SCHEDULE 14C
(Rule 14c-101)
INFORMATION REQUIRED IN INFORMATION STATEMENT
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities
Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
|X| Preliminary Information Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
|_| Definitive Information Statement
Boundless Corporation
(Name of Registrant as Specified in Its Charter)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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P R E L I M I N A R Y C O P Y
BOUNDLESS CORPORATION
100 Marcus Boulevard
Hauppauge, New York 11788
INFORMATION STATEMENT
(Dated March , 1998)
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. THE ACTIONS, DEFINED BELOW, HAVE ALREADY BEEN APPROVED BY WRITTEN CONSENT
OF MORGAN KENT GROUP, INC. WHICH OWNS A MAJORITY OF THE COMPANY'S OUTSTANDING
SHARES OF COMMON STOCK. A VOTE OF THE REMAINING STOCKHOLDERS IS NOT NECESSARY.
GENERAL
This Information Statement is first being furnished on or about March ,
1998 to holders of record as of the close of business on December 31, 1997 of
the common stock, $.01 par value per share ("Common Stock"), of Boundless
Corporation (formerly SunRiver Corporation), a Delaware corporation (the
"Company"), in connection with the following (collectively, the "Actions"):
1. amending the Company's Certificate of Incorporation, as amended
("Certificate of Incorporation"), (a) to effect a one-for-ten reverse split of
the issued and outstanding shares of Common Stock, and (b) to decrease the total
number of shares of Common Stock which the Company has authority to issue from
100,000,000 to 25,000,000 (the "Charter Amendment"); and
2. approving the Company's 1997 Incentive Plan (the "1997 Plan"), a copy of
which is attached hereto as Exhibit A, permitting the grant of stock options,
stock appreciation rights, performance shares, stock awards, stock units and
incentive awards to employees, directors and others.
The Board of Directors of the Company (the "Board") has approved, and
Morgan Kent Group, Inc. (formerly SunRiver Group, Inc.) ("Morgan Kent Group"),
which owned 26,439,380 shares (approximately 51%) of the 51,392,288 shares of
Common Stock outstanding as of December 31, 1997 has consented in writing to,
the Actions. Such approval and consent are sufficient under Section 228 of the
Delaware General Corporation Law and the Company's By-Laws to approve the
Actions. Accordingly, the Actions will not be submitted to the other Company
stockholders for a vote and this Information Statement is being furnished to
stockholders solely to provide them with certain information concerning the
Actions in accordance with the requirements of Delaware law and the Securities
Exchange Act of 1934, as amended, and the regulations promulgated thereunder,
including particularly Regulation 14C.
The Actions described in item 1, above, will be effective on the date that
a Certificate of Amendment of the Certificate of Incorporation with respect to
such Actions is filed with the Secretary of State of the State of Delaware. This
filing is expected to occur on March , 1998.
The principal executive offices of the Company are located at 100 Marcus
Boulevard, Hauppauge, New York 11788, and the Company's telephone number is
(516) 342-7400.
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AMENDMENT TO THE COMPANY'S
CERTIFICATE OF INCORPORATION
TO EFFECT A 1-FOR-10 REVERSE SPLIT OF THE OUTSTANDING COMMON STOCK AND
TO DECREASE THE NUMBER OF AUTHORIZED SHARES OF
COMMON STOCK FROM 100,000,000 TO 25,000,000
The Board has approved the Charter Amendment to effect a one-for-ten
reverse split ("Reverse Split") of the issued and outstanding shares of Common
Stock, par value $.01 per share ("Existing Common"), and to decrease the total
number of shares of Common Stock which the Company has authority to issue from
100,000,000 to 25,000,000. A copy of the Charter Amendment effecting the Reverse
Split, in substantially the form to be filed with the Department of State of
Delaware, is provided below. Morgan Kent Group, the majority stockholder of the
Company as of December 31, 1997 and as of the date of this Information
Statement, has consented to the Reverse Split and the Charter Amendment, which
is expected to become effective on March , 1998 (the "Effective Date"). Pursuant
to the Reverse Split, each share of Existing Common issued and outstanding
immediately prior to the Effective Date will be reclassified as, and exchanged
for, one-tenth of one share of newly issued Common Stock, par value $.01 ("New
Common").
The Reverse Split will not materially affect the proportionate equity
interest in the Company of any holder of Existing Common or the relative rights,
preferences, privileges or priorities of any such stockholder. In addition, the
approximately 11,835,331 shares issuable upon exercise of the Company's
outstanding options and warrants, and the exercise price per share, will be
proportionately adjusted, and the par value per share of the Common Stock will
not be changed.
Purpose and Effect of the Reverse Split
The Existing Common has been trading below $1.00 per share, which is the
minimum bid price for continued listing on The Nasdaq SmallCap MarketSM (the
"SmallCap Market"). The closing bid price for the Existing Common on February
13, 1998 was $0.69 per share. The Company believes that The Nasdaq Stock Market,
Inc. ("NASDAQ") may remove the Company from listing on the SmallCap Market if
the minimum bid price requirement continues not to be met. In an effort to avoid
such action by NASDAQ, the Board believes that it is in the best interest of the
Company and its stockholders to effect the Reverse Split.
The Board also believes that it is in the best interest of the Company and
its stockholders that the Common Stock be listed for trading on the Nasdaq
National MarketSM (the "National Market"), whose minimum bid price per share is
$5.00. While the Company currently does not meet the minimum bid price
requirement, the Reverse Split should positively affect the trading price per
share of the New Common. The Company will apply as early as practicable for
listing the New Common for trading on the National Market. The Company believes
that such listing, if accomplished, would be of benefit to the Company. The
Company believes that certain large investors, such as institutions, are more
likely to invest in stocks listed on the National Market than those listed on
the SmallCap Market. The Company also believes that listing on the National
Market may improve its image to its customers and vendors. However, there can be
no assurance that the Company will meet in the future the entry standards for
the National Market.
An additional effect of the Reverse Split will be to decrease the number of
issued and outstanding shares of Common Stock from 51,392,288 shares of Existing
Common as of December 31, 1997 to approximately 5,139,000 shares of New Common.
No assurance can be given, however, that the market price of the New Common will
rise in proportion to the reduction in the number of outstanding shares
resulting from the Reverse Split. The New Common issued pursuant to the Reverse
Split will be fully paid and non-assessable. All shares of New Common will have
the same par value, voting rights and other rights as shares of the Existing
Common have. Stockholders of the Company do not have preemptive rights to
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acquire additional shares of Common Stock which may be issued. In addition, the
filing of the Charter Amendment will lower the number of currently authorized
shares of the Common Stock from 100,000,000 to 25,000,000. The Certificate of
Incorporation will continue to authorize 1,000,000 shares of preferred stock,
par value $.01, of which none are currently issued or outstanding.
The Company's registration statement on Form S-1 registered in July 1996,
among other shares, 2,500,000 shares which may be issued and sold by the Company
from time to time. As of December 31, 1997, 918,651 of such 2,500,000 shares
remained unissued. However, the registration statement will have to be updated
before the Company can sell additional registered shares. Except as described in
this Information Statement, the Company has no definitive plans or commitments
to issue additional shares of Common Stock.
Stock Certificates and Fractional Shares
The Reverse Split will occur on the Effective Date without any further
action on the part of stockholders of the Company and without regard to the date
or dates on which certificates representing shares of Existing Common are
actually surrendered by each holder thereof for certificates representing the
number of shares of the New Common which each such stockholder is entitled to
receive as a consequence of the Reverse Split. After the Effective Date of the
Reverse Split, the certificates representing shares of Existing Common will be
deemed to represent one-tenth the number of shares of New Common. Certificates
representing shares of New Common will be issued in due course as old
certificates are tendered for exchange or transfer to American Stock Transfer &
Trust Company, 40 Wall Street, New York, NY 10005, Attention: Shareholder
Relations (the "Exchange Agent" or "Transfer Agent"), telephone number:
800-937-5449.
