As filed with the Securities and Exchange Commission on July 22, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------
MARGO CARIBE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------
COMMONWEALTH OF PUERTO RICO 66-0550881
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
HIGHWAY 690, KILOMETER 5.8
VEGA ALTA, PUERTO RICO 00692
(787) 883-2570
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------
1998 STOCK OPTION PLAN
(FULL TITLE OF THE PLAN)
MICHAEL J. SPECTOR
CHIEF EXECUTIVE OFFICER
MARGO CARIBE, INC.
P.O. BOX 706
DORADO, PUERTO RICO 00646
(787) 883-2570
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
--------
COPIES TO:
IGNACIO ALVAREZ
PIETRANTONI MENDEZ & ALVAREZ
SUITE 1901, BANCO POPULAR CENTER
209 MUNOZ RIVERA AVENUE
SAN JUAN, PUERTO RICO 00918
--------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================
TITLE OF SECURITIES TO AMOUNT TO BE PROPOSED MAXIMUM OFFERING PROPOSED MAXIMUM AMOUNT OF
BE REGISTERED REGISTERED PRICE PER UNIT(1) AGGREGATE REGISTRATION
OFFERING PRICE(1) FEE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par
value ($0.001 per 200,000 shares $2.375 $475,000 $140.13
share)
===============================================================================================================
(1)Estimated solely for the purpose of calculating the registration fee on the basis of the last sales price per
share of the Common Stock on July 20, 1998, as reported by the National
Association of Securities Dealers Automated Quotation National Market System.
===============================================================================================================
</TABLE>
<PAGE>
PROSPECTUS
200,000 SHARES
COMMON STOCK, PAR VALUE $0.001 PER SHARE
MARGO CARIBE, INC.
1998 STOCK OPTION PLAN
This Prospectus of Margo Caribe, Inc., a Puerto Rico corporation (the
"Company"), pertains to shares of Common Stock, par value $0.001 per share (the
"Common Stock") of the Company issuable pursuant to the exercise of options
granted or available for future grant under its 1998 Stock Option Plan (the
"1998 Plan").
The 1998 Plan was adopted and approved by the Board of Directors and
shareholders of the Company on April 23, 1998 and May 29, 1998, respectively. As
of June 30, 1998, no options have been granted under the 1998 Plan, except for
options to acquire 10,000 shares of Common Stock automatically granted to
non-employee directors of the Company pursuant to the terms of the 1998 Plan.
All of the 200,000 shares of Common Stock issuable upon the exercise of options
available for future grant are covered by this Prospectus and constitute the
maximum number of shares which may be issued under the 1998 Plan (subject to
certain adjustments described herein). All of such shares have been registered
by the Company pursuant to a Registration Statement on Form S-8 filed with the
Securities and Exchange Commission on July 22, 1998.
----------------------------------
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
----------------------------------
THE DATE OF THIS PROSPECTUS IS JULY 22, 1998
<PAGE>
SUMMARY DESCRIPTION OF THE 1998 PLAN
The following description is only a summary of the 1998 Plan and is
qualified in its entirety by reference thereto. A copy of the Plan may be
obtained from the Company's Human Resources Department.
PURPOSE, ADOPTION AND DESCRIPTION
The purposes of the 1998 Plan are to provide the Company and its
subsidiaries with an effective means to attract and retain highly qualified
personnel as well as to provide additional incentive to employees and
non-employee directors who provide services to the Company and its subsidiaries.
The 1998 Plan was adopted and approved by the Board of Directors and by the
shareholders of the Company on April 23, 1998 and May 29, 1998, respectively.
The 1998 Plan provides for the grant of stock options intended to
qualify as "qualified stock options" ("QSOs") within the meaning of Section 1046
of the Puerto Rico Internal Revenue Code of 1994, as amended (the "Puerto Rico
Code"), as "incentive stock options" ("ISOs") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "IRC") or "non-statutory stock options"
("NSOs") not intended to meet the requirements of Section 1046 of the Puerto
Rico Code or Section 422 of the IRC. The 1998 Plan permits the granting of stock
appreciation rights ("SARs") with respect to any shares of Common Stock covered
by any option in tandem with the granting of such stock options. An aggregate of
200,000 shares (subject to certain adjustments described herein) of Common Stock
have been reserved for issuance under the 1998 Plan.
ADMINISTRATION
The 1998 Plan is administered by a Committee (the "Committee")
appointed by the Board of Directors consisting of at least two directors (who
shall be "Non-Employee Directors" as defined in Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) who, as
Non-Employee Directors of the Company, shall receive an automatic grant of stock
options to acquire 2,500 shares of Common Stock each year on the first business
day following the Company's annual meeting of shareholders. The Committee has
general authority to administer the 1998 Plan, to grant options and SARs
thereunder, subject to the ratification of the Board of Directors if such
limitation is imposed by the Board of Directors, and to perform such other
functions as may be assigned to it by the Board of Directors in connection with
the 1998 Plan, including, among other things, determining the form of option
contracts to be issued under the 1998 Plan and the terms and conditions to be
included in such option contracts and adopting from time to time such rules and
regulations as it may deem appropriate for the proper administration of the 1998
Plan. The Committee has the authority to interpret the provisions of the 1998
Plan and to make all determinations deemed necessary or advisable for its
administration. All decisions, determinations and interpretations of the
Committee, unless disapproved by the Board
2
<PAGE>
of Directors, shall be final and binding on all persons, including the Company
and holders of options granted under the 1998 Plan. The 1998 Plan is currently
administered by the Compensation Committee of the Board of Directors of the
Company, which is currently comprised of three members, Blas R. Ferraiuoli,
Frederick D. Moss and Michael A. Rubin.
ELIGIBILITY
ELIGIBLE PERSONS. Any employee or director of the Company or its
subsidiaries is eligible to receive options pursuant to the 1998 Plan. Any
person who has been granted an option may, if he is otherwise eligible, be
granted an additional option or options. The persons to whom, and the time or
times at which, options shall be granted under the 1998 Plan, and the number of
shares subject to each such option, shall be determined by the Committee in its
sole discretion. Each employee or director, by accepting an option will, if the
Committee so requires, agree to remain employed by the Company or a subsidiary
for a specified period of time.
FAIR MARKET VALUE LIMITATION WITH RESPECT TO ISOS AND QSOS. To the
extent the aggregate fair market value of the shares of Common Stock (determined
as of the date of grant) for which ISOs or QSOs are exercisable for the first
time by an employee or director during any calendar year exceeds $100,000, such
options are treated as NSOs to the extent of such excess. To the extent an
optionee holds two or more ISOs or QSOs which become exercisable for the first
time in the same calendar year, the $100,000 limitation will be applied on the
basis of the order in which those options were granted.
SHARES SUBJECT TO THE 1998 PLAN
The maximum number of shares which may be issued under the 1998 Plan is
200,000 shares of the Company's authorized but unissued Common Stock or shares
of Common Stock which have been issued and which shall have been reacquired by
the Company, subject to adjustment upon certain changes in the Company's
capitalization, such as stock splits or the payment of a stock dividend. If an
option should expire or become unexercisable for any reason without having been
exercised in full, the shares subject to the portion of the option not so
exercised will be available for subsequent grants under the 1998 Plan. The
number of shares of Common Stock for which options and SARs may be granted under
the 1998 Plan shall be reduced by the number of shares subject to an option for
which an employee or director has exercised a related SAR in accordance with the
provisions of the 1998 Plan.
TERMS AND CONDITIONS OF OPTIONS AND SARS
Subject to the provisions of the 1998 Plan, the Committee shall
determine, in its discretion, for each option (which need not be identical) the
number of shares for which the option shall be granted, the exercise price of
the option, the time or times the option is to become exercisable, the status of
the option as either a NSO, an
3
<PAGE>
ISO or a QSO, the maximum term for which the option is to remain outstanding,
and all other terms and conditions of the option. The Committee may require the
voluntary surrender of all or any portion of any option granted under the 1998
Plan as a condition precedent to a grant of a new option to such optionee.
Options granted pursuant to the 1998 Plan shall be evidenced by written option
agreements, in such form as the Committee shall approve, containing such
provisions as the Committee shall determine.
Each SAR shall be subject to the same terms and conditions as the
related option with respect to date of expiration, exercisability,
transferability, and eligibility to exercise. SARs entitle the holder to
receive, in cash only, upon exercise the difference between the option exercise
price and the fair market value of the Common Stock in lieu of exercising the
related option.
OPTION GRANTS FOR NON-EMPLOYEE DIRECTORS
The 1998 Plan provides for an automatic grant of stock options to
acquire 2,500 shares of Common Stock to non-employee directors of the Company
each year on the first business day following the Company's annual meeting of
shareholders. The exercise price of such options is equal to the Fair Market
Value of the Common Stock on the date of the grant, and such options have a term
of ten years.
EXERCISE PRICE
The per share exercise price for shares to be issued pursuant to the
exercise of options granted under the 1998 Plan shall be no less than the fair
market value per share of the Common Stock on the date of the grant of the
option, and except that as to an optionee who at the time the option is granted
owns, directly or indirectly, more than 10% of the voting power of all classes
of stock of the Company or any subsidiary, the exercise price for any ISO
granted to such optionee shall not be less than 110% of the fair market value of
the Common Stock on the date the option is granted. The fair market value per
share of the Common Stock will generally be the closing price of the Common
Stock reported on the National Association of Securities Dealers Automated
Quotation System (the "NASDAQ") on the date of grant of the option, or if no
price is reported on such day, then on the next preceding day on which such
price was reported.
TERM AND EXERCISE PERIOD OF OPTIONS AND SARS
The term of each option granted pursuant to the 1998 Plan shall be
determined by the Committee, but shall never exceed ten years; provided,
however, in the event of an ISO granted to an optionee owning, directly or
indirectly, more than 10% of the outstanding voting power of all classes of
stock of the Company or any subsidiary at the time of the option grant, such
option shall have a term not to exceed five years. Unless an option agreement
provides otherwise, all options granted are 20% exercisable after the first year
and an additional 20% is exercisable after each subsequent year. Any part
4
<PAGE>
of an option that has become exercisable shall remain exercisable until it has
been exercised in full or it terminates or expires pursuant to the terms of the
1998 Plan or the applicable option contract.
Upon the exercise of a SAR, the related option shall cease to be
exercisable as to the shares with respect to which such SAR was exercised. Upon
exercise in full of the related option, the SAR granted with respect thereto
shall terminate.
