FORM 10-QSB - Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] Quarterly Report pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
For the period ended: September 30, 1998
or
[ ] Transition Report Pursuance to Section 13 or 15(d)
of the Securities Exchange act of 1934.
For the transition period from to
Commission File Number 33-16820-D
ARETE INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Colorado 84-1063149
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
2305 Canyon Blvd., Suite 103, Boulder, CO 80302
(Address of principal executive offices) (Zip Code)
(303) 247-1313
(Registrant's telephone number, including area code)
TRAVIS INDUSTRIES, INC.
3415 W. Broadway, Council Bluffs, IA 51501
(Former name, former address and former fiscal
year, if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
[ X ] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court.
[ X ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of November 13, 1998, Registrant had 226,184,655 shares of common stock,
No par value, outstanding.
INDEX
Page
Number
Part I Financial Information
Item 1. Financial Statements
Balance Sheet as of September 30, 1997 2
Statements of Operations, Three Months
Ended September 30, 1997 and 1996 3
Statements of Operations, Six Months
Ended September 30, 1997 and 1996 4
Statements of Cash Flows, Three Months
Ended September 30, 1997 and 1996 5
Statements of Cash Flows, Six Months
Ended September 30, 1997 and 1996 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of Operations 9
Part II Other Information 10
Item 1. Legal Proceedings 10
Item 2. Changes In Securities 10
Item 4. Submission of Matters to a Vote of
Security Holders. 12
Item 5. Other
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
<TABLE>
<CAPTION>
ARETE INDUSTRIES, INC.
BALANCE SHEET
September 30, 1998
(Unaudited)
<S> <C>
Current Assets
Cash $ 18,921
Inentory/Supplies 14,634
Accounts receivable, net of allowance for
doubtful accounts of $102,320 $ 65,114
____________
Total Current Assets 98,669
Furniture and equipment, net of accumulated
depreciation of $305,192 18,639
Prepaid Management fees 5,417
Other Prepaid Items 25,916
Other assets 40,615
____________
Total Assets $ 189,256
Current Liabilities
Customer deposits 16,028
Accounts payable and accrued expenses 310,988
Total Current Liabilities 327,016
___________
Total Liabilities 327,016
___________
Commitments and contingencies (Notes 2) -
Stockholders' Equity:
Redeemable preferred stock - $.0001 par
value 100,000,000 shares authorized:
Series A, none issued and outstanding
-
Series B, 28,400,000 shares issued and
outstanding, (liquidation amount of
$710,000) 710,000
Common stock - No par value,
500,000,000 shares authorized;
226,184,655 shares issued and
outstanding 5,992,961
Accumulated deficit (6,840,721)
Total Stockholders' (Deficit) (137,760)
___________
Total Liabilities and Stockholders' (Deficit) $ 189,256
</table/>
The accompanying notes are an integral part of the financial statements.
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
ARETE INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
For the Three Months Ended September 30
(Unaudited)
1998 1997
<S> <C> <C>
Sales $ 531,623 $ 506,186
Cost of goods sold (exclusive of
depreciation shown separately
below) 459,911 417,625
Gross Profit 71,712 88,561
Operating Expenses
Depreciation 10,924 7,222
Bad debts (5,000) 8,000
Rent 24,520 21,500
Professional fees 45,205 -
Salaries 28,378 45,779
Other operating expenses 36,548 47,341
Total Operating Expenses 140,575 129,842
____________ ____________
Net Operating (Loss) (68,863) (41,281)
Other Income (Expenses)
Interest and miscellaneous
income 377 741
Gain on sale of investment
- -
Interest (expense) (16,040) (4,704)
Total Other (15,663) (3,963)
Net (Loss) $ (84,526) $ (45,244)
________________ _______________
Net (Loss) per Share $ nil $ nil
Weighted Average Shares Outstanding 226,184,655 127,808,864
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
<CAPTION>
ARETE INDUSTRIES, INC.
STATEMENTS OF OPERATIONS
For the Six Months Ended September 30
(Unaudited)
1998 1997
<S> <C> <C>
Sales $ 1,115,405 $ 1,107,771
Cost of goods sold (exclusive of
depreciation shown separately
below) 923,489 872,847
Gross Profit 191,916 234,924
Operating Expenses
Depreciation 21,847 14,444
Bad debts
- 20,440
Rent 46,020 43,000
Professional fees 96,543 -
Salaries 98,608 96,783
Other operating expenses 83,120 104,258
Total Operating Expenses 346,138 278,925
Net Operating (Loss) (154,222) (44,001)
Other Income (Expenses)
Interest and miscellaneous
income 376 3,532
Gain on sale of investment 4,500 -
Interest (expense) (17,278) (10,007)
Total Other (12,402) (6,475)
Net (Loss) $ (116,624) $ (50,476)
________________ ______________
Net (Loss) per Share $ nil $ nil
Weighted Average Shares Outstanding 226,184,655 127,808,864
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARETE INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended September 30
(Unaudited)
1998 1997
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) $ (84,526) $ (45,244)
Adjustments to reconcile net
income (loss) to net cash used
in operating activities
Depreciation 10,924 7,222
Amortization of management fees 14,583 -
Stock issued for services 80,000 -
(Decrease) in customer deposits (93,972) -
Increase (decrease) in accounts
payable, accrued expenses and
other (Note 3) 66,622 25,841
(Increase) decrease in accounts
receivable 25,290 (20,653)
________ _________
Net Cash Provided by Operating
Activities 18,921 (32,834)
________ _________
Cash Flows from Investing Activities - -
________ _________
Cash Flows from Financing Activities: - 32,834
Net Cash (Used by) Financing ________ _________
Activities - 32,834
________
(Decrease) in cash 18,921 -
Cash, beginning of period - -
Cash, end of period $ 18,921 $ -
____________ __________
Interest paid $ 16,040 $ -
Income taxes paid $ - $ -
____________ ____________
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARETE INDUSTRIES, INC.
STATEMENTS OF CASH FLOWS
For the Six Months Ended September 30
(Unaudited)
1998 1997
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) $ (166,624) $ (50,476)
Adjustments to reconcile net
income (loss) to net cash used
in operating activities
Depreciation 21,847 14,444
Amortization of management fees 27,083 -
Stock issued for services 126,000 -
(Decrease) in customer deposits (100,511) -
Increase (decrease) in accounts
payable, accrued expenses and
other (Note 3) 81,899 21,950
(Increase) decrease in accounts
receivable 17,029 (8,918)
__________ _________
Net Cash Provided by Operating
Activities 6,723 (23,000)
__________ _________
Cash Flows from Investing Activities - -
__________ _________
Cash Flows from Financing Activities:
Repayment of Note Payable and Advances - 23,000
__________ _________
Net Cash (Used by) Financing
Activities - 23,000
__________ _________
Increase (Decrease) in cash 6,723 -
Cash, beginning of period 12,198 -
__________ ________
Cash, end of period $ 18,921 $ -
__________ ________
Interest paid $ 17,278 $ 2,700
Income taxes paid $ - $ -
__________ ________
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE>
ARETE INDUSTRIES, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
(Unaudited)
(1) Condensed Financial Statements
The financial statements included herein have been prepared
by Arete Industries, Inc. without audit, pursuant to the
rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures
normally included in the financial statements prepared in
accordance with generally accepted accounting principles
have been condensed or omitted as allowed by such rules
and regulations, and management believes that the
disclosures are adequate to make the information
presented not misleading.
The management of Arete Industries, Inc. believes that
the accompanying unaudited condensed financial
statements contain all adjustments (including normal
recurring adjustments) necessary to present fairly the
operations and cash flows for the periods presented.
(2) Basis of Presentation - Going Concern
The accompanying financial statements have been prepared
in conformity with generally accepted accounting
principles, which contemplates continuation of the Company
as a going concern. However, the Company has sustained
recurring operating losses, has a net capital deficiency,
and is delinquent on certain payroll taxes and on payment of
creditor liabilities pursuant to its Chapter 11 Plan of
Reorganization. Management is attempting to raise additional
capital, is in the process of executing a turn-around plan
and is looking for joint venture partners and/or a business
combination to grow the business.
In view of these matters, realization of certain of the assets
in the accompanying balance sheet is dependent upon continued
operations of the Company, which in turn is dependent upon
the Company's ability to meet its financing requirements,
raise additional capital, and the success of its future
operations. Management believes that actions planned
and presently being taken to revise the Company's operating
and financial requirements provide the opportunity for the
Company to continue as a going concern.
(3) Common Stock Issued
On August 10, 1998 the Company's Chief Executive Officer
exercised a compensatory stock option for 5,000,000 shares
of common stock for a total of $25,000. The proceeds
were used to collateralize a new line of credit for the
Company. Also an affiliate of the Chief Executive Officer
advanced a certificate of deposit in the amount of
$25,000 to collateralize an increase in the new line of
credit for the Company. Pursuant to the pledge agreement,
the affiliate received 2,500,000 shares of common stock as
prepaid interest. The prepaid interest has been capitalized
and is being ammortized over the 12 months life of the credit
line. In addition, the Company issued 2,500,000 shares
as collateral to ensure repayment of the $25,000 within
12 months from the date of the pledge.
The shares issued to the Chief Executive Officer were
registered on Form S-8 filed in April, 1998, and the shares
issued to the affiliate were issued pursuant to an exemption
from registration under Section 4(2) and Rule 504 of SEC
Regulation D.
Also during April 1998, a total 1,764,706 shares were issued
to the Company's Chief Executive for a six-month management fee
commencing May 1, 1998 valued at $45,000. These shares were
also registered under SEC Form S-8. The management fees were
capitalized and are being amortized over 6 months.
(4) Subsequent Events. Effective October 3, 1998, the Company
executed an agreement with the holder of all of the shares of
Class B Preferred Stock to convert such stock into common stock
on a one for one basis in exchange for subscription by the preferred
shareholder for 17,000,000 common shares for $100,000. The
agreement expires November 30, 1998 unless extended by mutual
agreement. If the preferred shareholder pays the entire
subscription of $100,000, he will receive 17,000,000
restricted shares of common stock. The shareholder has agreed
to lock up such shares for a period of one year and to subject
them to the current Voting Trust Agreement created pursuant to
the Change in Control Agreement during the lock-up period.
The Shares will be unregistered common stock subject to resale
under SEC Rule 144.
Effective October 1, 1998 all operating assets and principally
all liabilities of the commercial printing and direct mail
business were transferred to a new wholly-owned subsidiary
of the Company named Global Direct Marketing Services, Inc.
