (ii) 10 business days following the commencement of a
tender offer or exchange offer that would result in a person or group
beneficially owning 15% or more of such outstanding shares of Common Stock.
Until the Distribution Date, (i) the Rights will be evidenced by Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after the Record Date,
will contain a notation incorporating the Rights Plan by reference and (iii) the
surrender for transfer of any outstanding Common Stock certificates also will
constitute the transfer of the Rights associated with the Common Stock
represented by such certificates.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on the second anniversary of the Record Date,
unless earlier redeemed by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.
Upon any Person becoming the beneficial owner of 15% or more of the
then outstanding shares of Common Stock (except pursuant to an offer for all
outstanding shares of Common Stock that is determined by the Board of Directors
to be fair to and otherwise in the best interests of the Company and its
stockholders [a "Qualifying Tender Offer"]), each holder of a Right thereafter
will have the right to receive, upon exercise thereof, the number of shares of
Common Stock as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the number of shares of Common Stock for which such
Right was exercisable immediately prior to the occurrence of such event and (y)
dividing that product by 50% of the market price per share of Common Stock.
Notwithstanding any of the foregoing, following the occurrence of such event,
all rights that are, or (under certain circumstances specified in the Rights
Plan) were beneficially owned by any Acquiring Person, will be null and void.
However, Rights are not exercisable following the occurrence of either of the
events set forth above until such time as the Rights are no longer redeemable by
the Company as set forth below.
For example, assume that a stockholder holds Rights to purchase 100
shares of Common Stock at the $50 Purchase Price, and further assume that the
Common Stock had a per share trading price of $20 at the time of an event set
forth in the preceding section. As a result, the holder would have the right to
purchase 500 shares of Common Stock for the aggregate purchase price of $5,000 ,
or $10 per share. The 500 share figure is determined by (x) multiplying the $50
Purchase Price by 100 (representing the number of shares of Common Stock the
holder was entitled to purchase by virtue of the Rights), and (y) dividing that
product by $10 (or 50% of the $20 market price of the Common Stock).
In the event that, at any time following the Stock Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation or (ii) 50% or
more of the Company's assets or earning power is sold or transferred, each
holder of a Right (except Rights which previously have been voided as set forth
above) thereafter shall have the right, upon payment of the Purchase Price
(without giving effect to the adjustment described in the immediately preceding
section), to buy such number of shares of common stock of the acquiring company
as shall equal the result obtained by (x) multiplying the then current Purchase
Price by the number of shares of Common Stock for which such Rights were
exercisable immediately prior to the occurrence of such event and (y) dividing
that product by 50% of the market price per share of the common stock of the
acquiring company. The event set forth in this section and in the preceding
section are referred to as the "Triggering Events."
The Purchase Price payable, and the number of shares of the Common
Stock issuable, upon exercise of the Rights are subject to adjustment from time
to time prevent to dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Common Stock, (ii) if
holders of the Common Stock are granted certain rights or warrants to subscribe
for the Common Stock or convertible securities at less than the current market
price of the Common Stock, or (iii) upon the distribution to holders of the
Common Stock of evidences of indebtedness or assets (excluding regular quarterly
cash dividends) or of subscription rights or warrants (other than those referred
to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional shares of Common Stock will be issued and, in lieu thereof,
an adjustment in cash will be made based on the market price of the Common Stock
on the last trading date prior to the date of exercise.
The Company is only obligated to maintain authorized but unissued
shares of Common Stock for holders of Rights once a Distribution Event occurs.
The Company is permitted, however, if sufficient shares of unissued but
authorized Common Stock are not available to be purchased by holders of Rights,
to distribute to such holders, in lieu of Common Stock, other securities of the
Company with equivalent value to the Rights exercised, such as preferred stock,
debt instruments, or reduction in Purchase Price.
At any time until 10 days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $.001 per
Right, payable in cash or shares of Common Stock. Under certain circumstances
set forth in the Rights Plan, the decision to redeem shall require the
concurrence of a majority of the Continuing Directors (as hereinafter defined).
After the redemption period has expired, the Company's rights of redemption may
be restated if an Acquiring Person reduces his or her beneficial ownership to
10% or less of the outstanding shares of Common Stock in a transaction or series
of transactions not involving the Company. Immediately upon the action of the
Board of Directors ordering redemption of the Rights, with, where required, the
concurrence of the Continuing Directors, the Rights will terminate and the only
right which the holders of Rights will thereafter have will be to receive the
$.001 redemption price.
The term "Continuing Directors" means any member of the Board of
Directors of the Company who was a member of the Board prior to the date of the
Rights Plan, and any person who is subsequently elected to the Board if such
person is recommended or approved by a majority of the Continuing Directors, but
shall not include an Acquiring Person, or an affiliate or associate of an
Acquiring Person, or any representative of the foregoing.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends. While the distribution of the Rights will not
be taxable to stockholders or to the Company, stockholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for the Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth.
Any of the provisions of the Rights Plan may be amended by the Board of
Directors of the Company as long as the Rights are then redeemable including,
without limitation, the 15% threshold (but not, in general, below 10%), the
purchase price (but not by more than 50%), or Final Expiration Date (but not by
more than 3 additional years). When the Rights are not redeemable, the
provisions of the Rights Plan may be amended by the Board in order to cure any
ambiguity, to correct or supplement any provision which may be inconsistent with
any other provision or to make changes which do not affect adversely the
interests of holder of Rights; provided, however, that amendments proposed to be
made after a person becomes an Acquiring Person (other than pursuant to a
Qualifying Tender Offer) may be made only if approved by a majority of the
Continuing Directors.
The Company covenants in the Rights Plan to file a registration
statement under the Securities Act of 1933 with respect to shares of Common
Stock purchasable upon exercise of the Rights as soon as a Section 11(a)(ii)
Event occurs, or as soon as required by law, and may temporarily suspend, for no
more than 90 days, the exercisability of the Rights to permit the registration
statement to become effective.
A copy of the Rights Plan has been filed with the Securities and
Exchange Commission as an Exhibit to a Proxy Statement dated _________, 1998. A
copy of the Rights Plan is available free of charge from the Rights Agent. This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Plan, which is incorporated
herein by reference.
- --------
1 The portion of the legend in brackets shall be inserted only if applicable and
shall replace the preceding sentence.
<PAGE>
Appendix 3 to Proxy Statement
1998 IFS INTERNATIONAL, INC. STOCK PLAN
The Board of Directors of IFS INTERNATIONAL, INC. (the "Company"), a
corporation organized under the laws of the State of Delaware, hereby adopts
this 1998 IFS INTERNATIONAL, INC. Stock Plan.
WHEREAS, the growth, development and financial success of the Company
(and any parents and/or any subsidiaries of the Company) is and will remain
dependent, in significant part, upon the judgment, initiative, efforts and/or
services their respective employees, officers, directors, consultants and
advisors;
WHEREAS, the Company desires, in order to attract, compensate and
motivate selected employees, officers, directors, consultants and/or advisors
for the Company (and any parent and/or any subsidiaries of the Company), and to
appropriately compensate them for their efforts, to create a stock plan which
will enable the Company, in its sole discretion and from time-to-time, to offer
to or provide such persons with incentives and/or inducements in the form of
capital stock of the Company, or rights in the form of options to acquire
capital stock of the Company, thereby affording such persons with an opportunity
to share in potential capital appreciation in the capital stock of the Company
and/or potential distributions made in connection therewith;
WHEREAS, the Company further desires that the stock plan be structured
to permit it, in its sole discretion, to offer and issue options to purchase
capital stock which are classified as incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended;
WHEREAS, the Company further desires that the stock plan be structured
to permit it, in its sole discretion, to offer and issue capital stock or
options to acquire capital stock in reliance upon certain exemptions from
registration or qualification afforded under certain federal, state or
territorial securities laws to be selected by the Company as are or may become
applicable including, by way of example and not limitation: Rule 701 promulgated
under the Securities Act of 1933, as amended (for compensatory benefit plans);
Rules 504, 505 and/or 506 of Regulation D promulgated under the Securities Act
of 1933 (for private or limited offerings); Section 25102(f) of the California
Corporate Securities Law of 1968, as amended (for non-public offerings); and
Section 25102(o) of the California Corporate Securities Law of 1968, as amended
(for stock option and stock purchase plans conforming with Rule 701); and
WHEREAS, so long as the Company's equity securities remain registered
under Sections 12(b) or 12(g) of the Securities and Exchange Act of 1934, the
Company further desires that the stock plan be structured to comply with the
Securities and Exchange Act of 1934.
<PAGE>
ARTICLE I
DEFINITIONS
Set forth below are definitions of capitalized terms which are
generally used throughout the Plan, or references to provisions containing such
definitions (Capitalized terms used only in a specific section of the Plan are
defined in such section):
1.01 "Applicable Laws" means the requirements relating to the
administration of stock plans under: (i) United States corporate laws; (ii)
applicable Securities Laws (including those of any foreign country or
jurisdiction where Awards are, or will be, granted under the Plan), (iii) the
Code; and (iv) any stock exchange or quotation system on which the Common Stock
is listed or quoted.
1.02 "Approved Corporate Transaction" shall mean any time the Board
and/or, to the extent required by law, the stockholders of the Company, approve
either: (i) a merger or consolidation or stock exchange or divisive
reorganization (i.e., spin-off, split-off or split-up) and/or other
reorganization with respect to the Company and/or its stockholders, or (ii) the
sale, transfer, exchange or other disposition by the Company of fifty percent
(50%) or more of its assets in a single or series of related transactions, is
approved, provided, however, the term Approved Corporate Transaction shall not
include any transaction wherein the stockholders of the Company immediately
before such transaction directly or indirectly own, immediately following such
transaction, a majority of the Total Combined Voting Power (as such term is
defined in section 1.08A below) of the outstanding Voting Securities (as such
term is defined in section 1.08A below) of the surviving corporation (or other
entity) resulting from such transaction pursuant to clause (i), or the acquiring
corporation (or other entity) pursuant to clause (ii).
1.03 "Award" " shall collectively and severally refer to any Options or
Grant Shares granted or awarded under the Plan.
1.04 "Award Agreement" shall collectively and severally refer to: (i)
in the case of the grant or award of an Option, a Stock Option Certificate in
such form as prescribed by the Plan Administrator from time-to-time; (ii) in the
case of the grant or award of Grant Shares, a Stock Grant Agreement in such form
as prescribed by the Plan Administrator from time-to-time; and (iii) in the case
of the grant or award of SARs, a SAR Agreement in such form as prescribed by the
Plan Administrator from time-to-time; provided, however, the Company may, in its
sole discretion, (1) revise any such form of Award Agreement to reflect or
incorporate such changes as the Company or its legal counsel may determine is
appropriate and consistent with the terms of the Plan, and/or (2) evidence or
confirm the grant of an Award in a written employment or consulting agreement in
lieu of the form of any of the foregoing Award Agreements.
1.05 "Blue Sky Laws" shall mean the securities laws of any state or
territory of the United States, including any regulations or rules promulgated
thereunder, which may apply to a transaction described in this Plan by reason
of, among other things, the Recipient's residing in such, state or territory at
the time of such transaction.
1.06 "Board" shall mean the Board of Directors of the Company, as such
body may be reconstituted from time to time.
1.07 "California Securities Act" shall mean the California Corporate
Securities Law of 1968, as amended (references herein to sections of the
California Securities Act are intended to refer to sections of the California
Securities Act as enacted at the time of the adoption of the Plan by the Board
and as subsequently amended, or to any substantially similar successor
provisions of the California Securities Act resulting from recodification,
renumbering or otherwise).
1.08 "Change In Control" shall mean the occurrence of any "Control
Acquisition" or any "Significant Board Change" (as such terms are defined
below).
A. "Control Acquisition" shall mean any time an "Acquiring
Person" (as defined below) attains, by reason of and immediately after a
transaction or series of related transactions (other than a Non-Control
Transaction), "Beneficial Ownership" of fifty percent (50%) or more of the
"Total Combined Voting Power" of the Company's then outstanding "Voting
Securities" (all as defined below); unless the Board determines that it is not
in the best interests of the Company for such transaction to be construed as a
Control Acquisition; provided, however that at the time of such approval of the
Board there are then in office not less than two Continuing Directors (as such
term is defined below) and such action or transaction or series of related
actions or transactions are approved by a majority of the Continuing Directors
then in office.
(1) "Acquiring Person" shall mean any "Person" (as defined below) with the
exception of: (A) any Employee Benefit Plan (or a trust forming a part thereof)
maintained by the Company, or by any corporation or entity in which the Company
holds fifty percent (50%) or more of the Voting Securities (each, a "Controlled
Subsidiary"); (B) the Company or any Controlled Subsidiary; or (C) any Person
which acquires the threshold percentage of Voting Securities through a
"Non-Control Transaction" (as defined below).
(2) "Non-Control Transaction" shall mean any transaction in which the
stockholders of the Company immediately before such transaction directly or
indirectly own, immediately following such transaction, at least a majority of
the Total Combined Voting Power (as defined below) of the outstanding Voting
Securities (as defined below) of the surviving corporation (or other entity)
resulting from such transaction, in substantially the same proportion as such
stockholders' ownership of the Company's Voting Securities immediately before
such transaction.
(3) "Person," "Beneficial Ownership," "Total Combined Voting Power" and
"Voting Securities" shall have the meaning described to such terms in Sections
13(d) and 14(d) of the Securities Exchange Act and Rule 13d-3 promulgated
thereunder.
(4) "Continuing Director" shall mean: (A) any member of the Board, while
such Person is a member of the Board, who is not an Acquiring Person or an
"Affiliate" or "Associate" (as defined below) of an Acquiring Person, or a
representative of an Acquiring Person or any such Affiliate or Associate, and
was a member of the Board prior to the date of this Plan, or (B) any Person who
subsequently becomes a member of the Board, while such Person is a member of the
Board, who is not an Acquiring Person or an Affiliate or Associate of an
Acquiring Person or a representative of an Acquiring Person or any such
Affiliate or Associate, if such Person's nomination for election or election to
the Board is recommended or approved by a majority of the Continuing Directors.