PAYMENT OF OPTION EXERCISE PRICE
Payment for shares upon exercise of stock options may be made either in
cash or, with the consent of the Committee, by exchanging shares of Common Stock
at their fair market value, or a combination of both. No shares shall be issued
on the exercise of an option unless paid for in full at the time of purchase.
Neither the Company nor any subsidiary may directly or indirectly lend money to
any individual for the purpose of assisting such individual to acquire or to
carry shares issued upon the exercise of options granted under the 1998 Plan.
PROCEDURES FOR EXERCISE
An option shall be deemed to be exercised when written notice of such
exercise has been provided by the optionee to the Company in accordance with the
terms of the option and full payment for the shares with respect to which the
option is exercised has been received by the Company. An option may not be
exercised for a fraction of a share.
Upon the expiration of an option, an attached SAR shall automatically
be deemed to be exercised in full by the employee or director and cash shall be
paid to such employee or director for the excess, if any, of the fair market
value of one share of Common Stock at the time designated for measurement over
the fair market value of such share of the date of grant of the SAR multiplied
by the number of shares with respect to which the SAR is exercised.
OPTIONS GENERALLY NON-TRANSFERABLE
OPTIONS NONTRANSFERABLE. Options granted under the 1998 Plan shall by
their terms be nontransferable by the employee or director otherwise than by
will or the laws of descent and distribution, and, during the lifetime of the
employee or director, shall be exercisable only by the employee or director. No
transfer of an option by an employee or director by will or by the laws of
descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof and a copy of the
will and/or such other evidence as the Committee may determine necessary to
establish the validity of the transfer.
5
<PAGE>
TERMINATION OF EMPLOYMENT
TERMINATION OF CONTINUOUS STATUS AS AN EMPLOYEE OR DIRECTOR. If an
optionee ceases to be an employee or director of the Company or any subsidiary
for any reason (other than by reason of death), any option or SAR held by such
optionee under the 1998 Plan, to the extent unexercised and exercisable by the
optionee on the date on which the optionee ceased to be an employee or director,
may be exercised by the optionee within 90 days after the date on which the
optionee ceased to be an employee or director, but in any event no later than
the date of expiration of the option term. In the case of a termination of
employment by the Company or any of its subsidiaries, with or without cause, the
option or SAR shall terminate as of the date of such discharge if prior to such
termination the Committee in its discretion shall determine that it is not in
the best interests of the Company that the option or SAR continue for said
90-day period.
DEATH. If an employee's employment or a director's service as a
director with the Company or a subsidiary terminates by reason of death, his or
her stock options and SARs, whether or not then exercisable, may be exercised by
the estate, heir or legatee of the optionee within one year after the optionee's
death (but not later than the date the options or SARs would otherwise expire
and only to the extent that the employee or director was entitled to exercise
the option or SAR on the date of his or her death).
RIGHTS AS A STOCKHOLDER OR AS AN EMPLOYEE OR DIRECTOR
An optionee shall have no rights as a stockholder with respect to any
shares covered by an option until the optionee becomes the holder of record of
the shares for which the option has been exercised. No adjustment shall be made
for dividends or distributions or other rights for which the record date is
prior to the date on which such optionee shall have become the holder of record
thereof, except as discussed in "Adjustments Upon Changes in Capitalization"
below. Nothing in the option shall confer upon the optionee any right to
continue in the employ of the Company or any of its subsidiaries or interfere in
any way with any right of the Company or any of its subsidiaries to terminate
the optionee's employment at any time, with or without cause.
CONDITIONS UPON ISSUANCE OF SHARES
Shares of Common Stock shall not be issued pursuant to the exercise of
an option granted under the 1998 Plan unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder (including those exempting such exercise from the operation of
Section 16(b) of the Exchange Act), the requirements of any stock exchange or
automated stock quotation upon which the shares may then be listed
6
<PAGE>
or quoted and laws governing withholding from employees for income tax purposes,
and shall be further subject to the advice of counsel for the Company with
respect to such compliance. As a condition to the exercise of an option, the
Company may, if it shall deem it necessary or desirable for any reason, require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares of Common Stock are being purchased only for
investment and without any intention to sell or distribute such shares.
DISSOLUTION, LIQUIDATION, CHANGE IN CONTROL
In the event of the dissolution or liquidation of the Company, all
outstanding options shall terminate immediately prior to the consummation of
such transaction, unless otherwise provided by the Committee. If: (1) any person
(as defined for purposes of Section 13(d) and 14(d) of the Exchange Act, but
excluding the Company, any of its wholly-owned subsidiaries, Michael J. Spector
and Margaret D. Spector or any entity controlled by the Spectors) acquires
direct or indirect ownership of 50% or more of the combined voting power of the
then outstanding securities of the Company as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise; or
(2) the shareholders of the Company approve (A) any consolidation or merger of
the Company in which the Company is not the surviving corporation (other than a
merger of the Company in which the holders of the Company's Common Stock
immediately prior to the merger have the same proportionate ownership of the
surviving corporation immediately after the merger), or (B) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the Company to an
entity which is not a wholly-owned subsidiary of the Company, then the
exercisability of each outstanding option under the 1998 Plan shall be
automatically accelerated so that each such option shall, immediately prior to
the specified effective date of any of the foregoing transactions, become fully
exercisable with respect to the total number of shares of Common Stock subject
to such option and may be exercisable for all or any portion of such shares.
Upon the consummation of any of such transactions all outstanding options under
the 1998 Plan shall, to the extent not previously exercised, terminate and cease
to be outstanding.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
Subject to any required action by shareholders of the Company, the
number of shares of Common Stock covered by each outstanding option, the number
of shares of Common Stock available for issuance under the 1998 Plan, the price
per share of Common Stock covered by each outstanding option, and the maximum
number of shares of Common Stock with respect to which options may be granted to
any employee or director in any given year, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split or the payment of a stock dividend with respect to
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt
7
<PAGE>
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Committee, whose determination in that respect shall be final and binding.
TERMINATION AND AMENDMENT OF THE 1998 PLAN
Unless sooner terminated pursuant to the terms of the 1998 Plan, the
1998 Plan will terminate on April 23, 2008. Awards granted prior to termination
of the 1998 Plan shall continue in accordance with their terms following such
termination.
The Company's Board of Directors may suspend, amend, modify or
terminate the 1998 Plan, without shareholder approval except to the extent
required by the Puerto Rico Code or the IRC to permit the granting of QSOs or
ISOs under the 1998 Plan or by the rules of any securities exchanges or
automated quotation system on which the shares of Common Stock of the Company
trade. No amendment, suspension, modification or termination of the 1998 Plan
will affect previously granted options or SARs without the optionee's consent.
The 1998 Plan may be modified or amended at any time, both
prospectively and retroactively, and in such manner as to affect QSOs or ISOs
previously granted, if such amendment or modification is necessary for the 1998
Plan and the QSOs or ISOs granted thereunder to qualify under said provisions of
the Puerto Rico Code and the IRC.
ERISA AND INTERNAL REVENUE CODE SECTION 401
The 1998 Plan is not subject to the provisions of the Employee
Retirement Income Security Act of 1974 or to Section 401(a) of the IRC.
TAX WITHHOLDING AND TAX OFFSET PAYMENTS
The Committee may require payment, or withhold payments or retain
shares of Common Stock otherwise transferable upon exercise of an option, in
order to satisfy applicable withholding tax requirements. The Committee may make
tax offset payments to assist employees or directors in paying income taxes
incurred as a result of their participation in the 1998 Plan. The amount of the
tax offset payments shall be determined by multiplying a percentage (established
by the Committee) by all or a portion of the taxable income recognized by an
employee or director upon: (i) the exercise of an NSO or a SAR; or (ii) the
disposition of shares received upon exercise of a QSO or an ISO.
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<PAGE>
TAX CONSEQUENCES
THE FOLLOWING SUMMARY IS FOR GENERAL INFORMATION ONLY AND IS NOT A
COMPREHENSIVE ANALYSIS OF APPLICABLE FEDERAL AND COMMONWEALTH OF PUERTO RICO
("COMMONWEALTH") INCOME TAX LAWS. THIS DISCUSSION IS BASED ON THE IRC AND THE
PUERTO RICO CODE AND OTHER RELEVANT AUTHORITY IN EFFECT AS OF THE DATE OF THIS
PROSPECTUS. THIS SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL AND
COMMONWEALTH INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR PARTICIPANT IN
LIGHT OF HIS OR HER OWN CIRCUMSTANCES. FURTHERMORE, NO INFORMATION IS PROVIDED
WITH RESPECT TO TAX CONSEQUENCES UNDER FOREIGN, STATE OR LOCAL LAWS (OTHER THAN
THOSE OF THE COMMONWEALTH). THIS DISCUSSION IS NOT INTENDED AS A SUBSTITUTE FOR
CAREFUL TAX PLANNING. THE FEDERAL AND COMMONWEALTH INCOME TAX LAWS ARE COMPLEX
AND INDIVIDUAL CIRCUMSTANCES MAY AFFECT THEIR APPLICATION. PARTICIPANTS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO
THEM OF THE RECEIPT AND EXERCISE OF OPTIONS AND SARS GRANTED UNDER THE 1998 PLAN
AND THE DISPOSITION OF ANY SHARES OF COMMON STOCK ACQUIRED PURSUANT TO THE
EXERCISE OF SUCH OPTIONS.
PUERTO RICO TAX CONSEQUENCES. A recipient of a QSO does not recognize
income at the time of the grant of an option. In addition, no income is
recognized at the time a QSO is exercised. On a subsequent sale or exchange of
the shares acquired pursuant to the exercise of a QSO, the optionee may have
taxable long-term or short-term capital gain or loss, depending on whether the
shares were held for more than six months, measured by the difference between
the amount realized on the disposition of such shares and his or her tax basis
in such shares. Tax basis will, in general, be the amount paid for the shares.
