<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by Registrant: [X]
Filed by a Party other than the Registrant: [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Materials Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PROBEX CORP.
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE> 2
PRELIMINARY COPY
NOTICE OF 2001 ANNUAL MEETING
ON FEBRUARY 28, 2001 AND
PROXY STATEMENT
[PROBEX LOGO]
PROBEX CORP.
One Galleria Tower
13355 Noel Road, Suite 1200
Dallas, Texas 75240
Telephone (972) 788-4772
Fax (972) 980-8545
January __, 2001
Dear Probex Corp. Stockholder:
You are cordially invited to attend our Annual Meeting of Stockholders
on February 28, 2001, in Dallas, Texas. This meeting will be held at The
University Club, 13350 Dallas Parkway, Dallas, Texas 75240 (please use the
elevators located in front of Macy's department store inside the Galleria), at
10:30 a.m. (Central Standard Time). At the meeting, you will hear a report on
our business and have a chance to meet a number of our directors and officers.
This booklet includes the formal notice of the meeting and the Proxy
Statement. The Proxy Statement tells you about the matters to be addressed and
the procedures for voting at the meeting. It also describes how the Board
operates, gives personal information about our director candidates, sets forth
proposals to be voted upon, and provides additional information about us.
We hope you can join us on February 28th . Whether or not you can
attend, please read the enclosed Proxy Statement. When you have done so, please
mark your votes on the enclosed proxy, sign and date the proxy, and return it to
us. Your vote is important, so please return your proxy as soon as possible.
Sincerely,
Charles M. Rampacek
Chairman of the Board,
President and Chief
Executive Officer
<PAGE> 3
PRELIMINARY COPY
NOTICE AND PROXY STATEMENT
[PROBEX LOGO]
PROBEX CORP.
One Galleria Tower
13355 Noel Road, Suite 1200
Dallas, Texas 75240
January ___, 2001
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 28, 2001
We will hold our Annual Meeting of Stockholders at The University Club,
13350 Dallas Parkway, Dallas, Texas 75240 (please use the elevators located in
front of Macy's inside the Galleria), at 10:30 a.m., local time.
We are holding this meeting:
o To elect six directors for one, two or three year terms,
subject to stockholder approval of Proposal Two. If
stockholders do not approve Proposal Two, directors will be
elected for one year terms;
o To approve an amendment to our Certificate of Incorporation to
provide for a classified Board of Directors;
o To approve an amendment to our Certificate of Incorporation to
remove the ability of stockholders to act by written consent
in lieu of a special or annual meeting;
o To approve the issuance of up to 25 million shares of the
Company's common stock upon conversion of the Company's
preferred stock to be offered and sold in one or more private
placement transactions, subject to the terms outlined in this
Proxy Statement;
o To approve an amendment to our 1999 Omnibus Stock and
Incentive Plan, as amended and restated, to increase the
number of shares available under such plan;
o To ratify the appointment of Ernst & Young LLP as our
independent auditors; and
o To transact any other business that properly comes before the
meeting.
Your Board of Directors has selected January 12, 2001 as the record
date for determining stockholders entitled to vote at the meeting. A list of
stockholders on that date will be available for inspection at our offices
located at One Galleria Tower, 13355 Noel Road, Suite 1200, Dallas, Texas for
ten days before the meeting.
This Notice and Proxy Statement are being distributed to stockholders
on or about January ___, 2001. A copy of the Annual Report was mailed to you on
or about January 19, 2001.
By Order of the Board of Directors
Charles M. Rampacek
Chairman of the Board, President
and Chief Executive Officer
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
GENERAL INFORMATION .............................................................................. 1
PROPOSAL ONE - ELECTION OF DIRECTORS .............................................................. 3
Director Compensation......................................................................... 6
Board Committees.............................................................................. 6
Executive Officers............................................................................ 7
Other Significant Employees................................................................... 8
Terms of Office and Relationships............................................................. 8
Security Ownership of Management.............................................................. 9
Principal Stockholders........................................................................ 11
Compensation Committee Report on Executive Compensation....................................... 12
Executive Compensation ....................................................................... 13
Audit Committee Report........................................................................ 17
Section 16(a) Beneficial Ownership Reporting Compliance....................................... 17
Certain Relationships and Related Transactions................................................ 18
PROPOSAL TWO - AMENDMENT TO THE CERTIFICATE OF
INCORPORATION TO PROVIDE FOR A CLASSIFIED
BOARD OF DIRECTORS............................................................................ 20
PROPOSAL THREE -- AMENDMENT TO THE CERTIFICATE
OF INCORPORATION TO REMOVE STOCKHOLDER
ACTION BY CONSENT............................................................................. 21
PROPOSAL FOUR - APPROVAL OF THE ISSUANCE OF UP
TO 25 MILLION SHARES OF THE COMPANY'S
COMMON STOCK.................................................................................. 22
PROPOSAL FIVE - AMENDMENT TO THE 1999 OMNIBUS
STOCK AND INCENTIVE PLAN, AS AMENDED AND
RESTATED, TO INCREASE THE NUMBER OF SHARES
AVAILABLE UNDER THE PLAN...................................................................... 24
PROPOSAL SIX - RATIFICATION OF THE APPOINTMENT
OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.......................................................................... 29
OTHER BUSINESS .................................................................................... 29
SUBMISSION OF STOCKHOLDER PROPOSALS ............................................................... 29
INDEPENDENT AUDITORS............................................................................... 29
ADDITIONAL INFORMATION AND QUESTIONS............................................................... 29
EXHIBIT A -- Amendment to Certificate of Incorporation (Classified Board)
EXHIBIT B -- Amendment to Certificate of Incorporation (Action by Stockholder Consent)
EXHIBIT C -- Audit Committee Charter
</TABLE>
<PAGE> 5
GENERAL INFORMATION
Q: Who is soliciting my proxy?
A: We--the Board of Directors of Probex Corp.--are sending you this Proxy
Statement in connection with our solicitation of proxies for use at our
February 28, 2001 Annual Meeting of Stockholders and at any adjournment
of the meeting. Certain of our officers and employees also may solicit
proxies on our behalf by mail, phone, fax or in person.
Q: Who is paying for this solicitation?
A: We will pay for the solicitation of proxies, including out-of-pocket
expenses estimated to be $15,000. We also will reimburse banks,
brokers, custodians, nominees and fiduciaries for their reasonable
charges and expenses to forward our proxy materials to the beneficial
owners of our common stock.
Q: What am I voting on?
A: You are voting on the following:
o The election of six directors. If you approve Proposal Two, the
directors will serve in staggered terms of one, two and three
years. If you do not approve Proposal Two, the directors will be
elected for one year terms;
o The proposal to amend our Certificate of Incorporation to provide
for a classified Board of Directors;
o The proposal to amend our Certificate of Incorporation to remove
the ability of stockholders to act by written consent;
o The proposal to authorize the issuance of up to 25 million shares
of our common stock;
o The proposal to amend our 1999 Omnibus Stock and Incentive Plan, as
amended and restated, to increase the number shares available under
such plan; and
o The ratification of the appointment of Ernst & Young LLP as our
independent auditors.
Q: Who can vote?
A: Stockholders of record of our common stock at the close of business on
January 12, 2001, are entitled to vote at the meeting. Each stockholder
is entitled to cast one vote for each share of common stock owned.
Q. How do I vote?
A. You may vote in person at the meeting or by proxy. We recommend you
vote by proxy even if you plan to attend the meeting. You can always
change your vote at the meeting. If you have shares held by a broker or
other nominee, you may instruct your broker or nominee to vote your
shares by following the instructions that the broker or nominee
provides you. Most brokers offer voting by mail, telephone and
Internet.
Q. How do proxies work?
A. The Board of Directors of Probex Corp. is asking for your proxy. Giving
your proxy to the persons named by us means you authorize them to vote
your shares at the meeting in the manner you direct.