No fractional shares of New Common will be issued and, in lieu thereof,
stockholders holding a number of shares of Existing Common not evenly divisible
by 10, and stockholders holding fewer than 10 shares of Existing Common prior to
the Effective Date, upon surrender of their old certificates, will receive cash
in lieu of fractional shares of New Common. Such cash payment will not be made
until a stockholder's certificates of Existing Common are presented to the
Exchange Agent. The price payable by the Company for those shares of Existing
Common which are not divisible by 10 will be equal to the product of (a) the
number of such shares which cannot be exchanged for a whole number of shares of
New Common and (b) the average of the closing price of one share of Existing
Common as reported on the SmallCap Market for the 10 business days immediately
preceding the Effective Date of the Reverse Split for which transactions in the
Existing Common are reported.
Source of Funds; Number of Holders
The funds required to purchase the fractional shares are available and will
be paid from the current cash reserves of the Company. The Company cannot
predict with certainty the number of fractional shares or the total amount that
the Company will be required to pay for fractional share interests. However, it
is not anticipated that the funds necessary to effect the cancellation of
fractional shares will be material.
As of February 13, 1998, there were approximately 985 holders of record of
Existing Common. The Company does not anticipate that, as a result of the
Reverse Split, the number of holders of record or beneficial owners of Existing
Common or New Common will change significantly.
No Change in Company's Status
The Company does not anticipate any change in the Company's status as a
reporting company for federal securities law purposes as a result of the Reverse
Split.
Exchange of Stock Certificates
Included with this Information Statement as a separate document, the
Company is providing a transmittal form (the "Transmittal Form") that each
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stockholder of record on the Effective Date should use to transmit certificates
representing shares of Existing Common ("Old Certificates") to the Exchange
Agent for exchange or transfer. The Transmittal Form contains instructions for
the surrender of Old Certificates to the Exchange Agent in exchange for
certificates representing the appropriate number of whole shares in New Common.
No new certificates will be issued to a stockholder until such stockholder has
surrendered all Old Certificates together with a properly completed and executed
Transmittal Form to the Exchange Agent.
Upon proper completion and execution of the Transmittal Form and its return
to the Exchange Agent together with all of a stockholder's Old Certificates
and/or an Affidavit of Loss for any lost or destroyed certificates, as
applicable, that stockholder will receive a new certificate or certificates
representing the number of whole shares of New Common into which the shares of
Common Stock represented by the Old Certificates are being converted as a result
of the Reverse Split. Until surrendered to the Exchange Agent, Old Certificates
retained by stockholders will be deemed for all purposes, including voting and
payment of dividends, if any, to represent the number of whole shares of New
Common to which such stockholders are entitled as a result of the Reverse Split.
Stockholders should not send their Old Certificates to the Exchange Agent until
after the Effective Date. Shares of Existing Common surrendered after the
Effective Date will be replaced by certificates representing shares of New
Common as soon as practicable after such surrender.
No service charge will be payable by holders of shares of Existing Common
in connection with the exchange of shares and all expenses of the exchange and
issuance of new certificates will be borne by the Company.
Certificates representing shares of Existing Common which contain a
restrictive legend will be exchanged for New Common with the same restrictive
legend. As applicable, the time period during which a stockholder has held the
Existing Common will be included in the time period during which such
stockholder actually holds the New Common received in exchange for such Existing
Common for the purposes of determining the term of the restrictive period
applicable to the New Common.
Federal Income Tax Consequences
Except as described below with respect to cash received in lieu of
fractional share interests, the receipt of New Common in the Reverse Split
should not result in any taxable gain or loss to stockholders for federal income
tax purposes. The tax basis of New Common received as a result of the Reverse
Split (when added to the basis for any fractional share interests to which a
stockholder is entitled) will be equal, in the aggregate, to the basis of the
Existing Common exchanged for New Common. The per share tax basis of the New
Common is based on the tax basis of the Existing Common for which the New Common
is exchanged. For purposes of determining whether short-term or long-term
capital gains treatment will be applied to a stockholder's disposition of New
Common subsequent to the Reverse Split, a stockholder's holding period for the
shares of Existing Common will be included in the holding period for the New
Common received as a result of the Reverse Split. A stockholder who receives
cash in lieu of fractional shares of New Common will be treated as first
receiving such fractional shares and then receiving cash as payment in exchange
for such fractional shares of New Common and, except for dealers, will recognize
capital gain or loss in an amount equal to the difference between the amount of
cash received and the adjusted basis of such fractional shares.
THE DISCUSSION SET FORTH ABOVE CONCERNING CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF THE REVERSE SPLIT IS INCLUDED HEREIN FOR GENERAL INFORMATION
ONLY. ALL STOCKHOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS AS TO ANY
FEDERAL, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES APPLICABLE TO THEM WHICH COULD
RESULT FROM THE REVERSE SPLIT.
Effectiveness
The Company reserves the right, upon notice to stockholders, to abandon or
modify the proposed Charter Amendment and the Reverse Split at any time prior to
the filing of the Charter Amendment upon consent of the Board and the holders of
a majority of the Existing Common then issued and outstanding.
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Charter Amendment
The first paragraph of Article FOURTH of the Certificate of Incorporation
will be amended by deleting such paragraph and adding the following paragraphs
in lieu thereof:
"FOURTH: The total number of shares of all classes of stock which the
corporation shall have authority to issue is Twenty-Six Million
(26,000,000) which are divided into One Million (1,000,000) shares of
Preferred Stock, par value $.01 per share, and Twenty-Five Million
(25,000,000) shares of Common Stock, par value $.01 per share.
"On the effective date (the "Effective Date") of this Certificate of
Amendment, all outstanding shares of Common Stock of the corporation
shall be automatically combined at the rate of one-for-ten (the
"Reverse Split") without the necessity of any further action on the
part of the holders thereof or the corporation, provided, however, that
the corporation shall, through its transfer agent, exchange
certificates representing Common Stock outstanding immediately prior to
the Reverse Split (the "Existing Common") into new certificates
representing the appropriate number of shares of Common Stock resulting
from the combination ("New Common"). No fractional shares, but only
whole shares of New Common, shall be issued to any holder of fewer than
ten (10) shares or any number of shares which, when divided by ten
(10), does not result in a whole number. In lieu of fractional shares,
the corporation has arranged for its transfer agent (the "Exchange
Agent") to remit payment therefor on the following terms and conditions
and as set forth in the corporation's Information Statement dated
March [ ], 1998 with respect to the Reverse Split:
"The price payable by the corporation for fractional shares of Existing
Common, certificates for which are surrendered to the Exchange Agent in
connection with the Reverse Split, shall be equal to the product of (a)
the number of such shares which cannot be exchanged for a whole number
of shares of New Common and (b) the average of the closing price of one
share of Existing Common as reported on The Nasdaq SmallCap Market for
the 10 business days immediately preceding the Effective Date for which
transactions in the Existing Common are reported. The par value of the
Common Stock shall remain as otherwise provided in Article FOURTH of
this Certificate of Incorporation and shall not be modified as a result
of the Reverse Split. From and after the Effective Date, certificates
representing shares of Existing Common shall represent only the right
of the holders thereof to receive New Common and payment as provided
herein for any fractional shares of Existing Common.
"From and after the Effective Date, the term "New Common" as used in
this Article FOURTH shall mean Common Stock as provided in this
Certificate of Incorporation."
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ADOPTION OF THE COMPANY'S
1997 INCENTIVE PLAN
The Board believes that the 1997 Plan will benefit the Company by (i)
assisting it in recruiting and retaining employees and non-employee directors,
advisors and independent consultants with ability and initiative, (ii) providing
greater incentive for employees and consultants of the Company and its related
entities and (iii) associating the interest of employees and consultants with
those of the Company, its related entities and its stockholders through
opportunities for increased stock ownership. The Company had previously adopted
its 1995 Incentive Plan which permitted up to 6,000,000 shares of Common Stock
to be issued thereunder. As additional shares are no longer available to be
issued under the 1995 Incentive Plan, the Board has adopted the 1997 Plan.
Summary of the 1997 Plan
The Board will administer the 1997 Plan. The Board may, but has no current
intention to, delegate its authority to administer the 1997 Plan to a committee
of the Board or to one or more officers of the Company. As used in this summary,
the term "Administrator" means the Board and any delegate, as appropriate.