The Company will not be entitled to a business expense deduction in respect of
the grant of the option, the exercise thereof or the disposition of the shares.
With respect to a NSO, a recipient of a NSO does not recognize income
at the time of grant of the NSO. The difference between the fair market value of
the shares of stock on the date of exercise and the stock option exercise price
generally will be treated as compensation income upon exercise, and the Company
will be entitled to a deduction in the amount of income so recognized by the
optionee. Upon a subsequent disposition of the shares, the difference between
the amount received by the optionee and the fair market value of the shares of
stock on the option exercise date will be treated as long or short-term capital
gain or loss, depending on whether the shares were held for more than six
months.
SARs will not result in taxable income to the recipient or a tax
deduction for the Company at time of grant. The exercise of SARs will generally
result in compensation in the amount of the cash payment taxable as ordinary
income to the employee. The Company may generally claim a tax deduction in the
amount of any cash paid.
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<PAGE>
FEDERAL TAX CONSEQUENCES. GENERAL. The Company is organized under the
laws of the Commonwealth and, at the present time, it is not engaged in any
trade or business in the United States. Accordingly, it is subject generally to
a flat 30% federal income tax on its fixed or determinable, annual or periodic
income, if any, from sources within the United States. The Company would only be
entitled to claim deductions in computing its U.S. income tax liability to the
extent such deductions were directly related to any income effectively connected
with the conduct of a trade or business in the United States. Accordingly, the
limitations imposed by Section 162(m) of the IRC for compensation to certain
highly paid executives should not limit the tax deductions available to the
Company in connection with the 1997 Option Plan. For purposes of the discussion
below, some of the QSOs granted under the 1997 Option Plan may also be treated
as ISOs for purposes of Sections 421 and 422 of the IRC.
RESIDENTS OF PUERTO RICO. Recipients of stock options or SARs who are
residents of Puerto Rico during the entire taxable year and perform services for
the Company or its subsidiaries in Puerto Rico, will not have any gross income
for federal income tax purposes either in respect of (i) the grant or the
exercise of stock options or (ii) the grant of, or the receipt of cash payments
upon exercise of, SARs.
NON-RESIDENTS OF PUERTO RICO AND RESIDENTS OF PUERTO RICO WHO PERFORM
SERVICES OUTSIDE OF PUERTO Rico. In general, an optionee, who is a non-resident
of Puerto Rico or a resident of Puerto Rico who performs services outside Puerto
Rico, will not recognize taxable income upon grant or exercise of an ISO and the
Company and its subsidiaries will not be entitled to any business expense
deduction with respect to the grant or exercise of an ISO. However, upon the
exercise of an ISO, the excess of the fair market value on the date of exercise
of the shares received over the exercise price of the shares will be treated as
an adjustment to alternative minimum taxable income. In order for the exercise
of an ISO to qualify for the foregoing tax treatment, the optionee generally
must be an employee of the Company or its subsidiaries (within the meaning of
Section 422 of the IRC) from the date the ISO is granted through the date three
months before the date of exercise.
If the optionee has held the shares acquired upon exercise of an ISO
for at least two years after the date of grant and for at least one year after
the date of exercise, upon disposition of the shares by the optionee, the
difference, if any, between the sales price of the shares and the exercise price
of the option will be treated as long-term capital gain or loss. If the optionee
does not satisfy these holding period requirements, the optionee will recognize
ordinary income at the time of the disposition of the shares, generally in an
amount equal to excess of the fair market value of the shares at the time the
option was exercised over the exercise price of the option. The balance of the
gain realized, if any, will be long-term or short-term capital gain, depending
upon whether or not the shares were sold more than one year after the option was
exercised. If the optionee sells the shares prior to the satisfaction of the
holding
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<PAGE>
period requirements but at a price below the fair market value of the shares at
the time the option was exercised, the amount of ordinary income will be limited
to the amount realized on the sale over the exercise price of the option.
Subject to any limitations imposed by Section 162(m) of the IRC for federal
income tax purposes, the employee including such compensation in income and
certain reporting requirements, the Company and its subsidiaries will be allowed
a business expense deduction to the extent the optionee recognized ordinary
income. Upon any subsequent sale of the shares, the optionee will have taxable
gain or loss, measured by the difference between the amount realized on the
disposition and the tax basis of the shares (generally, the amount paid for the
shares plus the amount treated as ordinary income at the time the option was
exercised).
In general, an optionee, who is a non-resident of Puerto Rico or a
resident of Puerto Rico who performs services outside of Puerto Rico, to whom an
NSO is granted will recognize no income at the time of the grant of the option.
Upon exercise of an NSO, an optionee will recognize ordinary income in an amount
equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price of the option (or, if the optionee is subject
to restrictions imposed by Section 16 (b) of the Exchange Act, upon the lapse of
those restrictions, unless the optionee makes a special election within 30 days
after exercise to have income determined without regard to the restrictions).
Subject to any limitations imposed Section 162(m) of the IRC for federal income
tax purposes, the employee including such compensation in income and certain
reporting requirements, the Company will be entitled to a tax deduction in the
same amount. Upon a subsequent sale of the shares, the optionee will have
taxable gain or loss, measured by the difference between the amount realized on
the disposition and the tax basis of the shares (generally, the amount paid for
the shares plus the amount treated as ordinary income at the time the option was
exercised).
Upon exercise of a SAR, an optionee who is a non-resident of Puerto
Rico will recognize ordinary income in an amount equal to the cash received on
the exercise date. If it complies with applicable withholding requirements, the
Company and its subsidiaries will be entitled to a business expense deduction in
the same amount and at the same time as the optionee recognizes ordinary income.
Under the 1998 Plan, upon the occurrence of certain "change in control"
transactions involving the Company, all options then outstanding under the 1998
Plan become immediately exercisable. Under certain circumstances, compensation
payments attributable to such options may be treated as "parachute payments"
under the IRC, in which case a portion of such payments may be nondeductible to
the Company for federal income tax purposes and the recipient may be subject to
a 20% excise tax under the IRC.
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<PAGE>
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue 10,000,000 shares of Common Stock,
$0.001 par value, and 250,000 shares of Preferred Stock, $0.01 par value (the
"Preferred Stock"). The following summary of certain rights and privileges of
the Common Stock and Preferred Stock of the Company does not purport to be
complete. Statements in this summary are qualified in their entirety by
reference to the Company's Restated Certificate of Incorporation and the
amendments thereto and to the General Corporation Law of Puerto Rico.
As of June 30, 1998, there were 1,875,322 shares of Common Stock issued
and outstanding. The Common Stock is traded in the over-the-counter market on
Nasdaq Stock Market's National Market System. The holders of the Common Stock
are entitled to one vote for each share held of record on all matters submitted
to a vote of stockholders. Each share of Common Stock has the same relative
rights as, and is identical in all respects with, each other share of Common
Stock. There are no cumulative voting rights for the election of directors.
Subject to the rights of holders of any outstanding shares of Preferred
Stock, in the event of liquidation, dissolution or distribution of assets of the
Company, the holders of Common Stock are entitled to share ratably in the assets
of the Company legally available for distribution to stockholders. The Common
Stock has no redemption, conversion or sinking fund privileges.
Subject to any dividend preferences which may be established with
respect to any series of Preferred Stock, the holders of Common Stock are
entitled to receive, pro rata, dividends when and as declared by the Board of
Directors out of funds legally available therefor.
Holders of Common Stock do not have preemptive rights to subscribe for
or purchase additional securities of the Company.
ChaseMellon Shareholder Services, L.L.C., New York, New York, is the
transfer agent and registrar for the Common Stock.
The Company's Certificate of Incorporation authorizes the Board of
Directors to fix the designation, voting powers, preferences, limitations and
relative rights of any series of the Company's Preferred Stock at the time of
issuance. The holders of Common Stock may be adversely affected since preferred
stock issued in the future may be designated with special rights or preferences
by the Board of Directors over the holders of the Common Stock as to dividends,
liquidation rights, voting rights (e.g. separate class right to approve a merger
or sale of substantially all the assets of the Company) and other matters. The
issuance of Preferred Stock under certain circumstances may have the effect of
delaying, deferring or preventing a change in control of the Company.
12
<PAGE>
FEDERAL SECURITIES LAW ASPECTS
The shares of Common Stock of the Company issuable to persons
purchasing shares under the Plan have been registered under the Securities Act
of 1933, as amended (the "Act"), on a Registration Statement on Form S-8 (the
"Registration Statement"), thereby allowing the Common Stock so issued to be
freely resold or otherwise disposed of (without further registration) by anyone
purchasing stock under the Plan except for any such person who may be deemed an
"affiliate" of the Company. An "affiliate" of the Company is a person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Company. Persons deemed to
be affiliates may resell shares pursuant to Rule 144 promulgated by the
Securities and Exchange Commission or pursuant to a separate prospectus filed as
a part of the Registration Statement or pursuant to a separate registration
statement. Compliance with Rule 144 is subject to certain limitations and
requirements including limitations on the number of shares of Common Stock which
may be sold in any three-month period. In the event that a participating
employee becomes an officer or director of the Company or owner of 10% or more
of the Company's stock, the short-swing profit recovery provisions of Section
16(b) under the Securities Exchange Act of 1934 also would need to be
considered.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Company with the Securities and
Exchange Commission (the "SEC") are incorporated herein by this reference:
A. The Annual Report of the Company on Form 10-K for its
fiscal year ended December 31, 1998.
B. The Quarterly Report of the Company on Form 10-Q for
the quarter ended March 31, 1998.