If you sign and return the enclosed proxy card but do not specify how
your shares are to be voted, your shares will be voted FOR the election
of each of the six directors nominated for one, two and three year
terms, FOR the proposal to amend our Certificate of Incorporation to
provide for a classified Board of Directors, FOR the proposal to amend
our Certificate of Incorporation to remove the ability of stockholders
to act by written consent, FOR the proposal to approve the issuance of
up to 25 million shares of our common stock, FOR the proposal to amend
our 1999 Omnibus Stock and Incentive Plan, as amended and restated, to
increase the numbers of shares available under such plan, and FOR the
ratification of the appointment of Ernst & Young LLP as our independent
auditors.
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Q: What constitutes a quorum?
A: On January 12, 2001, we had 26,226,534 shares of common stock, $0.001
par value per share, outstanding. Voting can take place at the Annual
Meeting only if stockholders owning a majority of the voting power of
the common stock (that is, a majority of the total number of votes
entitled to be cast) are present, either in person or by proxy. If you
do not vote, or if a broker holding your shares in "street" or
"nominee" name indicates to us on a proxy that you have not voted and
it lacks discretionary authority to vote your shares, we will not
consider your shares as present or entitled to vote for any purpose.
You may receive more than one proxy or voting card depending on how you
hold your shares. Shares registered in your name are covered by one
card. If you also hold shares through a broker or other nominee, you
may also get material from them asking how you want to vote. To be sure
that all of your shares are voted, we encourage you to respond to each
request you receive.
Q. How do I revoke a proxy?
A. You may revoke your proxy before it is voted by submitting a new proxy
with a later date; by voting in person at the meeting; or by notifying
Probex's Secretary in writing at the address listed on the cover
letter.
Q. Will my shares be voted if I don't sign a proxy?
A. If you hold your shares directly in your own name, they will not be
voted unless you provide a signed proxy. Under certain circumstances,
shares which you own that are held by a broker may be voted even if you
do not provide voting instructions to the broker. Brokerage firms have
the authority under the American Stock Exchange rules to vote
customers' unvoted shares on certain "routine" matters. The election of
directors and the ratification of the appointment of Ernst & Young LLP
as the Company's independent auditors are considered to be "routine"
matters, and, therefore, your broker has the authority to vote your
unvoted shares for or against the directors nominated and the
ratification of the appointment of Ernst & Young LLP. The proposal to
amend our Certificate of Incorporation to provide for a classified
Board of Directors, the proposal to amend our Certificate of
Incorporation to remove the ability of stockholders to act by written
consent, the proposal to approve the issuance of up to 25 million
shares of our common stock, and the proposal to amend our 1999 Omnibus
Stock and Incentive Plan, as amended and restated, to increase the
number of shares available under such plan, are not "routine" matters,
and, therefore, your shares will not be voted on these matters if your
proxy is not signed.
Q. How many votes are needed for approval?
A. The six director candidates receiving the most "FOR" votes will be
elected to the six seats on the Board to be filled at the meeting. The
terms of the six directors will either be for one-year terms or one,
two and three years terms, subject to the results of Proposal Two
submitted to stockholders by this Proxy Statement. Abstentions,
withholding authority to vote for a candidate and broker non-votes will
only reduce the number of votes a candidate receives.
Approval of the amendments to our Certificate of Incorporation to
provide for a classified Board of Directors and to remove the ability
of stockholders to act by written consent, each requires the
affirmative vote of a majority of the shares outstanding. For this
purpose, an abstention and a broker non-vote will have the same effect
as a vote against the proposal.
Approval of the issuance of up to 25 million shares of our common
stock, the amendment to the 1999 Omnibus Stock and Incentive Plan, as
amended and restated, to increase the number of shares available under
such plan, and the ratification of the appointment of Ernst & Young LLP
as our independent auditors, each requires the affirmative vote of a
majority of the shares present in person or by proxy and entitled to
vote at the meeting. For this purpose, an abstention will have the same
effect as a vote against the
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proposals. Broker non-votes will not be counted as a vote either for or
against the proposals and will not be counted in determining the number
of shares entitled to vote on the proposals.
A "broker non-vote" occurs when a broker submits a proxy but does not
vote for or against a matter. This will occur when the beneficial owner
has not instructed the broker how to vote and the broker does not have
discretionary authority to vote in the absence of instructions.
Q: What should I do if I want to attend in person?
A: Only stockholders of record, their proxy holders, and invited guests
may attend the meeting. If you wish to vote in person and your shares
are held by a broker or nominee, you will need to obtain a proxy from
the broker or nominee authorizing you to vote your shares held in their
name.
PROPOSAL ONE
ELECTION OF DIRECTORS
Our Board of Directors has nominated the six director candidates named
below.
Our Board of Directors oversees the management of the Company on your
behalf. The Board reviews the Company's long-term strategic plans and exercises
direct decision-making authority on key issues, such as the terms of material
agreements. Just as important, the Board chooses the Chief Executive Officer,
sets the scope of his authority to manage the Company's day-to-day operations,
and evaluates his performance.
Four of our six nominees are outside directors, meaning those who are
not otherwise current employees of the Company. Of these four nominees, at least
two, and perhaps three, are independent directors, as set forth by the rules of
the American Stock Exchange, on which our common stock is listed. Independent
directors are not officers of the Company and are, in the view of our Board of
Directors, free of any relationship that would interfere with the exercise of
independent judgment. The following persons are not considered to be
independent: (a) a director who is employed by the Company or any of its
affiliates for the current year or any of the past three years; (b) a director
who accepts any compensation from the Company or any of its affiliates in excess
of $60,000 during the previous fiscal year, other than compensation for Board
service, benefits under a tax-qualified retirement plan, or non-discretionary
compensation; (c) a director who is a member of the immediate family of an
individual who is, or has been in any of the past three years, employed by the
Company or any of its affiliates as an executive officer (immediate family
includes a person's spouse, parents, children, siblings, mother-in-law,
father-in-law, brother-in-law, sister-in-law, son-in-law, daughter-in-law, and
anyone who resides in such person's home); (d) a director who is a partner in,
or a controlling shareholder or an executive officer of, any for-profit business
organization to which the Company made, or from which the Company received,
payments (other than those arising solely from investments in the Company's
securities) that exceed 5% of the Company's or business organization's
consolidated gross revenues for that year, or $200,000, whichever is more, in
any of the past three years; (e) a director who is employed as an executive of
another entity where any of the Company's executives serve on that entity's
compensation committee.
Our Certificate of Incorporation and Bylaws currently provide for one
class of directors, who serve one year terms expiring at the annual meeting of
stockholders following their election. The Company is submitting a proposal
(Proposal Two) to stockholders to amend the Company's Certificate of
Incorporation to provide for a classified Board of Directors. If the amendment
to the Company's Certificate of Incorporation with respect to a classified Board
is approved by stockholders, the directors will be nominated for terms of one,
two and three years as listed below. If the amendment to our Certificate of
Incorporation is not approved by stockholders, then each director will be
nominated for a one-year term to expire at the annual meeting of stockholders
one year following their election. Our Board of Directors has nominated for
re-election all of the persons currently serving as directors, whose terms are
expiring at this annual meeting of stockholders, and one new director, who is an
independent director. Personal information on each of our nominees is given
below.