Each employee, non-employee director, advisor, independent consultant and
member of the Board or a related entity is eligible to participate in the 1997
Plan. The Administrator will select the individuals who will participate in the
1997 Plan ("Participants"). The Administrator may, from time to time, grant
stock options, stock appreciation rights ("SARs"), stock awards, performance
shares or stock units or make an incentive award to Participants.
Options granted under the 1997 Plan may be qualified incentive stock
options ("ISOs") or non-qualified stock options. A stock option entitles the
Participant to purchase shares of Common Stock from the Company at the option
price. The option price will be fixed by the Administrator at the time the
option is granted, but the price cannot be less than the fair market value of
the stock on the date of grant in the case of an ISO, or 75% of that amount in
the case of a non-qualified stock option. The option price may be paid in cash,
with shares of Common Stock, with a combination of cash and Common Stock, in
installments or by allowing the Company to deduct from the number of shares of
Common Stock, deliverable upon exercise of the option, a number of such shares
which has an aggregate fair market value on the date of exercise of the option
equal to the aggregate option exercise price. The difference between the option
price and the fair market value of the stock on the date of grant of a
non-qualified stock option may constitute compensation expense to the Company
and, therefore, negatively affect the Company's earnings.
SARs may be granted in relation to option grants ("Corresponding SARs") or
independently of option grants. The difference between these two types of SARs
is that to exercise a Corresponding SAR, the Participant must surrender
unexercised that portion of the stock option to which the Corresponding SAR
relates. SARs entitle the Participant to receive the lesser of (i) the excess of
the fair market value of a share of Common Stock on the date of exercise over
the initial value of the SAR, or (ii) the initial value of the SAR. The initial
value of the SAR is the option price of the related option in the case of a
Corresponding SAR and the fair market value of a share of Common Stock on the
date of grant in the case of independent SARs. The amount payable upon the
exercise of a SAR may be paid in cash, Common Stock or a combination of the two.
Participants may also be awarded shares of Common Stock pursuant to a stock
award. The Administrator, in its discretion, may prescribe that a Participant's
right in a stock award shall be nontransferable or forfeitable or both unless
certain conditions are satisfied. These conditions may include, for example, a
requirement that the Participant continue employment with the Company or a
related entity for a specified period or that the Company, a related entity or
the Participant achieve stated objectives. As described below, stock awards may
be used to settle incentive awards.
The 1997 Plan also provides for the award of performance shares. A
performance share award entitles the Participant to receive a specified number
of shares of Common Stock. The Administrator will prescribe the requirements
that must be satisfied before a performance share award is earned. The
performance share award requirements may include, for example, a requirement
that the Participant continue employment with the Company or a related entity
for a specified period or that the Company, a related entity or the Participant
achieve stated objectives. To the extent that performance shares are earned, the
obligation will be settled in Common Stock.
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A Participant also may be awarded stock units under the 1997 Plan. A stock
unit is an award, stated with reference to a specified number of shares of
Common Stock, that entitles the Participant to receive a payment for each
specified share equal to the fair market value of the Common Stock on the date
of settlement and accumulated dividends. The Administrator, in its discretion,
may prescribe that a Participant's rights in stock units shall be
nontransferable or forfeitable or both unless certain conditions are satisfied.
These conditions may include, for example, a requirement that the Participant
continue employment with the Company or a related entity for a specified period
or that the Company, a related entity or the Participant achieve stated
objectives. To the extent that any such requirements are satisfied, the
obligation may be settled in cash, in Common Stock or by a combination of the
two.
The 1997 Plan also allows the Administrator to make incentive awards to
Participants on such terms and conditions as the Administrator prescribes. To
the extent that any incentive awards are granted, they may be settled in cash,
in Common Stock or by a combination of the two.
The 1997 Plan provides that in most circumstances outstanding options and
SARs will become exercisable and outstanding stock awards, performance shares,
stock units and incentive awards will be earned in full and nonforfeitable in
the event of a "change in control" of the Company (as defined in the 1997 Plan).
All stock options, SARs, stock awards, performance shares and stock units
granted under the 1997 Plan will be evidenced by written agreements between the
Company and the Participant. Under the 1997 Plan, the maximum aggregate number
of shares of Common Stock which may be issued is 10,000,000. After the Reverse
Split is effected, such number will become 1,000,000 pursuant to the
determination of the Board. Common stock issued under the 1997 Plan, other than
on exercise of an option with an option price equal to the fair market value of
the Common Stock on the date of grant, will constitute compensation expense to
the Company and will negatively affect the Company's earnings.
No option, SAR, incentive award or stock award may be granted and no
performance shares or stock unit may be awarded under the 1997 Plan after July
1, 2007. The Board may terminate the 1997 Plan sooner without further action by
stockholders. The Board also may amend the 1997 Plan, except that no amendment
may adversely affect the rights of Participants without their consent.
Unexercised Options
The following table sets forth information, as of February 13, 1998,
regarding the outstanding options granted under the 1997 Plan and the holders
thereof:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Number of Percent of Potential Realizable
Securities Total Value at Assumed
Underlying Options/SARs Exercise or Annual Rates of Stock
Options/SARs Granted under Base Price Expiration Price Appreciation for
Name Granted (#)(1) 1997 Plan ($/Sh) Date Option Term
---- -------------- --------- ------ ------
---------------------------
5% ($) 10% ($)
------ -------
- ----------------------------------------------------------------------------------------------------------------------------
J. Gerald Combs,
Chairman and CEO 650,000 60% $.66 July 1, 2002 118,525 261,909
- ----------------------------------------------------------------------------------------------------------------------------
Jeffrey K. Moore,
Director 250,000 23% $.66 July 1, 2002 45,586 100,734
- ----------------------------------------------------------------------------------------------------------------------------
All executive officers and
directors as a group(2) 900,000 83% $.66 July 1, 2002 164,111 362,643
- ----------------------------------------------------------------------------------------------------------------------------
All employees as a group
(other than executive
officers and directors) 180,000 17% $.66- $1.125 7/02-10/02 49,187 108,690
------- ---- ------------
- ----------------------------------------------------------------------------------------------------------------------------
Total 1,080,000 100%
=========
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
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(1) The numbers are prior to giving effect to the Reverse Split. All
options vested fully upon grant except that, with respect to each of Jeffrey
Moore's options and 250,000 of J. Gerald Combs' options, options to purchase
125,000 shares vest on July 1, 1998 and options to purchase the remaining
125,000 shares vest on July 1, 1999. Upon a "change in control" of the Company,
however, such options vest immediately. On February 13, 1998, the last sale
price of the Common Stock on The Nasdaq SmallCap Market was $0.69.
(2) Consists of Jeffrey Moore and J. Gerald Combs.
With respect to options which may be granted under the 1997 Plan in the
future, neither the number of individuals who will be selected to participate in
the 1997 Plan nor the type or size of award that will be approved by the
Administrator can presently be determined.
Federal Income Tax Consequences
No income is recognized by a Participant at the time an option is granted.
If the option is an ISO, no income will be recognized upon the Participant's
exercise of the option. Income is recognized by a Participant when he disposes
of shares acquired under an ISO. The exercise of a non-qualified stock option
generally is a taxable event that requires the Participant to recognize, as
ordinary income, the difference between the shares' fair market value and the
option price.
No income is recognized upon the grant of a SAR. The exercise of a SAR
generally is a taxable event. The Participant generally must recognize income
equal to any cash that is paid and the fair market value of Common Stock that is
received in settlement of a SAR.
The Participant will recognize income on account of a stock award on the
first day that the shares are either transferable or not subject to a
substantial risk of forfeiture. The amount of income recognized by the
Participant is equal to the fair market value of the Common Stock received on
that date.
The Participant will recognize income on account of the settlement of a
performance share award or stock unit and the making of an incentive award. The
Participant will recognize income equal to any cash that is paid and the fair
market value of Common Stock (on the date that the shares are first transferable
or not subject to a substantial risk of forfeiture) that is received under the
award.