C. The Current Report of the Company on Form 8-K dated
June 1, 1998.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act, subsequent to the date of this Prospectus and
prior to the filing of a post-effective amendment to the Registration Statement
on Form S-8 which indicates that all securities offered have been sold or which
deregisters all securities then remaining unsold, shall be deemed to be
incorporated by reference into this Prospectus and to be a part hereof from the
date of filing of such documents.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, a copy of any or all of the documents referred to above
which have been incorporated by reference in this Prospectus, other than
exhibits to such documents unless such exhibits
13
<PAGE>
are specifically incorporated by reference herein, and a copy of the Company's
latest Annual Report to Shareholders and other reports, proxy statements and
communications distributed to the Company's shareholders generally, upon written
or oral request of such person, to the Chief Financial Officer of Margo Caribe,
Inc., Margaret D. Spector at the address set forth below.
Questions and additional information regarding the 1998 Plan and its
administrators may be directed to the Secretary of Margo Caribe, Inc., Margaret
D. Spector at Highway 690, Km. 5.8, Vega Alta, Puerto Rico 00762, Telephone
Number: (787) 883-2570.
14
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1. The Annual Report of the Company on Form 10-K for its
fiscal year ended December 31, 1997.
2. The Quarterly Report of the Company on Form 10-Q for the
quarter ended March 31, 1998.
3. The Current Report of the Company on Form 8-K dated June 1,
1998.
4. All documents subsequently filed by the Company with the
Commission pursuant to Section 13(a),13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 and prior to the termination of this offering shall be
deemed to be incorporated by reference in this registration statement. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes of
this registration statement to the extent that a statement contained herein,
modified or superseded such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this registration statement.
ITEM 4. DESCRIPTION OF SECURITIES.
The Certificate of Incorporation of the Company authorizes a single
class of 10,000,000 shares of Common Stock, par value $0.001 per share (the
"Common Stock") and 250,000 shares of Preferred Stock, $0.01 par value (the
"Preferred Stock"). As of June 30, 1998, there were 1,875,322 shares of Common
Stock issued and outstanding and there were no shares of Preferred Stock
outstanding. As of June 30, 1998, there were outstanding options to purchase
94,250 shares of Common Stock.
The Common Stock is traded in the over-the-counter market on the
National Association of Securities Dealers Small Capital market. The holders of
the Common Stock are entitled to one vote for each share held of record on all
matters submitted to a vote of stockholders. Each share of Common Stock has the
same relative right as, and is identical in all respects with, each other share
of Common Stock. There are no cumulative voting rights for the election of
directors.
Subject to the rights of holders of any outstanding shares of Preferred
Stock, in the event of liquidation, dissolution or distribution of assets of the
Company, the holders of Common Stock are entitled to share ratably in the assets
of the Company legally available for distribution to stockholders. The Common
Stock has no redemption, conversion or sinking fund privileges.
Subject to any dividend preferences which may be established with
respect to Preferred Stock, the holders of Common Stock are entitled to receive,
pro rata, dividends when and as declared by the Board of Directors out of funds
legally available therefor.
Holders of Common Stock do not have preemptive rights to subscribe for
or purchase additional securities of the Company.
Chase Mellon Shareholder Services, L.L.C., New York, New York, is the
transfer agent and registrar for the Common Stock.
The Certificate of Incorporation authorizes the Board of Directors to
fix the designation, voting powers, preferences, limitations and relative rights
of any series of the Company's Preferred Stock at the time of issuance. The
holders of Common Stock may be adversely affected since preferred stock issued
in the future may be designated with special rights or preferences by the Board
of Directors over the holders of the Common Stock as to dividends, liquidation
rights, voting rights (e.g. separate class right to approve a merger or sale of
substantially all the assets of the Company) and other matters. The issuance of
Preferred Stock under certain circumstances may have the effect of delaying,
deferring or preventing a change in control of the Company.
II-1
<PAGE>
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
A. Article 1.02 (B) (6) of the Puerto Rico General Corporation Act (the
"PR GCA") provides that a corporation may include in its certificate of
incorporation a provision eliminating or limiting the personal liability of
members of its board of directors or governing body for breach of a director's
fiduciary duty of care. However, no such provision may eliminate or limit the
liability of a director for breaching his duty of loyalty, failing to act in
good faith, engaging in intentional misconduct or knowingly violating a law,
paying a dividend or approving a stock repurchase which was illegal, or
obtaining an improper personal benefit. A provision of this type has no effect
on the availability of equitable remedies, such as injunction or rescission, for
breach of fiduciary duty. Article Ninth of the Company's Certificate of
Incorporation contains such a provision.
B. Article 4.08 of the PR GCA authorizes Puerto Rico corporations to
indemnify their officers and directors against liabilities arising out of
pending or threatened actions, suits or proceedings to which they are or may be
made parties by reason of being directors or officers. Such rights of
indemnification are not exclusive of any other rights to which such officers or
directors may be entitled under any by-law, agreement, vote of stockholders or
otherwise. The Certificate of Incorporation of the Company provides that the
Company shall indemnify its directors, officers and employees to the fullest
extent permitted by law. The Company also maintains directors' and officers'
liability insurance on behalf of its directors and officers.
ITEM 7. EXEMPTIONS FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
*3.1 Certificate of Incorporation of the Company, as amended to
date (incorporated herein by reference to Exhibit 3.1 of the
Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (File No. 0-17224)).
*3.2 Bylaws of the Company, as amended to date (incorporated herein
by reference to Exhibit 3.2 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1997 (File No.
0-17224)).
4.1 Common Stock Certificate.
4.2 1998 Stock Option Plan.
4.3 Form of Stock Option Agreement
5 Opinion regarding legality and consent of Pietrantoni Mendez &
Alvarez.
23.1 Consent of Pietrantoni Mendez & Alvarez (included in the
opinion of counsel filed as Exhibit 5).
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Kaufman Rossin & Co.
24.1 Power of Attorney included on page II-4.
ITEM 9. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
- --------
*Previously filed
II-2
<PAGE>
1. To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
PROVIDED HOWEVER, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
2. That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
3. To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
4. That, for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Municipality of San Juan, Commonwealth of Puerto Rico, on the
22nd day of July, 1998.
MARGO CARIBE, INC.
By: /S/ MICHAEL J. SPECTOR
--------------------------------------
Michael J. Spector
Chairman of the Board, President
and Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints Michael J. Spector and Margaret D. Spector and each of them, each with
full power to act without the other, his true and lawful attorneys-in-fact and
agents, each with full power of substitution and resubstitution, for him and in
his name, place and stead in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and any registration statement relating to the same offering as this
Registration Statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto each of said attorneys-in-fact and agents
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each of said attorneys-in-fact and agents, or his substitute
or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Michael J. Spector Chairman of the Board, President, Chief July 22, 1998
- -------------------------------------------------- Executive Officer and Director
Michael J. Spector
/s/ Margaret D. Spector Secretary July 22, 1998
- -------------------------------------------------- and Director
Margaret D. Spector
/s/ Blas R. Ferraiuoli Director July 22, 1998
- --------------------------------------------------
Blas R. Ferraiuoli
/s/ Frederick D. Moss Director July 22, 1998
- --------------------------------------------------
Frederick D. Moss
/s/ Michael A. Rubin Director July 22, 1998
- --------------------------------------------------
Michael A. Rubin
/s/ Alfonso A. Ortega Vice President, Treasurer and Principal July 22, 1998
- -------------------------------------------------- Financial Officer and Accounting Officer
Alfonso A. Ortega
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- ------------
<S> <C>
3.1 -- Certificate of Incorporation of Margo Caribe, Inc., as currently in
effect (incorporated herein by reference to Exhibit 3.1 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1997
(File No. 0-17224)).
3.2 -- By-laws of Margo Caribe, Inc., as amended (incorporated herein by
reference to Exhibit 3.2 of the Company's Annual Report on Form 10-K
for the year ended December 31, 1997 (File No. 0-17224)).
4.1 -- Common Stock Certificate.
4.2 -- 1998 Stock Option Plan.
4.3 -- Form of Stock Option Agreement.
5 -- Opinion regarding legality and consent of Pietrantoni Mendez &
Alvarez.
23.1 -- Consent of Pietrantoni Mendez & Alvarez (included in the opinion of
counsel filed as Exhibit 5 thereto).
23.2 -- Consent of Deloitte & Touche LLP.
23.3 -- Consent of Kaufman Rossin & Co.
24.1 -- Power of Attorney (included on Page II-4).
</TABLE>
EXHIBIT 4.1
COMMON STOCK COMMON STOCK
NUMBER SHARES
MN 4000
INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR
THE STATE OF FLORIDA CERTAIN DEFINITIONS
THIS IS TO CERTIFY THAT CUSIP 566605 10 1
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF $.001
EACH OF THE COMMON STOCK OF
========================== MARGO NURSERY FARMS, INC. ===========================
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be held subject to all of the provisions of the Certificate of
Incorporation of the Corporation and all amendments thereof to all of which the
holder by the acceptance hereof assents. This certificate is not valid unless
countersigned by the Transfer Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated
/S/ MARGARET D. SPECTOR /S/ MICHAEL J. SPECTOR
SECRETARY PRESIDENT
[SEAL]
[NAME CHANGED TO MARGO CARIBE, INC.] [STATE OF INCORPORATION CHANGED TO
COMMONWEALTH OF PUERTO RICO]
<PAGE>
MARGO NURSERY FARMS INC.
The following abbreviations, when used in the inscriptions on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT-..........Custodian..........
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act.............
in common (State)
</TABLE>
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ____________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------SHARES
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLE CONSTITUTE AND APPOINT
- ------------------------------------------------------------------------ATTORNEY
TO TRANSFER SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH FULL
POWER OF SUBSTITUTION IN THE PREMISES.
DATED_______________________________
X_______________________________________________________
________________________________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE
NOTICE: WHATEVER.
IMPORTANT: SIGNATURE(S) MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A
REGISTERED NATIONAL STOCK EXCHANGE, OR BY A COMMERCIAL BANK OR A TRUST COMPANY.
EXHIBIT 4.2
MARGO CARIBE, INC.