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Our Board of Directors met 13 times during our fiscal year ended
September 30, 2000. On average, our directors attended 100% of the Board and
committee meetings held during our fiscal year ended September 30, 2000. No
voting director attended fewer than 75% of the meetings of the Board and the
Board committees on which the director served.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THE ELECTION OF EACH
OF THE NOMINEES FOR ELECTION AS DIRECTORS DESCRIBED ON THE FOLLOWING PAGE.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS (TERMS EXPIRING IN 2002)
THOMAS G. PLASKETT Mr. Plaskett served as Chairman of the Board of
(age 57) Probex from September 1997 until December 2000. He
has been a director of the Company since June 1994,
and was the interim President and Chief Executive
Officer of the Company from October 1999 until August
2000. Mr. Plaskett has broad-based experience at
senior levels of major corporations, having served as
Chairman of the Board of Greyhound Lines, Inc.,
Chairman and CEO of Pan Am Corporation and President
and CEO of Continental Airlines. He is presently a
director of Radio Shack and Smart and Final Inc. From
1992 to 1996, Mr. Plaskett was a director of Neostar
Retail Group, Inc. (formerly Babbage's, Inc.) and
served as Chairman of Neostar Retail Group, Inc. from
September 1996 to December 1996. Neostar Retail
Group, Inc. filed a petition for reorganization under
Chapter 11 of the Federal bankruptcy laws in
September 1996.
THOMAS G. MURRAY Mr. Murray formed the predecessor of Probex in July
(age 42) 1993 and was the President and CEO of Probex from
March 1994 through September 1997 and CEO from
October 1997 through September 1999. After September
1999, he served as a Senior Vice President of the
Company until June 2000. He has been a director of
the Company since 1994 and is currently a private
investor.
NOMINEES FOR ELECTION AS CLASS II DIRECTORS (TERMS EXPIRING IN 2003)
ANTHONY J. MASELLI Mr. Maselli has been a director of the Company since
(age 38) June 1998. He is the founder and Managing Director of
HSB Engineering Finance Corporation, and a Vice
President of Hartford Steam Boiler Inspection &
Insurance, Technology Risks Department. Mr. Maselli
has been with HSB since 1995. Prior to joining HSB,
he worked for United American Energy Corporation and
for Consolidated Edison of New York. Mr. Maselli has
experience in technology assessment, project
evaluation and all aspects of project development,
including project finance. He has been the key
individual in the development of several large
industrial projects, including independent power
projects, manufacturing facilities and private
corporation development.
K. BRUCE JONES Mr. Jones has been a director of the Company since
(age 57) May 1994. He is the founder and Managing Principal of
K.Bruce Jones and Associates, an investment
management firm. He has extensive experience in the
operation and financial management of emerging growth
companies.
NOMINEES FOR ELECTION AS CLASS III DIRECTORS (TERMS EXPIRING IN 2003)
CHARLES M. RAMPACEK Mr. Rampacek, our Chairman, Chief Executive Officer
(age 57) and President, joined the Company's Board in April
2000. He was named President and CEO in August 2000
and assumed the additional responsibility of Chairman
in December 2000. Mr. Rampacek was the President and
Chief Executive Officer of Lyondell-Citgo Refining,
LP, a joint venture of Citgo Petroleum Corporation
and Lyondell Chemical Company since 1996.
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From 1982 to 1995, he held various executive
positions for Tenneco, Inc., and its energy- related
subsidiaries, including President of Gas Pipeline
Transportation, Executive Vice President of Gas
Pipeline Operations and Senior Vice President of
Refining & Supply. Prior to that, Mr. Rampacek held
various positions with Exxon Company USA for 16
years. Additionally, Mr. Rampacek serves as a
director of Flowserve Corporation.
Dr. Bob G. Gower Dr. Gower is a new nominee to the Company's Board of
(age 63) Directors. He is the retired President and CEO of
Lyondell Petrochemical Company. Dr. Gower became the
President of Lyondell Petrochemical Company when it
was formed in April 1985 and was elected Chief
Executive Officer in October 1988 and Chairman of the
Board in August 1994. From 1984 to 1985 he served as
Senior Vice President for Atlantic Richfield Company,
responsible for Planning and Advanced Technology for
the company. From 1979 to 1984 he was Senior Vice
President of ARCO Chemical Company and prior to that
had various executive, sales, research and
engineering assignments with Sinclair and with ARCO
after the merger of the two companies. He is a member
of the Board of Directors of Kirby Corporation,
Omnova Solutions Inc., and CheMatch.com.
ADVISORY DIRECTORS (NOT FOR ELECTION)
NORA A. BLUM Ms. Blum has been an advisory director of the Company
(age 49) since December 2000. She is a Vice President with
Bechtel Enterprises, Inc. (BEn) with responsibility
for development and financing of various projects for
BEn's affiliate United Infrastructure Company, LLC
(UIC) and is currently managing UIC's investment in
Probex Corp. She has over 20 years of experience in
project development and financing, project and
regional office management, business development,
engineering and environmental remediation for
petroleum, power and infrastructure projects. Ms.
Blum has held a variety of increasingly responsible
management, business development and engineering
assignments within the Bechtel organization including
project development manager for Bechtel Petroleum &
Chemical and vice president and regional manager for
Bechtel Environmental, Inc. Prior to joining Bechtel,
Ms. Blum was associated with another major
engineering and construction company.
NICHOLAS W. HOLLINGSHAD Mr. Hollingshad has been an advisory director of the
(age 46) Company since April 1999. He is a principal of
Environmental Resources Management (ERM), a leading
international environmental engineering and
consulting firm, and has over 20 years of industrial
environmental engineering experience. He is Treasurer
of ERM-North America, and serves on the Board of
several ERM affiliates. Over an 8-year period prior
to joining ERM, he held a variety of process
engineering and management positions at two major
U.S. petroleum refineries.
WILLIAM A. SEARLES Mr. Searles has been an advisory director of the
(age 57) Company since November 1999. He has been associated
with American Physicians Services Group, Inc. since
1989 as a director and since 1995 as Chairman of APS
Investment Services, Inc. He has served as Chairman
of the Board of a private company, Uncommon Care,
Inc. since 1998 and as a director of a public
company, Prime Medical Services, Inc. since 1989. He
has also been a director of APS Asset Management,
Inc, a registered investment company since 1998.
Prior to 1989, he spent 25 years in various positions
with Wall Street Investment banking firms, including
his last 9 years as a limited partner with Bear
Sterns. Mr. Searles was the sole owner of a travel
agency that filed for Chapter 11 protection under the
Federal bankruptcy laws in late 1997 and liquidated
under Chapter 7 in January 1999.
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DIRECTOR COMPENSATION
We do not pay cash compensation to our Board of Directors. In August
1999, our Board of Directors approved the issuance to each outside
(non-employee) director warrants to purchase 100,000 shares of our common stock
at $0.50 per share for a five-year period ending August 2004, of which 60,000
vested immediately and the remaining 40,000 are subject to achievement of
certain performance conditions. Messrs. Jones, Maselli and Plaskett were each
issued these warrants as compensation for services rendered as directors for the
1998 calendar year.
In March 2000, the Board of Directors approved a compensation program
for our outside directors, which was modified in December 2000. Under this
program, any new outside director will receive options to purchase 10,000 shares
(5,000 shares in the case of any new advisory director) of common stock on the
date the director is elected to the Board of Directors, at the fair market value
(generally the closing price of the common stock as reported on the AMEX) on the
date of such grant. In addition, all outside directors will be entitled to
receive, on an annual basis, options to purchase 25,000 shares (12,500 shares in
the case of advisory directors) of common stock as of the date of the annual
meeting of stockholders for services rendered during the calendar year in which
the annual stockholders' meeting is held. The grant will be made on the date of
the annual meeting in each year starting with the annual meeting of stockholders
to be held in 2001 for the 2001 calendar year. The determination of directors as
outside directors will be made as of such date, and any grant will not be
subject to adjustment or proration due to a subsequent change in a director's
classification as an outside director or due to any subsequent resignation,
removal or death of a director during such calendar year.
In connection with the implementation of this program, our Board of
Directors also approved the grant of options as compensation for calendar years
1999 and 2000, as follows:
o as compensation for calendar year 1999, options to purchase 25,000
shares of common stock were granted to each of Messrs. Jones, Maselli and
Plaskett, and 12,500 shares of common stock were granted to each of Messrs.