The employer (either the Company or a related entity) will be entitled to
claim a federal income tax deduction on account of the exercise of a
non-qualified option or SAR, the vesting of a stock award, the settlement of a
performance share award or stock unit and the payment of an incentive award. The
amount of the deduction is equal to the ordinary income recognized by the
Participant. The employer will not be entitled to a federal income tax deduction
on account of the grant or the exercise of an ISO. The employer may claim a
federal income tax deduction on account of certain dispositions of Common Stock
acquired upon the exercise of an ISO.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of the outstanding Common Stock as of December 31, 1997, by (i) each
of the Company's directors and "named executive officers," (ii) directors and
named executive officers of the Company as a group and (iii) each person
believed by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock. Except as indicated, each such person has sole voting
and investment powers with respect to his and her shares. The address of Morgan
Kent Group is 515 Congress Avenue, Suite 2500, Austin, Texas 78701. The address
of Stephen Maysonave is 919 Corriente Pointe, Redwood City, CA 94065.
<TABLE>
<S> <C> <C>
Number of Shares Percentage of
Name of Beneficial Owner Beneficially Owned Outstanding Shares
Morgan Kent Group 29,514,399(1) 54.2%
Stephen Maysonave, Voting Trustee 29,514,399(1)(2) 54.2%
J. Gerald Combs 1,311,000(3) 2.5%
Leonard Mackenzie 500,000(3) *
Gary Wood 150,000(3) *
Daniel Matheson 250,000(3) *
Jeffrey Moore 250,000(2)(3) *
Joseph Gardner 33,853(3) *
Thomas Upton 83,540(3) *
Brian Hann 101,666(3) *
All current directors and named executive
officers as a group
(seven individuals) 2,180,059(3) 4.1%
- --------------------------------
<S> <C> <C>
</TABLE>
* Less than 1%.
(1) Includes 3,075,019 shares underlying the warrant held by Morgan Kent Group
(the "Morgan Kent Group Warrant") to purchase shares of Common Stock at an
exercise price of $.75 per share.
(2) Includes the shares beneficially owned by Morgan Kent Group, as a result of
Mr. Maysonave's beneficial ownership, as voting trustee, of 3,330,000
shares of Series B Preferred Stock of Morgan Kent Group (the "Series B
Preferred") pursuant to a voting trust expiring March 1999. Under a
stockholders agreement, the Series B Preferred has the power to elect three
of the five directors constituting Morgan Kent Group's entire board of
directors which has the sole voting power and, with the stockholders of
Morgan Kent Group, shares the investment power with respect to the Common
Stock owned by Morgan Kent Group. The 3,330,000 shares constitute 51.2% of
the 6,500,000 outstanding shares of the Series B Preferred. Messrs. Jeffrey
K. Moore and Matthew R. Moore (the "Moore Brothers") together own a
majority of the outstanding shares of the Series B Preferred and a majority
of the shares in the voting trust, and, voting together, have the power
under the voting trust agreement to replace Stephen Maysonave as voting
trustee at any time for any reason. Each of the Moore Brothers disclaims
beneficial ownership of the other's shares of Morgan Kent Group's Series B
Preferred.
(3) Consists of shares of Common Stock which may be issued upon exercise of
options as follows: Mr. Combs: 1,300,000; Mr. Mackenzie: 500,000; Mr. Wood:
150,000; Mr. Matheson: 250,000; Mr. Moore: 250,000; Mr. Gardner: 33,853;
Mr. Upton: 33,540; and Mr. Hann: 61,666. Mr. Mackenzie is a former Chief
Executive Officer of the Company.
By Order of the Board of Directors,
Joseph Gardner
Dated: March , 1998 Chief Financial Officer
9
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[Document to Accompany Information Statement]
LETTER OF TRANSMITTAL
Accompanying certificate(s) representing pre-reverse stock split shares of
Boundless Corporation common stock, $.01 par value ("Old Common Stock"), for
replacement by certificate(s) representing post-reverse stock split shares of
Boundless Corporation common stock, $.01 par value (New Common Stock").
Send this Transmittal Form by Mail or Deliver it By Hand
TO: American Stock Transfer & Trust Company
Transfer Agent for Boundless Corporation
40 Wall Street
46th Floor
New York, New York 10005
Dear Sirs:
In connection with the one-for-ten reverse stock split of Boundless
Corporation Old Common Stock for New Common Stock, enclosed are the below
described certificate(s) representing shares of Old Common Stock which the
undersigned hereby surrenders. Please send me certificate(s) representing shares
of New Common Stock to which I may be entitled.
The undersigned hereby acknowledges that he/she has received and read the
Information Statement, dated March [ ], 1998, relating to, among other
things, the reverse stock split. Any payment from the sale of any fractional
share interest to which the undersigned may be entitled in connection with the
reverse stock split shall be made to the undersigned, unless the new
certificate(s) is to be issued pursuant to the Special Issuance and Delivery
Instructions below in a name other than the undersigned, in which case any such
payment shall be made to the transferee in whose name the new certificate(s) is
to be issued. The price payable by the Company for those shares of Old Common
Stock which are not divisible by 10 will be equal to the product of (a) the
number of such shares which cannot be exchanged for a whole number of shares of
New Common Stock and (b) the average of the closing price of one share of Old
Common Stock, as reported on The Nasdaq SmallCap Market for the ten business
days immediately preceding the effective date of the reverse stock split for
which transactions in the Old Common Stock are reported.
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
CERTIFICATE(S) PRESENTED
- ------------------------------------------------------------------------------------------------------------------------------------
Name(s) of Record Holder(s) Certificate Number of
(As appears on certificate(s)) Number(s) Shares
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
----------------------------------------------------
----------------------------------------------------
----------------------------------------------------
Total Shares
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
If additional space is required, please attach separate sheet.
SEE INSTRUCTIONS
FOR ASSISTANCE, CALL AMERICAN STOCK TRANSFER & TRUST COMPANY AT (800) 937-5449
FACSIMILE TRANSMISSION COPY NUMBER (718) 234-5001
(CONFIRM BY TELEPHONE TO: (718) 921-8237/38)
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<TABLE>
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
SPECIAL ISSUANCE AND DELIVERY CHANGE OF ADDRESS INSTRUCTIONS
INSTRUCTIONS (PLEASE PRINT) (PLEASE PRINT)
To be completed ONLY if certificate(s) are to be issued in the name (To be completed ONLY if the present record address of the
of and mailed to other than the holders.* record holder(s) is to be changed and the certificate(s) are
(See Instructions 1) to be mailed to such new address. Do not use to change
record holder(s). (See Instruction 1)
Mail new certificate(s) to:
Register address of present record holder(s) as and mail new
Name................................................................ certificate(s) to:
Address............................................................. Address......................................................
.................................................................... .............................................................
</TABLE>
*If a new certificate is to be issued in the name of any person other than the
record holder(s) of the certificate(s) surrendered, such person should complete
and sign the Substitute Form W-9 (See Instruction 6).
- --------------------------------------------------------------------------
GUARANTEE OF SIGNATURES(S)
Authorized Signature..................................................
Name..................................................................
Title.................................................................
Name of Firm..........................................................
Address...............................................................
......................................................................
Area Code and Telephone Number........................................
Dated: ...............................................................
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOMINEE'S INSTRUCTIONS
To be completed ONLY if a certificate registered in a broker's, "street" or
other nominee name represents several beneficial ownerships. (See Instruction 1)
Certificate No. ________ submitted herewith for ________ shares represents
separate beneficial ownerships of an odd number of shares of common stock by
______ different beneficial owners.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE
By my signature below I represent that I have full power and authority to
present the above-described certificate(s) and to give above instructions, and
that I have good unencumbered title to the shares represented by said
certificate(s), free and clear of liens, charges and adverse claims.
Date: ___________________, 199_ Tel. No.: (___) ______________________________
Please Sign Here:_____________________________________________________________
- --------------------------------------------------------------------------------
Must be signed by recorded holder(s), exactly as name(s) appear(s) on
certificate(s), or by the authorized representative of such record holder(s).