1998 STOCK OPTION PLAN
EFFECTIVE APRIL 23, 1998
SECTION 1. INTRODUCTION
1.1 PURPOSE
The purposes of the Margo Caribe, Inc. 1998 Stock Option Plan
(the "Plan") is to provide Margo Caribe, Inc. (the "Corporation") and its
subsidiaries with an effective means to attract and retain highly qualified
personnel as well as to provide additional incentive to employees and directors
who provide services to the Corporation and its subsidiaries. The Plan is
expected to contribute to the attainment of these objectives by offering
selected employees and directors the opportunity to acquire stock ownership
interests in the Corporation.
1.2 CONSIDERATION TO CORPORATION FOR ISSUANCE OF OPTIONS AND
STOCK APPRECIATION RIGHTS: AGREEMENTS BY EMPLOYEES.
Each Employee by signing and accepting an Option Contract
will, if the Committee so requires, agree to remain employed by the Corporation
or a Subsidiary for a specified period of time, and the consideration to the
Corporation for the issuance of Options or Stock Appreciation Rights will be any
such employment agreements as well as the benefits to the Corporation from the
added incentive to the Employee of increased proprietorship in the Corporation.
Nothing in the Plan or in any Option Contract shall confer on any individual any
right to continue employed by the Corporation or any of its Subsidiaries or
limit the right of the Corporation or any of its Subsidiaries to terminate
Employment of an Employee at any time, with or without cause.
1.3 PLAN SUBJECT TO RATIFICATION BY SHAREHOLDERS.
The Plan shall become effective upon adoption by the Board of
Directors, provided that the Plan is approved, within one year following its
adoption by the Board of Directors, by a vote of the holders of a majority of
the shares of Common Stock entitled to vote and present in person or by proxy at
a duly held shareholders' meeting. No Option or Stock Appreciation Right under
the Plan may be granted more than 10 years after the earlier of the date the
Plan is adopted or the date the Plan is approved by the shareholders of the
Corporation, without further approval by the shareholders of the Corporation.
<PAGE>
2
1.4 LIMITATIONS ON NUMBER OF SHARES ISSUABLE UNDER THE PLAN.
Subject to the following provisions of this Section 1.4, the
aggregate number of shares of Common Stock which may be issued under the Plan
shall be limited to 200,000. The shares of Common Stock for which Options and
Stock Appreciation Rights may be granted may consist of either authorized but
unissued shares of Common Stock or shares of Common Stock which have been issued
and which shall have been heretofore or hereafter reacquired by the Corporation.
The total number of shares subject to Options and Stock Appreciation Rights
authorized under the Plan shall be subject to increase or decrease in order to
give effect to the adjustment provisions of Section 3.2 hereof or any amendment
adopted as provided in Section 4.2 hereof. If any Option or Stock Appreciation
Right granted under the Plan shall expire, terminate or be cancelled for any
reason without having been exercised in full, the corresponding number of
unpurchased shares shall again be available for purposes of the Plan. The number
of shares of Common Stock for which Options and Stock Appreciation Rights may be
granted under this Plan shall be reduced by the number of shares subject to an
Option for which an Employee has exercised a related Stock Appreciation Right in
accordance with Section 2.4, Subsection (d), hereof.
1.5 DEFINITIONS.
The following terms shall have the meanings set forth below:
(a) APPRECIATION DATE. The date designated by a grantee of a
Stock Appreciation Right for measurement of the appreciation in the value of the
Common Stock subject to the Stock Appreciation Right, which date shall not be
earlier than the date notice of such designation is received by the Secretary of
the Corporation.
(b) BOARD OR BOARD OF DIRECTORS. The Board of Directors of the
Corporation.
(c) COMMITTEE. The compensation committee or such other
committee or committees as shall be appointed by the Board of Directors to
administer the Plan pursuant to the provisions of Section 4.1 hereof.
(d) COMMON STOCK. The Corporation's presently authorized
common stock, par value $0.001 per share, except as this definition may be
modified pursuant to the provisions of Section 3.2 hereof.
<PAGE>
3
(e) DISABILITY. Complete and permanent inability by reason of
illness or accident to perform the duties of the occupation in which an Employee
was employed when such disability commenced.
(f) EMPLOYEE. Any salaried officer, common law employee or
member of the Board of Directors of the Corporation or any Subsidiary, or both.
(g) EMPLOYMENT. The rendering of services by an Employee for
the Corporation, or for any Subsidiary, or both. Whether military, government or
public service shall constitute termination of employment for purposes of this
Plan or any Option or Stock Appreciation Right granted hereunder shall be
determined in each case by the Committee in its sole discretion.
(h) FAIR MARKET VALUE. The closing price of the Common Stock
reported on the NASDAQ National Market System on the date as of which such value
is being determined or, if no price is reported on such day, then on the next
preceding day on which such price was reported, or, if at any time the Common
Stock shall not be reported on the NASDAQ National Market System, the Committee
shall determine the fair market value on the basis of available prices for such
Common Stock or in such manner as may be authorized by applicable regulations
under the PRC and the IRC.
(i) INCENTIVE STOCK OPTION. An option to purchase Common Stock
granted by the Corporation to an Employee under the Plan which satisfies the
requirements of Section 422 of the IRC.
(j) IRC. The Internal Revenue Code of 1986, as amended.
(k) QUALIFIED STOCK OPTION. An option to purchase Common Stock
granted by the Corporation to an Employee under the Plan which satisfies the
requirements of Section 1046 of the PRC.
(l) NONSTATUTORY STOCK OPTION. An option to purchase Common
Stock granted by the Corporation to an Employee under the Plan which does not
satisfy the requirements of Section 1046 of the PRC or Section 422 of the IRC.
(m) OPTION. A Qualified Stock Option, an Incentive Stock
Option or a Nonstatutory Stock Option.
(n) OPTION EXPIRATION DATE. The date on which an Option
becomes unexercisable by reason of the lapse of time or when a Nonstatutory
Stock Option otherwise becomes unexercisable.
<PAGE>
4
(o) PRC. The Puerto Rico Internal Revenue Code of 1994, as
amended.
(p) STOCK APPRECIATION RIGHT. An Employee's right to earn
additional compensation for the performance of future services, based on
appreciation in the Fair Market Value of the Common Stock pursuant to the
formula set forth in Section 2.4, Subsection (c), hereof.
(q) STOCK APPRECIATION RIGHT EXPIRATION DATE. The date on
which a Stock Appreciation Right becomes unexercisable by reason of the lapse of
time or, except in the case of a Stock Appreciation Right attached to a
Qualified Stock Option, or Incentive Stock Option, otherwise becomes
unexercisable.
(r) SUBSIDIARY. Any corporation in an unbroken chain of
corporations beginning with the Corporation if, at the time an Option is
granted, each of the corporations other than the Corporation owns stock
possessing 50% or more of the total combined voting power of all classes of
stock of one of the other corporations in such chain.
(s) The use of the singular shall also include within its
meaning the plural or vice versa.
SECTION 2. STOCK OPTIONS
2.1 GRANT AND EXERCISE OF OPTIONS.
(a) GRANT. The Committee on behalf of the Corporation may
grant Options to purchase Common Stock to Employees selected by it in its
discretion.
(b) OPTION CONTRACTS. Options and any Stock Appreciation
Rights attached thereto shall be evidenced by agreements ("Option Contracts") in
such form as the Committee shall approve containing such terms and conditions,
including the period of their exercise, whether in installments or otherwise, as
shall be contained therein, which need not be the same for all Options.
(c) OPTION PRICE. The purchase price per share of Common Stock
under each Option shall be not less than 100 percent of the Fair Market Value
per share of such Common Stock on the date the Option is granted, as determined
by the Committee. The purchase price may be subject to adjustment in accordance
with the provisions of Section 3.2 hereof.
<PAGE>
5
(d) TERM OF OPTION. The term during which each Option granted
under the Plan may be exercised shall not exceed a period of ten years from the
date of its grant.
(e) EXERCISE OF OPTIONS. Unless an Option Contract provides
otherwise, each Option granted to an Employee shall become exercisable, on a
cumulative basis, with respect to 20% of the shares of Common Stock covered
thereby on the first anniversary of the date of its grant and with respect to
100% of the shares of Common Stock covered thereby on the fifth anniversary of
the date of its grant. Any part of an Option that has become exercisable shall
remain exercisable until it has been exercised in full or it terminates or
expires pursuant to the terms of the Plan or the applicable Option Contract.
(f) OPTIONS NONTRANSFERABLE. Options granted under the Plan
shall by their terms be nontransferable by the Employee otherwise than by will
or the laws of descent and distribution, and, during the lifetime of the
Employee, shall be exercisable only by the Employee. No transfer of an Option by
an Employee by will or by the laws of descent and distribution shall be
effective to bind the Corporation unless the Corporation shall have been
furnished with written notice thereof and a copy of the will and/or such other
evidence as the Committee may determine necessary to establish the validity of
the transfer.
(g) PAYMENT. Each Option shall be exercised by delivery of a
written notice to the Corporation stating the number of whole shares of Common
Stock as to which the Option is being exercised and accompanied by payment
therefor. No shares shall be issued on the exercise of an Option unless paid for
in full at the time of purchase. Payment for shares purchased upon the exercise
of an Option shall be made in cash or, with the approval of the Committee, in
Common Stock valued at the then Fair Market Value thereof as determined by the
Committee, or by a combination of cash and Common Stock. Neither the Corporation
nor any Subsidiary may directly or indirectly lend money to any individual for
the purpose of assisting such individual to acquire or to carry shares issued
upon the exercise of Options granted under the Plan. No Employee shall have any
rights as a shareholder with respect to any share of Common Stock covered by an
Option unless and until such individual shall have become the holder of record
of such share, and except as otherwise permitted by Section 3.2 hereof, no
adjustment shall be made for dividends (ordinary or extraordinary, whether in
cash, securities or other property or distributions or other rights) in respect
of such share for which the record date is prior to the date on which such
individual shall have become the holder of record thereof.