Accounting for operations of this subsidiary will be
separated from that of the Registrant as the parent
company, but all assets in the new subsidiary will be
carried at their original book value before the reorganization.
Management deemed this structure more appropriate and
highly preferable to the former informal structure,
allowing for more critical financial analysis by management
of the different operating companies, and accommodating
future acquisitions and new businesses pursued by the Company.
On October 2, 1998, the two outside directors, were granted
incentive stock options to purchase 250,000 shares each of
the Company's common stock for a period of five years at an
exercise price equal to the high bid for the Company's
common shares on the OTC Bulletin Board as of the end
of the week of October 2, 1998. The Company agreed to
register the underlying common shares under SEC registration
Form S-8 once the price was determinable.
Also, on October 2, 1998, a subscription agreement was
authorized by the Company granting a related party the
right to purchase up to $500,000 in common stock over a two-year
period at a price 25% below the prevailing market price
at the time of purchase. The proposed purchase will
be unregistered common stock subject to resale under
SEC Rule 144.
On October 30, 1998, all contingencies to vesting of
ownership of shares by a related party of 20,000,000
shares of common stock issued pursuant to the Change
in Control Agreement dated April 30, 1998, were deemed
removed, and the Company's right to subscribe to 500,000
shares of Aggression Sports, Inc. for $100,000 was
extended for an additional six months. Additionally,
employment agreements were approved for the two
principal executive officers and, to accommodate the
accrual of salaries and reimbursable expenses,
the Company designated a new Class A Preferred Stock.
This class of preferred stock will be issued to
employees and consultants for deferred and/or accrued
salaries, will carry a cumulative quarterly dividend
based on the prime rate posted for each fiscal quarter,
and will be convertible into shares of Common Stock
of the Company on the basis of all accrued salary and
interest divided by 110% of the average bid for the
Company's common stock on the date of issuance of
the preferred shares or on the date of conversion,
whichever is less. Shares of common stock underlying
the new preferred shares will be registered when issued
under SEC registration statement Form S-8 or other
appropriate form.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Arete Industries, Inc. (the "Company") was organized as a Colorado
corporation on June 21, 1987. The Company is in the business of printing
advertising materials and coupons and mailing them to its customers.
During 1995, the Company filed a plan of reorganization which was approved
by the United States Bankruptcy Court.
The Company generated operating revenues of approximately $531,624 with cost
of goods sold of $459,911 (or 86% of sales) during the quarter ended
September 30, 1998. This is compared to operating revenues of $506,186
and cost of goods sold of approximately $417,625 (or 82% of sales)
during the quarter ended September 30, 1997. This increase in sales was
attributable mainly to increases in orders from existing customers over the
comparable period. The marginal increase in cost of goods sold is
attributable to an increase in direct labor expense which were not passed
directly through to customers. Operating expenses of approximately
$140,574 (or 26% of sales) were incurred during the quarter ended
September 30, 1998, compared to $129,842 (or 25% of sales) in the quarter
ended September 30, 1997. This increase was largely due to extraordinary
legal, accounting and corporate compliance costs associated with shareholder
actions, Securities and Exchange Act filings and expenses associated with the
shareholders' meeting held on September 1, 1998. The Company had a net
loss of $68,862 (or 12% of sales) during the quarter ended September 30, 1998
compared to a net loss of $41,281 (or 8% of sales) during the same period of
1997.
Management has begun implementing management information systems to assist
in devising cost cutting strategies to eliminate operating losses. Also,
management plans to expand marketing and adding much needed administrative
staff for customer service, scheduling and accounting, losses will be
eliminated within the next two fiscal quarters.
The Company had liabilities in excess of assets at September 30, 1998 of
$137,759.
At September 30, 1998, the Company had no material commitments for capital
expenditures.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On May 1, 1998 an action was filed by certain shareholders in The District
Court for Jefferson County, Colorado against the Company and its then current
and former officers and directors for certain relief fundamentally to
force a shareholders meeting, to prevent former management from voting their
shares at such meeting and to prevent management from issuing further shares
of stock and from taking any other material actions with respect to the
Company while the actions were pending. Plaintiff's alleged certain
improprieties by former management without specificity and sought
extraordinary relief in expedited proceedings which were held on May 15th,
1998. New Management vigorously defended the action and prevailed at the
expedited hearing. New Management for the Company stipulated to holding
a meeting of shareholders on September 1, 1998 and performed its obligation
without delay. The plaintiffs' failed to take advantage of their opportunity
to propose an alternative slate of directors or pursue a contested election
through solicitation of proxies, which the Company was willing to
distribute on their behalf. The Shareholders meeting was held pursuant to
the Court's order, whereafter the Company applied for dismissal of the Action
with prejudice, which application was recently granted by the Court on
October 8th, 1998.
The Registrant was recently made aware that the staff of the Central Regional
office of the U.S. Securities and Exchange Commission (the "Commission") is
proposing administrative enforcement proceedings against the Registrant and
its former management including its current Chief Executive Officer alleging
for certain violations of the federal securities laws arising out of informat-
ion made public in press releases issued in February of 1998 by the
Registrant pertaining to a proposed acquisition. No formal notice of
institution of any such proceedings has been received and management,
believing the Registrant and current management to be without culpability
in this regard, intends to vigorously defend such actions if they are
ultimately brought. Pursuant to the Change in Control Agreement executed on
April 30, 1998 and its Articles of Incorporation, as Amended and Restated to
date, former and current management are entitled to claim indemnification and
reimbursement and/or advance of legal fees and expenses in connection with
such action.
Item 2. Changes in Securities and Use of Proceeds
(a) Effective September 1, 1998 pursuant to amendments to the Articles of
Incorporation approved by shareholders on such date common shares of the
Registrant were converted from shares with par value to shares without par
value. Other than the impact on accounting for capital of the Registrant,
there is no material impact on the rights of holders of such securities.
(b) Not Applicable.
(c) Recent Sales of Unregistered Securities. During the period covered by
this report securities of the Registrant were sold to an affiliated entity of
an Officer, as described in Note (3) to Financial Statements, above,
and incorporated herein by reference. There were no underwriters involved,
and the proceeds were used to pre- pay interest on a loan of a certificate of
deposit from such affiliated entity to the Registrant to collateralize a line
of credit for the Registrant.
Item 4. Submission of Matters to a Vote of Security Holders
An Annual Meeting of Shareholders was held on September 1,
1998 in Boulder, Colorado. The shareholders elected
five individuals to the board of directors according
to the vote tally set forth below:
Thomas P. Raabe 104,899,397 For, 0 Abstain and 124,000 Withheld
Fred Boethling 104,899,397 For, 0 Abstain and 124,000 Withheld
Stephen E. Reichert 104,899,397 For, 0 Abstain and 124,000 Withheld
Thomas Y. Gorman 104,899,397 for, 0 Abstain and 124,000 Withheld
Keith Talbot 104,899,397 for, 0 Abstain and 124,000 Withheld
Other Matters submitted to a vote were:
Adoption of the 1998 Omnibus Stock Option and Incentive
Plan which provides for issuance of up to 24 Million shares
of common stock one half of which can be issued to current
management and Mr. Hobbs and one-half of which will be
reserved for issuance to key employees, directors and
consultants or advisors of the Company during fiscal year
1998. The Plan authorizes share bonuses, performance
awards, qualified and non-qualified stock options,
stock appreciation rights (SAR's), restricted stock
purchase rights, stock issuances in lieu of salary and
dividend equivalents as determined by the compensation
committee of disinterested directors of the board of
directors. The Plan complies with applicable IRS
regulations and Section 16 of the Securities Exchange
Act of 1934. Shares were reserved for issuance to
current management pursuant the Change in Control
Agreement dated April 30, 1998.
This measure was approved by shareholders as follows:
For: 97,421,347; Withhold: 5,979,000; Abstain: 170,000
Ratification of Amendments to the Articles
of Incorporation, including: (i) changing the name
of the Corporation to Arete Industries, Inc.;
(ii) elimination of Par Value for all capital
stock of the corporation; (iii) combining unissued
capital stock including common and preferred into a
single category of no par value capital stock; and
(iv) adopted restated and amended articles of
incorporation combining all former amendments and
effecting certain housecleaning amendments to conform
the Articles of Incorporation to changes in the state
corporation statute since inception of the Corporation.
This measure was approved by shareholders as follows:
For: 102,840,176; Withhold: 706,161; Abstain: 170,000
Ratification of Appointment of Independent Auditors,
re-election of Schumacher & Associates, Inc. of Englewood,
Colorado as the independent auditors of the Corporation
for the upcoming audit of the 1998 fiscal year.
This measure was approved by shareholders as follows:
For: 104,875,357; Withhold: 122,000; Abstain: 24,000
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
There were no Reports on Form 8-K filed during
the period covered by this report.
The following exhibits are attached:
<TABLE>
<S> <C>
Exhibit No. Page No.
3(i) Amended and restated Articles of
Incorporation of Arete Industries, Inc. EX-3.1
10-1 Omnibus Incentive Stock Compensation Plan
Adopted September 1, 1998 EX-10.1
10-2 Description of Stock Option Agreement with
Thomas P. Raabe adopted on August
10, 1998 by resolution of the board of directors EX 10.2
10-3 Guarantee and Pledge Agreement with the
Thomas P. Raabe Trust EX 10.3
27 Financial Data Schedule EX - 27
</TABLE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARETE INDUSTRIES, INC.
Date: November 20, 1998 By: /s/ Thomas PP. Raabe, CEO
Principal Executive Officer
Date: November 20, 1998 By: /s/ Fred Boethling, CFO, Secy./Treas.
Principal Financial and Accounting Officer
RESTATED ARTICLES OF INCORPORATION
WITH AMENDMENTS
OF
ARETE INDUSTRIES, INC.
Pursuant to the provisions of the Colorado Business Corporation Act,
the undersigned corporation adopts the following amended and restated
Articles of Incorporation. These articles correctly set forth the
provisions of the Articles of Incorporation, as amended, and supersede
the original Articles of Incorporation and all amendments thereto.
ARTICLE I
Name
The name of the Corporation shall be:
Arete Industries, Inc.
ARTICLE II
Purposes and Powers
The purpose for which this corporation is organized is to transact
any lawful business or businesses for which corporations may be
incorporated pursuant to the Colorado Business Corporation Act,
1973 Colorado Revised Statutes, 7-101-101 et. seq. including,
but not limited to, such business or businesses as shall be
specified in writing by the board of directors in the bylaws.