Hollingshad and Searles, at an exercise price equal to $3.75 per share (the
closing price of the common stock as of March 30, 2000, the date the
compensation plan was originally adopted); and
o as compensation for calendar year 2000, options to purchase 25,000
shares of common stock were granted to each of Messrs. Jones, Maselli, Murray
and Plaskett, and 12,500 shares of common stock were granted to each of Messrs.
Hollingshad and Searles, at an exercise price equal to the closing price of the
common stock as of the close of business on December 29, 2000 (the last business
day of the calendar year). The grant of these options is subject to stockholder
approval of Proposal Five, the amendment to the Company's 1999 Omnibus Stock and
Incentive Plan, as amended and restated.
We also reimburse directors for any out-of-pocket expenses incurred by
them in conjunction with the business.
BOARD COMMITTEES
Our Board of Directors has established three committees: the Audit
Committee, the Compensation Committee and the Corporate Governance Committee.
Audit Committee. The Audit Committee makes recommendations to the Board
of Directors regarding the selection of independent auditors, reviews our
filings with the Securities and Exchange Commission, reviews the results and
scope of audit and other services provided by our independent auditors and
reviews and evaluates our audit and control functions. The Audit Committee is
governed by our Audit Committee Charter, a copy of which is attached to this
Proxy Statement as Exhibit C.
During the fiscal year ended September 30, 2000, the Audit Committee
met one time. The directors serving on the Audit Committee are Messrs. Jones and
Plaskett.
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Compensation Committee. The Compensation Committee makes
recommendations to the Board of Directors concerning salaries and incentive
compensation for our employees. The Compensation Committee also reviews and
administers our 1999 Omnibus Stock and Incentive Plan, as amended and restated.
During the fiscal year ended September 30, 2000, the Compensation
Committee met three times. The directors serving on the Compensation Committee
are Messrs. Jones, Maselli and Plaskett.
Corporate Governance Committee. The Corporate Governance Committee was
formed to make recommendations to the Board of Directors regarding candidates
for election to the Board and concerning the size, structure, composition and
functioning of the Board of Directors as well as other corporate governance
issues. Recommendations by stockholders should be forwarded to the Secretary of
the Company and should identify the nominee by name and provide detailed
information concerning his or her qualifications. The Company's Bylaws require
that stockholders give advance notice and furnish certain information to the
Company in order to nominate a person for election as a director. See discussion
under "Submission of Stockholder Proposals" on page 29.
During the fiscal year ended September 30, 2000, the Corporate
Governance Committee met one time. The directors serving on the Corporate
Governance Committee are Messrs. Jones, Maselli and Rampacek.
EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
OFFICER
NAME AGE POSITION(S) SINCE
---- --- ----------- -----
<S> <C> <C> <C>
Charles M. Rampacek..................57 Chairman of the Board, President and 2000
Chief Executive Officer
Bruce A. Hall........................44 Senior Vice President, Chief Financial 1999
Officer and Secretary
Martin R. MacDonald..................38 Senior Vice President of Technology 1995
and Business Development
David J. McNiel......................47 Senior Vice President of Operations 2000
</TABLE>
Information concerning the business experience of CHARLES M. RAMPACEK is set
forth above under "Election of Directors."
BRUCE A. HALL (age 44) Senior Vice President, Chief Financial Officer and
Secretary, has served in numerous financial and operating positions with
companies in the hi-tech, manufacturing and real estate industries. Mr. Hall has
been Chief Financial Officer of two companies, including Aslan Real Estate, Ltd.
and Harris Adacom Systems, Inc. He has been the Controller of International
Operations for Recognition Equipment, Inc. and Harris Adacom, Inc. Additionally,
Mr. Hall was a principal of the Capital Funding and Consulting Group, L.C. and a
senior auditor with Arthur Young & Co, a predecessor of Ernst & Young LLP.
MARTIN R. MACDONALD (age 38), Senior Vice President of Technology and Business
Development joined the Company in 1995. Prior to joining the Company, Mr.
MacDonald served as manager of projects at Ferguson Industries, where he oversaw
various aspects of new technology design and implementation. At Thermix Inc.,
Mr. MacDonald was responsible for managing the development and implementation of
customized energy efficient technologies for the molten metal and chemical
industries. He has successfully developed and commercialized several new
technologies, including a high velocity galvanizing system, an ammonium
injection system, and a reduced emission ammonium polyphosphate plant, all of
which are currently in commercial use.
DAVID J. MCNIEL (age 47), Senior Vice President of Operations, joined the
Company on September 1, 2000. Mr. McNiel was Vice President of Refining for
Lyondell-Citgo Refining, LP, a joint venture of Citgo Petroleum Corporation and
Lyondell Chemical Company since 1996. From 1990 to 1996, McNiel held various
operations and technical executive positions with Tenneco Inc.'s natural gas
pipeline subsidiary. He also held operations positions at Mobil Oil Company for
two years, and spent 11 years at Tenneco Inc.'s refining and marketing
subsidiary in a variety of management and engineering assignments.
7
<PAGE> 12
OTHER SIGNIFICANT EMPLOYEES
JOHN N. BROBJORG (age 43), Corporate Controller, has served in numerous
financial positions with companies in the hi-tech, manufacturing, and clinical
laboratory industries. Mr. Brobjorg has been a finance and/or accounting manager
of several companies, including Praxair Inc from May 1996 to October 1999,
Corning Clinical Laboratories from February 1992 to April 1996, Convex Computer
Corporation from March 1985 to November 1990, and Amsoil, Inc. from November
1982 to March 1985. Additionally, Mr. Brobjorg was the Controller for Logic
Process Corporation from February 1991 to February 1992.
JOHN E. FAHEY (age 60), Vice President of Sales and Marketing, was the former
regional sales manager - base oil sales, and sales and marketing manager for
U.S. Government Sales for Safety Kleen-Oil Recovery. Mr. Fahey marketed base
oils for Safety-Kleen for 8 years. Mr. Fahey is a former President of the
Independent Lubricant Manufacturers Association (ILMA), which includes companies
purchasing approximately 25% of all U.S. base oil production.
PHIL D. PIERCE (age 58), Vice President of Sales and Supply was formerly the
President and majority stockholder of Delta Petroleum Products, Inc. ("Delta"),
a major distributor of lubricants for 20 years, and was responsible for all
aspects of the business including sales, operations, and administration. Mr.
Pierce has served on national distribution councils for several major oil
companies. Since selling Delta in 1992, he has worked extensively in the
environmental industry covering the U.S. and Mexico.
D. YALE SAGE (age 47), Vice President of Finance, was President and Chief
Operating Officer of Seaboard Management Corporation, a venture capital and
investment banking company, managing funds totaling over $50 million. Over the
past 10 years, he has served in numerous financial and operating positions with
companies in the manufacturing, financial service and entertainment industries.
Mr. Sage has been Chief Financial Officer of six companies, including Global
Plastics, L.L.C. Gateway International Development Corporation, and Groco
Specialty Chemicals and Coatings. Mr. Sage has been Controller of The Vault and
Federal Support Corporation. Mr. Sage's prior business background includes
Arthur Andersen and the First National Bank of Dallas.
LESTER F. VAN DYKE (age 58), Vice President of Investor Relations, joined the
Company on October 9, 2000. For the past 15 years, Mr. Van Dyke served as
director, investor relations and corporate communications for Battle Mountain
Gold Company where he was responsible for the development and implementation of
its worldwide investor communications programs. From 1973 to 1985, Mr. Van Dyke
held various communications positions of increasing responsibility with the
Pennzoil Company. He also held communications positions at Texaco Inc. and the
Oil & Gas Journal.
TERMS OF OFFICE AND RELATIONSHIPS
Our officers are elected annually by the Board of Directors at a
meeting held following each annual meeting of stockholders, or as necessary and
convenient in order to fill vacancies or newly created offices. Each officer
serves at the discretion of our Board of Directors.