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6
(h) INVESTMENT PURPOSE. At the time of any exercise of any
Option, the Corporation may, if it shall deem it necessary or desirable for any
reason, require the holder of the Option to represent in writing to the
Corporation that it is the intention of such holder to acquire the shares of
Common Stock being acquired for investment only and not with a view to the
distribution thereof. In such event no shares of Common Stock shall be issued to
such holder unless and until the Corporation is satisfied with the correctness
of such representation.
2.2 QUALIFIED STOCK OPTIONS AND INCENTIVE STOCK OPTIONS.
In addition to meeting the requirements of Section 2.1, each
Qualified Stock Option shall be subject to the requirements of (a) and each
Incentive Stock Option shall be subject to the requirements of (a), (b) and (c)
of this Section 2.2.
(a) ANNUAL LIMITATION OF OPTIONS WHICH MAY BE CONSIDERED
QUALIFIED STOCK OPTIONS AND/OR INCENTIVE STOCK OPTIONS. Anything else in the
Plan notwithstanding, if and to the extent that the provisions of Section 1046
of the PRC and/or Section 422 of the IRC shall so require, the aggregate Fair
Market Value (determined as of the time the Option is granted) of the shares
with respect to which Qualified Stock Options and/or Incentive Stock Options are
exercisable for the first time by any Employee during any calendar year (under
the Plan and any other plans of the Corporation and its Subsidiaries) shall not
exceed $100,000.
(b) INCENTIVE STOCK OPTIONS GRANTED TO TEN PERCENT
SHAREHOLDERS. Notwithstanding anything to the contrary contained in this Plan,
an Incentive Stock Option may not be granted to an Employee who owns, directly
or indirectly, stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Corporation or any Subsidiary
unless, at the time such Incentive Stock Option is granted, the exercise price
of such Incentive Stock Option is at least 110 percent of the Fair Market Value
of the Common Stock subject to the Incentive Stock Option, and such Incentive
Stock Option, by its terms, is not exercisable after the expiration of five (5)
years from the date of grant of such Incentive Stock Option.
(c) NOTICE. An Employee shall give prompt notice to the
Corporation of any disposition of shares acquired upon exercise of an Incentive
Stock Option if such disposition occurs within either two years after grant or
one year after the receipt of such shares by the Employee.
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7
2.3 VOLUNTARY SURRENDER AND CANCELLATION OF NONSTATUTORY
STOCK OPTIONS.
The Committee may grant to one or more holders of Nonstatutory
Stock Options, in exchange for the voluntary surrender and cancellation of such
Nonstatutory Stock Options and any corresponding Stock Appreciation Rights, new
Options having different Option prices than the Nonstatutory Stock Option prices
provided in the Nonstatutory Stock Options so surrendered and cancelled and
containing such other terms and conditions as the Committee may deem
appropriate.
2.4 STOCK APPRECIATION RIGHTS ATTACHED TO OPTIONS.
(a) GRANT. The Committee may grant a Stock Appreciation Right
with respect to any shares of Common Stock covered by any Option granted under
the Plan and such Stock Appreciation Right shall be granted only at the time of
grant of the related Option.
(b) TERMS AND CONDITIONS. Each Stock Appreciation Right shall
be subject to the same terms and conditions as the related Option with respect
to date of expiration, exercisability, transferability, and eligibility to
exercise. When a Stock Appreciation Right is granted with respect to shares of
Common Stock covered by a Qualified Stock Option, such Stock Appreciation Right
may be exercised only when the Fair Market Value of the shares of Common Stock
subject to the Option exceeds the exercise price of such Option. Any amount
payable upon the exercise of a Stock Appreciation Right shall be payable in the
form of cash only.
(c) AMOUNT OF COMPENSATION. The amount of compensation which
shall be payable to an Employee pursuant to the exercise of a Stock Appreciation
Right accompanying an Option is equal to the excess of the Fair Market Value of
one share of Common Stock on the Appreciation Date over the Fair Market Value of
such share on the date the Stock Appreciation Right was granted multiplied by
the number of Option shares with respect to which the Stock Appreciation Right
is exercised (the "spread"). The amount of compensation which shall be payable
pursuant to the exercise of a Stock Appreciation Right shall not exceed 100
percent of the spread. The cash paid upon exercise of Stock Appreciation Right
shall be reduced by such amount as the Corporation is required to withhold for
tax purposes.
(d) TERMINATION OF OPTIONS. Upon the exercise of a Stock
Appreciation Right, the related Option shall cease to be exercisable as to the
shares with respect to which such Stock
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8
Appreciation Right was exercised, and the related Option shall be considered to
have been exercised to that extent. Upon the exercise in full of the related
Option, the Stock Appreciation Right granted with respect thereto shall
terminate.
(e) AUTOMATIC EXERCISE UPON EXPIRATION. Upon the Option
Expiration Date of an Option, an attached Stock Appreciation Right shall
automatically be deemed to be exercised in full by the Employee and cash shall
be paid to such Employee for 100% of the spread. There shall be no automatic
exercise of an attached Stock Appreciation Right if the exercise price exceeds
the Fair Market Value of the Corporation's Common Stock on the Option Expiration
Date.
SECTION 3. PROVISIONS RELATING TO PLAN PARTICIPATION
3.1 TERMINATION OF EMPLOYMENT AND DEATH.
(a) OPTIONS AND STOCK APPRECIATION RIGHTS EXERCISABLE WITHIN
THREE MONTHS FOLLOWING TERMINATION OF EMPLOYMENT, DISCHARGE OR RETIREMENT.
Unless earlier terminated in accordance with its terms, an Option or Stock
Appreciation Right shall terminate ninety days after any of the following:
(i) voluntary termination of Employment by the
Employee, with or without the consent of the Corporation, or
(ii) termination of Employment by the Corporation or
any of its Subsidiaries, with or without cause, or
(iii) termination of Employment because of
Disability, retirement, or because the employing subsidiary ceased to be a
Subsidiary of the Corporation and the Employee does not, prior thereto or
contemporaneously therewith, become an Employee of the Corporation or of another
Subsidiary;
provided, that with regard to terminations of Employment pursuant to clause
(ii), the Option or Stock Appreciation Right shall terminate as of the date of
such discharge if prior to such termination the Committee in its discretion
shall determine that it is not in the best interests of the Corporation that the
Option or Stock Appreciation Right should continue for said ninety-day period.
(b) OPTIONS AND STOCK APPRECIATIONS RIGHTS EXERCISABLE WITHIN
ONE YEAR AFTER DEATH OR DISABILITY. If the holder of an Option or Stock
Appreciation Right shall die or terminate his employment due to Disability
during the term of an Option or Stock
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9
Appreciation Right, the holder or the legal representatives shall be entitled to
exercise the Option or Stock Appreciation in whole or in part, to the extent
then unexercised, at any time within one year following the death of the
Employee, but in no event after the Option Expiration Date or the Stock
Appreciation Right Expiration Date, and only to the extent that the Employee was
entitled to exercise the Option or Stock Appreciation Right on the date of his
death.
3.2 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CHANGE OF
CONTROL; DISSOLUTION.
(a) Subject to any required action by the shareholders of the
Corporation, each of (i) the number of shares of Common Stock covered by each
outstanding Option, (ii) the number of shares Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, (iii) the price per share of Common Stock covered by each such
outstanding Option, and (iv) the maximum number of shares with respect to which
Options may be granted to any Employee, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split or the payment of a stock dividend with respect to
the Common Stock or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Corporation;
provided, however, that (a) each such adjustment with respect to an Incentive
Stock Option or Qualified Stock Option shall comply with the rules of Section
424(a) of the IRC (or any successor provision) and an applicable provision of
the PRC and (b) in no event shall any adjustment be made which would render any
Qualified Stock Option granted hereunder other than a "qualified option" under
Section 1046 of the PRC or any Incentive Stock Options other than an "incentive
stock option" as defined in Section 422 of the IRC; and provided further,
however, that conversion of any convertible securities of the Corporation shall
not be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Committee, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Corporation of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) If: (1) Any person (as defined for purposes of Section 13(d) and
14(d) of the Exchange Act, but excluding the Corporation and any of its
wholly-owned subsidiaries and Michael J. Spector or Margaret D. Spector or any
entity controlled by the Spectors) acquires direct or
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10
indirect ownership of 50% or more of the combined voting power of the then
outstanding securities of the Corporation as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise; or
(2) the shareholders of the Corporation approve (A) any consolidation or merger
of the Corporation in which the Corporation is not the surviving corporation
(other than a merger of the Corporation in which the holders of Common Stock
immediately prior to the merger have the same or substantially the same
proportionate ownership of the surviving corporation immediately after the
merger), or (B) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the assets
of the Corporation to an entity which is not a wholly-owned subsidiary of the
Corporation, then the exercisability of each Option outstanding under the Plan
shall be automatically accelerated so that each Option shall, immediately prior
to the specified effective date of any of the foregoing transactions, become
fully exercisable with respect to the total number of shares subject to such
Option and may be exercisable for all or any portion of such Shares. Upon the
consummation of any of such transactions, all outstanding Options under the Plan
shall, to the extent not previously exercised, terminate and cease to be
outstanding.
(c) In the event of the proposed dissolution or liquidation of the
Corporation, all outstanding Options will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee.
SECTION 4. ADMINISTRATION
4.1 INDEPENDENT COMMITTEE TO ADMINISTER THE PLAN.
(a) COMPOSITION AND FUNCTIONS OF COMMITTEE. A Committee
consisting of at least two directors (who shall be "Non-Employee Directors" as
defined in Rule 16b-3 of the Securities and Exchange Commission) shall be
appointed by the Board of Directors and will have, subject to the express
provisions of the Plan, general authority to administer the Plan, to grant
Options and Stock Appreciation Rights thereunder, subject to the ratification of
the Board of Directors if such limitation is imposed by the Board of Directors,
and to perform such other functions as may be assigned to it by the Board of
Directors in connection with the Plan, including, among other things,
determining the form of Option Contracts to be issued under the Plan and the
terms and conditions to be included in such Option Contracts and adopting from
time to time such rules and regulations as it may deem appropriate for the
proper administration of the Plan. The Committee may also make
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11
such determinations under, and such interpretations of, and take such steps in
connection with, the Plan, the rules and regulations or Options and Stock
Appreciation Rights granted thereunder as it may deem necessary or advisable.