The terms "Affiliate" and "Associates" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act.
Notwithstanding the foregoing, a Control Acquisition shall not be deemed to
have occurred solely because any Person acquires Beneficial Ownership of more
than the threshold percentage of the outstanding Voting Securities as a result
of an acquisition of Voting Securities by the Company (each, a "Redemption")
which, by reducing the number of Voting Securities outstanding, increased the
percentage of outstanding Voting Securities Beneficially Owned by such Person;
provided, however, that if (A) a Control Acquisition would occur as a result of
a Redemption but for the operation of this sentence, and (B) after such
Redemption, such Person becomes the Beneficial Owner of any additional Voting
Securities, which increase the percentage of the then outstanding Voting
Securities Beneficially Owned by such Person over the percentage owned as a
result of the Redemption, then a Control Acquisition shall occur.
B. "Significant Board Change" shall mean any time, during any
period of three (3) consecutive years after the date of this Agreement, wherein
the individuals who constituted the Board at the beginning of such period (the
"Incumbent Board") cease to constitute a majority of the Board, for any reason
other than: (1) the voluntary resignation of one or more Board members; (2) the
refusal by one or more Board members to stand for election to the Board; and/or
(3) the removal of one or more Board members for good cause; provided, however,
(A) that if the nomination or election of any new director of the Company was
approved by a vote of at least a majority of the Incumbent Board, such new
director shall be deemed a member of the Incumbent Board; and (B) that no
individual shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual or
threatened "Election Contest" (as described in Rule 14a-11 promulgated under the
Securities Exchange Act), or as a result of a solicitation of proxies or
consents by or on behalf of an Acquiror, other than a member of the Board (a
"Proxy Contest"), or as a result of any agreement intended to avoid or settle
any Election Contest or Proxy Contest.
1.09 "Code" shall mean the Internal Revenue Code of 1986, as amended
(references herein to sections of the Code are intended to refer to sections of
the Code as enacted at the time of the adoption of the Plan by the Board and as
subsequently amended, or to any substantially similar successor provisions of
the Code resulting from recodification, renumbering or otherwise).
1.10 "Commission" shall mean the United States Securities and Exchange
Commission.
1.11 "Common Stock" shall mean the Company's common stock, no par
value.
1.12 "Company" shall mean IFS INTERNATIONAL, INC., a Delaware
corporation and its successors.
1.13 "Consent of Spouse" shall mean that Consent of Spouse in such form
as prescribed by the Plan Administrator from time-to-time.
1.14 "Consultant" shall mean any Person who, in a capacity other than
as an Employee or Director, provides bona fide services in a consulting or
advisory capacity to the Company and/or to any Parent and/or to any Subsidiary,
whether as an entity or a natural person, and whether as an independent
contractor or an employee of an employer.
1.15 "Director" shall mean any Person who is voted or appointed as a
member of the Board of Directors of the Company and/or of any Parent and/or of
any Subsidiary, whether such Person is so engaged at the time the Plan is
adopted or becomes so engaged subsequent to the adoption of the Plan.
1.16 "Disability" (or the related term "Disabled") shall be defined,
without limitation, as any of the following with respect to a Recipient who is
an Employee or a Director: (i) the receipt of any disability insurance benefits
by the Recipient; (ii) a declaration by a court of competent jurisdiction that
the Recipient is legally incompetent; (iii) the Recipient's material inability
due to medically documented mental or physical illness or disabilities to fully
perform the Recipient's regular obligations as an Employee or as a Director (as
the case may be) under such office, with reasonable accommodation if then
required by applicable federal, state, territorial and/or provincial laws or
regulations, for a three (3) month continuous period, or for six (6) cumulative
months within any one (1) year continuous period, or the reasonable
determination by the Board that the Recipient will not be able to fully perform
the Recipient's regular obligations as an Employee or as a Director (as the case
may be), under such office, with reasonable accommodation if then required by
applicable federal, state and/or territorial laws or regulations, for a three
(3) month continuous period. If the Board determines that the Recipient is
Disabled under clause (iii) above, and the Recipient disagrees with the
conclusion of the Board, then the Company shall engage a qualified independent
physician reasonably acceptable to the Recipient to examine the Recipient at the
Company's sole expense. The determination of such physician shall be provided in
writing to the parties and shall be final and binding upon the parties for all
purposes of this Agreement. The Recipient hereby consents to examination in the
manner set forth above, and waives any physician-patient privilege arising from
any such examination as it relates to the determination of the purported
disability. If the parties cannot agree upon such physician, a physician shall
be appointed by the American Arbitration Association, located in Troy, New York,
according to the rules and practices of the American Arbitration Association
from time-to-time in force.
1.17 "Eligible Person" shall mean any Person who, at the applicable
time of the grant or award of an Award under the Plan, is an Employee, a
Director, and/or a Consultant. Notwithstanding the foregoing, no Award hereunder
may be granted to any Person, even if otherwise an Eligible Person, with respect
to: (i) any circumstances which would not be considered to be either a bonus or
reward for services provided, or compensation for services rendered; or (ii) in
the case of any Consultant, services rendered wholly or partially in connection
with the offer and sale of securities in a capital-raising transaction.
1.18 "Employee" shall mean any employee of the Company or of any Parent
and/or of any Subsidiary, whether such Person is so employed at the time the
Plan is adopted or becomes so employed subsequent to the adoption of the Plan.
1.19 "Executive Officer" shall mean the Company's president, principal
financial officer, principal accounting officer (or, if there is no such
accounting officer, the controller), any vice-president of the Company in charge
of a principal business unit, division or function (such as sales,
administration or finance), any other officer who performs a policy-making
function, or any other person who performs similar policy-making functions for
the Company. Officers of any Parent or Subsidiary of the Company shall be deemed
Executive Officers of the Company if they perform such policy-making functions
for the Company.
1.20 "Exchange Act" shall mean the Securities and Exchange Act of 1934,
as amended, including any regulations or rules promulgated by the Commission
thereunder (references herein to sections of the Exchange Act are intended to
refer to sections of the Exchange Act as enacted at the time of the adoption of
the Plan by the Board and as subsequently amended, or to any substantially
similar successor provisions of the Exchange Act resulting from recodification,
renumbering or otherwise).
1.21 "Fair Market Value" of a share of Common Stock as of a given
valuation date shall be determined as follows:
A. If the Common Stock is traded on a stock exchange, the Fair
Market Value will be equal to the closing price of Common Stock on the principal
exchange on which the Common Stock is then trading as reported by such exchange
(or as reported by any composite index which includes such principal exchange)
for the trading day previous to the date of valuation, or if the Common Stock is
not traded on such date, on the next preceding trading day during which a trade
occurred;
B. If the Common Stock is traded over-the-counter on the
Nasdaq National Market on the date in question, the Fair Market Value will be
equal to the last transaction-price of the Common Stock as reported by Nasdaq
for the trading day previous to the date of valuation, or if the Common Stock is
not traded on such date, on the next preceding trading day during which a trade
occurred;
C. If the Common Stock is traded over-the-counter on the
Nasdaq SmallCap Market, the Fair Market Value will equal the mean between the
last reported closing representative bid and asked price for the Common Stock as
reported by Nasdaq for the trading day previous to the date of valuation, or if
the Common Stock is not traded on such date, on the next preceding trading day
during which a trade occurred; or
D. If the Common Stock is not publicly traded on an exchange
and is not traded over-the-counter on Nasdaq, the Fair Market Value shall be
determined by the Board acting in good faith on such basis as it deems
appropriate, including quotations by market makers if the Common Stock is traded
over-the-counter on the NASD Electronic Bulletin Board or Pink Sheets on the
date in question should the Plan Administrator deem such quotations to be
appropriate given the volume and circumstances of trades; provided, however, in
the case of any Award granted pursuant to the exemption afforded by Section
25102(o) of the California Securities Act, the Board shall, in accordance with
Regulation 260.140.50 promulgated under the California Securities Act, price the
Award at a price which is fair to the Company and the Recipient and, in
connection therewith, take into consideration the earnings history, book value
and prospects of the Company in the light of market conditions generally.
The Fair Market Value as determined above shall be subject to
such discount as the Plan Administrator may, in its sole discretion and without
obligation to do so, determine to be appropriate to reflect any such impairments
to the value of the associated Option Shares and/or Grant Shares to which the
valuation relates such as, by way of example and not limitation, (1) the fact
that such Option Shares and/or Grant Shares constitute unregistered securities
(whether or not considered "restricted stock" within the meaning of Rule 144 of
the Securities Act), and/or (2) such Option Shares and/or Grant Shares are
subject to conditions, risk of forfeiture, or repurchase rights or rights of
first refusal which impair their value including, without limitation, those
forfeiture conditions more particularly described in Article VII; provided,
however, in the event of the grant or award of an Incentive Option, no discount
shall be given with respect to any impairments in value attributable to any
restriction which, by its terms, will never lapse within the meaning of Section
422(c)(7) of the Code.
1.22 "Forfeitable Grant Shares" shall mean Grant Shares that are
subject to restrictions set forth in Article VII.
1.23 "Grant Shares" shall mean Plan Shares granted or awarded in
accordance with Article VI.
1.24 "Incentive Option" shall mean an Option which qualifies under
Section 422 of the Code, and is specifically granted as an Incentive Option
under the Plan in accordance with the applicable provisions of Article V.
1.25 "Independent SAR" shall have the meaning ascribed to such term in
section 9.01.
1.26 "Non-Qualified Option" shall mean any Option granted under the
Plan other than an Incentive Option; provided, however, the term Non-Qualified
Option shall include any Incentive Option which, for any reason, fails to
qualify as an incentive stock option under Section 422 of the Code and the rules
and regulations thereunder.
1.27 "Option" shall mean an option to purchase Plan Shares granted or
awarded pursuant to Article V. Unless specific reference is made thereto, the
term "Options" shall be construed as referring to both Non-Qualified Options
(including Replacement Options) and Incentive Options.
1.28 "Option Price" is defined in section 5.02 of the Plan.
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1.29 "Option Shares" shall mean any Plan Shares which an Option
entitles the holder thereof to purchase.
1.30 "Parent" shall mean any "parent" of the Company, as such term is
defined by, or interpreted under, Rule 701 promulgated under the Securities Act,
including any such parent which is a corporation, partnership, limited
partnership or limited liability company to the extent permitted under Rule 701.
1.31 "Person" shall be defined, in its broadest sense, as any
individual, entity or fiduciary such as, by way of example and not limitation,
individual or natural persons, corporations, partnerships (limited or general),
joint-ventures, associations, limited liability companies/partnerships or
fiduciary arrangements (such as trusts and custodial arrangements).
1.32 "Plan" shall mean this 1998 IFS INTERNATIONAL, INC. Stock Plan.
1.33 "Plan Administrator" shall refer to the Person or Persons who are
administering the Plan as described in Article III, namely, the Board, the Plan
Committee, or any Director-Officers designated by the Board or the Plan
Committee.
1.34 "Plan Committee" shall mean that Committee comprised of members of
the Board that may be appointed by the Board to administer and interpret the
Plan as more particularly described in Article III of the Plan.
1.35 "Plan Shares" shall refer to shares of Common Stock issuable in
connection with Awards in accordance with section 4.01, including, Option
Shares, Grant Shares and SAR Shares.
1.36 "Recipient" shall mean any Eligible Person who, at a particular
time, receives the grant of an Award.
1.37 "Recipient's Representative's Letter" shall mean that letter from
an independent investment advisor of a Recipient in such form as prescribed by
the Plan Administrator from time-to-time.
1.38 "Replacement Option" shall mean a Non-Qualified Option
specifically granted as a Replacement Option under the Plan in accordance with
the applicable provisions of section 5.08.
1.39 "Reporting Company" shall mean a corporation which registers its
equity securities pursuant to Sections 12(b) or 12(g) of the Exchange Act;
provided, however, any foreign corporation which registers its equity securities
as a "foreign private issuer" shall not be deemed a Reporting Company for
purposes of this Plan unless and until such time as it is required or elects to
register its equity securities as a foreign issuer other than a foreign private
issuer.
1.40 "Stock Appreciation Rights" or "SARs" shall have the meaning
ascribed to such terms in section 9.01.
1.41 "Securities Act" shall mean the Securities Act of 1933, as
amended, including all regulations or rules promulgated by the Commission
thereunder (references herein to sections of the Securities Act are intended to
refer to sections of the Securities Act as enacted at the time of the adoption
of the Plan by the Board and as subsequently amended, or to any substantially
similar successor provisions of the Securities Act resulting from
recodification, renumbering or otherwise).
1.42 "Securities Laws" shall collectively refer to the Securities Act,
the Exchange Act and the Blue Sky Laws.
1.43 "Subsidiary" shall mean any "majority-owned subsidiary" of the
Company, as such term is defined by, or interpreted under, Rule 701 promulgated
under the Securities Act, including any such subsidiary which is a corporation,
partnership, limited partnership or limited liability company to the extent
permitted under Rule 701. The term Subsidiary shall specifically exclude any
majority-owned subsidiaries (other than the Company, if applicable) of any
Parent.
1.44 "Tandem SAR" shall have the meaning ascribed to such term in
section 9.01.
1.45 "Ten Percent Stockholder" shall mean a Person who owns, either
directly or indirectly, at the time such Person is granted an Award, stock of
the Company possessing more than ten percent (10%) of the total combined voting
power or value of all classes of stock of the Company or of any Parent and/or
any Subsidiary.