ARTICLE III
Capital
The aggregate number of capital shares which the corporation
shall have authority to issue is Five Hundred Million
(500,000,000). Except for any class or series of common
or preferred shares that may be subsequently established
from time to time by resolution of the board of directors
pursuant to this Article III, each capital share of this
corporation shall be a voting Common Share without par value,
shall have unlimited voting rights, and shall be entitled to
receive the net assets of the corporation upon dissolution.
Issuance of fractional shares is expressly authorized in
the discretion of the board of directors or as provided for
in the bylaws.
The board of directors of this corporation shall have the
authority to establish by resolution different classes
or series of common or preferred shares and, within the
limitations provided by the Colorado Business Corporation
Act, 7-106-102, or any similar provision as may later be
adopted, to fix by resolution the voting powers,
designations, preferences, and relative participating,
optional, or other special rights, and the qualifications,
limitations, or restrictions of the shares of any such
class or series so established.
The shares of the corporation may be issued for consideration
as may be fixed from time to time by the board of directors
of the corporation, which consideration may consist of any
tangible or intangible property or benefit to the corporation
including cash, promissory notes, services performed and
any other securities of the corporation. The judgment of
the board of directors as to the value of any property or
services received shall, in the absence of fraud or bad
faith, be conclusive upon all persons for adequacy of
consideration received with respect to whether such shares
are validly issued, fully paid and nonassessable. Upon receipt
of the consideration for which the board of directors has
authorized the issuance of shares, the shares so issued therefore
shall be deemed fully paid and nonassessable.
Except as otherwise provided in the bylaws, the board of
directors may authorize the issuance by the corporation
of some or all of the shares of any or all of its classes
or series without certificates. Within a reasonable time
after the issuance or transfer of shares without certificates,
the corporation shall send to the shareholder a written statement
of the information required on certificates pursuant to the
provisions of subsections (2) and (4) of 7-106-206 and
7-106-208 of the Colorado Business Corporation Act, or any
similar provision as may later be adopted.
ARTICLE IV
Period of Duration
This corporation shall exist perpetually unless dissolved
according to law.
ARTICLE V
No Cumulative Voting
At the election of directors of the corporation, directors
shall be elected by a majority vote of the shareholders, and
the cumulative system of voting of shares of stock shall
not be allowed.
ARTICLE VI
Restriction on Transfer of Shares
Transfer or registration of transfer of all, or any part of
the shares of the corporation may be restricted by these
Articles or any amendment hereto, the bylaws, an agreement
among shareholders, or an agreement among shareholders and
the corporation. The corporation is authorized to become
party to agreements entered into by any of its shareholders
including holders of rights convertible into, or carrying a
right to subscribe for, or acquire shares. The board of
directors is hereby authorized on behalf of the corporation
to exercise the corporation's right to so impose such
restrictions.
ARTICLE VII
Board of Directors
The number of directors shall be fixed in accordance with the
bylaws. The number of directors may be increased or decreased
at any time by the adoption of or amendment to the bylaws, but
no decrease shall have the effect of shortening the term of any
incumbent director. In the absence of any provision in the
bylaws fixing the number of directors, the number shall be
the same as provided in these Articles of Incorporation. The
number of directors shall be not less than three, except
there need be only as many directors as there are shareholders
in the event that the outstanding shares are held by fewer than
three shareholders.
A director shall be a natural person who is eighteen years of
age or older and need not be a resident of the state of Colorado
or a shareholder unless the bylaws so prescribe.
The board of directors may at any time appoint an advisory board
consisting of directors, non-directors, shareholders and/or non-
shareholders for the purpose of advising and counseling the board
of directors, and may compensate such advisory board members in
the manner provided in the bylaws or as determined by the board
of directors in their sole discretion in the absence of a bylaw
provision. Such advisory board shall serve in an advisory
capacity only and membership per se shall not carry or impute
the status of a director, officer, fiduciary, employee or agent
of the corporation. Members of any such advisory board shall
not, solely by virtue of holding such position, have any express
or implied authority to act on behalf of the corporation, nor
shall be deemed to hold any of the duties and responsibilities
of a director, officer, fiduciary, employee or agent of the
corporation to any member thereof. The corporation shall
indemnify any advisory board member and shall advance
reasonable legal costs and expenses to the fullest extent
permitted by law and/or as set forth in these Articles or
in the bylaws, whichever provision is the most liberal.
ARTICLE VIII
Indemnification/Limitation of Liability of Directors
The corporation shall, to the fullest extent permitted by the
provisions of the Colorado Business Corporation Act, 7-109-101
to 7-109-107, inclusive, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify
under said sections from and against any and all of the expenses,
liabilities or other matters referred to in or covered by said
sections, and the indemnification provided for herein shall not
be deemed exclusive of any other rights to which those indemnified
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee, fiduciary or agent
and shall inure to the benefit of the heirs, executors and
administrators of such person.
Pursuant to the Colorado Business Corporation Act, 7-108-402,
directors of the corporation shall not be liable to the corporation
or its shareholders for monetary damages for breach of fiduciary
duty as a director of the corporation except that this provisions
shall not eliminate or limit the liability of a director to the
corporation or its shareholders for: (i) monetary damages for
any breach of such director's duty of loyalty to the corporation
or to its shareholders; (ii) for any acts or omissions not in
good faith or which involve intentional misconduct or a
knowing violation of law; (iii) for any acts specified in
the Colorado Business Corporation Act, 7-108-403, or (iv)
for any transaction from which the director derived an
improper personal benefit.
In accordance with the Colorado Business Corporation Act
7-109-108, as may be amended or supplemented, the corporation
may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee, fiduciary, or
agent of the corporation or who, while a director, officer,
employee, fiduciary or agent of the corporation is or was
serving at the request of the corporation as a director,
officer, employee, fiduciary, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against
any liability asserted against him and incurred by him in any
such capacity or arising out of his status as such, whether or
not the corporation would have the power to indemnify him
against such liability under provisions of this Article X.
Notwithstanding the foregoing, the corporation grants to
its officers, directors, fiduciaries and agents any more
expansive indemnification rights now or in the future
created by case law or granted by statute in the State of Colorado.
ARTICLE IX
Transactions with Interested Directors
No contract or other transaction between the corporation and one
(1) or more of its directors or officers or any other corporation,
firm, association, or entity in which one (1) or more of its
directors or officers are directors or officers or are financially
interested shall be either void or voidable or be enjoined, set
aside, or give rise to an award of damages or other sanctions
solely because of such relationship or interest, or solely
because such directors or officers are present at the meeting
of the board of directors or a committee thereof which authorizes,
approves, or ratifies such contract or transaction, or solely
because their votes are counted for such purpose if:
(i) The material facts as to such relationship or interest and
as to the subject transaction are disclosed or are known to the
board of directors or committee, and the board of directors or
committee in good faith authorizes, approves or ratifies the
contract or transaction by the affirmative vote of a majority
of the disinterested directors, even though the disinterested
directors are less than a quorum; or
(ii) The material facts as to such relationship or
interest and as to the subject transaction are disclosed or
are known to the shareholders entitled to vote thereon and
the contract or transaction is authorized, approved, or
ratified in good faith by vote or written consent of the
shareholders; or
(iii) The contract or transaction was fair and
reasonable to the corporation as of the time it is authorized,
approved, or ratified by the board of directors, a committee
thereof or the shareholders.
Common or interested directors may be counted in determining
the presence of a quorum at a meeting of the board of directors
or a committee thereof which authorizes, approves, or ratifies
such contract or transaction.
ARTICLE X
Dividend Restrictions
This corporation may pay dividends in cash, property, or its
own shares, and may redeem its shares at their fair market
value or their face value except: (i) when the corporation
is insolvent; or (ii) if after such dividend or distribution
the corporation's total assets would be less than the sum
of its total liabilities plus (unless these Articles of
Incorporation or any subsequent amendment hereto, provide
otherwise) the amount that would be needed, if the corporation
were to be dissolved at the time of the distribution, to
satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to
those receiving the distribution; and (iii) subject to
the provisions of the Colorado Business Corporation Act,
7-106-401, as amended, or any subsequent amendment thereof.
ARTICLE XI
Quorum and Action of Shareholders
One Third (1/3) of the shares entitled to vote, represented
in person or by proxy, shall constitute a quorum at a meeting
of shareholders, and the affirmative vote of fifty-one percent
(51%) of the shares represented at the meeting and entitled
to vote on the subject matter shall be the act of the shareholders.
Such action of the shareholders may be taken at a meeting called
for such purpose or in such manner as provided for in the bylaws.
ARTICLE XII
Voting of Shareholders
The shareholders, by vote or concurrence of a majority of the
outstanding shares of the corporation, or any class or series
thereof, entitled to vote on the subject matter, may take any
action which, except for this Article, would require a two-thirds
vote under the Colorado Business Corporation Act, as amended.
ARTICLE XIII
Regulation of Internal Affairs
The internal affairs of the corporation shall be regulated as
provided for in the bylaws. The initial bylaws may be adopted
by the initial incorporation(s) or by the initial board of
directors. The power to alter, amend, or repeal the bylaws
or to adopt new bylaws shall be vested in the board of
directors. The bylaws may contain any provision for the
regulation and management of the affairs of the corporation
not inconsistent with the Colorado Business Corporation Act,
as the same may be amended or supplemented or by these
Articles of Incorporation.
All corporate powers shall be exercised by or under the
authority of the board of directors. The business and
affairs of the corporation shall be managed under the
direction of the board of directors, or as provided for
in the bylaws, any committee of directors under such
delegation of authority by the full board of directors
as is permitted under the Colorado Business Corporation
Act, 7-108-206, as amended or supplemented.
ARTICLE XIV
Restriction on Purchase of Shares
This corporation shall have the right to purchase, take,
receive, redeem or otherwise acquire, hold, own, pledge,
transfer or otherwise dispose of its own shares in
accordance with the Colorado Business Corporation Act,
Section 7-103-102, as amended, or any subsequent amendment
thereof.
VERIFICATION
The undersigned being the Secretary of the within corporation
certifies that the foregoing Restated Articles of
Incorporation with Amendments were adopted by shareholder
vote at a meeting of shareholders held on September 1,
1998, in which the number of votes cast for the amendment
by the shareholders as a whole including each voting
group entitled to vote separately on the amendment was
sufficient for approval by such shareholders and/or that
voting group.
IN WITNESS WHEREOF, the above-named Secretary hereby verifies
that the foregoing are true and correct copy of the Restated
Articles of Incorporation with Amendments duly approved by
shareholders of the corporation at a meeting held on
September 1, 1998.
Date: Fred C. Boethling, Secretary
TRAVIS INDUSTRIES, INC.