The Committee may, in its discretion or in accordance with a direction from the
Board of Directors, waive any provisions of any Option Contract, provided such
waiver is not inconsistent with the terms of the Plan as then in effect.
(b) AUTHORIZATION OF ACTIONS TAKEN BY THE COMMITTEE AND BOARD
OF DIRECTORS. Vacancies in the Committee shall be filled by the Board of
Directors. The Committee may act by a majority of its members either at a
meeting or in writing without a meeting. All questions arising under the Plan or
under the rules and regulations or under the Option Contracts, whether such
questions involve interpretation thereof or otherwise, shall be determined by
the Committee and its determination, unless disapproved by the Board of
Directors, shall be conclusive and binding in all cases. To the extent that any
such action would not adversely affect the status of Qualified Stock Options and
Incentive Stock Options under the PRC and IRC, respectively, all matters
provided in the Plan, in the Option Contracts, or in such rules and regulations
to be determined or performed by the Committee may be determined or performed by
the entire Board of Directors. No member of the Board of Directors or of the
Committee shall be liable for any action taken or any determination made in good
faith with respect to the Plan or any Option Contract.
(c) FINDINGS OF THE BOARD OF DIRECTORS AND COMMITTEE ARE
CONCLUSIVE. Each determination, interpretation, or other action made or taken
pursuant to the provisions of this Plan by the Board of Directors or the
Committee shall be final and shall be binding and conclusive for all purposes
and upon all persons, including, without limitation thereto, the Corporation,
the shareholders, the Committee and each of the members thereof, and the
Employee of the Corporation, and their respective successors in interest.
4.2 AMENDMENT AND DISCONTINUANCE OF THE PLAN.
The Board of Directors may at any time amend, modify, suspend
or terminate the Plan, without shareholder approval, except to the extent
required by the PRC or the IRC to permit the granting of Qualified Stock Options
or Incentive Stock Options, or by the rules of any securities exchange or
automated quotation system on which the shares of Common Stock of the
Corporation trade at such time, provided, that no change shall be made which
will have a material adverse effect upon any Option or Stock Appreciation Right
previously granted unless the consent of the affected Employee is obtained.
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12
4.3 COMPLIANCE WITH LAW AND OTHER CONDITIONS.
(a) OPTIONS AND STOCK APPRECIATION RIGHTS. Any exercise by an
Employee of an Option or Stock Appreciation Right shall be made only in
compliance with any applicable rule or regulation of the Securities and Exchange
Commission exempting such exercise from the operation of Section 16(b) of the
Securities Exchange Act of 1934 and any other applicable law, rule, regulation
or other provision that may hereafter relate to the exercise and cash settlement
rights of Stock Appreciation Rights under the Federal securities laws.
(b) GENERALLY. No shares of Common Stock shall be issued
pursuant to the exercise of any Option or Stock Appreciation Right granted under
the Plan prior to the compliance by the Corporation to the satisfaction of its
counsel with any applicable laws and with any applicable regulations of any
securities exchange on which such shares are listed.
4.4 WITHHOLDING TAXES.
Whenever shares of Common Stock are to be issued pursuant to
the Plan, the Corporation shall have the right to require that there be remitted
to the Corporation an amount sufficient to satisfy all applicable federal,
state, commonwealth and local withholding tax requirements prior to the delivery
of any certificate or certificates for such shares. The Corporation reserves the
right to satisfy the applicable federal, state, commonwealth and local
withholding tax requirements through the retention of shares of Common Stock
otherwise transferable upon exercise of an Option. Such withheld amounts shall
meet the Federal securities laws requirements set forth in Section 4.3,
Subsection (a), hereof. Whenever payments are to be made in cash, such payments
shall be net of an amount sufficient to satisfy federal, state and local
withholding tax requirements and authorized deductions.
4.5 TAX OFFSET PAYMENTS.
The Committee shall have the authority at the time of any
award under this Plan or anytime thereafter to make Tax Offset Payments to
assist Employees in paying income taxes incurred as a result of their
participation in this Plan. The Tax Offset Payments shall be determined by
multiplying a percentage established by the Committee by all or a portion (as
the Committee shall determine) of the taxable income recognized by an Employee
upon (i) the exercise of a Nonstatutory Stock Option or a Stock
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13
Appreciation Right, or (ii) the disposition of shares received upon exercise of
a Qualified Stock Option or Incentive Stock Option. The percentage shall be
established, from time to time, by the Committee at that rate which the
Committee, in its sole discretion, determines to be appropriate and in the best
interests of the Corporation to assist Employees in paying income taxes incurred
as a result of the events described in the preceding sentence. Tax Offset
Payments shall be subject to the restrictions on transferability applicable to
Options set forth in Section 2.1(f).
4.6 USE OF PROCEEDS AND FUNDING.
(a) USE OF PROCEEDS. The proceeds from the sale of Common
Stock pursuant to Options granted under the Plan shall constitute general funds
of the Corporation and may be used for its corporate purposes as the Corporation
may determine.
(b) FUNDING. No provision of the Plan shall require or permit
the Corporation, for the purpose of satisfying any obligations under the Plan,
to purchase assets or place any assets in a trust or other entity to which
contributions are made or otherwise to segregate any assets, nor shall the
Corporation maintain separate bank accounts, books, records or other evidence of
the existence of a segregated or separately maintained or administered fund for
such purposes. Employees shall have no rights under the Plan other than as
unsecured general creditors of the Corporation, except that insofar as they may
have become entitled to payment of additional compensation by performance of
services, they shall have the same rights as other employees under general law.
This Subsection shall not prevent the Corporation from purchasing its Common
Stock for the purpose of meeting its requirements to issue Common Stock pursuant
to the Plan.
4.7 OTHER.
To the extent applicable, this Plan is intended to permit the
issuance of Qualified Stock Options in accordance with the provisions of Section
1046 of the PRC and Incentive Stock Options in accordance with Section 422 of
the IRC. This Plan may be modified or amended at any time, both prospectively
and retroactively, and in such manner as to affect Qualified Stock Options or
Incentive Stock Options previously granted, if such amendment or modification is
necessary for this Plan and the Qualified Stock Options or Incentive Stock
Options granted hereunder to qualify under said provisions of the PRC and the
IRC.
EXHIBIT 4.3
STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of _____________, is made and entered into by
and between MARGO CARIBE, INC., a Puerto Rico corporation (the "Company"), and
___________________ (the "Optionee").
WITNESSETH:
WHEREAS, the Company has adopted and approved the 1998 Stock Option
Plan (the "Plan") for the purpose of providing economic incentive to the
employees and directors of the Company; and
WHEREAS, the Plan provides for the grant of qualified stock options
which meet the requirements of Section 1046 of the Puerto Rico Internal Revenue
Code of 1994, as amended, ("qualified stock options") incentive stock options
which meet the requirements of Section 422 of the Internal Revenue Code of 1986,
as amended, ("incentive stock options") and stock options not intended to
qualify as incentive stock options or qualified stock options ("non-statutory
options"); and
WHEREAS, this Agreement is executed pursuant to, and is intended to
carry out the purposes of the Plan, by granting [a qualified stock option] [an
incentive stock option] [a non-statutory stock option] to the Optionee.
NOW, THEREFORE, in consideration of the Optionee's employment by the
Company or Optionee's service as a non-employee director, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1. GRANT OF THE OPTION. Subject to and upon the terms and
conditions set forth in this Agreement and of the Plan, a copy of
<PAGE>
2
which is attached hereto as Exhibit A, the Company hereby grants to the Optionee
[a qualified stock option] [an incentive stock option] [a non-statutory stock
option] (the "Option") to purchase up to _________________ (_______) shares (the
"Option Shares") of the Company's common stock, par value $0.001 per share (the
"Common Stock"), at a price equal to $_____ per share, which is equal to the
Fair Market Value of the Common Stock, as defined in the Plan.
2. TERM. The term of the Option shall commence on the date of this
Agreement, and, subject to the provisions of Section 5 hereof, shall expire ten
(10) years from the date of this Agreement. Upon its termination, the Option
shall be of no further force and effect and shall not be exercisable to any
extent.
3. VESTING. Subject to the provisions of Section 5 of this Agreement,
the right of the Optionee to purchase the Option Shares under the Option shall
vest over a period of five (5) years at the rate of twenty percent (20%) per
year, the first twenty percent (20%) to vest on the first anniversary date of
this Agreement, and an additional twenty percent (20%) shall vest on each
subsequent anniversary date of this Agreement.
4. RESTRICTIONS ON TRANSFER. The Optionee may not transfer any of the
Optionee's rights in the Option or under this Agreement except upon the
Optionee's death. No transfer of an option by an Optionee by will or by the laws
of descent and distribution shall be effective to bind the Company unless the
Company shall have been furnished with written notice thereof and a copy of the
will and/or such other evidence as the Committee may determine necessary to
establish the validity of the transfer.
<PAGE>
3
5. TERMINATION OF OPTION ON TERMINATION OF EMPLOYMENT AND CERTAIN OTHER
EVENTS.
(a) If the Optionee's employment or service as a non-employee
director with the Company or any of its subsidiaries terminates by reason of
death, the Option shall become fully vested and may thereafter be immediately
exercised by the legal represen tative of the estate or by the legatee of the
Optionee under the will of the Optionee, for a period of one (1) year from the
date of death or until the expiration of the stated term of the Option,
whichever period is shorter.
(b) If the Optionee's employment or service as a non-employee
director with the Company or any of its subsidiaries terminates voluntarily
(with or without the consent of the Company) or by reason of Disability (as
hereinafter defined), retirement, or because the employing subsidiary ceased to
be a Subsidiary (as hereinafter defined) of the Company and the employee or
director does not, prior thereto or contemporaneously therewith, become an
employee or director of the Company or of another Subsidiary, the Option shall
become fully vested and may thereafter be exercised for a period of ninety (90)
days from the date of such termination of employment or the expiration of the
stated term of such Option, whichever period is shorter.