(Label affixed below shows holder's name as it appears on the transfer agent's
records.)
- --------------------------------------------------------------------------------
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<PAGE>
INSTRUCTIONS
1. Delivery. In order to present certificate(s) for replacement by
certificate(s) representing New Common Stock, this Letter of Transmittal must be
properly filled in and signed by or on behalf of the record holder(s), and
delivered (by mail or otherwise) with the certificate(s) to American Stock
Transfer & Trust Company, 40 Wall Street, 46th Floor, New York, New York 10005.
THE METHOD OF DELIVERY IS AT THE OPTION AND RISK OF THE STOCKHOLDER. IF DELIVERY
IS BY MAIL, INSURED REGISTERED MAIL, RETURN RECEIPT REQUESTED, IS SUGGESTED. The
certificate(s) representing shares of New Common Stock will be mailed to the
stockholder's present record address, unless the Special Issuance and Delivery
of Change of Address Instructions (front side) are completed.
2. Signature on this Letter of Transmittal should correspond with the
name(s) as written on the face of the certificate(s). If shares are registered
differently on several certificates, as many separate Letters of Transmittal as
there are different registrations should be submitted. If certificate(s) are
registered in the names of two or more joint owners, administrator, guardian,
attorney-in-fact or another acting in a fiduciary or representative capacity,
such person should so indicate when signing. If a corporation, sign in full
corporate name by President or other authorized officer. If a Partnership, sign
in partnership name by an authorized person.
3. Special Issuance and Delivery Instructions. If the certificate(s) for
Common Stock is to be issued in the name of a person other than the person in
whose name the surrendered certificate(s) is registered, the surrendered
certificate(s) must be duly endorsed in blank by the record holder(s) thereof or
accompanied by a duly executed instrument of assignment in blank and the
signature to the endorsement or assignment must be guaranteed by a member of an
approved Signature Guarantee Medallion Program. A Guarantee of Signature(s) box
is provided on the front side of this transmittal letter.
If the endorsement or assignment is executed by an attorney, executor,
administrator, guardian or other fiduciary, or by an officer of a corporation,
the person executing the endorsement or assignment must give his or her full
title in such capacity, and proper evidence of his or her authority to act in
such capacity must accompany the stock certificate(s).
4. Fractional Interests. Settlement of fractional shares will be made by
cash. No fractional shares will be issued.
5. Nominees' Holdings. (This instruction is applicable only to broker's,
"street" name registrations, and nominee holders.) Each beneficial ownership
represented by a certificate registered in a broker's, "street" or other
nominee's name will be separately treated in computing fractional interests if
the Nominee's Instructions (front side) are completed. A separate Letter of
Transmittal and Nominee's Instructions should be submitted with each certificate
representing a different beneficial ownership which is to be separately treated
in computing fractional interests. Submission of a Letter of Transmittal with
the Nominee's Instructions completed will constitute the record holder's
representation that the beneficial ownership information shown therein is
accurate.
6. Substitute Form W-9. Request for Taxpayer Identification Number. Any
person in whose name a new certificate is to be issued and who is not a record
holder of the surrendered certificate, must complete and sign the Substitute
Form W-9 below. If the new certificate(s) will instead be issued in the name of
the record holder(s), then any such record holder(s) who has not previously
provided a Taxpayer Identification Number (TIN) must complete and sign the
Substitute Form W-9 below.
7. Lost, Stolen or Destroyed Certificates. A holder of record of shares of
Old Common Stock who has lost, has had stolen, or has had destroyed a
certificate(s) formerly representing such shares may request the Transfer Agent
to send him/her the necessary documents to replace the lost, stolen or destroyed
certificate(s).
8. Inadequate Space. If the space provided in this Letter of Transmittal is
inadequate the certificate numbers and the number of securities should be listed
on a separate schedule attached hereto.
[IRS Substitute Form W-9 and Guidelines thereto have been omitted from the
Information Statement filing with the Commission.]
3
<PAGE>
EXHIBIT A
TO INFORMATION STATEMENT
BOUNDLESS CORPORATION
1997 INCENTIVE PLAN
ARTICLE I.
DEFINITIONS
1.01. Administrator means the Board and any delegate of the Board that is
appointed in accordance with Article III.
1.02. Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of an award of Performance Shares or Stock Units or a Stock
Award, Option or SAR granted to such Participant.
1.03. Board means the Board of Directors of the Company.
1.04. Change in Control shall mean an event or series of events that would
be required to be described as a change in control of the Company in a proxy or
information statement distributed by the Company pursuant to section 14 of the
Securities Exchange Act of 1934 (the "Exchange Act") in response to Item 6(e) of
Schedule 14A promulgated thereunder or otherwise adopted. The determination
whether and when a change in control has occurred or is about to occur shall be
made by the Board in office immediately prior to the occurrence of the event or
series of events constituting such change in control.
1.05. Code means the Internal Revenue Code of 1986, and any amendments
thereto.
1.06. Common Stock means the common stock of the Company.
1.07. Company means Boundless Corporation.
1.08. Control Change Date means the occurrence of the event or series of
events constituting a Change in Control as determined by the Board.
1.10. Corresponding SAR means an SAR that is granted in relation to a
particular Option and that can be exercised only upon the surrender to the
Company, unexercised, of that portion of the Option to which the SAR relates.
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1.11. Exchange Act means the Securities Exchange Act of 1934, as amended
and as in effect on the date of this Agreement.
1.12. Fair Market Value means, on any given date, the closing price of a
share of Common Stock as reported on the Nasdaq SmallCap Market (or Nasdaq
National Market, if applicable) on such date, or if the Common Stock was not
traded on such exchange on such day, then on the next preceding day that the
Common Stock was traded on such exchange, all as reported by such source as the
Administrator may select.
1.13. Incentive Award means an award which, subject to such terms and
conditions as may be prescribed by the Administrator, entitles the Participant
to receive a cash payment from the Company or a Related Entity.
1.14. Initial Value means, with respect to a Corresponding SAR, the option
price per share of the related Option and, with respect to a SAR granted
independently of an Option, the Fair Market Value of one share of Common Stock
on the date of grant.
1.15. Option means a stock option that entitles the holder to purchase from
the Company a stated number of shares of Common Stock at the price set forth in
an Agreement.
1.16. Participant means an employee of and non-employee director, advisor
and independent consultant to the Company or a Related Entity, including an
employee who is a member of the Board, who satisfies the requirements of Article
IV and is selected by the Administrator to receive an award of Performance
Shares or Stock Units, a Stock Award, an Option, an SAR, or an Incentive Award
or a combination thereof.
1.17. Performance Shares means an award which, in accordance with and
subject to an Agreement, will entitle the Participant, or his estate or
beneficiary in the event of the Participant's death, to receive a Stock Award.
1.18. Plan means the Company's 1997 Incentive Plan.
1.19. Related Entity means any entity that directly or indirectly, through
one or more intermediaries, controls, or is controlled by, or is under common
control with, the Company.
1.20. SAR means a stock appreciation right that entitles the holder to
receive, with respect to each share of Common Stock encompassed by the exercise
of such SAR, the lesser of (a) the excess of the Fair Market Value at the time
2
<PAGE>
of exercise over the Initial Value, or (b) the Initial Value. References to
"SARs" include both Corresponding SARs and SARs granted independently of
Options, unless the context requires otherwise.
1.21. Stock Award means Common Stock awarded to a Participant under Article
IX or in accordance with an award of Performance Shares.
1.22. Stock Unit means an award, in the amount determined by the
Administrator and specified in an Agreement, stated with reference to a
specified number of shares of Common Stock, that entitles the holder to receive
a payment for each specified share equal to the Fair Market Value of Common
Stock on the date of payment and the accumulated dividends on such share, in the
form of additional Stock Units as if such dividends had been invested in Common
Stock on the dividend payment date, from the date of grant to the date of
payment.
ARTICLE II.