1.46 "Termination By Company For Cause" shall mean the following:
A. Employee-Recipient. In the case of a Recipient
who is an Employee, the Plan Administrator determines that:
(1) Any representation or warranty of the Recipient
in connection with the grant of the Award (or the subsequent exercise
of an Option, if the Award is an Option) is not materially true,
accurate and complete;
(2) The Recipient has breached or wrongfully failed
and/or refused to fulfill and/or perform any of the Recipient's
obligations, promises or covenants under the underlying Award
Agreement;
(3) The Recipient has breached or wrongfully failed
and/or refused to fulfill and/or perform any of the Recipient's
representations, warranties, obligations, promises or covenants in any
agreement (other than the Award Agreement) entered into between the
Company and the Recipient, without cure, if any, as provided in such
agreement;
(4) The Recipient has failed and/or refused to obey
any lawful and proper order or directive of the Board, and/or the
Recipient has intentionally interfered with the compliance by other
employees of the Company with any such orders or directives;
(5) The Recipient has breached the Recipient's
fiduciary duties to the Company;
(6) The Recipient has caused the Company to be
convicted of a crime, or intentionally caused the Company to incur
criminal penalties in material amounts;
(7) The Recipient has committed: (A) any act of
fraud, misrepresentation, theft, embezzlement or misappropriation,
and/or any other dishonest act against the Company and/or any of its
affiliates, subsidiaries, joint ventures; or (B) any other offense
involving moral turpitude, which offense is followed by conviction or
by final action of any court of law; or (C) a felony;
(8) The Recipient has used alcohol or drugs to an
extent that such use: (A) interfered with or was likely to interfere
with the Recipient's ability to perform the Recipient's duties to the
Company; and/or (B) such use endangers or was likely to endanger the
life, health, safety, or property of the Recipient, the Company, and/or
any other person;
(9) The Recipient has demonstrated or committed
such acts racism, sexism or other discrimination as would tend to bring
the Company into public scandal or ridicule, or would otherwise result
in material and substantial harm to the Company's business, reputation,
operations, affairs or financial position; and/or
(10) The Recipient engaged in other conduct
constituting cause for termination.
B. Director-Recipient. With respect to a Recipient who is a
Director, the Plan Administrator determines that:
(1) The Board has removed the Recipient as a member
of the Board for "cause" as such term is defined or interpreted by the
Articles or Certificate of Incorporation and/or the Bylaws of the
Company, and/or the laws of the State of the Company's organization, or
for breach of the Recipient's statutory or common law duties as a
Director;
(2) The Recipient has refused or is unable to be
nominated for a position on the Board, including where due to the
Recipient's failure to request cumulative voting for such election (if
applicable) and the Recipient's failure to vote all of the Recipient's
shares of Common Stock for the Recipient's election to the Board;
and/or
(3) Any event described above in section 1.46A has
occurred with respect to the Recipient.
C. Consultant-Recipient. In the case of any Recipient who is a
Consultant, the Plan Administrator determines that any event described above in
section 1.46A has occurred with respect to the Recipient.
Any nominees or designees of the Recipient to the Board shall,
if a member of the Plan Administrator, abstain from voting with respect to any
decision by the Plan Administrator relating to any of the foregoing events as
they pertain to any Award in which the Recipient has a direct or indirect
interest.
In the event the Recipient is both Disabled and the provisions
of subsection 1.46A(6) are applicable with respect to the Recipient, the Company
shall nevertheless have the right to deem such event as a Termination By Company
For Cause.
1.47 "Termination By Recipient For Good Reason" shall mean the
following:
A. Employee-Recipient. With respect to any Recipient who is an
Employee:
(1) The Company's representations or warranties in
the Award Agreement are not materially true, accurate and complete;
(2) The Company has intentionally and continually
breached or wrongfully failed and/or refused to fulfill and/or perform
any of the Company's obligations, promises or covenants under the
underlying Award Agreement;
(3) The Company has intentionally and continually
breached or wrongfully failed and/or refused to fulfill and/or perform
any of the Company's representations, warranties, obligations, promises
or covenants in any agreement (other than the Award Agreement) entered
into between the Company and the Recipient, without cure, if any, as
provided in such agreement; and/or
(4) The Company intentionally requires the
Recipient to commit or participate in any felony or other serious
crime.
B. Director-Recipient. With respect to any Recipient who is a
Director:
(1) The Company removes or fails to reappoint or
re-elect the Recipient as a Director (unless such action is
attributable to an event considered to constitute Termination By
Company For Cause); and/or
(2) The occurrence of any of the events described
above in subsection 1.47A(1) through subsection 1.47A(4) with respect
to the Director.
C. Consultant-Recipient. With respect to any Recipient who is
a Consultant, the occurrence of any of the events described above in subsection
1.47A(1) through subsection 1.47A(4) with respect to the Consultant.
In the event any of the events described above in this section
1.46 occurs with respect to the Company, and such event is reasonably
susceptible of being cured, then the Company shall be entitled to a grace period
of thirty (30) days following receipt of written notice of such event (or such
longer period of time as is reasonable should such event be of a character which
cannot be cured within a period of thirty (30) days), to cure such event to the
reasonable satisfaction of the Recipient, provided that the Company promptly
commences to cure such event and uses reasonable diligence thereafter in curing
such event No act, nor failure to act, on the Company's part shall be considered
"intentional" unless the Company has acted, or failed to act, with a lack of
good faith and with a lack of reasonable belief.
1.48 "Termination Of Recipient" is defined, as the case may be, as
follows:
A. Employee-Recipient. With respect to a Recipient who is an
Employee, the time when the employee-employer relationship between the Recipient
and the Company (or any Parent or Subsidiary) is terminated for any reason
whatsoever, whether voluntary or involuntary (including death or Disability), or
with or without good cause, including, but not by way of limitation, termination
by resignation, discharge, retirement, or leave of absence, but excluding
terminations where: (1) the Recipient remains employed by the Company (if such
termination relates to the Recipient's employment with any Parent and/or any
Subsidiary) and/or by any Parent and/or any Subsidiary (if such termination
relates to the Recipient's employment with the Company); (2) there is
simultaneous employment of the Recipient by the Company and/or any Parent and/or
any Subsidiary; and/or (3) there is a simultaneous establishment of a consulting
relationship between the Company and the Recipient."
B. Director-Recipient. With respect to a Recipient who is a
Director, the time when the Recipient's status as a Director ceases for any
reason whatsoever, whether voluntary or involuntary (including death or
Disability), or with or without good cause, but excluding cases where the
Recipient remains a Director of the Company (if such termination relates to the
Recipient's status as a Director of any Parent and/or any Subsidiary) and/or by
any Parent and/or any Subsidiary (if such termination relates to the Recipient's
status as a Director of the Company).
C. Consultant-Recipient. With respect to a Recipient who is a
Consultant, the time when the Recipient's engagement as a Consultant to the
Company and/or any Parent and/or any Subsidiary ceases for any reason
whatsoever, whether voluntary or involuntary (including death or Disability), or
with or without good cause, but excluding cases where there is a simultaneous
commencement of employment of the Recipient by the Company and/or any Parent
and/or any Subsidiary.
1.49 "Transfer" shall mean any transfer or alienation of an Award which
would directly or indirectly change the legal or beneficial ownership thereof,
whether voluntary or by operation of law, regardless of payment or provision of
consideration, including, by way of example and not limitation: (i) the sale,
assignment, bequest or gift of the Award; (ii) any transaction that creates or
grants an option, warrant, or right to obtain an interest in the Award; (iii)
any transaction that creates a form of joint ownership in the Award between the
Recipient and one or more other Persons; (iv) any Transfer of the Award to a
creditor of the Recipient, including the hypothecation, encumbrance or pledge of
the Award or any interest therein, or the attachment or imposition of a lien by
a creditor of the Recipient on the Award or any interest therein which is not
released within thirty (30) days after the imposition thereof; (v) any
distribution by a Recipient which is an entity to its stockholders, partners,
co-venturers or members, as the case may be; or (vi) any distribution by a
Recipient which is a fiduciary such as a trustee or custodian to its settlors or
beneficiaries.
1.50 "Withholding Taxes" means any federal, state and/or local
employment taxes which the Company shall have the obligation to withhold from a
Recipient in connection with the grant of any Award and/or exercise of any
Option, as the case may be.
ARTICLE II
TERM OF PLAN
2.01 Effective Date for Plan; Termination Date for Plan. The Plan shall
be effective as of such time and date as the Plan is adopted by the Board, and
the Plan shall terminate on the first business day prior to the ten (10) year
anniversary of the date the Plan became effective. No Awards shall be granted or
awarded under the Plan before the date the Plan becomes effective or after the
date the Plan terminates; provided, however: (i) all Awards granted pursuant to
the Plan prior to the effective date of the Plan shall not be affected by the
termination of the Plan; and (ii) all other provisions of the Plan shall remain
in effect until the terms of all outstanding Awards have been satisfied or
terminated in accordance with the Plan and the terms of such Awards.
2.02 Failure of Stockholders to Approve Plan. In the event the Plan is
not approved by the holders of a majority of the shares of Common Stock of the
Company within twelve (12) months before or after the date the Plan becomes
effective, then: (i) any Incentive Options granted under the Plan shall be
reclassified as Non-Qualified Options retroactive to the date of grant; and (ii)
any Awards (including Incentive Options discussed immediately above) made
pursuant to the exemption afforded by Section 25102(o) of the California
Securities Act shall be rescinded (including any Incentive Options granted
pursuant to such exemption, notwithstanding clause (i) above).
ARTICLE III
PLAN ADMINISTRATION
3.01 General. The Plan shall be administered exclusively by the Board
and/or, to the extent authorized pursuant to this Article III, the Plan
Committee or Director-Officers (collectively, the "Plan Administrator").
3.02 Delegation to Plan Committee. Subject to the authority granted to
the Board under the Articles of Incorporation and the Bylaws of the Company, the
Board may, in its sole discretion and at any time, establish a committee
comprised of two (2) or more members of the Board (the "Plan Committee") to
administer the Plan either in its entirety or to administer such functions
concerning the Plan as delegated to such Committee by the Board. Members of the
Plan Committee may resign at any time by delivering written notice to the Board.
Vacancies in the Plan Committee shall be filled by the Board. The Plan Committee
shall act by a majority of its members in office. The Plan Committee may act
either by vote at a meeting or by a memorandum or other written instrument
signed by a majority of the Plan Committee.
3.03 Compliance with Section 16 of the Exchange Act. Anything in this
Article III to the contrary notwithstanding, in the event and commencing at such
time as this Company becomes a Reporting Company, or is otherwise required to
register its equity securities under Sections 12(b) or 12(g) of the Exchange
Act, any matter concerning a grant or award of an Award under the Plan to any
Director, Executive Officer or Ten Percent Stockholder shall, to the extent
desirable to qualify such Awards as exempt under Rule 16b-3(b)(3) promulgated
under the Exchange Act, be made only by: (i) the Board; (ii) the Plan Committee,
provided it is comprised solely of "Non-Employee Directors" within the meaning
of Rule 16b-3(b)(3); or (iii) a special committee of the Board, or subcommittee
of the Plan Committee, comprised solely of two (2) or more members of the Board
who are non-Employee Directors.
3.04 Compliance with Section 162(m) of the Code. Anything in this
Article III to the contrary notwithstanding, in the event and commencing at such
time as any grant of an Award shall be subject to the deduction limitations
prescribed by Section 162(m) of the Code, and the Plan Administrator determines
it to be desirable to qualify Awards granted hereunder as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the Plan
Administrator shall (for purposes of making such grant) consist of a special
committee of the Board comprised solely of two or more "outside directors"
within the meaning of Section 162(m) of the Code.
3.05 Delegation to Director-Officers. Subject to the authority granted
to the Board under the Articles of Incorporation and the Bylaws of the Company,
the Board may, in its sole discretion and at any time, and subject to the
authority granted to it by the Board, the Plan Committee may, in its sole
discretion and at any time, delegate all or any portion of their authority
described below under section 3.06 through section 3.06 to one or more Directors
who are also Director-Officers, provided that the Board or the Plan Committee
(as the case may be) ratifies such actions by such designated Director-Officers.
Notwithstanding the foregoing, in the event the Company is then a Reporting
Company, no authority shall be delegated to the aforesaid Director-Officers with
respect to any matter concerning a grant or award of an Award under the Plan to
any Director, Executive Officer or Ten Percent Stockholder.
3.06 Authority to Make Awards and to Determine Terms and Conditions of
Awards. Subject to any limitations prescribed by the Articles of Incorporation
and Bylaws of the Company, and further subject to the express terms, conditions,
limitations and other provisions of the Plan, the Plan Administrator shall have
the full and final authority, in its sole discretion at any time and from
time-to-time, to do any of the following: (i) designate and/or identify the
Persons or classes of Persons who are considered Eligible Persons; (ii) grant
Awards to such selected Eligible Persons or classes of Eligible Persons in such
form and amount as the Plan Administrator shall determine; (iii) determine the
number of Plan Shares to be covered by each Award; (iv) approve forms of Award
Agreements for use under the Plan; (v) impose such terms, limitations,
restrictions and conditions upon any Award as the Plan Administrator shall deem
appropriate and necessary including, without limitation: (1) the date of grant
of the Award; (2) the time or times when Options or SARs may be exercised (which
may be based on performance criteria); (3) any vesting and/or forfeiture
conditions placed upon any Awards; and (4) and repurchase conditions placed upon
grants or awards of Grant Shares; (vi) require as a condition of the grant of an
Award that the Recipient surrender for cancellation some or all of any
unexercised Options which have previously been granted to the Recipient under
the Plan or otherwise (an Award, the grant of which is conditioned upon such
surrender; may have a price or value lower (or higher) than the surrendered
Option; may cover the same (or a lesser or greater) number of shares of Common
Stock as such surrendered Option; may contain such other terms as the Plan
Administrator deems appropriate and necessary; and shall be exercisable in or
granted in accordance with its terms, without regard to the number of shares,
price, exercise period or any other term or condition of such surrendered
Option); (vii) approve the reduction in the exercise price of any Option or SAR
to the then current Fair Market Value if the Fair Market Value of the Common
Stock covered by such Option or SAR shall have declined since the date such
Option or SAR was granted; (viii) determine the type and value of consideration
which the Company will accept from Recipients in payment for the exercise of
Options and/or the award of Grant Shares; (ix) determine the type and value of
consideration which the Company will pay in connection with the exercise of
SARs; (x) adopt, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax laws, and
make all other determinations and take all other action necessary or advisable
for the implementation and administration of the Plan; (xi) modify or amend each
Award (subject to ), including the discretionary authority to extend the
post-termination exercisability period of Options or SARs longer than is
otherwise provided for in the Plan; and (xii) agree to withhold Plan Shares in
satisfaction of any applicable Withholding Taxes. In determining the recipient,
form and amount of Awards, the Plan Administrator shall consider any factors it
may deem relevant such as, by way of example and not limitation or obligation,
the Recipient's functions, responsibilities, value of services to the Company,
and past and potential contributions to the Company's profitability and sound
growth.