There are no family relationships among our directors and officers.
Pursuant to a contractual arrangement with HSB Engineering Finance Corporation,
HSB Engineering Finance Corporation currently can nominate one member to our
Board of Directors. Mr. Maselli was HSB Engineering Finance Corporation's
initial nominee to our Board of Directors. Additionally, pursuant to contractual
arrangements with APS Financial Corporation, Probex Southwest Partnership LP and
United Infrastructure Company, LLC, each is entitled to the appointment of an
advisory director to our Board of Directors.
8
<PAGE> 13
SECURITY OWNERSHIP OF MANAGEMENT
The following sets forth the number of shares of our common stock
beneficially owned by (1) our individual directors (including advisory
directors) and (2) all of our executive officers and directors as a group, as of
December 31, 2000.
None of our executive officers or directors own shares of our Series A
Preferred Stock.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Owner of Class*
------------------- ------------------- ---------
<S> <C> <C>
Charles M. Rampacek 352,857 (1) 1.3%
Chairman, CEO & President
One Galleria Tower
13355 Noel Road, Suite 1200
Dallas, TX 75240
K. Bruce Jones 914,541 (2) 3.5%
Director
88 S. Bishop Road
Santa Rosa Beach, FL 32459
Anthony J. Maselli 28,000 (3) **
Director
109 North Road
Harwinton, CT 06791
Thomas G. Murray 1,870,623 (4) 7%
Director
3523 Cooper Creek
Denton, TX 76208
Thomas G. Plaskett 353,750 (5) 1.3%
Director
5215 North O'Connor
Suite 1070
Irving, TX 75039
Nora A. Blum 0 **
Advisory Director
P.O. Box 2166
Houston, TX 77252
Nicholas W. Hollingshad 832,400 (6) 3.2%
Advisory Director
3204 Long Prairie Road, Suite C
Flower Mound, TX 75022
William A. Searles 251,325 (7) **
Advisory Director
179 Hartshorne Rd.
Locust, NJ 07760
All executive officers and directors as a group 5,588,213 (8) 19.9%
</TABLE>
9
<PAGE> 14
Notes:
* Based on 26,209,868 shares of our common stock outstanding as of December 31,
2000.
** Represents less than 1% of our outstanding common stock.
1. Includes 210,000 shares acquirable pursuant to the exercise of stock
options and 142,857 shares of common stock acquirable upon conversion
of $200,000 in principal amount of 7% Senior Secured Convertible Notes
due November 2004, which are convertible at the option of the holder at
any time. Excludes 800,000 shares acquirable pursuant to the exercise
of stock options that have not vested.
2. Includes 445,207 shares owned by CPM Partners, L.L.C. for which Mr.
Jones exercises voting control. Mr. Jones disclaims beneficial
ownership of these shares. Also includes 154,469 shares acquirable
pursuant to the exercise of warrants. Excludes 40,000 shares acquirable
pursuant to the exercise of warrants that have not vested.
3. Includes 20,000 shares acquirable pursuant to the exercise of warrants.
Excludes 40,000 shares acquirable pursuant to the exercise of warrants
that have not vested.
4. Includes 85,410 shares acquirable pursuant to the exercise of warrants
and 326,666 shares acquirable pursuant to the exercise of stock
options. Excludes 163,334 shares acquirable pursuant to the exercise of
stock options that have not vested.
5. Includes 185,000 shares acquirable pursuant to the exercise of
warrants. Excludes 165,000 shares acquirable pursuant to the exercise
of warrants that have not vested.
6. Includes 832,400 shares owned by Probex Southwest Partnership LP for
which Mr. Hollingshad exercises voting control. Mr. Hollingshad
disclaims beneficial ownership of these securities, except to the
extent of his aggregate pecuniary interest (approximately 16.5%) in the
partnership.
7. Includes 251,325 shares acquirable pursuant to the exercise of warrants
held by American Physicians Service Group, for which Mr. Searles
exercise voting control. Mr. Searles disclaims beneficial ownership of
the 251,325 shares held by American Physicians Service Group.
8. Represents 11 persons and includes 686,666 shares acquirable pursuant
to the exercise of stock options, 670,875 shares acquirable pursuant to
the exercise of warrants, 285,714 shares acquirable upon conversion of
$400,00 in principal amount of 7% Senior Secured Convertible Notes due
November 2004 and 1,391,586 shares for which the executive officer or
director exercises voting rights and shares acquirable upon exercise
but disclaims beneficial ownership.
10
<PAGE> 15
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information, as of December 31,
2000, with respect to the beneficial ownership of shares of our common stock (i)
by any person or "group," as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, known to us to own beneficially more than five
percent of the outstanding shares of common stock, (ii) by each of our directors
and each of our executive officers named in the Summary Compensation Table and
(iii) by all of our directors and executives officers as a group. Except as
otherwise indicated, we believe that each person named below possesses sole
voting and investment power of his shares of common stock.
<TABLE>
<CAPTION>
Name and Address Amount and Nature Percent
of Beneficial Owner of Beneficial Owner of Class*
------------------- ------------------- ---------
<S> <C> <C>
Zesiger Capital Group LLC 5,357,000 (1) 17%
320 Park Avenue, 30th Floor
New York, NY 10022
HSB Engineering Finance Corp. 2,796,114 10.7%
One State Street
Hartford, CT 06102
General Conference of 1,598,868 (2) 5.9%
Seventh-day Adventists
12501 Old Columbia Pike
Silver Spring, MD 20904
Thomas G. Murray 1,870,623 (3) 7%
Director
3523 Cooper Creek
Denton, Texas 76208
Alex D. Daspit 1,820,195 (4) 6.8%
3707 Princeton Ave.
Dallas, Texas 75205
</TABLE>
Notes:
* Based on 26,209,868 shares of common stock outstanding as of December 31,
2000.
1. Based upon Schedule 13G filed on December 6, 2000, and other
information known to the Company. Includes 5,357,000 shares of common
stock acquirable upon conversion of 7% Senior Secured Convertible Notes
due November 2004, which are convertible at any time at the option of
the holders. Zesiger Capital Group LLC disclaims beneficial ownership
of all of these securities. Such securities are held in discretionary
accounts which Zesiger Capital Group LLC manages. Clients for whom
Zesiger Capital Group LLC acts as an investment adviser may withdraw
dividends or the proceeds of sales from the accounts managed by Zesiger
Capital Group LLC. No single client account owns more than 5% of the
class of securities.
2. Based upon Schedule 13G filed on August 23, 2000, and other information
known to the Company. Includes 967,999 shares of common stock
acquirable upon conversion of 181,500 shares of Series A Preferred
Stock, which are convertible into common stock at any time at the
option of the holder. General Conference of Seventh-day Adventists is a
corporation acting as trustee and manager to certain retirement,
investment and income funds who are the record owner of a portion of
these shares. Includes 9,169 shares of common stock and 10,000 shares
of Series A Preferred Stock, which are convertible into 53,334 shares
of common stock at any time at the option of the holder, owned by
General Conference Insurance Company of Vermont, a wholly-owned
subsidiary of General Conference Corporation of Seventh-day Adventists.
11
<PAGE> 16
3. Includes 85,410 shares acquirable pursuant to the exercise of warrants
and 326,666 shares acquirable pursuant to the exercise of stock
options. Excludes 163,334 shares acquirable pursuant to the exercise of
stock options that have not vested.