1998 OMNIBUS STOCK OPTION AND INCENTIVE PLAN
1. PURPOSE.
The Plan is intended to provide incentive to key employees and
directors of, and key consultants, vendors, customers, and
others expected to provide significant services to the
Corporation, to encourage proprietary interest in the
Corporation, to encourage such key employees to remain in the
employ of the Corporation and its Subsidiaries, to attract new
employees with outstanding qualifications, and to afford
additional incentive to consultants, vendors, customers, and
others to increase their efforts in providing significant
services to the Corporation.
2. DEFINITIONS.
2.1 "Award" shall mean an Option which may be designated
an Incentive Stock Option or a Non-statutory Stock
Option, a Purchase Right, a Stock Appreciation Right or a
Stock Payment, in each case as granted pursuant to the Plan.
2.2 "Award Agreement" shall mean a Stock Option
Agreement, Restricted Stock Agreement or a Purchase Right
Agreement.
2.3 "Beneficiary" shall mean the person, persons, trust
or trusts entitled by will or the laws of descent and distribution
to receive the benefits specified under the Plan in the event of
a Participant's death.
2.4 "Board" shall mean the Board of Directors of the
Corporation.
2.5 "Code" shall mean the Internal Revenue Code of
1986, as amended.
2.6 "Committee" shall mean the committee, if any,
appointed by the Board in accordance with Section 4 of the
Plan.
2.7 "Common Stock" shall mean the Common Stock
of the Corporation.
2.8 "Corporation" shall mean Travis Industries, Inc.
and its Subsidiaries.
2.9 "Disability" shall mean the condition of a
Participant who is unable to (i) perform his or her substantial
and material job duties due to injury or sickness or such other
condition as the Board or Committee may determine in its sole
discretion; and/or (ii) engage in any substantial gainful activity
by reason of any medically determinable physical or mental
impairment which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of
not less than twelve (12) months.
2.10 "Discount" shall mean, with respect to the
Purchase Price of Purchase Rights, the discount from the Fair
Market Value of a Share as set forth in Section 8.3.
2.11 "Dividend Equivalent" shall mean a right to
receive a number of Shares or a cash amount, determined as
provided in Article 12 hereof.
2.12 "Eligible Employee" shall mean an individual who
is employed (within the meaning of Code Section 3401 and the
regulations thereunder) by the Corporation.
2.13 "Event" shall mean any of the following:
(a) Any person or entity (or group of affiliated
persons or entities) who acquired in one or more transactions,
whether before or after the Effective Date of the Plan,
ownership of more than fifty percent (50%) of the outstanding
Shares of stock entitled to vote in the election of directors of
the Corporation; or
(b) The dissolution or liquidation of the Corporation
or a reorganization, merger or consolidation of the
Corporation with one or more entities, as a result of which the
Corporation is not the surviving entity, or a sale of all or
substantially all of the assets of the Corporation as an entirety
to another entity.
For purposes of this definition, ownership does not include
ownership: (i) by a person owning such Shares merely of
record (such as a member of a securities exchange,
a nominee or a securities depository system), (ii) by a person
who is a bona fide pledgee of Shares prior to a default and
determination to exercise powers as an owner of the Shares,
(iii) by a person who is not required to file a statement on
Schedule 13D by virtue of Rule 13d-1(b) of the Securities and
Exchange Commission under the Exchange Act, or (iv) by a
person who owns or holds Shares as an underwriter acquired in
connection with an underwritten offering pending and for
purposes of resale.
2.14 "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
2.15 "Exercise Price" shall mean the price per Share of
Common Stock, determined by the Board or the Committee, at
which an Award may be exercised.
2.16 "Fair Market Value" shall mean the value of one (1) Share
of Common Stock, determined as follows:
(i) if the Shares are traded on an exchange, the price
at which Shares traded at the close of business on the date
of valuation; or
(ii) if the Shares are traded over-the-counter on
the NASDAQ System, the closing bid price if one is available,
or the mean between the bid and asked prices on said system at
the close of business on the date of valuation; or
(iii) if neither (i) nor (ii) above applies, the Fair
Market Value as determined by the Board or the Committee in
good faith. Such determination shall be conclusive and binding
on all persons.
2.17 "Incentive Stock Option" shall mean an option described
in Section 422A(b) of the Code.
2.18 "Nonstatutory Stock Option" shall mean an option
not described in Section 422(b), 422A(b), 423(b) or 424(b) of
the Code.
2.19 "Option" shall mean either an Incentive Stock
Option or a Nonstatutory Stock Option granted pursuant to the
Plan.
2.20 "Participant" shall mean an Eligible Employee
who has received an Award under the Plan.
2.21 "Performance Award" shall mean a cash bonus,
stock bonus or other performance or incentive award that is
paid in cash, stock or a combination of both.
2.22 "Plan" shall mean the Travis Industries, Inc. 1998
Omnibus Stock Option and Incentive Plan, as it may be
amended from time to time.
2.23 "Purchase Price" shall mean the Exercise Price
times the number of Shares with respect to which an Award is
exercised.
2.24 "Purchase Right" shall mean the grant to an
Employee of the right to purchase Shares under the Plan.
2.25 "Restricted Stock" shall mean those Shares issued
pursuant to a Restricted Stock Award that are not free of the
restrictions set forth in the related Restricted Stock Agreement.
2.26 "Restricted Stock Award" shall mean an award of
a fixed number of shares subject to payment of such
consideration, if any, and such forfeiture provisions, as are set
forth in the related Restricted Stock Agreement.
2.27 "Retirement" shall mean the voluntary termination
of employment by an Employee upon the attainment of age
sixty-five (65) and the completion of not less than twenty (20)
years of service with the Corporation or a Subsidiary.
2.28 "Share" shall mean one (1) share of Common Stock,
adjusted in accordance with Section 15.3 of the Plan (if
applicable).
2.29 "Securities Act" shall mean the Securities Act of
1933, as amended from time to time.
2.30 "Stock Appreciation Right" shall mean the right to
receive a number of Shares or a cash amount, or a combination
of Shares and cash, based upon the Fair Market Value, book
value or other measure determined by the Board or the
Committee, as the case may be, pursuant to Section 9 of the
Plan.
2.31 "Stock Payment" shall mean a payment in the
form of Shares, or a Purchase Right, as part of a deferred
compensation arrangement made in lieu of all or any portion
of the compensation, including without limitation the salary,
bonuses or commissions, that would otherwise become payable
in cash to an Eligible Employee.
2.32 "Subsidiary" shall mean any corporation at least
fifty percent (50%) of the total combined voting power of
which is owned by the Corporation or by another subsidiary.
2.33 "Tax Date" shall have the meaning set forth in
Section 15.3 hereof.
3. EFFECTIVE DATE.
The Plan was adopted by the Corporation's
shareholders and by the Board on September 1, 1998. The
Effective Date of the Plan shall be September 1, 1998 (the
"Effective Date").
4. ADMINISTRATION.
The Plan shall be administered by the Board in
compliance with Rule 16b-3 of the Exchange Act ("Rule
16b-3"), or by a Committee appointed by the Board, which
Committee shall be constituted to permit the Plan to comply
with Rule 16b-3, and which shall consist of not less than three (3)
members. The Board shall appoint one (1) of the members
of the Committee, if there be one, as Chairman of the
Committee. If a Committee has been appointed, the Committee
shall hold meetings at such times and places as it may
determine. Acts of a majority of the Committee at which a
quorum is present, or acts reduced to or approved in writing by
a majority of the members of the Committee shall be valid acts
of the Committee. The Board, or the Committee, if there be
one, shall from time to time at its discretion select the Eligible
Employees and consultants who are to be granted Awards,
determine the number of Shares or cash, or the combination
thereof, to be applicable to such Award, and designate any
Options as incentive Stock Options or Nonstatutory Stock
Options, except that no incentive Stock Option may be granted
to a non-employee director or a non-employee consultant. A
member of the Board or Committee member shall in no event
participate in any determination relating to Awards held by or
to be granted to such Board or Committee member; however,
a member of the Board or a Committee member shall be
entitled to receive Awards approved by the shareholders in
accordance with the provisions of Rule 16b-3. The
interpretation and construction by the Board, or by the
Committee, if there be one, of any provision of the Plan or of
any Award granted thereunder shall be final. No member of the
Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or
any Award granted thereunder. In addition to any right of
indemnification provided by the Articles of Incorporation or
Bylaws of the Corporation, such person shall be indemnified
and held harmless by the Corporation from any loss, cost,
liability or expense that may be imposed upon or reasonably
incurred by him in connection with any claim, suit, action or
proceeding to which he may be a party by reason of any action
or omission under the Plan.
5. PARTICIPATION.
5.1 Eligibility. Subject to the terms and conditions of
Section 5.2 below, the Participants shall be such
persons as the shareholders may approve or as the Committee
may select from among the following classes of parsons: (i)
Employees of the Corporation or of a Subsidiary (who may be
officers, whether or not they are directors); and (ii) Consultants,
vendors, customers, and others expected to provide significant
services to the Corporation or a Subsidiary.
For purposes of this Plan, a Participant who is a director
or a consultant, vendor, customer, or other provider of
significant services to the Corporation or a Subsidiary shall be
deemed to be an Eligible Employee, and service as a director,
consultant, vendor, customer, or other provider of significant
services to the Corporation or a Subsidiary shall be deemed to
be employment, except that no Incentive Stock Option may be
granted to a non-employee director or non-employee
consultant, vendor, customer, or other provider of significant
services to the Corporation or a Subsidiary, and except that no
Nonstatutory Stock Option may be granted to a non-employee
director or non-employee consultant, vendor, customer, or other
provider of significant services to the Corporation or a
Subsidiary other than upon a vote of a majority of disinterested
directors finding that the value of the services rendered or to be
rendered to the Corporation or a Subsidiary by such non-
employee director or non-employee consultant, vendor,
customer, or other provider of services is at least equal to the
value of the Awards granted.
5.2 Ten-Percent Shareholders. An Eligible Employee
who owns more than ten percent (10%) of the total combined
voting power of all classes of outstanding stock of the
Corporation, its parent or any of its Subsidiaries shall not be
eligible to receive an Award for an Incentive Stock Option
unless (i) the Exercise Price of the Shares subject to such
Award is at least one hundred ten percent (110%) of the Fair
Market Value of such Shares on the date of grant: and (ii) such
Awards by its terms is not exercisable after the expiration of
five (5) years from the date of grant.
5.3 Stock Ownership. For purposes of Section 5.2 above, in
determining stock ownership, an Eligible Employee shall
be considered as owning the stock owned, directly or
indirectly, by or for a corporation, partnership, estate or trust
shall be considered as being owned proportionately by or for its
shareholders, partners or beneficiaries. Stock with respect to
which such Eligible Employee holds an Award shall not be
counted.