3.07 Authority to Interpret Plan; Binding Effect of All Determinations.
The Plan Administrator shall, in its sole and absolute discretion, interpret and
determine the effect of all matters and questions relating to the Plan
including, without limitation, all questions relating to whether a Termination
Of Recipient has occurred such as, by way of example and not limitation, those
relating to the effect of a leave of absence, a change in status from an
employee to an independent contractor, and/or any other change in the
employer-employee relationship. All interpretations and determinations of the
Plan Administrator under the Plan (including, without limitation, determinations
pertaining to the eligibility of Persons to receive Awards, the form, amount and
timing of Awards, the methods of payment for Awards, the restrictions and
conditions placed upon Awards, and the other terms and provisions of Awards and
the certificates or agreements evidencing same) need not be uniform and may be
made by the Plan Administrator selectively among Persons who receive, or are
eligible to receive, Awards under the Plan, whether or not such Persons are
similarly situated. All actions taken and all interpretations and determinations
made under the Plan in good faith by the Plan Administrator shall be final and
binding upon the Recipient, the Company, and all other interested Persons. No
member of the Plan Administrator shall be personally liable for any action taken
or decision made in good faith relating to the Plan, and all Persons
constituting the Plan Administrator shall be fully protected and indemnified to
the fullest extent permitted under applicable law by the Company in respect to
any such action, determination, or interpretation.
3.08 Compensation; Advisors. Members of the Plan Administrator shall
receive such compensation for their services hereunder as may be determined by
the Board. All expenses and liabilities incurred by members of the Plan
Administrator in connection with the administration of the Plan shall be borne
by the Company. The Plan Administrator may, at the cost of the Company, employ
attorneys, consultants, advisors, accountants, appraisers, brokers or other
Persons to provide advice, opinions or valuations, and the Plan Administrator
shall be entitled to rely upon any such advice, opinions or valuations.
ARTICLE IV
SHARES OF COMMON STOCK ISSUABLE UNDER PLAN
4.01 Maximum Number of Shares Authorized Under Plan. Plan Shares which
may be issued or granted under the Plan shall be authorized and unissued or
treasury shares of Common Stock. The aggregate maximum number of Plan Shares
which may be issued, whether upon exercise of Options or as a grant of Grant
Shares, or in payment of SARs, shall not exceed Nine Hundred Fifty Thousand
(950,000) shares of Common Stock; provided, however, that such number shall be
increased by the following (unless and to the extent that such action would
cause an Incentive Option to fail to qualify as an Incentive Option under
Section 422 of the Code):
A. Any shares of Common Stock tendered by a Recipient as
payment for Option Shares (in connection with the exercise of the associated
Option) or Grant Shares;
B. Any shares of Common Stock underlying any options, warrants
or other rights to purchase or acquire Common Stock which options, warrants or
rights are surrendered by a Recipient as payment for Option Shares (in
connection with the exercise of the associated Option) or Grant Shares;
C. Any shares of Common Stock subject to an Option which,
for any reason, is terminated unexercised or expires;
D. Any Forfeitable Grant Shares which, for any reason, are
forfeited by the holder thereof or repurchased by the Company; and
E. Any SAR Shares subject to an Independent SAR which, for any
reason, is terminated unexercised or expires.
4.02 Calculation of Number of Shares Available for Awards. For purposes
of calculating the maximum number of Plan Shares which may be issued under the
Plan, the following rules shall apply:
A. When Options are exercised, and when cash is used as full
payment for Option Shares issuable upon exercise of such Options, all Option
Shares issued in connection with such exercise (including Option Shares, if any,
withheld in satisfaction of any applicable Withholding Taxes) shall be counted;
B. When Options are exercised, and when shares of Common Stock
are used as full or partial payment for Option Shares issuable upon exercise of
such Options, the net Option Shares issued in connection with such exercise
(including Option Shares, if any, withheld in satisfaction of any Applicable
Withholding Tax Requirements) shall be counted;
C. When Grant Shares are granted, and when shares of Common
Stock are used as full or partial payment therefore, the net Grant Shares issued
(including Grant Shares, if any, withheld in satisfaction of any applicable
Withholding Taxes) shall be counted;
D. When SARs are exercised, only the Plan Shares issued in
payment thereof (including Plan Shares, if any, withheld in satisfaction of any
applicable Withholding Taxes) shall be counted; and
E. If the exercise price of an Option or SAR is reduced, the
transaction will be treated as a cancellation of the Option or SAR, and the
grant of a new Option or SAR.
4.03 Date of Awards. The date an Award is granted shall mean the date
selected by the Plan Administrator as of which the Plan Administrator allots a
specific number of Plan Shares to a Recipient with respect to such Award
pursuant to the Plan.
ARTICLE V
OPTIONS (TO PURCHASE OPTION SHARES)
5.01 Grant. The Plan Administrator may from time to time, and subject
to the provisions of the Plan and such other terms and conditions as the Plan
Administrator may prescribe, grant to any Eligible Person one or more options
("Options") to purchase the number of Plan Shares allotted by the Plan
Administrator ("Option Shares"), which Options shall be designated as
Non-Qualified Options or Incentive Options; provided, however, no Incentive
Option shall be granted to any Person who is not an "employee" (within the
meaning of Sections 422(a)(2) and 3401(c) of the Code) of the Company and/or of
any Parent and/or of any Subsidiary.
All Options shall be Non-Qualified Options unless expressly
stated by the Plan Administrator to be an Incentive Option, even if the terms
and conditions of the Option comply with the terms and conditions of Section 422
of the Code. No Incentive Option may be granted in tandem with any other Option.
The grant of an Option shall be evidenced by a written Stock Option Certificate,
executed by the Recipient and an authorized officer of the Company, stating: (i)
whether the Option is an Incentive Option, if applicable; (ii) the number of
Option Shares subject to the Option; (iii) the Option Price (as such term is
defined below) for the Option; and (iv) all other material terms and conditions
of such Option.
5.02 Option Price. The purchase price per Option Share deliverable upon
the exercise of an Option (the "Option Price") shall be such price as may be
determined by the Plan Administrator; provided, however: (i) if the Option is an
Incentive Option, the Option Price per Option Share may not be less than the
Fair Market Value of a share of Common Stock as of the date of the grant, unless
the Recipient of the Option is a Ten Percent Stockholder at the time of grant,
in which case the Option Price per Option Share may not be less than one hundred
ten percent (110%) of the Fair Market Value of a share of Common Stock on the
date the Option is granted; (ii) the Option Price per Option Share shall not be
less than that allowed under the Applicable Laws; and (iii) under no
circumstances shall the Option Price per Option Share be less than the then
current par value per share of Common Stock.
5.03 Option Term; Expiration. The term of each Option shall commence at
the grant date for such Option as determined by the Plan Administrator, and
shall expire (unless an earlier expiration date is expressly provided in the
underlying Stock Option Certificate or another section of the Plan including,
without limitation, section 5.05), on the first business day prior to the ten
(10) year anniversary of the date of grant thereof; provided, however,
notwithstanding the foregoing, any Incentive Options granted to a Ten Percent
Stockholder shall terminate on the first business day prior to the five (5) year
anniversary of the date of grant thereof. Except as limited by the requirements
of Section 422(b)(3) of the Code in the case of Incentive Options, and Section
25102(o) of the California Securities Act and Regulation 240.140.41 promulgated
thereunder with respect to Options granted under Section 25102(o) of the
California Securities Act, the Plan Administrator may extend the term of any
outstanding Option should the Plan Administrator, in its sole and absolute
discretion, determine it advisable or necessary to do so including, without
limitation, in connection with any Termination Of Recipient.
5.04 Exercise Date. Unless a later exercise date is expressly provided
in the underlying Stock Option Certificate or another section of the Plan, each
Option shall become exercisable on the later of: (i) the date of its grant as
determined by the Plan Administrator; or (ii) the date of delivery to the
Recipient, and execution by the Company and the Recipient, of the underlying
Stock Option Certificate evidencing the grant of the Option. No Option shall be
exercisable after the expiration of its applicable term as set forth in section
5.03. Subject to the foregoing, each Option shall be exercisable in whole or in
part during its applicable term unless expressly provided otherwise in the
underlying Stock Option Certificate.
5.05 Vesting Conditions. Subject to the limitations in Article X relating
to Termination Of Recipient, the Plan Administrator may subject any Options
granted to such vesting conditions as the Plan Administrator, in its sole
discretion, determines are appropriate and necessary, such as, by way of example
and not obligation: (1) the attainment of goals by the Recipient; (2) in the
case of a Recipient who is an Employee, the continued provision of employment
services by such Recipient to the Company and/or to any Parent or Subsidiary;
(3) in the case of a Recipient who is a Director, the continued service by such
Recipient as a Director to the Company and/or to any Parent or Subsidiary; or
(4) in the case of a Recipient who is a Consultant, the continued provision of
consulting services by such Recipient to the Company and/or to any Parent or
Subsidiary. If no vesting is expressly provided in the underlying Stock Option
Certificate, the Option Shares shall be deemed fully vested upon date of grant.
Where vesting conditions are based upon continued performance of services to the
Company, the special rules of Article X relating to Termination Of Recipient
shall apply. No vesting conditions may be imposed which are not permitted, or
exceed those permitted, under the exemption from registration or qualification
to be relied upon under applicable Securities Laws, as selected by the Company
in its sole discretion. For example, Options granted in reliance upon the
exemption afforded by Section 25102(o) of the California Securities Act and
Regulation 260.140.41(f) promulgated thereunder, shall provide for the vesting
of Option Shares (for Recipients other than Executive Officers, Directors and/or
Consultants) for a period of time which do not exceed five (5) years from date
of grant of the Option, and which do not vest at least twenty percent (20%) per
year on a cumulative basis from date of grant (i.e., 0% upon grant, 20% after
one year, 40% after two years, etc.). If no vesting is expressly provided in the
underlying Stock Option Certificate, the Option Shares shall be deemed fully
vested upon date of grant. The Plan Administrator may waive the acceleration of
any vesting and/or expiration provision of any outstanding Option should the
Plan Administrator, in its sole and absolute discretion, determine it advisable
or necessary to do so including, without limitation, in connection with any
Termination Of Recipient.
5.06 Manner of Exercise. An exercisable Option, or any exercisable
portion thereof, may be exercised solely by delivery of all of the following to
the Secretary of the Company at its principal executive offices prior to the
time when such Option (or such portion) becomes unexercisable under this Article
V: (i) a Notice of Exercise of Stock Option in the form attached to the
underlying Stock Option Certificate, duly signed by the Recipient or other
Person then entitled to exercise the Option or portion thereof, stating the
number of Option Shares to be purchased by exercise of the associated Option;
(ii) subject to Article VIII relating to non-cash form of consideration, payment
in full for the Option Shares to be purchased by exercise of the underlying
Option, together with payment in satisfaction of any applicable Withholding
Taxes (collectively, the "Gross Option Exercise Price"), in immediately
available funds, in U.S. dollars; provided, however, the Plan Administrator may,
in its sole discretion, permit a delay in payment of the Gross Option Exercise
Price for a period of up to thirty (30) days; (iii) a Consent of Spouse from the
spouse of the Recipient, if any, duly signed by such spouse; (iv) in the event
that the Option or portion thereof shall be exercised by any Person other than
the Recipient, appropriate proof of the right of such person or persons to
exercise the Option or portion thereof; and (v) Such documents, representations
and undertakings as provided in the Stock Option Certificate and/or which the
Plan Administrator, in its absolute discretion, deems necessary or advisable
pursuant to section 13.01.
5.07 Net Conversion of Option. Notwithstanding section 5.06, if and to
the extent expressly permitted in the underlying Stock Option Certificate, or if
and to the extent otherwise consented to by the Plan Administrator in writing,
the Recipient may convert an Option, in whole or in part, into such net number
of Option Shares as shall be determined by dividing (x) the difference between
(I) the aggregate Fair Market Value of the total number Option Shares to be
exercised as of the conversion date, together with payment in satisfaction of
any applicable Withholding Taxes, and (II) the aggregate Exercise Price of such
total number of Option Shares, by (y) the Fair Market Value of one Option Share
as of the date of conversion. The Recipient shall, in the event of such
permitted conversion, tender to the Company all of the items described in
section 5.06 with respect to the underlying Option (other than section 5.06 to
the extent payment therefore is not required by operation of this section 5.07).