(c) If the Optionee's employment or service as a non-employee
director with the Company or any of its subsidiaries is terminated by the
Company or any of its subsidiaries, with or without cause, the Option may
thereafter be exercised to the extent it was exercisable at the time of
termination of employment for a period of ninety (90) days from the date of
termination of the expiration of the stated term of the option, whichever period
is shorter, provided that the Option shall terminate as of the date the Optionee
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4
ceased being an employee of the Company or any of its subsidiaries if the
Committee (as hereinafter defined) in its sole discretion shall determine that
it is not in the best interest of the Company that the option should continue
for such ninety (90) day period.
(d) For purposes of this Agreement, "Disability" shall mean
complete and permanent inability by reason of illness or accident to perform the
duties of the occupation of the employee or non-employee director when such
disability commenced, "Subsidiary" shall mean any corporation in an unbroken
chain of corporations beginning with the Company if, at the time a stock option
is granted, each of the corporations other than the Company owns stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of stock of one of the other corporations in such chain, and "Committee"
shall mean the compensation committee or such other committee or committees as
shall be appointed by the Board of Directors of the Company to administer the
Plan pursuant to the provisions of Section 4.1 therein.
6. ADJUSTMENT IN CERTAIN EVENTS.
(a) In the event of any stock dividend or stock split, the
Company (subject to any required action by the shareholders of the Company)
shall make such equitable adjustments as are necessary and appropriate to
protect the Option from dilution in the number, kind and the exercise price of
the Option Shares underlying the Option.
(b) In the event that (1) any person (as defined for purposes
of Section 13(d) and 14(d) of the Exchange Act, but excluding the Corporation,
any of its wholly-owned subsidiaries, Michael J. Spector and Margaret D. Spector
or any entity controlled by the Spectors) acquires direct or indirect ownership
of 50% or more of the combined voting power of
<PAGE>
5
the then outstanding securities of the Corporation as a result of a tender or
exchange offer, open market purchases, privately negotiated purchases or
otherwise; or (2) the shareholders of the Corporation approve (A) any
consolidation or merger of the Corporation in which the Corporation is not the
surviving corporation (other than a merger of the Corporation in which the
holders of Common Stock immediately prior to the merger have the same or
substantially the same proportionate ownership of the surviving corporation
immediately after the merger), or (B) any sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Corporation to an entity which is not a
wholly-owned subsidiary of the Corporation, then the exercisability of each
Option outstanding under the Plan shall be automatically accelerated so that
each Option shall, immediately prior to the specified effective date of any of
the foregoing transactions, become fully exercisable with respect to the total
number of shares subject to such Option and may be exercisable for all or any
portion of such Shares. Upon the consummation of any of such transactions, all
outstanding Options under the Plan shall, to the extent not previously
exercised, terminate and cease to be outstanding.
(c) In the event of the proposed dissolution or liquidation of
the Corporation, all outstanding Options will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee.
7. PRIVILEGE OF STOCK OWNERSHIP. The Optionee shall not be deemed to be
the holder of, or to have any of the rights of a shareholder with respect to,
any Option Shares unless and until the Optionee properly exercises the Option in
accordance with the requirements of Sections 8 and 9. Upon the proper exercise
of the
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6
Option, the Optionee shall have full voting and other ownership rights with
respect to the Option Shares.
8. MANNER OF EXERCISING OPTION. The Option may be exercised only as to
whole shares and only by written notice signed by the Optionee (or in the case
of exercise after Optionee's death or mental disability by Optionee's legal
representative, executor, administrator or heir or legatee, as applicable), and
mailed or delivered to the Secretary of the Company at its principal office. The
notice shall specify the number of Option Shares with respect to which the
Option is being exercised. The notice must be accompanied by payment in full for
such Shares in cash and include any representations required by Section 9. If
the Option is exercised by a person other than the Optionee, such person must
provide the Company with proof, in a form satisfactory to the Company and its
counsel, that such person has the right to exercise the Option. The Company
shall have the right to accept payment, in whole or in part, for the Option in
the form of Common Stock of the Company valued at the then Fair Market Value
thereof, at the sole discretion of the Committee.
9. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) Prior to the exercise of the Option, the Optionee shall
deliver to the Company such representations in writing as may be requested by
the Company in order to ensure that the exercise of the Option and the issuance
of the Option Shares will comply with all applicable federal and state
securities laws.
(b) The Optionee acknowledges and confirms that (i) it has
received a copy of the Prospectus relating to the Plan; (ii) it is familiar with
the business and affairs of the Company and (iii) that the granting of the
Option by the Company does not involve
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7
any representation of any kind by the Company as to it business, affairs,
earnings or assets, the tax consequences of the exercise thereof, or otherwise.
(c) If the Company shall determine, in its discretion, that it
is necessary or desirable to obtain the listing, registration or qualification
of the Option Shares upon any securities exchange or under any federal or state
law, or the consent or approval of any government regulatory body, then the
Option may not be exercised in whole or in part, and no shares may be issued
under the Option, until such listing, registration, qualification, consent or
approval is obtained free of any conditions deemed unacceptable to the Company.
10. TAXES. The Company shall have the right to require the Optionee to
pay to the Company, or to make arrangements satisfactory to the Company
regarding the payment of, any federal, state or local taxes required to be paid
or withheld with respect to the Option.
11. EMPLOYMENT. Nothing in this Agreement shall be deemed to grant any
right of continued employment to the Optionee or to limit, restrict or waive any
right of the Company to terminate the Optionee's employment at any time with or
without cause.
12. MISCELLANEOUS.
(a) ASSIGNMENT. This Agreement may not be assigned by the
Optionee without the prior written consent of the Company. This Agreement shall
be binding upon and inure to the benefit of the parties, and their successors
and assigns.
(b) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties regarding the subject matter hereof. This
Agreement supersedes all prior discussions and agree-
<PAGE>
8
ment (oral or written) between the parties with respect to the subject matter of
this Agreement. This Agreement may not be modified except in a written document
signed by both of the parties.
(c) NOTICES. All notices required or permitted under this
Agreement shall be in writing and shall be deemed to have been duly given upon
receipt if delivered in person or upon the expiration of seven (7) days after
the date of posting, if mailed by registered or certified mail, postage pre-paid
to the parties at the following addresses:
If to the Company:
Margo Caribe, Inc.
P.O. Box 706
Dorado, Puerto Rico 00646
Attention: Chief Executive Officer
If to the Optionee:
Any party may change the address to which notices to
such party shall be delivered or mailed by giving notice thereof to the other
party in the manner provided by this Section.
(d) GOVERNING LAW. The validity and effect of this Agreement
shall be governed by and construed and enforced in accordance with the laws of
the Commonwealth of Puerto Rico without regard to its principles of conflicts of
laws.
(e) WAIVER. Any term or condition of this Agreement may be
waived at any time by the party which is entitled to the benefit thereof, but
only if such waiver is evidenced by a writing signed
<PAGE>
9
by such party. No failure on the part of a party hereto to exercise, and no
delay in exercising, any right, power or remedy created hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of such right,
power or remedy by any such party preclude any other future exercise thereof or
the exercise of any other right, power or remedy. No waiver by any party hereto
to any breach of or default in any term or condition of this Agreement shall
constitute a waiver of or consent to any subsequent breach of or default in the
same or any other term or condition hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first written above.
MARGO CARIBE, INC.
By:
-------------------------------------------
Name:
Title:
OPTIONEE:
By:
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EXHIBIT 5
PIETRANTONI MENDEZ & ALVAREZ
Banco Popular Center - Suite 1901
209 Munoz Rivera Avenue
San Juan, Puerto Rico 00918
Switchboard (787) 274-1212
Telecopier (787) 274-1470
July 22, 1998
Board of Directors
Margo Caribe, Inc.
Highway 690, Kilometer 5.8
Vega Alta, Puerto Rico 00692
Dear Sirs:
As special counsel to Margo Caribe, Inc., a Puerto Rico corporation
(the "Company"), we have been requested to render this opinion for filing as
Exhibit 5 to the Company's registration statement on Form S-8, which is being
filed with the Securities and Exchange Commission (the "Registration
Statement").
The Registration Statement covers 200,000 shares (the "Shares") of
Common Stock, which may be sold by the Company upon the exercise of options to
be granted pursuant to the Company's 1998 Stock Option Plan (the "Plan") filed
as Exhibit 4.2 to the Registration Statement.
We have examined the Company's Certificate of Incorporation, the
Company's By-Laws, the Plan, and related minutes of action taken by the Board of
Directors and Stockholders of the Company and such other documents and records
as we have deemed appropriate. In the foregoing examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to originals of all documents submitted to us as
certified or reproduced copies of originals.
Based upon the foregoing, we are of the opinion that:
1. The Plan and the Shares have been duly authorized by all requisite
corporate action on the part of the Company.
2. When the Shares are sold in the manner and for the consideration
described in the Plan, the Shares will be validly issued, fully paid and
non-assessable.
<PAGE>
Margo Caribe, Inc.
July 22, 1998
Page -2-
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement. In giving the foregoing consent, we do not thereby admit
that we are within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended.
Very truly yours,
/s/ Pietrantoni Mendez & Alvarez
EXHIBIT 23.2
DELOITTE & TOUCHE LETTERHEAD
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Margo Caribe, Inc. (formerly Margo Nursery Farms, Inc.) on Form S-8 of our
report dated March 20, 1998 appearing in the Annual Report on Form 10-K of
Margo Nursery Farms, Inc. for the year ended December 31, 1997.
/s/ DELOITTE & TOUCHE LLP
- --------------------------
DELOITTE & TOUCHE LLP
San Juan, Puerto Rico
July 22, 1998
EXHIBIT 23.3
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report, dated February 25, 1997, which appears on
page F-4 of the annual report on Form 10-K of Margo Nursery Farms, Inc. for
the years ended December 31, 1996 and 1995.
/s/ KAUFMAN, ROSSIN & CO.
---------------------
KAUFMAN, ROSSIN & CO.
Miami, Florida
July 22, 1998