5.4 Outstanding Stock. For purposes of Section 5.2 above,
"Outstanding stock" shall include all stock actually
issued and outstanding immediately after the grant of the
Award to the Participant. "Outstanding stock" shall not include
shares authorized for issue under outstanding Options or
Purchase Rights held by the Participant or by any other person.
6. STOCK SUBJECT TO THE PLAN.
The stock subject to Awards granted under the Plan
shall be Shares of the Corporation's authorized but unissued or
reacquired Common Stock. The aggregate number of Shares which may
be issued as Awards or upon exercise of Awards under
the Plan shall not exceed Twenty Four Million (24,000,000)
shares. The number of Shares subject to unexercised Options,
Stock Appreciation Rights or Purchase Rights
(plus the number of Shares previously issued under the
Plan) shall not at any time exceed the number of Shares
available for issuance under the Plan. In the event that any
unexercised Option, Stock Appreciation Right or Purchase
Right, or any portion thereof, for any reason expires or is
terminated, or if any Shares subject to a Restricted Stock
Award do not vest or are not delivered, the unexercised or
unvested Shares allocable to such Option, Stock Appreciation
Right, Purchase Right or Restricted Stock Award may again be
made subject to any Award. Any Shares withheld by the
Corporation pursuant to Section 15.3 shall not be deemed to be
issued. The number of withheld Shares shall be deducted from
the applicable Award and shall not entitle the Participant to
receive additional Shares. The limitations established by this
Article 6 shall be subject to adjustment in the manner provided
in Section 14.5 hereof upon the occurrence of an event
specified therein.
7. OPTIONS.
7.1 Stock Option Agreements. Options shall be
evidenced by written stock option agreements in such form as
the Committee shall from time to time determine. Such
agreements shall comply with and be subject to the terms and
conditions set forth below.
7.2 Number of Shares. Each Option shall state the
number of Shares to which it pertains and shall provide for the
adjustment thereof in accordance with the provisions of Section
14.5 hereof.
7.3 Exercise Price. Each Option shall state the Exercise
Price thereof. The Exercise Price in the case of any Incentive
Stock Option shall not be less than the Fair Market Value on
the date of grant and, in the case of any Option granted to an
Optionee described in Section 5.2 hereof, shall not be less than
one hundred ten percent (110%) of the Fair Market Value on
the date of grant. The Exercise Price in the case of any
Nonstatutory Stock Option shall not be less than eighty-five
percent (85%) of the Fair Market Value on the date of grant.
7.4 Medium and Time of Payment. The Purchase Price
shall be payable in full in United States dollars upon the
exercise of the Option; provided, however, that if the applicable
Stock Option Agreement so provides the Purchase Price may
the paid (i) by the surrender of Shares in good form for transfer,
owned by the Participant and having a Fair Market Value on
the date of exercise equal to the Purchase Price, or in any
combination of cash and Shares, as long as the sum of the cash
so paid and the Fair Market Value of the Shares so surrendered
equals the Purchase Price, (ii) by cancellation of indebtedness
owed by the Corporation to the Participant, (iii) with a full
recourse promissory note executed by the Participant, or (iv)
any combination of the foregoing. The interest rate and other
terms and conditions of such note shall be determined by the
Committee. The Committee may require that the Participant
pledge his or her Shares to the Corporation for the purpose of
securing the payment of such note. In no event shall the stock
certificate(s) representing such Shares be released to the
Participant until such note shall be paid in full.
7.5 Term and Non-Transferabiliy of Options. Each
option shall state the time or times which all or part thereof
becomes exercisable. No Option shall be exercisable after the
expiration of ten (10) years from the date it was granted, and no
Option granted to a Participant described in Section 5.2 hereof
shall be exercisable after the expiration of five (5) years from
the date it was granted. During the lifetime of the Participant,
the Option shall be exercisable only by the Participant and shall
not be assignable or transferable. In the event of the
Participant's death, the Option shall not be transferable by the
Participant other than by will or the laws of descent and
distribution.
7.6 Modification, Extension and Renewal of Option.
Within the limitations of the Plan, the Committee may modify,
extend or renew outstanding Options or accept the cancellation
of outstanding Options (to the extent not previously exercised)
for the granting of new Options in substitution therefor. The
foregoing notwithstanding, no modifications of an Option shall,
without the consent of the Participant, alter or impair any rights
or obligations under any Option previously granted.
7.7 Limitation on Grant of Incentive Stock Options. In
the case of Incentive Stock Options granted hereunder, the
aggregate Fair Market Value (determined as of the date of the
grant thereof) of the Shares with respect to which Incentive
Stock Options become exercisable by any Participant for the
first time during any calendar year (under this Plan and all
other plans maintained by the Corporation, its parent or it
Subsidiaries) shall not exceed One Hundred Thousand Dollars
($100,000). The Board or Committee may, however, with the
Participant's consent authorize an amendment to the incentive
Stock Option which renders it a Nonstatutory Stock Option.
7.8 Other Provisions. The Stock Option Agreements
authorized under the Plan may contain such other provisions
not inconsistent with the terms of the Plan (including, without
limitation, restrictions upon the exercise of the Option) as the
Committee shall deem advisable.
7.9 Specific Awards Approved by the Shareholders.
Subject to the approval by the vote of the shareholders at the
Annual Meeting of the Shareholders and Annual Meeting of the
Board on September 1, 1998, the individuals whose names are
set forth in Exhibit "A", a copy of which is attached hereto and
incorporated herein by this reference, shall be deemed granted
Nonstatutory Stock Options as of the Effective Date, in the
amounts and for the amount indicated opposite their respective
names, and in accordance with the vesting schedule set forth
herein, all in accordance with the provisions set form in this
Article 7 of the Plan. The provisions of this Section 7.9 shall
not be amended more than once every six (6) months, other
than to comport with changes in the Internal Revenue Code, the
Employee Retirement Income Security Act, or the rules
thereunder, and/or intended to be construed in accordance
with the provisions pertaining to "formula awards" under
Paragraph (c)(2)(ii) of Rule 16b-3.
8. RESTRICTED STOCK PURCHASE RIGHTS
8.1 Stock Purchase Agreements. Purchase Rights shall
be evidenced by written Stock Purchase Agreements in such
form as the Committee shall from time to time determine. Such
agreements shall comply with and be subject to the terms and
conditions set forth below.
8.2 Number of Shares. Each Purchase Right shall state
the number of Shares to which it pertains and shall provide for
the adjustment thereof in accordance with the provisions of
Section 14.5 hereof.
8.3 Purchase Price. Each Stock Purchase Agreement shall state
the Purchase Price per Share at which the Purchase
Right may be exercised which shall not be lass than the Fair
Market Value of a Share on the date on which the Purchase
Rights are granted. Unless the Board or Committee otherwise
determines, the Purchase Price per Share at which any Purchase
Right granted under the Plan may be exercised shall not be less
than the Fair Market Value of a Share as of the date on which
the Purchase Right is granted, less a discount (the "Discount")
equal to not more than seventy-five percent (75%) of such
value.
8.4 Exercisability and Non -Transferability of Purchase
Rights. Purchase Rights granted to an Eligible Employee
pursuant to the Plan must be exercised within sixty (60) days
after the later to occur of (i) Board approval of the grant of the
Purchase Right or (ii) delivery of notice of such grant. Purchase
Rights may not be sold, pledged assigned, hypothecated,
transferred or disposed of in any manner and shall expire
immediately upon the death of the Participant or the
termination of such Participant a employment with the
Corporation.
8.5 Medium and Time of Payment. The Purchase Price
shall be payable in full in United States dollars upon exercise
of the Purchase Right; provided however that if the applicable
Stock Purchase Agreement so provides the Purchase Price may
be paid (i) by the surrender of Shares in good form for transfer
owned by the person exercising the Purchase Right and having
a Fair Market Value on the date of exercise equal to the
Purchase Price or in any combination of cash and Shares as
long as the sum of the cash so paid and the Fair Market Value
of the Shares so surrendered equal the Purchase Price or (iii)
with a full recourse promissory note executed by the
Participant. The interest rate and other terms and conditions of
such note shall be determined by the Committee. The
Committee may require that the Participant pledge his or her
Shares to the Corporation for the purpose of securing the
payment of such note. In no event shall the stock certificate(s)
representing such Shares be released to Participant until such
note shall be paid in full. In the event the Corporation
determines that it is required to withhold state or federal
income tax as a result of the exercise of a Purchase Right, as a
condition to the exercise thereof, a Participant may be required
to make arrangements satisfactory to the Corporation for it to
satisfy such withholding requirements. In addition, the
Participant shall agree to immediately notify the Corporation if
he or she files an election pursuant to Section 83(b) of the Code
with respect to receipt of the Shares.
8.6 Consent of Spouse. Each Participant who is
married must cause his or her spouse to sign and deliver the
Stock Purchase Agreement to the Corporation, in the place
provided for such signature on the Stock Purchase Agreement.
8.7 Modification, Extension and Renewal of Purchase
Rights. Within the limitations of the Plan, the Board or the
Committee may modify, extend or renew outstanding Purchase
Rights or accept the cancellation of outstanding Purchase
Rights (to the extent not previously exercised) for the granting
of new Purchase Rights in substitution therefor. The foregoing
notwithstanding, no modification of a Purchase Right shall,
without the consent of the Employee, alter or impair any rights
or obligations under any Purchase Right previously granted.
8.8 Repurchase Option as to Unvested Shares.
(a) Termination of Employment. In the event of
the voluntary or involuntary termination or cessation of
employment or association of the Participant with the
Corporation or any Subsidiary for any reason whatsoever, with
or without cause (including death or disability), the Corporation
shall, upon the date of such termination, have an irrevocable,
exclusive option to repurchase (the "Repurchase Option") all
or any portion of the Shares held by the Employee that are
subject to the Repurchase Option as of such date at the original
Purchase Price.
(b) Vesting. Initially, all of the Shares shall be
subject to the Repurchase Option. Thereafter, the Repurchase
Option shall lapse and expire, or "vest", as to a specified
number of the Shares in accordance with a schedule to be
determined by the Board or the Committee, as the case may be,
which shall be attached to the Stock Purchase Agreement to be
entered into between the Participant sad the Corporation as
provided in Section 8.1 above. All Shares which continue to be
subject to the Repurchase Option are sometimes hereinafter
referred to as "Unvested Shares."