5.08 Grant of Replacement Options. In the event: (i) the Gross Option
Exercise Price is paid in the form of shares of Common Stock owned by the
Recipient pursuant to section of ; and (ii) the exercising Recipient is then an
Eligible Person, then the Plan Administrator in its sole discretion may, or the
Plan Administrator (if and to the extent expressly required by the underlying
Stock Option Certificate) shall, grant to the exercising Recipient options (the
"Replacement Options") entitling the exercising Recipient to purchase such
number of Plan Shares as shall equal the number of shares of Common Stock
delivered to the Company in payment of the Gross Option Exercise Price with
respect to the underlying Stock Option Certificate. The Replacement Option: (1)
shall be immediately exercisable upon its grant (without any vesting
conditions); (2) shall have an Option Price for each Option Share which equals
the Fair Market Value of the Common Stock so paid as determined for purposes of
payment pursuant to section of ; (3) shall have an Option Term co-terminus with
that of the underlying Option; and (4) shall contain such other terms and
conditions as contained in the underlying Stock Option Certificate. Shares of
Common Stock received by the Recipient in connection with the grant of the
Replacement Option may not be used as consideration in connection with the
exercise of the Replacement Option, unless such shares of Common Stock have been
held by the Recipient for a period of at least one (1) year, and such form of
payment is otherwise permitted pursuant to the terms of Article VIII. Each
Replacement Option shall be a Non-Qualified Option, even if the underlying
Option was an Incentive Option or the terms and conditions of the Replacement
Option would comply with the terms and conditions of Section 422 of the Code.
The grant of a Replacement Option shall be evidenced by a written Stock Option
Certificate, executed by the Recipient and an authorized officer of the Company,
stating: (A) the number of Option Shares subject to the Option; (B) the Option
Price (determined in the manner prescribed above in this section) for the
Option; and (C) all other material terms and conditions of such Option.
5.09 Conditions to Issuance of Option Shares. The Company shall not be
required to issue or deliver any certificate or certificates representing the
Option Shares purchased upon exercise of any Option or any portion thereof prior
to fulfillment of all of the following conditions: (i) the delivery of the
documents described in section 5.06; (ii) the receipt by the Company of full
payment for such Option Shares, together with payment in satisfaction of any
applicable Withholding Taxes; (iii) subject to Article XIII, the satisfaction of
any requirements or conditions of the Applicable Laws; and (iv) the lapse of
such reasonable period of time following the exercise of the Option as the Plan
Administrator may establish from time-to-time for administrative convenience.
5.10 Notice of Disposition of Option Shares Acquired by Exercise of
Incentive Options. The Plan Administrator may require any Recipient who is an
Employee who acquires any Option Shares pursuant to the exercise of an Incentive
Option to give the Company prompt notice of any "disposition" (within the
meaning of Section 422(a)(1) of the Code) of such Option Shares within (i) two
(2) years from the date of grant of the underlying Incentive Option, or (ii) one
(1) year after the issuance of such Option Shares to such Employee. The Plan
Administrator may direct that the certificates evidencing such Option Shares
refer to such requirement to give prompt notice.
ARTICLE VI
GRANT SHARES
6.01 Grant. The Plan Administrator may from time to time, and subject
to the provision of the Plan and such other terms and conditions as the Plan
Administrator may prescribe, grant to any Eligible Person one or more Plan
Shares allotted by the Plan Administrator ("Grant Shares"). The grant of Grant
Shares or grant of the right to receive Grant Shares shall be evidenced by a
written Stock Grant Agreement, executed by the Recipient and an authorized
officer of the Company on or before the time of the grant of such Grant Shares,
setting forth: (i) the number of Grant Shares granted; (ii) the consideration
(if any) for such Grant Shares; and (iii) all other material terms and
conditions of such grant.
6.02 Consideration (Purchase Price). The Plan Administrator, in its
sole discretion, may grant or award Grant Shares in any of the following
instances:
A. As Bonus/Reward. As a "bonus" or "reward" for services
previously rendered and otherwise fully compensated, in which case the recipient
of the Grant Shares shall not be required to pay any consideration to the
Company for such Grant Shares, and the value of each Grant Shares shall be the
Fair Market Value of a share of Common Stock on the date of grant.
B. As Compensation. As "compensation" for the previous
performance or future performance of services or attainment of goals, in which
case the recipient of the Grant Shares shall not be required to pay any
consideration to the Company for such Grant Shares (other than the performance
of the Recipient's services), and the value of each Grant Share received
(together with the value of such services or attainment of goals attained by the
Recipient), shall be the Fair Market Value of a share of Common Stock on the
date of grant.
C. As Purchase Price Consideration. In "consideration" for the
payment of a purchase price to the Company for each of such Grant Shares (the
"Stock Grant Purchase Price") in an amount established by the Plan
Administrator, provided, however:
(1) If the Grant Shares are issued in reliance upon
the exemption afforded by Section 25102(o) of the California Securities
Act, the Stock Grant Purchase Price per each Grant Share may not be
less than eighty-five percent (85%) of the Fair Market Value of a share
of Common Stock as of the date of grant of such purchase right or the
consummation of such purchase; provided, however, if the Recipient is a
Ten Percent Stockholder, the Stock Grant Purchase Price per Grant Share
may not be less than one hundred percent (100%) of the Fair Market
Value of a share of Common Stock as of the date of grant of such
purchase right or the consummation of such purchase;
(2) The Stock Grant Purchase Price shall not be less
than that allowed under the exemption from registration under the
applicable Blue Sky Laws of the state or territory in which the
Recipient then resides as selected by the Company in its sole
discretion;
(3) If the Common Stock is traded on a stock exchange
or over-the-counter on Nasdaq, the purchase price shall not be less
than the minimum price per share permitted by such stock exchange or
Nasdaq; and
(4) Under no circumstances shall the Stock Grant
Purchase Price per Grant Share be less than the then current par value
per share of Common Stock.
6.03 Term; Expiration. The term in which a Recipient may purchase any
Grant Shares awarded for which the Recipient is required to pay consideration
shall commence at the grant date of the underlying Stock Grant Agreement as
determined by the Plan Administrator, and shall expire on the date specified in
the underlying Stock Grant. Except as limited by the requirements of Section
25102(o) of the California Securities Act and Regulation 240.140.41 promulgated
thereunder with respect to Grant Shares granted under Section 25102(o) of the
California Securities Act, the Plan Administrator may extend the term of any
outstanding Stock Grant Agreement should the Plan Administrator, in its sole and
absolute discretion, determine it advisable or necessary to do so including,
without limitation, in connection with any Termination Of Recipient.
6.04 Deliveries; Manner of Payment. The Grant Shares may be purchased
solely by delivery of all of the following to the Secretary of the Company at
the principal executive offices at the Company prior to the time the Grant
Shares become purchasable under this Article VI: (i) the Stock Grant Agreement
for the Grant Shares, duly signed by the Recipient; (ii) a Consent of Spouse
from the spouse of the Recipient, if any, duly signed by such spouse; (iii)
subject to Article VIII relating to non-cash form of consideration, payment in
full of the Stock Grant Purchase Price (where payment thereof is required),
together with payment in satisfaction of any applicable Withholding Taxes
(collectively, the "Gross Stock Grant Purchase Price"), in immediately available
funds, in U.S. dollars; provided, however, the Plan Administrator may, in its
sole discretion, permit a delay in payment of the Gross Stock Grant Purchase
Price for a period of up to thirty (30) days; (iv) such documents,
representations and undertakings as provided in the Stock Grant Agreement and/or
which the Plan Administrator, in its absolute discretion, deems necessary or
advisable pursuant to section 13.01.
6.05 Conditions to Issuance of Grant Shares. The Company shall not be
required to issue or deliver any certificate or certificates representing the
Grant Shares prior to fulfillment of all of the following conditions: (i) the
delivery of the documents described in section 6.04; (ii) the receipt by the
Company of full payment (if applicable) for such Grant Shares, together with
payment in satisfaction of any applicable Withholding Taxes; (iii) subject to
Article XIII, the satisfaction of any requirements or conditions of the
Applicable Laws; and (iv) the lapse of such reasonable period of time following
the award of the Grant Shares as the Plan Administrator may establish from
time-to-time for administrative convenience.
ARTICLE VII
FORFEITURE CONDITIONS PLACED UPON GRANT SHARES
7.01 Vesting Conditions; Forfeiture of Unvested Grant Shares. Subject to
the limitations in Article X relating to Termination Of Recipient, the Plan
Administrator may subject or condition Grant Shares granted or awarded
(hereinafter referred to as "Forfeitable Grant Shares") to such vesting
conditions based upon continued provision of services or attainment of goals
subsequent to such grant of Forfeitable Grant Shares as the Plan Administrator,
in its sole discretion, may deem appropriate and necessary, such as, by way of
example and not obligation: (i) the attainment of goals by the Recipient; (ii)
in the case of a Recipient who is an Employee, the continued provision of
employment services by such Recipient to the Company and/or to any Parent or
Subsidiary; (iii) in the case of a Recipient who is a Director, the continued
service by such Recipient as a Director to the Company and/or to any Parent or
Subsidiary; or (iv) in the case of a Recipient who is a Consultant, the
continued provision of consulting services by such Recipient to the Company
and/or to any Parent or Subsidiary, subject to the provisions set forth below.
Where vesting conditions are based upon continued performance of services to the
Company, the special rules of Article X relating to Termination Of Recipient
shall apply. In the event the Recipient does not satisfy any vesting conditions,
the Company may require the Recipient, subject to the repurchase payment terms
of section 7.02, to forfeit such unvested Forfeitable Grant Shares to the
Company. All vesting conditions imposed on the grant of Forfeitable Grant
Shares, including repurchase payment terms complying with section 7.02, shall be
set forth in a written Stock Grant Agreement, executed by the Company and the
Recipient on or before the time of the grant of such Forfeitable Grant Shares,
stating the number of said Forfeitable Grant Shares subject to such conditions,
and further specifying the vesting conditions. If no vesting conditions are
expressly provided in the underlying Stock Grant Agreement, the Grant Shares
shall not be deemed to be Forfeitable Grant Shares, and will not be subject to
forfeiture. The Plan Administrator may waive the acceleration of any vesting
conditions placed upon any Forfeitable Grant Shares should the Plan
Administrator, in its sole and absolute discretion, determine it advisable or
necessary to do so including, without limitation, in connection with any
Termination Of Recipient.
7.02 Repurchase of Forfeitable Grant Shares Which Are Forfeited.
A. Repurchase Rights and Price. In the event the Company does not waive its
right to require the Recipient to forfeit any or all of such unvested
Forfeitable Grant Shares, the Company shall be required to pay the Recipient,
for each unvested Forfeitable Grant Share which the Company requires the
Recipient to forfeit, the amount per Forfeitable Grant Share set forth in the
Stock Grant Agreement, provided, however:
(1) The repurchase price per Forfeitable Grant
Share in any event may not be less that the "original cost" (as such
term is defined below) of such Forfeitable Grant Shares to be forfeited
or, if elected by the Plan Administrator in its sole discretion and
without any obligation to do so in the underlying Stock Grant
Agreement, the "book value" (as such term is defined below) of such
Forfeitable Grant Shares to be forfeited, if higher than the original
cost; and
(2) If such vesting conditions are based upon
Termination Of Recipient as an Employee, and if the Forfeitable Grant
Shares to be forfeited were issued in reliance upon the exemption
afforded by Section 25102(o) of the California Securities Act, then,
based upon the Company's election:
(A)In the case of any Recipient other
than an Executive Officer, Director, or Consultant, the
vesting conditions for the aggregate group of Forfeitable
Grant Shares (of which the Grant Shares to be forfeited are a
part) must lapse at the rate of at least twenty percent
(20%) per year over five (5) years from the date of purchase
(i.e., 0% upon grant, 20% after one year, 40% after two years,
etc.); or
(B)The repurchase price for the
Forfeitable Grant Shares to be forfeited may not be less than
the "fair value" of such Forfeitable Grant Shares if such
price is greater than the original price per share for such
shares.
The "original cost" per Forfeitable Grant Share means the aggregate amount
originally paid to the Company by the Recipient (or his, her or its predecessor)
to purchase or acquire all of the Grant Shares to be forfeited, divided by the
total number of such shares. The amount of consideration paid by any Recipient
(or his, her or its predecessor) who originally received the Grant Shares as
compensation for services or a bonus, or otherwise without payment of
consideration in cash or property, shall be zero
The "book value" per Forfeitable Grant Share means the difference between the
Company's total assets and total liabilities as of the close of business on the
last day of the calendar month preceding the date of forfeiture, divided by the
total number of shares of Common Stock then outstanding. The book value per
Forfeitable Grant Share shall be determined by the independent certified public
accountant regularly engaged by the Company. The determination shall be
conclusive and binding and made in accordance with generally accepted accounting
principles applied on a basis consistent with those previously applied by the
Company.
B. Form of Payment. The repurchase payments to be made by the Company to a
Recipient for forfeited Forfeitable Grant Shares shall be in the form of cash or
cancellation of purchase money indebtedness with respect to the initial purchase
of said Forfeitable Grant Shares by the Recipient, if any, and must be paid no
later than ninety (90) days after the date of termination.
7.03 Restrictive Legend. Until such time as all conditions placed upon
Forfeitable Grant Shares lapse, the Plan Administrator may place a restrictive
legend on the share certificate representing such Forfeitable Grant Shares which
evidences said restrictions in such form, and subject to such stop instructions,
as the Plan Administrator shall deem appropriate and necessary, including the
following legend with respect to vesting conditions based upon continued
provision of services by the Recipient:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
FORFEITURE IN THE EVENT CERTAIN VESTING CONDITIONS BASED UPON THE
CONTINUED PROVISION OF SERVICES TO THE COMPANY BY THE HOLDER HEREOF ARE
NOT SATISFIED. THIS RISK OF FORFEITURE AND UNDERLYING VESTING
CONDITIONS ARE SET FORTH IN FULL IN THAT CERTAIN STOCK GRANT AGREEMENT
BETWEEN THE HOLDER OF THIS CERTIFICATE AND THE COMPANY DATED THE DAY OF
, , AND THAT CERTAIN 1998 IFS INTERNATIONAL, INC. STOCK PLAN DATED
APRIL ___, 1998, A COPY OF WHICH MAY BE INSPECTED BY AUTHORIZED PERSONS
AT THE PRINCIPAL OFFICE OF THE COMPANY AND ALL THE PROVISIONS OF WHICH
ARE INCORPORATED BY REFERENCE IN THIS CERTIFICATE.