4. Based upon Schedule 13G filed on February 18, 2000, and other
information known to the Company. Includes 85,000 shares acquirable
pursuant to the exercise of warrants and 300,000 shares acquirable
pursuant to the exercise of fully vested stock options. Excludes
100,000 shares acquirable pursuant to the exercise of stock options
that have not vested.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy
The Compensation Committee works with senior management to develop and
implement the Company's executive compensation philosophy. Generally, the
Company's philosophy on executive compensation has been to provide a base cash
compensation that is at or below the average of other comparable companies, and
to provide additional incentive compensation in the form of cash bonuses and
grants of stock options based on the realization of stated objectives, such as
acquisitions, financings and other similar criteria expected to result in
improvements in total stockholder return. The Compensation Committee recognizes,
however, that in order to continue to grant options under the existing 1999
Omnibus Stock and Incentive Plan, as amended and restated (the "1999 Plan"), the
existing 1999 Plan will have to be amended to permit the grant of additional
shares. Such an amendment has been approved by the Board of Directors based upon
the recommendation of the Compensation Committee and is being submitted to the
stockholders for their approval at the 2001 Annual Meeting of Stockholders. See
"Amendment of 1999 Omnibus Stock and Incentive Plan, as amended and restated."
The programs proposed to be implemented by the Compensation Committee will be
retroactive to fiscal 2000.
Executive Compensation
Mr. Rampacek, the Company's Chairman of the Board, President and Chief
Executive Officer receives a base salary of $180,000 per year. This base cash
compensation, like that paid to other executive officers, is related primarily
to competitive factors and is not tied to the Company's financial performance or
the achievement of specific goals. The base compensation of the Company's
executive officers was increased in fiscal 2000 over fiscal 1999 levels to bring
them more nearly in line with the base compensation being paid by competitive
companies. In evaluating these increases the Committee also considered the
overall performance of the executive officers, in light of their objective and
subjective contributions to the Company's success. In addition to base salary,
options to purchase shares of common stock were awarded to certain of the
Company's executive officers during fiscal 2000.
Other Incentive Compensation
Awards of stock options were made in fiscal 2000 to Messrs. MacDonald,
Hall, McNiel and Rampacek, executive officers of the Company. In March 2000, the
Compensation Committee, subject to stockholder approval, approved the 1999 Plan.
The 1999 Plan was subsequently approved by stockholders at a special meeting of
stockholders held in July 2000. Additionally, in March 2000 the Committee
approved a director compensation program, which was subsequently amended in
December 2000 (See "Director Compensation"). These grants were made for services
rendered by the members of the Board.
12
<PAGE> 17
Employment Arrangements
The Company is currently finalizing employment agreements with Mr.
Rampacek and Mr. McNiel that continue in effect until August 31, 2005. Under
these agreements, Mr. Rampacek serves as the President and Chief Executive
Officer of the Company and Mr. McNiel serves as Senior Vice President of
Operations.
None of the other officers of the Company has an employment agreement.
The Company also maintains a 401(k) Plan, health insurance and other
benefits generally available to all employees. Currently the Company makes no
matching or other contributions to this plan, other than the payment of its
operating and administrative expenses.
This report has been furnished by the current members of the
Compensation Committee.
K. Bruce Jones Anthony J. Maselli Thomas G. Plaskett
EXECUTIVE COMPENSATION
General
Only one officer of the Company received compensation and cash bonus
payments in excess of $100,000 during the fiscal years ended September 30, 1998,
1999, or 2000. Mr. MacDonald, Senior Vice President of Technology and Business
Development, was paid cash compensation of $108,143 for the fiscal year ended
September 30, 2000. Compensation does not include minor business related and
other expenses paid by the Company and such amounts in the aggregate do not
exceed $10,000. Our President and Chief Executive Officer since August 2000, Mr.
Rampacek has been paid cash compensation of $30,462 for the fiscal year ended
September 30, 2000 and has been paid in form of non-cash compensation as
described below. Our former interim President and Chief Executive Officer from
October 1999 through July 2000, Mr. Plaskett, has never been paid any cash
compensation (salary or bonus) but has instead been paid in the form of non-cash
compensation as described below.
13
<PAGE> 18
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------------ ---------------------------
Fiscal Securities
Year Restricted Underlying
Ended Stock Options/
Sept. 30 Salary ($) Bonus ($) Awards ($) SAR (#)
--------- ---------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C>
CHARLES M. RAMPACEK
CEO/President 2000 30,462(6) -- -- 1,000,000(7)
Director 2000 -- -- -- 10,000(5)
THOMAS G. PLASKETT
Chairman/Interim
CEO & President 2000 -- -- -- --
Chairman of the Board 1999 -- -- -- 350,000(3)
Chairman of the Board 1998 -- -- -- --
MARTIN R. MACDONALD
Senior VP - Technology
& Business Development 2000 108,143 -- -- 100,000(4)
Senior VP - Operations 1999 64,876 -- -- 370,000(2)
Senior VP 1998 46,667 -- -- 50,000(1)
</TABLE>
Notes:
1. Represents grant of options to purchase 50,000 shares of common stock
of the Company at an exercise price of $0.50 per share as a performance
bonus. Such option vested upon grant.
2. In July 1999, the Board of Directors approved and the Company adopted
the 1999 Omnibus Stock and Incentive Plan for certain employees to
purchase common stock of the Company. Effective July 22, 1999, the
Company approved the issuance of options to purchase 2,748,000 shares
of common stock to employees of the Company. The exercise price is
$0.50 per share and each option is generally exercisable after meeting
five equally weighted goals over a maximum ten-year vesting period. As
of September 30, 1999, all of these options had been granted but none
had been vested or exercised. Mr. MacDonald was granted 370,000 options
under this issuance.
3. In October 1999, Mr. Plaskett assumed the additional responsibilities
of Chief Executive Officer and President of the Company on an interim
basis in addition to his continuing role as Chairman of the Board. Mr.
Plaskett was not paid any cash compensation in these roles but was
granted a warrant to purchase 250,000 shares of common stock of the
Company at $1.00 per share for a five-year period. 50% of this award,
or 125,000 shares, vested immediately upon issuance and the remaining
50%, or 125,000 shares, have not vested. Additionally, in August 1999,
the Board of Directors approved the issuance to each outside (non
employee) director warrants to purchase 100,000 shares of common stock
of the Company at $0.50 per share for a five-year period. Mr. Plaskett
received a warrant to purchase 100,000 shares of common stock of the
Company, of which 60,000 vested immediately and the remaining 40,000
will vest subject to the Company achieving certain performance
milestones. This warrant represents compensation for Mr. Plaskett's
services as a director, and does not relate to services provided as the
interim President and Chief Executive Officer of the Company.
4. Represents options to purchase 100,000 shares of common stock at an
exercise price of $1.875 per share granted under the Company's 1999
Omnibus Stock and Incentive Plan, as amended and restated, as
additional compensation for services rendered.
14
<PAGE> 19
5. In April 2000, the Board of Directors granted Mr. Rampacek options to
purchase an aggregate of 10,000 shares of common stock of the Company
upon his election to the Board of Directors. These options represent
compensation for Mr. Rampacek's services as a director and do not
relate to services provided as the current President and Chief
Executive Officer of the Company. The options are exercisable at $3.437
per share and expire in April 2010.
6. Represents Mr. Rampacek's salary from August 1, 2000 until September
30, 2000.
7. Represents options to purchase 1,000,000 shares of common stock granted
on August 1, 2000, subject to the execution of an employment agreement
with the Company, which did not occur prior to the fiscal year end.
Upon grant, 200,000 shares vested immediately and the remainder vest
ratably over the next four years on the date of initial employment.
Options/SAR Grants Table
OPTION/SAR GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options/
Underlying SAR's Granted Exercise or
Options/SAR's to Employees Base Price Expiration
Name and Principal Position Granted (#) in Fiscal Year ($/SH) Date
--------------------------- ------------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
CHARLES M. RAMPACEK
Director 10,000(1) N/A $ 3.437 4/7/2010
President/CEO 863,946(2) 29.6% $ 2.20 8/1/2010
President/CEO 136,054(2) 4.8% $ 2.9375 8/1/2010
MARTIN R. MACDONALD
Senior VP - Technology
& Business Development 100,000(3) 3.5% $ 1.875 4/1/2010
</TABLE>
Notes:
1. In April 2000, the Board of Directors granted Mr. Rampacek options to
purchase an aggregate of 10,000 shares of common stock of the Company
upon his election to the Board of Directors. These options represent
compensation for Mr. Rampacek's services as a director and do not
relate to services provided as the current President and Chief
Executive Officer of the Company. The options are exercisable at $3.437
per share and expire in April 2010.