(c) Notice. Within ninety (90) days following
the date of the Participant's termination of employment by the
Corporation, the Corporation shall notify the Employee as to
whether it wishes to repurchase the Unvested Shares pursuant
to the exercise of the Repurchase Option. If the Corporation
elects to repurchase said Unvested Shares, it shall set a date for
the closing of the transaction at the Executive Offices of the
Corporation, not later than thirty (30) days from the date of
such notice.
(d) Transfers. Except for transfers to Participant's descendants
and spouses, the Participant shall not transfer by sale,
assignment, hypothecation, donation or otherwise any of
the Shares or any interest therein prior to the release
of such Shares from the Repurchase Option.
(e) Assignment. The Corporation's Repurchase Option may be
assigned in whole or in part to any stockholder or
stockholders of the Corporation or other persons or
organizations.
8.9 Corporation's Right of First Refusal to Purchase
Vested Shares. Each Stock Purchase Agreement entered into as
provided herein shall provide for a right of first refusal and
option on the part of the Corporation to purchase all or any part
of any Shares which are no longer subject to the Repurchase
Option which the Participant purposes to sell, transfer or
otherwise dispose of (except for transfers to Participant's
descendants and spouses) on the following terms and
conditions:
(a) The Participant must notify the Corporation
in writing of any proposed sale, transfer or other disposition of
any of the Shares, specifying the proposed transferee, the
number of Shares proposed to be transferred, and the price at
which such Shares are to be sold, transferred or otherwise
disposed.
(b) The Corporation shall have a period of thirty (30)
days from receipt of such notice to notify the
Participant in writing as to whether or not the Corporation
elects to purchase all or a specified portion of such Shares at the
lower of: i) price per share set forth in the notice given by the
Participant, or ii) the Fair Market Value for a share of the
Corporation's Common Stock, without restrictions, on the date
on which the notice is given by Participant to the Corporation
(determined as provided in Section 2.13 above), less in either
case an amount equal to the Discount.
(c) if the Corporation elects not to purchase all of the Shares
specified in the notice, the Participant may sell,
transfer or otherwise dispose of the remaining Shares in strict
accordance with the terms specified in the notice within ninety
(90) days following the date of the notice. It is understood and
agreed that any transferee of any of such Shares (other than the
Corporation) will take and acquire all of such Shares subject to
the continuing right of first refusal and option on the part of the
Corporation to purchase all or any portion of such Shares from
the transferee on all of the same terms and conditions as are set
forth in the Stock Purchase Agreement, unless the Participant
shall have paid to the Corporation, out of the proceeds from the
sale of such Shares or otherwise, an amount equal to the lesser
of (i) the Discount, or (ii) the amount by which the Fair Market
Value for a share of the Corporation's Common Stock, without
restrictions, on the date on which the notice is given by
Participant to the Corporation (determined as provided in
Section 2.13 above) exceeds the price per Share paid by the
Participant for such Shares.
8.10 Other Provisions. The Stock Purchase Agreements
authorized may contain such other provisions not inconsistent
with the terms of the Plan as the Board or the Committee shall
deem advisable.
9. STOCK APPRECIATION RIGHTS.
9.1 Grant. Stock Appreciation Rights related or unrelated
to Options or other Awards may be granted to Eligible Employees
(i) at such time, if unrelated to an Award, or if related to
an Award other than an Incentive Stock Option; or (ii)
only at the time of grant of an Option if related thereto. A
Stock Appreciation Right may extend to all or a portion of the
Shares covered by a related Award.
9.2 Exercise of Stock Appreciation Rights. A Stock Appreciation
Right granted in connection with an Award shall be
exercisable only at such time or times, and to the extent, that
a related Award is exercisable. A Stock Appreciation Right
granted in connection with an Option may be exercisable only
when the Fair Market Value of the stock subject to the Option
exceeds the Exercise Price of the incentive Stock Option.
9.3 Payment.
(a) Upon the exercise of a Stock Appreciation
Right, and, if such Stock Appreciation Right is related to an
Award, surrender of an exercisable portion of a related Award,
the Participant shall be entitled to receive payment of an
amount determined by multiplying: (i) the difference obtained
by subtracting the purchase price of a share of Common Stock
specified in the related Award, or if such Stock Appreciation
Right is unrelated to an Award, from the Fair Market Value,
book value or other measure specified in the Award of such
Stock Appreciation Right of a share of Common Stock on the
date of exercise of such Stock Appreciation Right, by (ii) the
number of Shares as to which such Stock Appreciation Right
has been exercised.
(b) The Board or the Committee, as the case may be, in its
sole discretion, may require settlement of the
amount determined under paragraph (a) above solely in cash,
solely in Shares of Common Stock (valued at Fair Market
Value on the business day next preceding the date of exercise
of such Stock Appreciation Right), or partly in such Shares and
partly in cash.
9.4 Maximum Stock Appreciation Right Term. Each
Stock Appreciation Right and all rights and obligations
thereunder shall expire on such date as shall be determined by
the Board or the Committed but not later than ten (10) years
after the date of the Award thereof, and shall be subject to
earlier termination as provided in the related Award Agreement
and Sections 14.6, 14.7, 14.8, 14.9 and 15.1.
10. PERFORMANCE AWARDS.
One or more Performance Awards may be granted to
any Eligible Employee. The value of such Awards may be
linked to the market value, book value or other measure of the
value of the Common Stock or other specific performance
criteria determined appropriate by the Board or the Committee,
in each case on a specified date or over any period determined
by the Board or the Committee, or may be based upon the
appreciation in the market value, book value or other measure
of the value of a specified number of Shares of Common Stock
over a fixed period determined by the Board or the
Committees. In making such determinations, the Board or the
Committees may consider (among such other factors as it
deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the
Participant.
11. DIVIDEND EQUIVALENTS.
A Participant may also be granted "Dividend
Equivalents" based on the dividends declared on the Common
Stock, to be credited as of dividend payment dates, during the
period between the Award Date and the date such Award is
exercised, vests or expires as determined by the Board or the
Committee. Such Dividend Equivalents shall be converted to
cash or additional Shares of Common Stock by such formula
and at such time and subject to such limitations as may be
determined by the Board or the Committee.
12. STOCK PAYMENTS.
The Board or the Committee may approve Stock
Payments to Eligible Employees who elect to receive such
payments in the manner determined from time to time by the
Board or the Committee. The number of Shares shall be
determined by the Board or the Committee and may be based
upon the Fair Market Value, book value or other measure of the
value of such Shares on the Award Date or on any date
thereafter.
13. LOANS.
The Corporation may, with the Board's or the
Committee's approval, extend one or more loans to Participants
in connection with the exercise or receipt of outstanding
Awards granted under the Plan; provided any such loan shall be
subject to the following terms and conditions;
(i) The principal of the loan shall not exceed the
amount required to be paid to the Corporation upon the
exercise or receipt of one or more Awards under the Plan less
the aggregate Par Value of any Common Stock deliverable on
such event, and the loan proceeds shall be paid directly to the
Corporation in consideration of such exercise or receipt.
(ii) The initial term of the loan shall be determined by
the Board or the Committee; provided that the
term of the loan, including extensions, shall not exceed a period
of ten (10) years.
(iii) The loan shall be with full recourse to the
Participant, shall be evidenced by the Participant's promissory
note and shall bear interest at a rate determined by the Board or
the Committee but not less than the Corporation's average cost
of funds as of a date within thirty-one (31) days of the date of
such loan, as determined by the Board or Committee.
(iv) in the event a Participant terminates his or her
employment at the request of the Corporation, the unpaid
principal balance of the note shall become due and payable on
the tenth (10th) business day after such termination; provided,
however, that if a sale of such Shares would cause such
Participant to incur liability under Section 16(b) of the
Exchange Act, the unpaid balance shall become due and
payable on the tenth (10th) business day after the first day on
which a sale of such Shares could have been made without
incurring such liability assuming for these purposes that there
are no other transactions by the Participant subsequent to such
termination. In the event a Participant terminates employment
other than at the request of the Corporation, the unpaid
principal balance of the note shall become due and payable six
(6) months after the date of such termination.
14. RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND BENEFICIARIES.
14.1 Employee Status. Status as an Eligible Employee
shall not be construed as a commitment that any Award will be
made under the Plan to an Eligible Employee or to Eligible
Employees generally.
14.2 No Employment Contract. Nothing contained in
the Plan (or in the Award Agreements or in any other
documents related to the Plan or to Awards) shall confer upon
any Eligible Employee or any Participant any right to continue
in the employee of the Corporation or constitute any contract
or agreement of employment, or interfere in any way with the
right of the Corporation to reduce such person's compensation
or to terminate the employment of such Eligible Employee or
Participant, with or without cause, but nothing contained in the
Plan or any document related thereto shall affect any other
contractual right of any Eligible employee or Participant.
Nothing contained in the Plan (or in the Award Agreements or
in any other documents related to the Plan or the Awards) shall
confer upon any director of the Corporation any right to
continue as a director of the Corporation.
14.3 No Transferability. Awards may be exercised only
by, and amounts payable or Shares issued pursuant to an Award
shall be paid only to or registered only in the name of the
Participant or, in the event of the Participant's death, to the
Participant's Beneficiary or, in the event of the Participant's
Disability, to the participant's Personal Representative or, if
there is none, to the Participant. Other than by will or the laws
of descent and distribution, no right or benefit under the Plan
or any Award, including, without limitation, any Option or
share of Restricted Stock that has not vested, shall be subject in
any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge and any such
attempted action shall be void and no such right or benefit shall
be, in any manner, liable for, or subject to, debts, contract,
liabilities, engagements, or torts of any Eligible Employee,
Participant or Beneficiary, in any case except as may otherwise
by expressly required by applicable law. The Board or the
Committee shall disregard any attempt at transfer, assignment
or other alienation prohibited by the preceding sentence and
shall pay or deliver such cash or Shares of Common Stock in
accordance with the provisions of the Plan. Notwithstanding
the foregoing, the Board or the Committee may authorize
exercise by or transfers or payments to a third party in a
specific case or more generally; provided, however, with
respect to any option or similar right (including any Stock
Appreciation Right) such discretion may only be exercised to
the extent that applicable rules under Section 16 of the
Exchange Act would so permit without disqualifying the Plan
from certain benefits thereunder.
14.4 Plan Not Funded. No Participant, Beneficiary or
other person shall have any right, title or interest in any fund
or in any specific asset (including Shares of Common Stock) of
the Corporation by reason of any Award granted hereunder.