The conditions shall similarly apply to any new, additional or
different securities the Recipient may become entitled to receive with respect
to such Forfeitable Grant Shares by virtue of a stock split or stock dividend or
any other change in the corporate or capital structure of the Company.
The Plan Administrator shall also have the right, should it
elect to do so, to require the Recipient to deposit the share certificate for
the Forfeitable Grant Shares with the Company or its agent, endorsed in blank or
accompanied by a duly executed irrevocable stock power or other instrument of
transfer, until such time as the conditions lapse. The Company shall remove the
legend with respect to any Forfeitable Grant Shares which become vested, and
remit to the Recipient a share certificate evidencing such vested Grant Shares.
ARTICLE VIII
NON-CASH PURCHASE CONSIDERATION
Notwithstanding section 5.06 or section 6.04, if and to the extent
expressly permitted in the underlying Stock Option Certificate or Stock Grant
Agreement (as the case may be), or if and to the extent otherwise consented to
by the Plan Administrator in writing, payment of the Gross Option Exercise Price
or the Gross Stock Grant Purchase Price (as the case may be) may be made by one
or more of the following non-cash forms of payment in lieu of cash
consideration:
(1) Shares of Common Stock owned by the Recipient
duly endorsed for transfer to the Company, with a Fair Market Value on
the date of delivery equal (i) in the case of the exercise of an
Option, to the aggregate Gross Option Exercise Price of the Option
Shares with respect to which the Option or portion thereof is thereby
exercised, or (ii) in the case of the purchase of Grant Shares, to the
Gross Stock Grant Purchase Price;
(2) The surrender or relinquishment of options (other
than with respect to the underlying Option), warrants or other rights
to acquire Common Stock held by the Recipient, with a Fair Market Value
on the date of delivery (or date of grant if permitted by the Plan
Administrator) equal (i) in the case of the exercise of an Option, to
the aggregate Gross Option Exercise Price of the Option Shares with
respect to which the Option or portion thereof is thereby exercised, or
(ii) in the case of the purchase of Grant Shares, to the Gross Stock
Grant Purchase Price;
(3) A reduction in the amount of any Company
liability to the Recipient, including any liability attributable to the
Recipient's participation in any Company-sponsored deferred
compensation program or arrangement;
(4) A full recourse promissory note bearing interest
at a rate as shall then preclude the imputation of interest under the
Code, and payable upon such terms as may be prescribed by the Plan
Administrator. The Plan Administrator shall prescribe the form of such
note and the security to be given for such note. Notwithstanding the
foregoing, no Option may be exercised by delivery of a promissory note
or by a loan from the Company if such loan or other extension of credit
is prohibited by law at the time of exercise of this Option or does not
comply with the provisions of Regulation G promulgated by the Federal
Reserve Board with respect to "margin stock" if the Company and the
Recipient are then subject to such Regulation;
(5) Any combination of the foregoing methods of
payment; and/or
(6) Such other good and valuable consideration and
method of payment for the issuance of Plan Shares to the extent
permitted by Applicable Laws.
ARTICLE IX
STOCK APPRECIATION RIGHTS
9.01 Grant. The Plan Administrator may from time to time, and subject
to the provisions of the Plan and such other terms and conditions as the Plan
Administrator may prescribe, in its sole discretion, grant to any Eligible
Person the following Stock Appreciation Rights ("SARs"): (i) in connection with
all or any part of an Option granted to such Eligible Person, either
concurrently with the grant of such underlying Option or at any time thereafter
during the term of such underlying Option (a "Tandem SAR"); or (ii)
independently of the grant of any Option to such Eligible Person (an
"Independent SAR"). The grant of an SAR shall be evidenced by a written Stock
Appreciation Rights Agreement ("SAR Agreement"), executed by the Recipient and
an authorized officer of the Company, stating: (1) if the SAR is a Tandem SAR,
the underlying Option to which the SAR relates; (2) if the SAR is an Independent
SAR, the number of Plan Shares covered by the SAR (the "SAR Shares"); (3) if the
SAR is an Independent SAR, the term of the SAR; and (4) all other material terms
and conditions of such SAR.
9.02 Tandem SARs. The following provisions apply to each grant of a
Tandem SAR:
A. The Tandem SAR shall entitle the Recipient to exercise such
Tandem SAR by surrendering to the Company unexercised a portion of the
underlying Option. The Recipient shall receive in exchange from the Company an
amount equal to the excess of (x) the aggregate Fair Market Value on the date of
exercise of the Tandem SAR of the Option Shares covered by the surrendered
portion of the underlying Option, over (y) the aggregate Option Price of the
Option Shares covered by the surrendered portion of the underlying Option.
Notwithstanding the foregoing, the Plan Administrator may place limits on the
amount that may be paid upon exercise of a Tandem SAR; provided, however, that
such limit shall not restrict the exercisability of the underlying Option;
B. When a Tandem SAR is exercised, the underlying Option, to
the extent surrendered, shall no longer be exercisable;
C. A Tandem SAR shall be exercisable only when and to the
extent that the underlying Option is exercisable, and shall expire no later than
the date on which such underlying Option expires; and
D. A Tandem SAR may only be exercised at a time when the Fair
Market Value of the Option Shares covered by the underlying Option exceeds the
exercise price of the Option Shares covered by the underlying Option.
9.03 Independent SARs. The following provisions apply to each grant of
an Independent SAR:
A. The Independent SAR shall entitle the Recipient, by
exercising the Independent SAR, to receive from the Company an amount equal to
the excess of (x) the Fair Market Value of the SAR Shares covered by exercised
portion of the Independent SAR, as of the date of such exercise, over (y) the
Fair Market Value of the SAR Shares covered by the exercised portion of the
Independent SAR, as of the date on which the Independent SAR was granted;
provided, however, that the Plan Administrator may place limits on the amount
that may be paid upon exercise of a Independent SAR; and
B. Independent SARs shall be exercisable, in whole or in part,
at such times as the Plan Administrator shall specify in the SAR Agreement.
9.04 Form of Payment. The Company's obligation arising upon the
exercise of (i) Tandem SARs shall be paid in cash; and (ii) Independent SARs
shall be paid in cash or SAR Shares, or in any combination of cash and SAR
Shares, as the Plan Administrator, in its sole discretion, may determine;
provided, however, the Plan Administrator may, in the case of the exercise of
either Tandem SARs or Independent SARS, withhold such amount of cash and, if
applicable, SAR Shares, as the Plan Administrator deems necessary to satisfy any
applicable Withholding Taxes. SAR Shares issued upon the exercise of an
Independent SAR shall be valued at their Fair Market Value as of the date of
exercise.
9.05 SAR Term; Expiration. The term of each SAR shall commence at the
grant date for such SAR as determined by the Plan Administrator, and shall
expire (unless, in the case of a Tandem SAR, an earlier expiration date is
expressly provided in the underlying SAR Agreement or another section of the
Plan including, without limitation, section 9.07), on the first business day
prior to the ten (10) year anniversary of the date of grant thereof. The Plan
Administrator may extend the term of any outstanding SAR should the Plan
Administrator, in its sole and absolute discretion, determine it advisable or
necessary to do so including, without limitation, in connection with any
Termination Of Recipient.
9.06 Exercise Date. Unless a later exercise date is expressly provided
in the underlying SAR Agreement or another section of the Plan, each SAR shall
become exercisable on the later of: (i) the date of its grant as determined by
the Plan Administrator; or (ii) the date of delivery to the Recipient, and
execution by the Company and the Recipient, of the underlying SAR Agreement
evidencing the grant of the SAR. No SAR shall be exercisable after the
expiration of its applicable term as set forth in section 9.05. Subject to the
foregoing, each SAR shall be exercisable in whole or in part during its
applicable term unless expressly provided otherwise in the underlying SAR
Agreement.
9.07 Vesting Conditions. Subject to the limitations in Article X relating
to Termination Of Recipient, the Plan Administrator may subject any SARs granted
to such vesting conditions (in addition, in the case of any Tandem SARs, to such
vesting conditions as are specified in the underlying Option) as the Plan
Administrator, in its sole discretion, determines are appropriate and necessary,
such as, by way of example and not obligation: (1) the attainment of goals by
the Recipient; (2) in the case of a Recipient who is an Employee, the continued
provision of employment services by such Recipient to the Company and/or to any
Parent or Subsidiary; (3) in the case of a Recipient who is a Director, the
continued service by such Recipient as a Director to the Company and/or to any
Parent or Subsidiary; or (4) in the case of a Recipient who is a Consultant, the
continued provision of consulting services by such Recipient to the Company
and/or to any Parent or Subsidiary. Where vesting conditions are based upon
continued performance of services to the Company, the special rules of Article X
relating to Termination Of Recipient shall apply. If no vesting is expressly
provided in the underlying SAR Agreement, the SAR shall be deemed fully vested
upon date of grant (subject, in the case of any Tandem SAR, to such vesting
conditions as are specified under the underlying Option). The Plan Administrator
may waive the acceleration of any vesting and/or expiration provision of any
outstanding SAR should the Plan Administrator, in its sole and absolute
discretion, determine it advisable or necessary to do so including, without
limitation, in connection with any Termination Of Recipient.
9.08 Manner of Exercise. An exercisable SAR, or any exercisable portion
thereof, may be exercised solely by delivery of all of the following to the
Secretary of the Company at its principal executive offices prior to the time
when such SAR (or such portion) becomes unexercisable under this Article IX: (i)
a Notice of Exercise of the SAR in the form attached to the underlying SAR
Agreement, duly signed by the Recipient or other Person then entitled to
exercise the SAR or portion thereof, stating the number of Option Shares (in the
case of a Tandem SAR) or SAR Shares (in the case of an Independent SAR) to be
exercised; (ii) a Consent of Spouse from the spouse of the Recipient, if any,
duly signed by such spouse; (iii) in the event that the SAR or portion thereof
shall be exercised by any Person other than the Recipient, appropriate proof of
the right of such person or persons to exercise the SAR or portion thereof; (iv)
such documents, representations and undertakings as provided in the SAR
Agreement and/or which the Plan Administrator, in its absolute discretion, deems
necessary or advisable pursuant to section 13.01.
9.09 Conditions to Issuance of SAR Shares. The Company shall not be
required to issue or deliver any certificate or certificates representing the
SAR Shares purchased upon exercise of any Independent SAR or any portion thereof
prior to fulfillment of all of the following conditions: (i) the delivery of the
documents described in section 9.08; (ii) the receipt by the Company of full
payment in satisfaction of any applicable Withholding Taxes; (iii) subject to
Article XIII, the satisfaction of any requirements or conditions of the
Applicable Laws; and (iv) the lapse of such reasonable period of time following
the exercise of the Independent SAR as the Plan Administrator may establish from
time-to-time for administrative convenience.
ARTICLE X
SPECIAL RULES FOR VESTING OR FORFEITURE
CONDITIONS BASED ON CONTINUED PERFORMANCE OF SERVICES
10.01 Lapse of Unvested Options, Unvested SARs, and Forfeitable Grant
Shares. Where vesting conditions are imposed upon Options or SARs, or forfeiture
conditions are imposed upon Forfeitable Grant Shares, and such conditions are
based upon continued performance of services to the Company, then, in the event
of Termination Of Recipient: (i) in the case of unvested Options, the
prospective right to purchase unvested Option Shares shall immediately lapse
upon such termination if not exercised prior thereto; (ii) in the case of
unvested SARs, the prospective right to exercise the unvested portion of such
SARs shall immediately lapse upon such termination if not exercised prior
thereto; and (iii) in the case of unvested Forfeitable Grant Shares, all such
unvested Forfeitable Grant Shares shall be immediately forfeited upon such
termination unless such forfeiture is expressly waived in writing by the
Company; provided, however, in each of the foregoing cases, the Plan
Administrator may, but without any obligation to do so, provide in the
underlying Award Agreement that such unvested Options, SARs or Forfeitable Grant
Shares shall immediately vest upon the occurrence of one or more of the
following events as selected by the Plan Administration in its sole and absolute
discretion: (1) in the event of Termination of Recipient where such termination
is made by the Recipient and constitutes Termination By Recipient For Good
Reason; (2) in the event of Termination of Recipient where such termination is
made by the Company but does not constitute Termination By Company For Cause;
and/or (3) in the event of Termination of Recipient due to his or her death or
Disability.
10.02 Immediate Vesting of Unvested Options, Unvested SARs, and Forfeitable
Grant Shares Upon Specified Events. The Plan Administrator may, but without any
obligation to do so, provide in the underlying Award Agreement that unvested
Options, SARs or Forfeitable Grant Shares shall immediately vest upon the
occurrence of one or more of the following events as selected by the Plan
Administration in its sole and absolute discretion: (i) in the event of a Change
In Control; and/or (ii) in the event of an Approved Corporate Transaction.
10.03 Acceleration of Expiration Date - Vested Options and SARs. Where
vesting conditions are imposed upon Options or SARs, and such conditions are
based upon continued performance of services to the Company, then, in the event
of Termination Of Recipient, unless otherwise expressly waived or extended by
the underlying Award Agreement, the following rules shall apply:
(1) The expiration date for vested Options and vested
SARs shall be accelerated to thirty (30) days after the effective date
of Termination Of Recipient (but not less than six (6) months in the
event of the Recipient's death or Disability with respect to an Option
granted pursuant to the exemption afforded by Section 25102(o) of the
California Securities Act and Regulation 260.140.41(g) promulgated
thereunder); provided, however, the Plan Administrator may, but without
any obligation to do so, provide in the underlying Award Agreement that
the expiration date for vested Options or vested SARs shall not be
accelerated in any event, or be accelerated to a date later than said
thirty (30) days after the effective date of Termination Of Recipient,
in any of the following events as selected by the Plan Administration
in its sole and absolute discretion: (i) in the event of Termination of
Recipient where such termination is made by the Recipient and
constitutes Termination By Recipient For Good Reason; (ii) in the event
of Termination of Recipient where such termination is made by the
Company but does not constitute Termination By Company For Cause;
and/or (iii) in the event of Termination of Recipient due to his or her
death or Disability.