2. Represents options to purchase 1,000,000 shares of common stock granted
on August 1, 2000, subject to the execution of an employment agreement
with the Company, which did not occur prior to the fiscal year end.
Upon grant, 200,000 shares vested immediately and the remainder vest
ratably over the next four years on the date of initial employment.
3. Represents options granted under the Company's 1999 Omnibus Stock and
Incentive Plan, as amended and restated, as additional compensation for
services rendered. Upon grant 50,000 options vested immediately and the
remainder will vest ratably over the next four years.
15
<PAGE> 20
Fiscal Year End Option/SAR Values
FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-The-Money
Options/SAR's Option/SAR's
at 9/30/00 (#) at 9/30/00
------------------------- -------------------------
Name and Principal Position Exercisable/Unexercisable Exercisable/Unexercisable
--------------------------- ------------------------- -------------------------
<S> <C> <C>
CHARLES M. RAMPACEK 210,000/800,000 (1)(2) $ 62,550/$250,199(5)
Director/President/CEO
THOMAS G. PLASKETT 185,000/165,000 (3) $318,970/$277,730(5)
Former Chairman, Interim
CEO & President
MARTIN R. MACDONALD 177,647/420,000 (4) $262,265/$797,290(5)
Senior VP - Technology
& Business Development
</TABLE>
Notes:
1. Represents options to purchase 10,000 shares of common stock at an
exercise price of $3.437 per share, granted upon election to the Board
of Directors pursuant to the director compensation plan adopted by the
Board of Directors on March 30, 2000. These shares represent
compensation for Mr. Rampacek's services as director and do not relate
to his services provided as the current President and Chief Executive
Officer of the Company.
2. Represents options to purchase 1,000,000 shares of common stock granted
on August 1, 2000, subject to the execution of an employment agreement
with the Company, which did not occur prior to the fiscal year end.
Upon grant, 200,000 shares vested immediately and the remainder vest
ratably over the next four years on the date of initial employment.
3. In October 1999, Mr. Plaskett assumed the additional responsibilities
of Chief Executive Officer and President of the Company on an interim
basis in addition to his continuing role as Chairman of the Board. Mr.
Plaskett was not paid any cash compensation in these roles but was
granted a warrant to purchase 250,000 shares of common stock of the
Company at $1.00 per share for a five-year period. 50% of this award,
or 125,000 shares, vested immediately upon issuance and the remaining
50%, or 125,000 shares, have not vested. Additionally, in August 1999,
the Board of Directors approved the issuance to each outside
(non-employee) director warrants to purchase 100,000 shares of common
stock of the Company at $0.50 per share for a five-year period. Mr.
Plaskett received a warrant to purchase 100,000 shares of common stock
of the Company, of which 60,000 vested immediately and the remaining
40,000 will vest subject to the Company achieving certain performance
milestones. This warrant represents compensation for Mr. Plaskett's
services as a director, and does not relate to services provided as the
interim President and Chief Executive Officer of the Company.
4. Represents options to purchase 100,000 shares of common stock at
exercise price of $1.875 per share granted under the Company's 1999
Omnibus Stock and Incentive Plan, as amended and restated, as
additional compensation for services rendered. Upon grant 50,000
options vested immediately and the remainder will vest ratably over the
next four years. Represents an option to purchase 50,000 shares of
common stock which vested upon grant. Represents options to purchase
370,000 shares of common stock. These options vest upon meeting five
equally weighted goals over a maximum ten year vesting period. None of
these options have vested. Represents a warrant to purchase 70,588
shares of common stock at $1.00 per share expiring on June 4, 2001.
Represents warrant to purchase 7,059 share of common stock at $0.50 a
shares expiring on June 4, 2004.
5. Value based upon the Company's closing share price of $2.562 on
September 29, 2000.
16
<PAGE> 21
AUDIT COMMITTEE REPORT
The Audit Committee is composed of two directors and operates under a
charter adopted by the Board of Directors. The Board of Directors believes that
both of these directors are independent as defined by the American Stock
Exchange's Listed Company Guide. The Board of Directors, however, acknowledges
that Mr. Plaskett's services as the interim President and Chief Executive
Officer of the Company from October 1999 to July 2000 may disqualify him as
having been employed by the Company or any of its affiliates for the current or
preceding three years. The Board intends to seek clarification from the American
Stock Exchange regarding Mr. Plaskett's status. In light of the interim nature
of Mr. Plaskett's duties and the fact that he received no cash compensation for
his services, maintained his primary occupation unrelated to the Company, and
was only present on an as needed basis, the Board does not believe Mr. Plaskett
was an "employee" of the Company for purposes of the American Stock Exchange
Rules. Nevertheless, the Board has nominated Dr. Gower for election at this
annual meeting, and if elected, intends to add Dr. Gower to the Audit Committee.
Therefore, if the American Stock Exchange ultimately determines that the Company
is not in compliance, the election of Dr. Gower would resolve any such
non-compliance. A copy of the Audit Committee Charter is attached to this Proxy
Statement as Exhibit C.
Management is responsible for the Company's internal controls and the
financial reporting process. Ernst & Young LLP, the Company's independent
auditors, are responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with generally accepted auditing
standards. The Audit Committee's responsibility is to monitor and oversee these
processes.
In this context, the Audit Committee reviewed and discussed the audited
financial statements with both management and Ernst & Young LLP. Specifically,
the Audit Committee has discussed with Ernst & Young LLP matters required to be
discussed by SAS 61 (Codification of Statements on Auditing Standards, AU
Section 380).
The Audit Committee received from Ernst & Young LLP the written
disclosures and the letter required by Independence Standards Board Standard No.
1 ( Independence Discussions with Audit Committees), and has discussed with
Ernst & Young LLP the issue of its independence from the Company.
Based on the Audit Committee's review of the audited financial
statements and its discussions with management and Ernst & Young LLP noted
above, the Audit Committee recommended to the Board of Directors that the
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-KSB for the year ended September 30, 2000.
K. Bruce Jones Thomas G. Plaskett
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires directors and certain
officers, and persons who beneficially own more than ten percent (10%) of the
Company's stock, to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission. Directors, certain
officers and greater than ten percent (10%) beneficial owners are required by
the Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on a review of the copies furnished to the Company and
representations from the directors and certain officers, the Company believes
that all Section 16(a) filing requirements for the year ended September 30, 2000
applicable to its directors, certain officers and greater than ten percent (10%)
beneficial owners were satisfied, other than a Form 4 and amended Form 4 filed
late by Mr. Maselli, a director of the Company. This Form 4 and amended Form 4
reflected the exercise of stock options and a single sale of common stock
derived from the exercise of the stock option.
17
<PAGE> 22
Based on representations from the directors and certain officers, the
Company believes that no other Forms 5 for directors, certain officers and
greater than ten percent (10%) beneficial owners were required to be filed with
the Securities and Exchange Commission for the period ended November 30, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Anthony J. Maselli, a director since June 1998, is the Founder and
Managing Director of HSB Engineering Finance Corporation (HSB Engineering) and a
Vice President of the Technology Risks Department of Hartford Steam Boiler
Inspection & Insurance Company. Mr. Maselli has been with HSB Engineering since
1995. On June 30, 1998, Probex and HSB Engineering, a wholly-owned subsidiary of
Hartford Steam Boiler Inspection & Insurance Company, entered into an agreement
whereby HSB Engineering agreed to loan up to $1,500,000 for working capital
purposes. In exchange for the loan, we granted a ten-year warrant to purchase
shares of our common stock at $0.01 per share equal to 10% of the number of
shares of common stock outstanding on a fully diluted basis.