PURPOSES
The Plan is intended to assist the Company and Related Entities in
recruiting and retaining key employees, non-employee directors and independent
consultants by enabling such individuals to participate in the future success of
the Company and the Related Entities and to associate their interests with those
of the Company and its shareholders. The Plan is intended to permit the award of
Performance Shares and Stock Units, the grant of Stock Awards, SARs, the grant
of both Options qualifying under Section 422 of the Code ("incentive stock
options") and Options not so qualifying, and the grant of Incentive Awards. No
Option that is intended to be an incentive stock option shall be invalid for
failure to qualify as an incentive stock option. The proceeds received by the
Company from the sale of Common Stock pursuant to this Plan shall be used for
general corporate purposes.
3
<PAGE>
ARTICLE III.
ADMINISTRATION
The Plan shall be administered by the Administrator. The Administrator
shall have authority to award Performance Shares and Stock Units and to grant
Stock Awards, Incentive Awards, Options and SARs upon such terms (not
inconsistent with the provisions of this Plan) as the Administrator may consider
appropriate. Such terms may include conditions (in addition to those contained
in this Plan) on the exercisability of all or any part of an Option or SAR or on
the transferability or forfeitability of a Stock Award, Incentive Award,
Performance Shares, or Stock Units, including by way of example and not
limitation, conditions on which Participants may defer receipt of benefits under
the Plan, requirements that the Participant complete a specified period of
employment with or service to the Company or a Related Entity, that the Company
achieve a specified level of financial performance or that the Company achieve a
specified level of financial return. Notwithstanding any such conditions, the
Administrator may, in its discretion, accelerate the time at which any Option or
SAR may be exercised, or the time at which a Stock Award may become transferable
or nonforfeitable or the time at which a Stock Unit or Incentive Award may be
settled. In addition, the Administrator shall have complete authority to
interpret all provisions of this Plan; to prescribe the form of Agreements; to
adopt, amend, and rescind rules and regulations pertaining to the administration
of the Plan; and to make all other determinations necessary or advisable for the
administration of this Plan. The express grant in the Plan of any specific power
to the Administrator shall not be construed as limiting any power or authority
of the Administrator. Any decision made, or action taken, by the Administrator
or in connection with the administration of this Plan shall be final and
conclusive. Neither the Administrator nor any member of the Board shall be
liable for any act done in good faith with respect to this Plan or any
Agreement, Option, SAR, Stock Award, Incentive Award or an award of Performance
Shares or Stock Units. All expenses of administering this Plan shall be borne by
the Company.
The Board, in its discretion, may appoint a committee of the Board and
delegate to such committee all or part of the Board's authority and duties with
respect to the Plan. The Board, in its discretion, may delegate to one or more
officers of the Company all or part of the Board's authority and duties with
respect to grants and awards to individuals who are not subject to the reporting
and other provisions of Section 16 of the Exchange Act. The Board may revoke or
4
<PAGE>
amend the terms of a delegation at any time but such action shall not
invalidate any prior actions of the Board's delegate or delegates that were
consistent with the terms of the Plan.
ARTICLE IV.
ELIGIBILITY
4.01. General. Any employee of and non-employee director, advisor or
independent consultant to the Company or a Related Entity (including a
corporation that becomes a Related Entity after the adoption of this Plan) is
eligible to participate in this Plan if the Administrator, in its sole
discretion, determines that such person has contributed significantly or can be
expected to contribute significantly to the profits or growth of the Company or
a Related Entity. Directors of the Company who are employees of the Company or a
Related Entity may be selected to participate in this Plan.
4.02. Grants. The Administrator will designate individuals to whom an award
of Stock Units or Performance Shares are to be granted and to whom Stock Awards,
Incentive Awards, Options and SARs are to be granted and will specify the number
of shares of Common Stock subject to each award or grant. An Option may be
granted with or without a related SAR. A SAR may be granted with or without a
related Option. Each award of Performance Shares or Stock Units, and all Stock
Awards, Options and SARs granted under this Plan shall be evidenced by
Agreements which shall be subject to the applicable provisions of this Plan and
to such other provisions as the Administrator may adopt. No Participant may be
granted incentive stock options or related SARs (under all incentive stock
option plans of the Company and any Related Entity) which are first exercisable
in any calendar year for stock having an aggregate Fair Market Value (determined
as of the date an Option is granted) that exceed the limitation prescribed by
Code section 422(d). The preceding annual limitation shall not apply with
respect to Options that are not incentive stock options.
5
<PAGE>
ARTICLE V.
STOCK SUBJECT TO PLAN
5.01. Shares Issued. Upon the award of shares of Common Stock pursuant to a
Stock Award, or when an award of Stock Units is earned, the Company may issue
shares of Common Stock from its authorized but unissued Common Stock. Upon the
exercise of any Option or SAR, the Company may deliver to the Participant (or
the Participant's broker if the Participant so directs), shares of Common Stock
from its authorized but unissued Common Stock.
5.02. Aggregate Limit. The maximum aggregate number of shares of Common
Stock that may be issued under this Plan shall not exceed 10,000,000 shares.
5.03. Incentive Stock Options. Subject to the limitations set forth in the
preceding section, the maximum aggregate number of shares that may be issued
pursuant to the exercise of Options that are incentive stock options is
10,000,000 shares. The maximum aggregate number of shares of Common Stock that
may be issued pursuant to the exercise of options that are incentive stock
options under this Plan shall be subject to adjustment as provided in Article
XIII.
5.04. Reallocation of Shares. If an Option is terminated, in whole or in
part, for any reason other than its exercise or the exercise of a Corresponding
SAR, the number of shares of Common Stock allocated to the Option or portion
thereof may be reallocated to other Options, Corresponding SARs, Stock Awards
and awards of Stock Units and Performance Shares to be granted under this Plan.
If an award of Performance Shares is forfeited, in whole or in part, without the
issuance of a Stock Award, the number of shares of Common Stock allocated to the
Performance Share Award or portion thereof may be reallocated to other Options,
Corresponding SARs, Stock Awards and awards of Stock Units and Performance
Shares to be granted under this Plan. If an award of Stock Units is forfeited,
in whole or in part, to the extent that no settlement is made for such Stock
Units, the number of shares of Common Stock allocated to the awards of Stock
Units or portion thereof may be reallocated to other Options, SARs, Stock Awards
and awards of Stock Units and Performance Shares to be granted under this Plan.
6
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ARTICLE VI.
OPTION PRICE
The price per share for Common Stock purchased on the exercise of an Option
shall be determined by the Administrator on the date of grant; provided,
however, that the price per share for Common Stock purchased on the exercise of
any Option shall not be less than 75% of the Fair Market Value on the date the
Option is granted and provided further that the price per share for Common Stock
purchased on the exercise of an Option that is an incentive stock option shall
not be less than the Fair Market Value on the date the Option is granted.
ARTICLE VII.
EXERCISE OF OPTIONS AND SARS
7.01. Maximum Option or SAR Period. The maximum period in which an Option
or SAR may be exercised shall be determined by the Administrator on the date of
grant, except that no Option that is an incentive stock option or its
Corresponding SAR shall be exercisable after the expiration of ten years from
the date such Option or Corresponding SAR was granted. The terms of any Option
that is an incentive stock option or Corresponding SAR may provide that it is
exercisable for a period less than such maximum period.
7.02. Nontransferability. Any Option or SAR granted under this Plan shall
be nontransferable except by will or by the laws of descent and distribution. In
the event of any such transfer, the Option and any Corresponding SAR that
relates to such Option must be transferred to the same person or person(s).
During the lifetime of the Participant to whom the Option or SAR is granted, the
Option or SAR may be exercised only by the Participant. No right or interest of
a Participant in any Option or SAR shall be liable for, or subject to, any lien,
obligation, or liability of such Participant.
7.03. Employee Status. For purposes of determining the applicability of
Section 422 of the Code (relating to incentive stock options), or in the event
that the terms of any Option or SAR provide that it may be exercised only during
employment or within a specified period of time after termination of employment,
the Administrator may decide to what extent leaves of absence for governmental
7
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or military service, illness, temporary disability, or other reasons shall
not be deemed interruptions of continuous employment.