(2) The expiration date for unvested Options and
unvested SARs (insofar as they do not become immediately vested
pursuant to section 10.02)) shall be upon Termination Of Recipient if
earlier than the expiration date specified in section 5.03 in the case
of an Option and section 9.05 in the case of an SAR.
ARTICLE XI
ASSIGNABILITY OF CERTAIN AWARDS
11.01 Exercise of Options and SARs. Options and SARs (whether vested or
unvested) may be exercised only by the original Recipient thereof or, to the
extent a Transfer is permitted pursuant to section 11.02 and/or section 11.03
below, by a permitted transferee of such Options or SARs.
11.02 Transfer of Options, SARs and Unvested Forfeitable Grant Shares.
Except as provided in section 11.03 below, neither Options and SARs (whether
vested or unvested), nor unvested Forfeitable Grant Shares, may be Transferred
by a Recipient, including upon the Death of a Recipient and/or pursuant to a
Qualified Domestic Relations Order as defined by Section 414(p) of the Code,
unless (A) such Transfer is expressly permitted in the underlying Award
Agreement, or (B) the Plan Administrator, in its sole and absolute discretion,
otherwise consents to such Transfer in writing; provided, however, anything in
the preceding sentence to the contrary notwithstanding, the following Options
may not in any circumstances be Transferred:
A. Incentive Options, except to the extent such Transfer (if
otherwise permitted under the terms of the Stock Option Certificate or by the
Plan Administrator) will not violate Section 422(b)(5) of the Code (i.e., any
Transfer {including Transfers pursuant to Qualified Domestic Relations Orders}
other than Transfers to a deceased Recipient's successors pursuant to will or
the laws of descent or distribution by reason of the death of the Recipient );
B. Options granted pursuant to the exemption afforded by
Section 25102(o) of the California Securities Act, except to the extent such
Transfer (if otherwise permitted under the terms of the Stock Option Certificate
or by the Plan Administrator) will not violate Section 25102(o) (i.e., any
Transfer {including Transfers pursuant to Qualified Domestic Relations Orders}
other than Transfers to a deceased Recipient's successors pursuant to will or
the laws of descent or distribution by reason of the death of the Recipient);
C. Options registered under the Securities Act with the
Commission on Form S-8; and/or
D. Options granted pursuant to any other exemption from
registration or qualification to be relied upon by the Company under applicable
Securities Laws which prohibits such assignment.
11.03 Death of Recipient. Upon the death of the Recipient (if the Recipient
is a natural Person, vested Options, vested SARs and unvested Forfeitable Grant
Shares may, if such Transfer is expressly permitted in the underlying Award
Agreement, or if the Plan Administrator, in its sole and absolute discretion,
otherwise consents to such Transfer in writing, be Transferred to such Persons
who are the deceased Recipient's successors pursuant to will or the laws of
descent or distribution by reason of the death of the Recipient (the
"Recipient's Successors") and, in the case of vested Options, and vested SARs,
may thereafter be exercised by the Recipient's Successors. Options, SARs and
unvested Forfeitable Grant Shares so Transferred shall not be further
Transferred by the Recipient's Successors except to the extent the original
Recipient of such Options, SARs and unvested Forfeitable Grant Shares would have
been permitted to Transfer such Options and SARs pursuant to section 11.02.
11.04 Effect of Prohibited Transfer or Exercise. Any Transfer or
exercise of any Option or SAR or unvested Forfeitable Grant Share so Transferred
in violation of this Article XI shall be null and void ab initio and of no
further force and effect.
11.05 Application to Vested Grant Shares. Under no circumstances shall
the prohibition against Transfer contained in this Article XI be construed to
apply to vested Grant Shares.
ARTICLE XII
NO STOCKHOLDER RIGHTS FOR HOLDERS OF OPTIONS OR SARs
The Recipient of any Option or SAR (whether vested or unvested) shall
not be, nor have any of the rights or privileges of, a stockholder of the
Company with respect to the Option Shares underlying the Option or SAR Shares
underlying the SAR including, by way of example and not limitation, the right to
vote for the election of directors or upon any matter submitted to stockholders
at any meeting thereof, or to give or withhold consent to any corporate action,
or to receive notice of meetings or other actions affecting stockholders, or to
receive dividends, distributions, subscription rights or otherwise, unless and
until all conditions for exercise of the Option or SARs shall be satisfied, and
the Option or SAR duly exercised and underlying Option Shares or SAR Shares duly
issued and delivered, at which time the Recipient shall become a stockholder of
the Company with respect to such issued Option Shares or SAR Shares and, in such
capacity, shall thereafter be fully entitled to receive dividends (if any are
declared and paid), to vote, and to exercise all other rights of a stockholder
with respect to such issued Option Shares or SAR Shares.
ARTICLE XIII
COMPLIANCE WITH APPLICABLE SECURITIES LAWS
13.01 Registration or Exemption from Registration. Unless expressly
stipulated in the underlying Award Agreement, in no event shall the Company be
required at any time to register any securities issued under or derivative from
the Plan, including any Option, Option Shares, Grant Shares or SAR Shares
awarded or granted hereunder (the "Plan Securities"), under the Securities Act
(including, without limitation, as part of any primary or secondary offering, or
pursuant to Form S-8) or to register or qualify the Plan Securities under any
applicable Securities Laws. In the event the Company does not register or
qualify the Plan Securities, the Plan Securities shall be issued in reliance
upon such exemptions from registration or qualification under the applicable
Securities Laws that the Company and its legal counsel, in their sole
discretion, shall determine to be appropriate and necessary with respect to any
particular offer or sale of securities under the Plan including, without
limitation:
A. In the case of applicable federal Securities Laws, any of
the following if available: (1) Section 3(a)(11) of the Securities Act for
intrastate offerings and Rule 147 promulgated thereto; (2) Section 3(b) of the
Securities Act for limited offerings and Rule 701 promulgated thereto and/or
Rules 504 and/or 505 of Regulation D promulgated thereto, and/or (3) Section
4(2) of the Securities Act for private offerings and Rule 506 of Regulation D
promulgated thereto; and
B. In the case of applicable Blue Sky Laws, the requirements
of any applicable exemptions from registration or qualification afforded by such
Blue Sky Laws including, in the case of a Recipient residing in the State of
California, the exemptions afforded by Sections 25102(f) or 25102(o).
13.02 Failure or Inability to Obtain Regulatory Consents or Approvals.
In the event the Company is unable to obtain, without undue burden or expense,
such consents or approvals that may be required from any applicable regulatory
authority (or may be deemed reasonably necessary or advisable by legal counsel
for the Company) with respect to the applicable exemptions from registration or
qualification under the applicable Securities Laws which the Company is
reasonably relying upon, the Company shall have no obligation under this
Agreement to issue or sell the Plan Securities until such time as such consents
or approvals may be reasonably obtained without undue burden or expense, and the
Company shall be relieved of all liability therefor; provided, however, the
Company shall, if requested by the Recipient, rescind the Recipient's investment
decisions and return all funds or payments made by the Recipient to the Company
should the Company fail to obtain such consents or approvals within a reasonable
time after the Recipient tenders such funds or property to the Company.
13.03 Provision of Other Documents, Including Recipient's
Representative's Letter. If requested by the Company, the Recipient shall
provide such further representations or documents as the Company or its legal
counsel, in their reasonable discretion, deem necessary or advisable in order to
effect compliance with the conditions of any and all of the aforesaid exemptions
from registration or qualification under the applicable Securities Laws which
the Company is relying upon, or with all applicable rules and regulations of any
applicable securities exchanges or Nasdaq. If required by the Company, the
Recipient shall provide a Recipient's Representative's Letter from a purchaser
representative with credentials reasonably acceptable to the Company to the
effect that such purchaser representative has reviewed the Recipient's proposed
investment in the Plan Securities and has determined that an investment in the
Plan Securities: (i) is appropriate in light of the Recipient's financial
circumstances, (ii) that the purchaser representative and, if applicable, the
Recipient, have such knowledge and experience in financial and business matters
that such persons are capable of evaluating the merits and risks of an
investment in the Plan Securities, and (iii) that the purchaser representative
and, if applicable, the Recipient, have such business or financial experience to
be reasonably assumed to have the capacity to protect the Recipient's interests
in connection with the purchase of the Plan Securities.
13.04 Legend on Plan Shares. In the event the Company delivers
unregistered Plan Shares, the Company reserves the right to place the following
legend or such other legend as it deems necessary on the share certificate or
certificates to comply with the applicable Securities Laws being relied upon by
the Company.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN (1)
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED,
IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION AFFORDED BY SUCH ACT
INCLUDING, WITHOUT LIMITATION, RULE 701 TO SECTION 3(b) OF THE
SECURITIES ACT OF 1933, OR (2) REGISTERED OR QUALIFIED, AS THE CASE MAY
BE, UNDER THE SECURITIES LAWS OF ANY STATE OR TERRITORY OF THE UNITED
STATES OR PROVINCE OF CANADA WHICH MAY BE APPLICABLE, IN RELIANCE UPON
AN EXEMPTION FROM REGISTRATION OR QUALIFICATION, AS THE CASE MAY BE,
AFFORDED BY SUCH STATE OR TERRITORIAL SECURITIES LAWS. [[for Recipients
residing in California: INCLUDING, WITHOUT LIMITATION, [[SECTION
25102(f)]] [[SECTION 25102(o)]] OF THE CALIFORNIA CORPORATE SECURITIES
LAW OF 1968, AS AMENDED]]. THESE SECURITIES HAVE BEEN ACQUIRED FOR THE
HOLDER'S OWN ACCOUNT FOR INVESTMENT PURPOSES AND NOT WITH A VIEW FOR
RESALE OR DISTRIBUTION. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED
UNLESS (A) THEY HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933 AS WELL AS UNDER THE SECURITIES LAWS OF ANY STATE OR
TERRITORY OF THE UNITED STATES AS MAY THEN BE APPLICABLE, OR (B) THE
TRANSFER AGENT (OR THE COMPANY IF THEN ACTING AS ITS TRANSFER AGENT) IS
PRESENTED WITH EITHER A WRITTEN OPINION SATISFACTORY TO COUNSEL FOR THE
COMPANY OR A NO-ACTION OR INTERPRETIVE LETTER FROM THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION AND ANY APPLICABLE STATE OR
TERRITORIAL SECURITIES REGULATORY AGENCY TO THE EFFECT THAT SUCH
REGISTRATION OR QUALIFICATION, AS THE CASE MAY BE, IS NOT REQUIRED
UNDER THE CIRCUMSTANCES OF SUCH SALE OR TRANSFER.
ARTICLE XIV
REPORTS TO RECIPIENTS OF AWARDS
14.01 Financial Statements. The Company shall provide each Recipient with the
Company's financial statements at least annually. 14.02 Incentive Stock Option
Reports. The Company shall provide, with respect to each holder of an Incentive
Option who has exercised such Incentive Option, on or before January 31st of the
year following the year of exercise of such Incentive Option, a statement
containing the following information: (i) the Company's name, address, and
taxpayer identification number; (ii) the name, address, and taxpayer
identification number of the Person to whom Option Shares were issued by the
Company upon exercise of the Incentive Option; (iii) the date the Incentive
Option was granted; (iv) the date the Option Shares underlying the Incentive
Option were issued pursuant to the exercise of the Incentive Option; (v) the
Fair Market Value of the Option Shares on date of exercise; (vi) the number of
Option Shares issued upon exercise of the Incentive Option; (vii) a statement
that the Incentive Option was an incentive stock option; and (viii) the total
cost of the Option Shares.
ARTICLE XV
ADJUSTMENTS
15.01 Common Stock Recapitalization or Reclassification; Combination or
Reverse Stock Split; Forward Stock Split. If (i) outstanding shares of Common
Stock are subdivided into a greater number of shares by reason of
recapitalization or reclassification, (ii) a dividend in Common Stock shall be
paid or distributed in respect of the Common Stock, then the number of Plan
Shares, if any, available for issuance under the Plan, and the Option Price of
any outstanding Options in effect immediately prior to such subdivision or at
the record date of such dividend shall, simultaneously with the effectiveness of
such subdivision or immediately after the record date of such dividend, be
proportionately increased and reduced, respectively. If outstanding shares of
Common Stock are combined into a lesser number of shares by reason of
combination or reverse stock split, then the number of Plan Shares, if any,
available for issuance under the Plan, and the Option Price of any outstanding
Option in effect immediately prior to such combination shall, simultaneously
with the effectiveness of such combination, be proportionately reduced and
increased, respectively.
15.02 Consolidation or Merger; Exchange of Securities; Divisive
Reorganization; Other Reorganization or Reclassification. In case of (i) the
consolidation, merger, combination or exchange of shares of capital stock with
another entity, (ii) the divisive reorganization of the Company (i.e., split-up,
spin-off or split-off), or (iii) any capital reorganization or any
reclassification of Common Stock (other than a recapitalization or
reclassification described above in section 15.01), the Recipient shall
thereafter be entitled upon exercise of the Option to purchase the kind and
number of shares of capital stock or other securities or property of the Company
(or its successor{s}) receivable upon such event by a Recipient of the number of
Option Shares which such Option entitles the Recipient to purchase from the
Company immediately prior to such event. In every such case, the Company may
appropriately adjust the number of Option Shares which may be issued under the
Plan, the number of Option Shares subject to Options theretofore granted under
the Plan, the Option Price of Options theretofore granted under the Plan, and
any and all other matters deemed appropriate by the Plan Administrator.
15.03 Adjustments Determined in Sole Discretion of Board. All
adjustments to be made pursuant to the foregoing subsections shall be made in
such manner as the Plan Administrator shall deem equitable and appropriate, the
determination of the Plan Administrator shall be final, binding and conclusive.