There shall be no funding of any benefits which may become
payable hereunder. Neither the provision of the Plan (or of any
documents related hereto, nor the creation or adoption of the
Plan, nor any action taken pursuant to the provisions of the
Plan shall create, or be construed to create, a trust of any kind
or a fiduciary relationship between the Corporation and any
Participant or Beneficiary. To the extent that a Participant, a
Beneficiary or other person acquires a right to receive an
Award hereunder, such right shall be no greater than the right
of any unsecured general creditor of the Corporation. Awards
payable under the Plan shall be paid in Shares of Common
Stock or from the general assets of the Corporation, and no
special or separate fund or deposit shall be established and no
segregation of assets or Shares shall be made to assure payment
of such Awards.
14.5 Adjustment Upon Recapitalization and Corporate
Changes. If the outstanding Shares of Common Stock are
changed into or exchanged for cash or a different number or
kind of Shares or securities of the Corporation, or if the
outstanding Shares of the Common Stock are increased,
decreased, exchanged for, or otherwise changes, or if additional
Shares or new or different shares or securities are distributed
with respect to the outstanding Shares of the Common Stock,
through a reorganization or merger in which the Corporation is
the surviving entity or through a combination, consolidation,
recapitalization, reclassification, stock split, stock dividend,
reverse stock split, stock consolidation or other capital change
or adjustment, an appropriate adjustment shall be made in the
number and kind of shares or other consideration that is subject
to or may be developed under the Plan and pursuant to
outstanding Awards. A corresponding adjustment to the
consideration payable with respect to Awards granted prior to
any such change and to the price, if any, to be paid in
connection with Restricted Stock Awards shall also be made as
appropriate. Corresponding adjustments shall be made with
respect to Stock Appreciation Rights related to Options to
which they are related. In addition, the Board or the Committee
may grant such additional rights in the foregoing
circumstances as the Board or the Committee deems to be in
the best interest of any Participant and the Corporation in order
to preserve for the participant the benefits of an Award.
14.6 Termination of Employment Except by Death,
Disability or Retirement. If a Participant ceases to be an
Employee for any reason other than his or her death, disability
or retirement, such Participant shall have the right, subject to
the restrictions of Section 14.3 above, to exercise any Award at
any time within three (3) months after termination of
employment, but only to the extent that, at the date of
termination of employment, the Participant's right to exercise
such Award had accrued pursuant to the terms of the applicable
agreement and had not previously been exercised; provided,
however, that if the Participant was terminated for cause (as
defined in the applicable agreement) any Award not exercised
in full prior to such termination shall be canceled. For this
purpose, the employment relationship shall be treated as
continuing intact while the Participant is on military leave, sick
leave or other bona fide leave of absence (to be determined in
the sole discretion of the Board or the Committee). The
foregoing notwithstanding, in the case of an incentive Stock
Option, employment shall not be deemed to continue beyond
the ninetieth (90th) day after the Participant's re-employment
rights are guaranteed by statute or by contract.
14.7 Death of Participant. If a Participant dies while an
Employee, or after ceasing to be an Employee but during the
period while he or she could have exercised the Award under
this Section 14.7, and has not fully exercised the Award, then
the Award may be exercised in full at any time within twelve
(12) months after the Participant's death but no later than the
date of termination (fixed in the applicable agreement), by the
executors or administrators of his or her estate or by any person
or persons who have acquired the Award directly from the
Participant by bequest or inheritance, but only to the extent
that, at the date of death, the Participant's right to exercise such
Award had accrued and had not been forfeited pursuant to the
terms of the applicable agreement and had not previously been
exercised.
14.8 Disability of Participant. If a Participant ceases to
be an Employee by reason of Disability, such Participant shall
have the right to exercise the Award at any time within twelve
(12) months after termination of employment (but not later than
the termination date fixed in the applicable agreements) but only
to the extent that at the date of termination of employment, the
Participant's right to exercise such Award had accrued pursuant
to the terms of the applicable agreement and had not previously
been exercised.
14.9 Retirement of Participant. If a Participant ceases to
be an Employee by reason of Retirement, such Participant shall
have the right to exercise the Award at any time within three
(3) months after termination of employment (but not later than
the termination date fixed in the applicable agreements) but only
to the extent that, at the date of termination of employment, the
Participant's right to exercise such Award had accrued pursuant
to the terms of the applicable agreement and had not previously
been exercised.
14.10 Rights as a Stockholder. A Participant, or a
transferee of a Participant, shall have no rights as a
stockholder with respect to any Shares covered by his or her
Award until the date of the issuance of a stock certificate
for such Shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to
the date such stock certificate is issued, except as provided in
Section 14.5 hereof.
14.11 Deferral of Payments. The Board or the Committee
may approve the deferral of any payments that may
become due under the Plan. Such deferrals shall be subject to
any conditions, restrictions or requirements as the Board or the
Committee may determine.
14.12 Acceleration of Awards. Immediately prior to the
occurrence of an Event, (i) each Option and Stock
Appreciation Right under the Plan shall become exercisable in
full; (ii) Restricted Stock delivered under the Plan shall
immediately vest free of restriction; and (iii) each other Award
outstanding under the Plan shall be fully vested or exercisable
unless prior to the Event, the Board or the Committee
otherwise determines that there shall be no such acceleration or
vesting of an Award or otherwise determines those Awards
which shall be accelerated or vested and to the extent to which
they shall be accelerated or vested, or that an Award shall
terminate, or unless in connection with such Event the Board
provides (a) for the assumption of such Awards theretofore
granted; or (b) for the substitution for such Awards of new
awards covering securities or obligations (or any combination
thereof) of a successor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to number and kind of
shares and prices; or (c) for the payment of the Fair Market
Value of the then outstanding Awards. In addition, the Board
or the Committee may grant such additional rights in the
foregoing circumstances as the Board or the Committee deems
to be in the best interest of the Participant and the Corporation
in order to preserve for the Participant the benefits of an
Award. For purposes of this Section 14.12 only, Board shall
mean the Board of Directors of the Corporation as constituted
immediately prior to the Event. In addition, the Board may in
its sole discretion accelerate the exercisability or vesting of any
or all Awards outstanding under the Plan in circumstances
under which the Board or the Committee determines such
acceleration appropriate.
15. MISCELLANEOUS
15.1 Termination, Suspension and Amendment. The Board or the
Committee may, at any time suspend, amend, modify of
terminate the Plan (or any part thereof) and may, with
the consent of a Participant, authorize such modifications
of the terms and conditions of such Participant's Award as it
shall deem advisable; provided that, except as permitted under
the provision of Section 14.5 hereof, no amendment or
modification of the Plan may be adopted without approval by
a majority of the Shares of the Common Stock (represented in
person or by proxy) at a meeting of stockholders at which a
quorum is present and entitled to vote thereat, if such
amendment or modification would:
(i) materially increase the benefits accruing to
Participants under the Plan within the meaning of Rule 16b-3
under the Exchange Act or any successor provision;
ii) materially increase the aggregate number of
Shares which may be delivered pursuant to Awards granted
under the Plan; or
iii) materially modify the requirements of
eligibility for either adoption of the Plan.
Neither adoption of the Plan nor the provisions hereof
shall limit the authority of the Board to adopt other Plans or to
authorize other payment of compensation and benefits under
applicable law. No Awards under the Plan may be granted or
amended during any suspension of the Plan or after its
termination. The amendment, suspension or termination of the
Plan shall not, without the consent of the Participant, alter or
impair any rights or obligations pertaining to any Awards
granted under the Plan prior to such amendment, suspension or
termination.
15.2 No Fractional Shares. No Award or installment
thereof shall be exercisable except in respect to whole Shares,
and fractional share interest shall be disregarded.
15.3 Tax Withholding and Tax Bonuses. As required by
law, federal, state or local taxes that are subject to the
withholding of tax at the source shall be withheld by the
Corporation as necessary to satisfy such requirement. The
Corporation is entitled to require deduction from other
compensation payable to such Participant or, in the alternative;
i) the Corporation may require the Participant to advance such
sums: or ii) if Participant elects, the Corporation may withhold
(or require the return of) Shares having the Fair Market Value
equal to the sums required to be withheld. If the Participant
elects to advance such sums directly, written notice of that
election shall be delivered prior to such exercise and, whether
pursuant to such election or pursuant to a requirement imposed
by the Corporation, payment in cash or by check of such sums
for taxes shall be delivered within ten (10) days after the
Exercise Date. If the Participant elects to have the Corporation
withhold Shares (or be entitled to the return of Shares) having a
Fair Market Value equal to the sums required to be withheld,
the value of the Shares to be withheld (or returned) will be
equal to the Fair Market Value on the day the amount of tax to
be withheld (or subject to return) is to be determined (the "Tax
Date").
15.4 Restriction on Elections Made by Participants.
Elections by Participants to have Shares withheld (or subject to
return) for this purpose will be subject to the following
restrictions: i) the election must be made prior to the Tax Date;
ii) the election must be irrevocable; iii) the election will be
subject to the Board's disapproval; and (iv) if the Participant is
an "officer" within the meaning of Section 16 of the Exchange
Act, the election shall be subject to such additional restrictions
as the Board or the Committee may impose in an effort to
secure the benefits of any regulations thereunder.
15.5 Limitations on the Corporation's Obligations. The
Corporation shall not be obligated to issue Shares and/or
distribute cash to the Participant upon any Award exercise until
such payment has been received or Shares have been
withheld, (unless withholding for offset against a cash payment)
as of or prior to the Exercise Date is sufficient to cover all such
sums due or which may be due with respect to such exercise.
In addition, the Board or the Committee may grant to a
Participant a cash bonus in any amount required by federal,
state, or local tax law to be withheld with respect to an Award.
15.6 Compliance with Laws. The Plan, the granting of
Awards under the Plan, the Stock Option Agreements and
Stock Purchase Agreements and the delivery of Options, Shares
and Awards (and/or the payment of money or Common Stock)
pursuant thereto and the extension of any loans hereunder are
subject to such additional requirements as the Board or the
Committee may impose to assure or facilitate compliance with
all applicable federal and state laws, rules and regulation
(including, without limitation, securities laws and margin
requirements) and to such approvals by any regulatory or
governmental agency which may be necessary or advisable in
connection therewith. In connection with the administration of
the Plan or the grant of any Award, the Board or the Committee
may impose such further limitations or conditions as in its
opinion may be required or advisable to satisfy, or secure the
benefits of, applicable regulatory requirements (including those
rules promulgated under Section 16 of the Exchange Act or
those rules that facilitate exemption from or compliance with
the Securities Act or the Exchange Act), the requirements of
any stock exchange upon which such Shares or shares of the
same class are then listed, and any Blue Sky or other securities
laws applicable to such Shares.