7.04. Change in Control. Section 7.01 to the contrary notwithstanding,
after a Control Change Date each Option or SAR shall be fully exercisable
thereafter in accordance with the terms of the applicable Agreement. If not
sooner exercisable under the terms of the applicable Agreement, a Participant's
Option or SAR shall be fully exercisable (i) as of his termination of employment
if his employment terminates after a Control Change Date and he is terminated
without cause or following his refusal to move to another location or (ii) as of
the date that there is a material reduction in the Participant's compensation or
duties if such reduction occurs after a Control Change Date. For purposes of the
preceding sentence the term "cause" means a willful neglect of responsibilities
to the Company or a Related Entity.
ARTICLE VIII.
METHOD OF EXERCISE
8.01. Exercise. Subject to the provisions of Articles VII and XIV, an
Option or SAR may be exercised in whole at any time or in part from time to time
at such times and in compliance with such requirements as the Administrator
shall determine; provided, however, that a Corresponding SAR that is related to
an incentive stock option may be exercised only to the extent that the related
Option is exercisable and when the Fair Market Value exceeds the option price of
the related Option. An Option or SAR granted under this Plan may be exercised
with respect to any number of whole shares less than the full number for which
the Option or SAR could be exercised. A partial exercise of an Option or SAR
shall not affect the right to exercise the Option or SAR from time to time in
accordance with this Plan and the applicable Agreement with respect to the
remaining shares subject to the Option or related to the SAR. The exercise of
either an Option or Corresponding SAR shall result in the termination of the
other to the extent of the number of shares with respect to which the Option or
Corresponding SAR is exercised.
8.02. Payment. Unless otherwise provided by the Agreement, payment of the
Option price shall be made in cash or a cash equivalent acceptable to the
Administrator. If the Agreement provides, or in the discretion of the Board,
payment of all or part of the Option exercise price may be made by surrendering
shares of Common Stock to the Company, including by allowing the Company to
deduct from the number of shares of Common Stock, deliverable upon exercise of
the Option, a number of such shares which has an aggregate Fair Market Value on
the date of exercise of the Option equal to the aggregate Option exercise price.
If Common Stock is used to pay all or part of the Option exercise price, the
shares surrendered must have a Fair Market Value (determined as of the day
preceding the date of exercise) that is not less than such price or part
thereof.
8
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8.03. Installment Payment. If the Agreement provides, and if the
Participant is employed by the Company on the date the Option is exercised,
payment of all or part of the Option price may be made in installments. In that
event the Company may, if so determined by the Administrator, lend the
Participant an amount equal to not more than 90% of the Option price of the
shares acquired by the exercise of the Option. This amount shall be evidenced by
the Participant's promissory note and shall be payable in not more than five
equal annual installments, unless the amount of the loan exceeds the maximum
loan value for the shares purchased, which value shall be established from time
to time by regulations of the Board of Governors of the Federal Reserve System.
In that event, the note shall be payable in equal quarterly installments over a
period of time not to exceed five years.
The Participant shall pay interest on the unpaid balance at the minimum
rate necessary to avoid imputed interest or original issue discount under the
Code. All shares acquired with cash borrowed from the Company shall be pledged
to the Company as security for the repayment thereof. In the discretion of the
Administrator, shares of stock may be released from such pledge proportionately
as payments on the note (together with interest) are made, provided the release
of such shares complies with the regulations of the Federal Reserve System
relating to securities credit transactions then applicable. While shares are so
pledged, and so long as there has been no default in the installment payments,
such shares shall remain registered in the name of the Participant, and he shall
have the right to vote such shares and to receive all dividends thereon.
8.04. Determination of Payment of Cash and/or Common Stock Upon Exercise of
SAR. At the Administrator's discretion, the amount payable as a result of the
exercise of an SAR may be settled in cash, Common Stock, or a combination of
cash and Common Stock. A fractional share shall not be deliverable upon the
exercise of an SAR but a cash payment will be made in lieu thereof.
8.05. Shareholder Rights. No Participant shall have any rights as a
stockholder with respect to shares subject to his Option or SAR until the date
of exercise of such Option or SAR.
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ARTICLE IX.
STOCK AWARDS
9.01. Awards. In accordance with the provisions of Article IV, the
Administrator will designate each individual to whom a Stock Award is to be made
and will specify the number of shares of Common Stock covered by such awards.
9.02. Vesting. The Administrator, on the date of the award, may prescribe
that a Participant's rights in the Stock Award shall be forfeitable or otherwise
restricted for a period of time set forth in the Agreement. By way of example
and not of limitation, the restrictions may postpone transferability of the
shares or may provide that the shares will be forfeited if the Participant
separates from the service of the Company and its Related Entities before the
expiration of a stated term or if the Company, the Company and its Related
Entities or the Participant fails to achieve stated objectives.
9.03. Change in Control. Section 9.02 to the contrary notwithstanding,
after a Control Change Date each Stock Award will become transferable and
nonforfeitable thereafter in accordance with the terms of the applicable
Agreement. If not sooner transferable and nonforfeitable under the terms of the
applicable Agreement, a Participant's interest in a Stock Award shall be
transferable and nonforfeitable (i) as of his termination of employment if his
employment terminates after a Control Change Date and he is terminated without
cause or following his refusal to move to another location or (ii) as of the
date that there is a material reduction in the Participant's compensation or
duties if such reduction occurs after a Control Change Date. For purposes of the
preceding sentence the term "cause" means a willful neglect of responsibilities
to the Company or a Related Entity.
9.04. Shareholder Rights. Prior to their forfeiture (in accordance with the
terms of the Agreement and while the shares of Common Stock granted pursuant to
the Stock Award may be forfeited), a Participant will have all rights of a
shareholder with respect to a Stock Award, including the right to receive
dividends and vote the shares; provided, however, that (i) a Participant may not
sell, transfer, pledge, exchange, hypothecate, or otherwise dispose of shares of
Common Stock granted pursuant to a Stock Award, (ii) the Company shall retain
custody of the certificates evidencing shares of Common Stock granted pursuant
to a Stock Award, and (iii) the Participant will deliver to the Company a stock
power, endorsed in blank, withrespect to each Stock Award. The limitations set
forth in the preceding sentence shall not apply after the shares of Common Stock
granted under the Stock Award are no longer forfeitable.
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ARTICLE X.
PERFORMANCE SHARE AWARDS
10.01. Award. In accordance with the provisions of Article IV, the
Administrator will designate individuals to whom an award of Performance Shares
is to be granted and will specify the number of shares of Common Stock covered
by the award.
10.02. Earning the Award. The Administrator, on the date of the grant of an
award, may prescribe that the Performance Shares, or portion thereof, will be
earned, and the Participant will be entitled to receive Common Stock pursuant to
a Stock Award only upon the satisfaction of certain requirements or the
attainment of certain objectives. By way of example and not of limitation, the
restrictions may provide that Performance Shares will be forfeited without the
issuance of a Stock Award if the Participant separates from the service of the
Company and its Related Entities before the expiration of a stated term or if
the Company, the Company and its Related Entities or the Participant fails to
achieve stated objectives.
10.03. Change in Control. In the discretion of the Board, Section 10.02 to
the contrary notwithstanding, each Performance Share shall be earned in its
entirety and converted into a Stock Award as of a Control Change Date. Each
Performance Share award will become transferable and nonforfeitable thereafter
as described in Plan section 9.03 in accordance with the terms of the applicable
Agreement.
10.04. Shareholder Rights. No Participant shall, as a result of receiving
an award of Performance Shares, have any rights as a shareholder until and to
the extent that the award of Performance Shares is earned and a Stock Award is
made. If the Agreement so provides, a Participant may receive a cash payment
equal to the dividends that are payable with respect to the number of shares of
Common Stock covered by the award between the date the Performance Shares are
awarded and the date a Stock Award is made. A Participant may not sell,
transfer, pledge, exchange, hypothecate, or otherwise dispose of a Performance
Share award or the right to receive Common Stock thereunder other than by will
or the laws of descent and distribution. After an award of Performance Shares is
earned and a Stock Award is made, a Participant will have all the rights of a
shareholder as described in Plan section 9.04.
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ARTICLE XI.