15.04 No Other Rights to Recipient. Except as expressly provided in
this Article XV: (i) the Recipient shall have no rights by reason of any
subdivision or consolidation of shares of capital stock of any class or the
payment of any stock dividend or any other increase or decrease in the number of
shares of stock of any class, and (ii) the dissolution, liquidation, merger,
consolidation or divisive reorganization or sale of assets or stock to another
corporation (including any Approved Corporate Transactions), or any issue by the
Company of shares of capital stock of any class, or warrants or options or
rights to purchase securities (including securities convertible into shares of
capital stock of any class), shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of, or the Option Price for,
the Option Shares. The grant of an Award pursuant to the Plan shall not in any
way affect or impede the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge, consolidate, dissolve or liquidate, or to sell or
transfer all or any part of its business or assets.
ARTICLE XVI
APPROVED CORPORATE TRANSACTIONS -- AFFECT ON OPTIONS
Notwithstanding Article XV above, in the event of the occurrence of any
Approved Corporate Transaction, or in the event of any change in applicable
laws, regulations or accounting principles, the Plan Administrator in its
discretion is hereby authorized to take any one or more of the following actions
whenever the Plan Administrator determines that such action is appropriate in
order to facilitate such Approved Corporate Transactions or to give effect to
changes in laws, regulations or principles:
16.01 Purchase or Replacement of Option. In its sole and absolute
discretion, and on such terms and conditions as it deems appropriate, the Plan
Administrator may provide, either by the terms of the underlying Award Agreement
or by action taken prior to the occurrence of such transaction or event and
either automatically or upon the Recipient's request, for any one or combination
of the following: (1) the purchase of any such Option for an amount of cash
equal to the amount that could have been attained upon the exercise of such
Option, or realization of the Recipient's rights had such Option been currently
exercisable or payable or fully vested; and/or (ii) the replacement of such
Option with other rights or property (which may or may not be securities)
selected by the Plan Administrator in its sole discretion.
16.02 Acceleration of Vesting and Exercise. In its sole and absolute
discretion, and on such terms and conditions as it deems appropriate, the Plan
Administrator may provide, either by the terms of the underlying Award Agreement
or by action taken prior to the occurrence of such transaction or event, that
such Option may not be exercised after the occurrence of such event; provided,
however, the Recipient must be given the opportunity, for a specified period of
time prior to the consummation of such transaction, to exercise the Option as to
all Option Shares (i.e., both fully vested and unvested) covered thereby.
16.03 Assumption or Substitution. In its sole and absolute discretion,
and on such terms and conditions as it deems appropriate, the Plan Administrator
may provide, either by the terms of the underlying Award Agreement or by action
taken prior to the occurrence of such transaction or event, that such Option be
assumed by the successor or survivor corporation, or a parent or subsidiary
thereof, or shall be substituted for by similar options covering the capital
stock of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares and
prices.
ARTICLE XVII
CERTAIN TRANSACTIONS WITHOUT CHANGE IN
BENEFICIAL OWNERSHIP -- AFFECT ON OPTIONS
Notwithstanding Article XV above, in the event of a transaction whose
principal purpose is to change the State in which the Company is incorporated,
or to form a holding company, or to effect a similar reorganization as to form
of entity without change of beneficial ownership, including, without limitation,
through: (i) a merger or consolidation or stock exchange or divisive
reorganization (i.e., spin-off, split-off or split-up) or other reorganization
with respect to the Company and/or its stockholders, or (ii) the sale, transfer,
exchange or other disposition by the Company of its assets in a single or series
of related transactions, then the Plan Administrator may provide, in its sole
and absolute discretion, and on such terms and conditions as it deems
appropriate, either by the terms of the underlying Award Agreement or by action
taken prior to the occurrence of such transaction or event, that such Option
shall be assumed by the successor or survivor corporation, or a parent or
subsidiary thereof, or shall be substituted for by similar options covering the
capital stock of the successor or survivor corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number and kind of
shares and prices.
ARTICLE XVIII
AMENDMENT AND DISCONTINUATION OF PLAN; MODIFICATION OF AWARDS
18.01 Amendment, Modification or Termination of Plan. The Board may
amend or modify the Plan or suspend or discontinue the Plan at any time or from
time-to-time; provided, however, (i) no such action may adversely alter or
impair any Award previously granted under the Plan without the consent of each
Recipient affected thereby, and (ii) no action of the Board will cause Incentive
Options granted under the Plan not to comply with Section 422 of the Code unless
the Board specifically declares such action to be made for that purpose.
18.02 Modification of Terms of Outstanding Options. Subject to the
terms and conditions and within the limitations of the Plan, the Plan
Administrator may modify the terms and conditions of any outstanding Options
granted under the Plan, including extending the expiration date of such Options
or renewing such Options or repricing such options or modifying any vesting
conditions (but only, in the case of Incentive Options, to the extent permitted
under Section 422 of the Code), or accept the surrender of outstanding Options
(to the extent not theretofore exercised) and authorize the granting of new
Options in substitution therefor (to the extent not theretofore exercised);
provided, however, no modification of any outstanding Option may, without the
consent of the Recipient affected thereby, adversely alter or impair such
Recipients rights under such Option.
18.03 Modification of Vesting Conditions Placed on Forfeitable Grant
Shares. Subject to the terms and conditions and within the limitations of the
Plan, including vesting conditions, the Plan Administrator may modify the terms
and conditions placed upon the grant of any Forfeitable Grant Shares; provided,
however, no modification of any conditions placed upon Forfeitable Grant Shares
may, without the consent of the Recipient thereof, adversely alter or impair
such Recipient's rights with respect to such Forfeitable Grant Shares.
18.04 Compliance with Laws. The Plan Administrator may, at any time or
from time-to-time, without receiving further consideration from, or paying any
consideration to, any Person who may become entitled to receive or who has
received the grant of an Award hereunder, modify or amend Awards granted under
the Plan as required to: (i) comport with changes in securities, tax or other
laws or rules, regulations or regulatory interpretations thereof applicable to
the Plan or Awards thereunder or to comply with the rules or requirements of any
stock exchange or Nasdaq and/or (ii) ensure that the Plan is and remains exempt
from the application of any participation, vesting, benefit accrual, funding,
fiduciary, reporting, disclosure, administration or enforcement requirement of
either the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the corresponding provisions of the Internal Revenue Code of 1986,
as amended (Subchapter D of Title A, Chapter 1 of the Code {encompassing
Sections 400 to 420 of the Code}).
ARTICLE XIX
MISCELLANEOUS
19.01 Performance on Business Day. In the event the date on which a
party to the Plan is required to take any action under the terms of the Plan is
not a business day, the action shall, unless otherwise provided herein, be
deemed to be required to be taken on the next succeeding business day.
19.02 Employment Status. In no event shall the granting of an Award be
construed to: (i) grant a continued right of employment to a Recipient if such
Person is employed by the Company and/or by the Parent and/or any Subsidiary, or
(ii) affect, restrict or interfere with in any way any right the Company and/or
Parent and/or any Subsidiary may have to terminate or otherwise discharge the
employment and/or engagement of such Person, at any time, with or without cause,
except to the extent that such Person and the Company and/or Parent and/or any
Subsidiary may have otherwise expressly agreed in writing. Unless otherwise
expressly agreed in writing, the application and/or construction of the terms
Termination By Company For Cause, Termination By Recipient For Good Reason and
Termination Of Recipient are solely intended for, and shall be limited to, the
operation of the vesting and expiration provisions of Awards granted under this
Plan, and governing Award Agreements, and not for any other purpose.
19.03 Non-Liability For Debts; Restrictions Against Transfer. No
Options or unvested Forfeitable Grant Shares granted hereunder, or any part
thereof, (i) shall be liable for the debts, contracts, or engagements of a
Recipient, or such Recipient's successors in interest as permitted under this
Plan, or (ii) shall be subject to disposition by transfer, alienation, or any
other means whether such disposition be voluntary or involuntary or by operation
of law, by judgment, levy, attachment, garnishment, or any other legal or
equitable proceeding (including bankruptcy), and any attempted disposition
thereof shall be null and void ab initio and of no further force and effect.
19.04 Relationship Of Plan To Other Options And Compensation Plans. The
adoption of this Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Parent or Subsidiary. Nothing in this Plan
shall be construed to limit the right of the Company to: (i) establish any other
forms of incentives or compensation for Employees and/or Directors of the
Company and/or of any Parent and/or any Subsidiary and/or to any Consultants to
the Company and/or to any Parent and/or any Subsidiary; or (ii) to grant options
to purchase shares of Common Stock or to award shares of Common Stock or grant
any other securities or rights otherwise under this Plan in connection with any
proper corporate purpose including but not by way of limitation, in connection
with the acquisition by purchase, lease, merger, consolidation or otherwise, of
the business, stock or assets of any corporation, partnership, firm or
association.
19.05 Severability. If any term or provision of this Plan or the
application thereof to any person or circumstance shall, to any extent, be
determined to be invalid, illegal or unenforceable under present or future laws,
then, and in that event: (i) the performance of the offending term or provision
(but only to the extent its application is invalid, illegal or unenforceable)
shall be excused as if it had never been incorporated into this Plan, and, in
lieu of such excused provision, there shall be added a provision as similar in
terms and amount to such excused provision as may be possible and be legal,
valid and enforceable; and (ii) the remaining part of this Plan (including the
application of the offending term or provision to persons or circumstances other
than those as to which it is held invalid, illegal or unenforceable) shall not
be affected thereby, and shall continue in full force and effect to the fullest
extent provided by law.
19.06 Headings; References; Incorporation; Gender; Statutory
References. The headings used in this Plan are for convenience and reference
purposes only, and shall not be used in construing or interpreting the scope or
intent of this Plan or any provision hereof. References to this Plan shall
include all amendments or renewals thereof. All cross-references in this Plan,
unless specifically directed to another agreement or document, shall be
construed only to refer to provisions within this Plan, and shall not be
construed to be referenced to the overall transaction or to any other agreement
or document. Any Exhibit referenced in Plan shall be construed to be
incorporated in this Plan by such reference. As used in this Plan, each gender
shall be deemed to include the other gender, including neutral genders
appropriate for entities, if applicable, and the singular shall be deemed to
include the plural, and vice versa, as the context requires. Any reference to
statutes or laws will include all amendments, modifications, or replacements of
the specific sections and provisions concerned.
19.07 Applicable Law. This Plan and the rights and remedies of each
party arising out of or relating to this Plan (including, without limitation,
equitable remedies) shall (with the exception of the Securities Laws) be solely
governed by, interpreted under, and construed and enforced in accordance with
the laws (without regard to the conflicts of law principles) of the State of New
York, as if this Plan were made, and as if its obligations are to be performed,
wholly within the State of New York.
<PAGE>
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1998 IFS INTERNATIONAL, INC. STOCK PLAN
Adopted May ___, 1998
- --------------------------------------------------------------------------------
IFS INTERNATIONAL, INC.
Rensselaer Technology Park
300 Jordan Road
Troy, New York 12180
<PAGE>
Appendix 4 to Proxy Statement
Amendment to Certificate of Determination
<PAGE>
IFS International, Inc.
Rensselaer Technology Park
300 Jordan Road
Troy, New York 12180
PROXY
The undersigned hereby appoints __________________ and ______________________,
and each of them, with power of substitution, to represent and vote on behalf of
the undersigned all of the shares of IFS International, Inc. which the
undersigned is entitled to vote at the Annual Meeting of Shareholders to be held
on Thursday, January 21, 1999, at the offices of the Company located at 300
Jordan Road, Troy, New York, and at any adjournment thereof, hereby revoking all
proxies heretofore given with respect to such stock, upon the proposals more
fully described in the notice of and proxy statement for the meeting, receipt of
which are hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS LISTED BELOW AND
ELECTION OF THE PERSONS NAMED BELOW AS DIRECTORS.
1. PROPOSAL FOR ADOPTION OF CLASSIFIED BOARD PROVISIONS AND GENERAL UPDATE OF
BYLAWS
_ FOR _ AGAINST _ ABSTAIN
2. PROPOSAL FOR ADOPTION OF STOCKHOLDERS' RIGHTS PLAN
_ FOR _ AGAINST _ ABSTAIN
3. PROPOSAL FOR APPROVAL OF 1998 IFS INTERNATIONAL, INC. STOCK PLAN
_ FOR _ AGAINST _ ABSTAIN
4. PROPOSAL TO AMEND CERTIFICATE OF DETERMINATION CONCERNING SERIES A PREFERRED
STOCK.
_ FOR _ AGAINST _ ABSTAIN
5. PROPOSAL FOR APPROVAL OF CHANGE OF CORPORATE NAME TO IFS HOLDINGS INC.
_ FOR _ AGAINST _ ABSTAIN
6. PROPOSAL FOR APPROVAL OF THE SELECTION OF URBACH KAHN & WERLIN PC AS THE
COMPANY'S INDEPENDENT AUDITORS FOR THE FISCAL YEAR ENDING APRIL 30, 1999.
_ FOR _ AGAINST _ ABSTAIN
7. ELECTION OF DIRECTORS _ FOR all nominees _ WITHHOLD AUTHORITY
listed below (except to vote for all
as marked to the nominees listed below
contrary below)
Frank A. Pascuito, David L. Hodge, Simon J. Theobald, Arnold Wells,
John P. Singleton, DuWayne J. Peterson, Per Olof Ezelius
INSTRUCTION:
To withhold authority to vote for any individual nominee, write that nominee's
name in the space provided below.)
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR ALL OF THE ABOVE-DESCRIBED PROPOSALS AND FOR ELECTION OF THE NAMED
DIRECTOR NOMINEES. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR DISCRETION UPON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
Please sign exactly a 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 President or other authorized officer. If a partnership or
limited liability company, please sign in the partnership or limited liability
company name by authorized person.
Printed Name of Shareholder
Date
Signature
Signature if held jointly
Please sign and return this proxy in the enclosed, postage-paid envelope whether
or not you attend the meeting. You may attend the meeting and void this proxy
simply by voting your shares. I G will G will not attend the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