15.7 Governing Laws. The Plan and all Awards granted
under the Plan and the documents evidencing Awards shall be
governed by, and construed in accordance with, the laws of the
State of Colorado, except as to matters governed by the
laws of the State of Colorado as the state of incorporation of
the Corporation.
15.8 Securities Law Requirements.
a) Legality of issuance. The issuance an any Shares upon
the exercise of any Option and the grant of any
Option shall be contingent upon the following:
i) the Corporation and the Participant shall have
taken all actions required to register the Shares under the
Securities Act, and to qualify the Option and the Shares under
any and all applicable state securities or "Blue Sky" laws or
regulations, or to perfect an exemption from the respective
registration and qualification requirements thereof;
ii) any applicable listing requirement of any
stock exchange on which the Common Stock is listed shall
have been satisfied; and
iii) any other applicable provision of federal law
shall have been satisfied.
b) Restrictions on Transfer. Regardless of whether the
offering and sale of Shares under the Plan has been registered
under the Securities Act or has been registered or qualified
under the securities laws of any state, the Corporation may
impose restrictions on the sale, pledge or other transfer of such
Shares (including the placement of appropriate legends on
stock certificates) if, in the judgment of the Corporation and its
counsel, such restrictions are necessary or desirable in order to
achieve compliance with the provision of the Securities Act,
the securities laws of any state or any other law. In the event
that the sale of Shares under the Plan is not registered under the
Securities Act but an exemption is available which required an
investment representation or other representation, each
Participant shall be required to represent that such Shares are
being acquired for investment, and not with a view to the sale
or distribution thereof, and to make such other representations
as are deemed necessary or appropriate by the Corporation and
its counsel. Any determination by the Corporation and its
counsel in connection with any of the matter set forth in this
Section 15.8(b) shall be conclusive and binding on all persons.
Stock certificates evidencing Shares acquired under the Plan
pursuant to an unregistered transaction shall bear the following
restrictive legend and such other restrictive legends as are
required or deemed advisable under the provisions of any
applicable law:
THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"SECURITIES ACT"). ANY TRANSFER OF SUCH SECURITIES WILL BE
INVALID UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES
ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF
COUNSEL FOR THE ISSUER SUCH REGISTRATION IS UNNECESSARY IN
ORDER FOR SUCH TRANSFER TO COMPLY WITH THE SECURITIES ACT.
c) Registration or Qualification of Securities. The
Corporation may, but shall not be obligated to register or
qualify the issuance of Awards and/or the sale of Shares under
the Securities Act or any other applicable law. The Corporation
shall not be obligated to take any affirmative action in order to
cause the issuance of Awards or the sale of Shares under the
Plan to comply with any law.
d) Exchange of Certificates. If, in the opinion of the
Corporation and its counsel, any legend placed on a certificate
representing Shares issued under that Plan is no longer
required, the holder of such certificate shall be entitled to
exchange such certificate for a certificate representing the same
number of Shares but lacking such legend.
15.9 Execution. To record the adoption of the Plan in
the form set forth above by the Board effective as of September
1, 1998, the Corporation has caused this Plan to be executed
in the name and on behalf of the Corporation where provided
below by an officer of the Corporation thereunto duly
authorized.
ARETE INDUSTRIES, INC.
By:___________________________
_____________________, President
Attest:
________________________
______________, Secretary
EXHIBIT 10-2
SUMMARY OF STOCK OPTION TO THOMAS P. RAABE
GRANTED AUGUST 10, 1998
Based upon contribution of extraordinary services performed over and above the
ordinary duties of a chief exective officer, including performing extraordinary
legal work in connection with the shareholders' meeting, the hostile
shareholder's law suit and preparation of the proxy statement and annual
reports, which legal work would have cost the Company a substantial amount
of legal fees, Mr. Raabe was awarded a compensatory stock option to purchase
five million common shares for $0.005 per share or $25,000. Shares underlying
the option were included in shares previously registered under Form S-8 filed
in April, 1998.
GUARANTEE AND PLEDGE AGREEMENT
This Agreement is between the Thomas P. Raabe Trust as
Guarantor ("Trust") and Travis Industries, Inc., its successors
and assignees as Borrower ("Travis") effective this 10th day of
August, 1998.
WHEREAS, the Trust has been requested to pledge to US
Bank, NA ("Bank"), on behalf of Travis, a Certificate of
Deposit in the amount of $25,000 (the "CD") as collateral to
guarantee the repayment of a secured line of credit issued to
Travis by Bank.
WHEREAS, Travis desires to compensate the Trust and to
provide security for the return of the $25,000 collateral to be
advanced by the Trust; and
WHEREAS, the Parties hereto desire to set forth their
agreement with respect to the foregoing in writing hereby.
NOW THEREFORE, IT IS AGREED:
1. The Thomas P. Raabe Trust agrees to advance the sum of
$25,000 to Travis in the form of a pledge of a Certificate of
Deposit in such amount to collateralize a secured line of
credit to Travis granted by the Bank for a period of one (1)
year from the date of the advance.
2. The Trust shall be entitled to all interest on the CD until it is
either returned to the Trust, transferred to Travis by the
Trust as provided herein, cancelled or surrendered to the
Bank.
3. The Trust shall be paid Two Million Five Hundred
Thousand (2,500,000) shares of Travis common stock, as
pre-paid interest on the advance, which shall be unrestricted
shares under the private offering exemption provided by
Rule 504 promulgated by the U.S. Securities and Exchange
Commission.
4. The CD shall be returned to the Trust or repaid in cash on or
before one (1) year from the date of pledge to the Bank.
Travis' obligation to repay $25,000 to the Trust on default
or maturity of this Agreement shall be on a full recourse
basis to Travis and the Trust shall not be deemed to have
made an election of remedies by exercise of any one or
more enforcement or collection remedies provided herein,
until the Trust shall have fully recovered its principal,
interest, collection costs and reasonable attorneys fees for
collection on any default.
5. Travis agrees to pledge the following security for the return
of the CD or repayment of the $25,000 principal amount
thereof:
a) Two Million Five Hundred Thousand (2,500,000) shares
of common stock of Travis which can be sold by the
Trust at maturity of this Agreement in lieu of cash
repayment or, upon default, put to Travis for cash
repayment, or withheld by the Trust pending exhaustion
of other available remedies, to ensure payment in full,
all at the sole option of the Trust; and
b) a secured position in assets of the company including
cash, accounts, accounts receivable, furniture, fixtures
and equipment, trademarks and trade names, and
intangible assets now owned or hereafter acquired and
secured by the execution and filing of a security
agreement and financing statement in the states of
Colorado and Iowa and junior to existing security
positions known and of record at the time of filing of
such security agreement and financing statement.
6. At any time following the advance of the CD, the Trust may
elect to transfer the CD to Travis and liquidate or hold the
shares of Travis Common Stock in full payment and
satisfaction of this Agreement. At such time, the security
and collateral agreements provided for herein shall
terminate. Travis shall be under a continuing obligation to
ensure that the shares will be subject to resale without
restriction under federal or state securities laws. In this
connection, all securities issued to the Trust hereunder will
be deemed fully paid and non-assessable, and fully vested as
of the date issued. The securities will be issued in a
transaction exempt from registration under the federal or
state securities laws in a qualified transaction under Rule
504 and will, as such not be deemed to be restricted
securities under Rule 144 of the federal securities laws. In
the event that for any reason, such exemption from
registration and from resale without registration is deemed
inapplicable to the current transaction, the Trust's election
to keep the shares under this paragraph may be revoked and
the Trust shall be entitled to proceed against the other
collateral or otherwise proceed against the Company for
repayment. The Trust is granted conditional piggy-back
registration rights with respect to the shares issued under
this Agreement to demand that such shares be covered by
any pending or effective registration statement filed by
Travis subsequent to the date hereof.
7. The Trust represents and warrants to Travis that in
connection with his/its acquisition of the shares that (i) he/it
is acquiring such securities for his/its own account, for
investment purposes only and not with a view to the public
resale or distribution thereof; (ii) he/it will not sell, transfer
or otherwise dispose of the Shares except in transactions
which are not in violation of the Act; and (iii) he/it is a
sophisticated and an accredited investor as those terms are
defined under Regulation D under the '33 Act.
8. All representations and warranties made herein shall survive
the closing. This Agreement shall bind the parties, their
heirs, legal representative and permitted assigns. The Trust
may assign its right to receive all or a portion of the
consideration being received or the rights being granted
hereunder to any party in his/its sole discretion, however,
Travis may not assign all or any portion of its rights or
obligations under this Agreement without the express
written consent of the Trust. Every representation herein
shall be deemed repeated at the closing which shall occur on
the date the CD is created and pledged on behalf of Travis
or funds to purchase the CD are advanced by the Trust
whichever is sooner. The parties shall execute such
additional instruments as may from time to time be
necessary to accomplish the objectives hereof. This
Agreement constitutes the entire agreement between the
Parties and may not be modified or cancelled except in
writing signed by the Seller and Purchaser.
9. By executing this Agreement on behalf of the respective
party who is a corporate and/or trust entity, the individual so
executing this Agreement on such party's behalf represents
and warrants that he/she has been duly authorized to do so
by the Trust's beneficiaries or Trustees and the
corporation's board of directors, as the case may be, and
that such signature is sufficient without more to bind such
Trust or corporation. Either party shall be entitled to receive
any further documentation validating such authority after
the fact, but shall at all times be entitled to rely upon the
agent's signature as evidence of authority from the
principal.
10. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the state of
Colorado. This Agreement may be executed at different
times and places, in counterparts and shall be effective as of
the date first above written.
IN WITNESS WHEREOF, the Parties have executed this
Agreement, effective as of the date first above written.
TRAVIS INDUSTRIES, INC.: THOMAS P. RAABE, TRUST:
By: By:
Fred Boethling, Director, Thomas P. Raabe, Trustee
Secretary/Treas.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
[TYPE] EX-27
[TEXT]
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 18,921
<SECURITIES> 0
<RECEIVABLES> 167,434
<ALLOWANCES> 102,320
<INVENTORY> 14,634
<CURRENT-ASSETS> 98,669
<PP&E> 323,831
<DEPRECIATION> 305,192
<TOTAL-ASSETS> 189,256
<CURRENT-LIABILITIES> 327,016
<BONDS> 0
0
710,000
<COMMON> 5,992,961
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 189,256
<SALES> 531,623
<TOTAL-REVENUES> 531,623
<CGS> 459,911
<TOTAL-COSTS> 140,575
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,663
<INCOME-PRETAX> (84,526)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (84,526)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