STOCK UNITS
11.01. Award. In accordance with the provisions of Article IV, the
Administrator will designate individuals to whom an award of Stock Units is to
be made and will specify the number of Stock Units covered by the award.
11.02. Vesting. The Administrator, on the date of the award, may prescribe
that the Participant's right to receive a payment pursuant to a Stock Unit award
shall be forfeitable or otherwise terminated for a period of time set forth in
the Agreement or upon the failure to satisfy such other conditions as the
Administrator may prescribe consistent with the Plan. By way of example and not
limitation, the restrictions may provide that the shares will be forfeited if
the Participant separates from the service of the Company and its Related
Entities before the expiration of a stated term or if the Company does not
attain a specified level of financial performance or a specified level of
financial return.
11.03. Payment. In accordance with the Agreement, the amount payable when
an award of Stock Units is earned may be settled in cash, Common Stock or a
combination of cash and Common Stock. A fractional share shall not be
deliverable when an award of Stock Units is earned, but a cash payment will be
made in lieu thereof.
11.04. Shareholder Rights. No Participant shall, as a result of receiving a
Stock Unit award, have any rights as a shareholder of the Company or Related
Entity. A Participant may not sell, transfer, pledge, exchange, hypothecate, or
otherwise dispose of a Stock Unit award other than by will or the laws of
descent and distribution. The limitations set forth in the preceding sentence
shall not apply to Common Stock issued as payment pursuant to a Stock Unit
award.
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ARTICLE XII.
INCENTIVE AWARDS
12.01. Awards. The Administrator shall designate Participants to whom
Incentive Awards are made for annual incentive payments. All Incentive Awards
shall be finally determined exclusively by the Administrator under the
procedures established by the Administrator.
12.02. Terms and Conditions. The Administrator, at the time an Incentive
Award is made, shall specify the terms and conditions which govern the award.
Such terms and conditions may include, by way of example and not of limitation,
requirements that the Participant complete a specified period of employment with
the Company or a Related Entity or that the Company, a Related Entity, or the
Participant attain stated objectives or goals as a prerequisite to payment under
an Incentive Award. The Administrator, at the time an Incentive Award is made,
shall also specify when amounts shall be payable under the Incentive Award and
whether amounts shall be payable in the event of the Participant's death,
disability, or retirement.
Notwithstanding any other provision of the Plan, the Administrator, in its
discretion may adjust the terms, conditions or other requirements applicable to
Incentive Awards and may increase or decrease the amounts otherwise payable
under an Incentive Award, to reflect unusual or extraordinary transactions or
events. The Administrator may make such adjustments with respect to one or more
Participants, with respect to all Participants as to Incentive Awards made
during a particular year, or with respect to all outstanding Incentive Awards.
ARTICLE XIII.
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options that are incentive stock
options and Corresponding SARs may be granted under this Plan shall be
proportionately adjusted, and the terms of outstanding awards of Performance
Shares, Stock Awards, Stock Units Options, and SARs shall be adjusted, as the
Board shall determine to be equitably required in the event that (a) the Company
(i) effects one or more stock dividends, stock split-ups, subdivisions or
consolidations of shares or (ii) engages in a transaction to which Section 424
of the Code applies or (b) there occurs any other event which, in the judgment
of the Board necessitates such action. Any determination made under this Article
XIII by the Board shall be final and conclusive .
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The issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash or property, or for
labor or services, either upon direct sale or upon the exercise of rights or
warrants to subscribe therefor, or upon conversion of shares or obligations of
the Company convertible into such shares or other securities, shall not affect,
and no adjustment by reason thereof shall be made with respect to, outstanding
awards of Performance Shares, Stock Awards, Stock Units, Options or SARs.
The Board may make Stock Awards and may grant awards of Performance Shares,
Stock Units, Options, and SARs in substitution for performance shares, phantom
shares, stock awards, stock options, stock appreciation rights, or similar
awards held by an individual who becomes an employee of the Company or a Related
Entity in connection with a transaction described in the first paragraph of this
Article XIII. Notwithstanding any provision of the Plan (other than the
limitation of Article V), the terms of such substituted awards of Performance
Shares, Stock Units, Stock Awards, Option or SAR grants shall be as the Board,
in its discretion, determines is appropriate.
ARTICLE XIV.
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES
No Option or SAR shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, withholding tax
requirements), any listing agreement to which the Company is a party, and the
rules of all domestic stock exchanges on which the Company's shares may be
listed. The Company shall have the right to rely on an opinion of its counsel as
to such compliance. Any share certificate issued to evidence Common Stock when a
Stock Award is granted, in payment when a Stock Unit is earned or for which an
Option or SAR is exercised may bear such legends and statements as the
Administrator may deem advisable to assure compliance with federal and state
laws and regulations. No Option or SAR shall be exercisable, no Stock Award
shall be granted, no Common Stock shall be issued, no certificate for shares
shall be delivered, and no payment shall be made under this Plan until the
Company has obtained such consent or approval as the Administrator may deem
advisable from regulatory bodies having jurisdiction over such matters.
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ARTICLE XV.
GENERAL PROVISIONS
15.01. Effect on Employment. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any individual any right to continue in the employ or
service of the Company or a Related Entity or in any way affect any right and
power of the Company or a Related Entity to terminate the employment or service
of any individual at any time with or without assigning a reason therefor.
15.02. Unfunded Plan. The Plan, insofar as it provides for grants, shall be
unfunded, and the Company shall not be required to segregate any assets that may
at any time be represented by grants under this Plan. Any liability of the
Company to any person with respect to any grant under this Plan shall be based
solely upon any contractual obligations that may be created pursuant to this
Plan. No such obligation of the Company shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company.
15.03. Disposition of Stock. A Participant shall notify the Administrator
of any sale or other disposition of Common Stock acquired pursuant to an Option
that was an incentive stock option if such sale or disposition occurs (i) within
two years of the grant of an Option or (ii) within one year of the issuance of
the Common Stock to the Participant. Such notice shall be in writing and
directed to the Secretary of the Company.
15.04. Rules of Construction. Headings are given to the articles and
sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
15.05. Employee Status. In the event that the terms of any award of
Performance Shares, Stock Unit or Stock Award or Incentive Award or the grant of
any Option or SAR provide that shares may be issued or become transferable and
nonforfeitable thereunder only after completion of a specified period of
employment, the Administrator may decide in each case to what extent leaves of
absence for governmental or military service, illness, temporary disability, or
other reasons shall not be deemed interruptions of continuous employment.
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15.06. Limitation on Awards. Notwithstanding any other provision of the
Plan, if any award under this Plan, either alone or together with payments that
a Participant has the right to receive from the Company or a Related Entity,
would constitute a "parachute payment" (as defined in section 280G of the Code),
all such payments shall be reduced to the largest amount that will result in no
portion being subject to the excise tax imposed by section 4999 of the Code.
ARTICLE XVI.
AMENDMENT
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment shall, without a Participant's consent, adversely
affect any rights of such Participant under any outstanding award of Performance
Shares, Stock Unit, or under any Stock Award, Option or SAR outstanding at the
time such amendment is made.
ARTICLE XVII.
DURATION OF PLAN
No Performance Shares or Stock Units may be awarded and no Stock Award,
Option, SAR or Incentive Award may be granted under this Plan more than ten
years after the earlier of the date that the Plan is adopted by the Board or the
date that the Plan is approved by shareholders as provided in Article XVIII.
Performance Shares and Stock Units awarded, and Stock Awards Options, SARs and
Incentive Awards granted before that date shall remain valid in accordance with
their terms.
ARTICLE XVIII. EFFECTIVE DATE OF PLAN
Performance Shares and Stock Units may be awarded and Stock Awards,
Options, SARs and Incentive Awards may be granted under this Plan upon its
adoption by the Board, provided that no award of Performance Shares, Stock Unit,
Stock Award, Option or SAR will be effective unless this Plan is approved by a
majority of the votes entitled to be cast by the Company's shareholders, voting
either in person or by proxy, at a duly held shareholders' meeting or by the
consent of shareholders owning more than 50% of shares of the Company's Common
Stock within twelve months of such adoption.
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