On June 6, 2000, HSB Engineering exercised a loan conversion of the
then outstanding loan balance of $750,000, resulting in us issuing 2,796,114
shares of common stock to HSB Engineering. In addition, we paid accrued interest
of $188,625 due under the convertible promissory note. Upon conversion of the
loan, we also amended certain rights previously to granted HSB Engineering. Such
amended rights include the following:
o HSB Engineering can appoint one member to be nominated for
election to our Board of Directors and all committees thereof
as long as they, together with their affiliates, in the
aggregate, hold common stock representing at least five
percent of our common stock outstanding.
o So long as HSB Engineering, together with their affiliates, in
the aggregate, hold common stock representing at least five
percent of our common stock outstanding, our Board of
Directors may not take action to increase the number of voting
directors constituting the Board of Directors to a number
greater than nine, without the affirmative vote of their
representative.
o So long as HSB Engineering, together with their affiliates, in
the aggregate, hold common stock representing at least five
percent of our common stock outstanding, we may not
participate in any significant transaction if their
representative and at least one other outside director votes
against such significant transaction. These significant
transactions include mergers, asset sales, changes in our
authorized stock, and the creation of any additional class of
capital stock.
Thomas G. Murray, a director since 1994 was also the Chief Executive
Officer of the Company until October 1999, and thereafter was a Senior Vice
President of the Company until his resignation on May 31, 2000. In connection
with his resignation, the Company entered into an employment agreement with Mr.
Murray whereby Mr. Murray agreed to continue to provide services to the Company
as a non-executive employee until January 2002. In exchange for these services,
we have agreed to pay Mr. Murray cash compensation of $90,000 annually, and to
provide Mr. Murray with certain other employee benefits, in each case, through
June 30, 2001. In addition, we modified the terms of certain options previously
issued to Mr. Murray to permit those options to vest at certain time intervals,
rather than upon the occurrence of certain specified events. As a result,
one-third of Mr. Murray's options to purchase 490,000 shares of common stock at
$.50 per share vested on May 31, 2000, and one-third of his options will vest on
January 1 of 2001 and 2002.
Nicholas W. Hollingshad, an advisory director since April 1999, is a
principal of Environmental Resources Management (ERM), an international
industrial environmental firm. We have engaged ERM to provide environmental due
diligence and permitting service in connection with the development of our
initial plant in Wellsville, Ohio. Pursuant to such engagement, for the fiscal
year ended September 30, 2000, we paid ERM an aggregate of $96,925.
Additionally, as of January 5, 2001, we have paid ERM $204,168 and expect to pay
in excess of $400,000 during the current fiscal year.
William A. Searles, an advisory director since November 1999, is the
Chairman of APS Investment Services, Inc. We engaged APS Financial Corporation,
an affiliate of APS Investment Services, Inc., to serve as the placement agent
for our private placement of Series A Preferred Stock. As a result of such
engagement, we paid
18
<PAGE> 23
APS Financial Corporation a total of $588,500 in cash commissions and issued to
APS Financial Corporation five-year warrants to purchase a total of 402,000
shares of common stock at a purchase price of $1.875 per share.
Nora A. Blum, a recently elected advisory director in December 2000, is
a Vice President of Bechtel Enterprises, Inc. We entered into a memorandum of
understanding with Bechtel Corporation, an affiliate of Bechtel Enterprises,
Inc. in February 2000 to negotiate a strategic worldwide alliance. Additionally,
we are currently negotiating an engineering, procurement and construction
contract with Bechtel Corporation (Bechtel) for the construction of our first
plant in Wellsville, Ohio. In connection with services rendered to us by
Bechtel, we paid Bechtel $2,015,251 during the fiscal year ended September 30,
2000. As of January 5, 2001, we have paid Bechtel $3,352,768 and expect to pay
Bechtel $4,239,000 during the first calendar quarter of 2001. The expected
payments totaling $4,239,000 consists of: $757,000 for preliminary engineering
fees, $2,482,000 for engineering, procurement and construction advances, and
$1,000,000 that was deferred.
Bechtel has invested $600,000 in us and also possesses a warrant to
purchase up to 200,000 shares of our common stock at exercise price of $3.00 per
share. Further, United Infrastructure Company, LLC, an affiliate of Bechtel
Enterprises, Inc., has made a direct equity investment in us totaling $1
million. United Infrastructure Company, LLC also agreed, subject to certain
mutually agreed upon conditions, to make additional direct equity investments in
us totaling $4 million toward the financing of the Wellsville plant.
19
<PAGE> 24
PROPOSAL TWO
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO IMPLEMENT A CLASSIFIED BOARD OF DIRECTORS
Proposal
The Board of Directors has unanimously approved and recommended for
stockholder approval an amendment to the Certificate of Incorporation to add a
new article providing for a classified Board of Directors, the text of which is
set forth in Exhibit A to this Proxy Statement (the "Classified Board
Amendment"). Under Delaware law, the amendment would become effective upon
stockholder approval and filing of the amendment to the Certificate of
Incorporation.
The Classified Board Amendment provides that, at this Annual Meeting,
the Company's Board of Directors will be divided into three classes (denominated
Class I, Class II and Class III) which shall be as nearly equal in number as
possible. The directors in each class will hold office following their initial
classification for terms of one year, two years and three years, respectively.
Thus, the term of office of the Class I Directors will expire at the year 2002
Annual Meeting of Stockholders, the term of office of the Class II Directors
will expire at the year 2003 Annual Meeting of Stockholders, and the term of
office of the Class III Directors will expire at the year 2004 Annual Meeting of
Stockholders. Thereafter, the successors to each class of directors shall be
elected for three-year terms. If this proposal is not approved, each director
will be elected to serve for a term of one year and until their successors are
duly elected and qualified.
Under Delaware law, a director of a corporation with a classified board
of directors may be removed by the stockholders only for cause unless the
corporation's certificate of incorporation provides otherwise. The Company's
Certificate of Incorporation does not provide otherwise. Therefore, if this
proposal is approved, the holders of a majority of the outstanding voting shares
would be able to remove a director during his or her elected term only for
"cause." In this context, "cause" is not defined by statute. If a vacancy occurs
during the term of any director, under Delaware law the majority of the Board of
Directors may fill the vacancy, and the director so appointed will hold office
until the next election of the class to which he or she was appointed.
Classification of the Board of Directors will promote continuity and
stability in the Company's management and policies since a majority of the
Company's directors at any given time will have prior experience with the
Company. The Board of Directors further believes that such continuity and
stability will facilitate long-range planning and will have a beneficial effect
on employee loyalty and customer confidence. Currently, the entire Board of
Directors must stand for election each year. Accordingly, it is possible that
all or a majority of the current directors could be replaced at any given Annual
Meeting. If this proposal is approved, the Board of Directors will be divided
into three classes effective with this 2001 Annual Meeting, only one of which
classes will stand for election at each Annual Meeting thereafter.
In addition, classification of the Board of Directors may have the
effect of delaying, deferring or preventing a change of control of the Company
since only one-third of the directors are up for election each year and
directors may not be removed, except for cause. The Board of Directors believes
that increased management stability and continuity fostered by the classified
Board of Directors will enhance the capacity of the Board of Directors to defend
against undesirable takeover attempts and, in the event of the sale of the
Company, would enhance the Board of Directors' ability to negotiate a
transaction that is in the stockholders' best interest. The proposed
classification of the Board of Directors is not being recommended in response to
a pending or threatened attempt to acquire control of the Company.
Vote Necessary to Approve the Proposal
The affirmative vote of the holders of a majority of the outstanding
shares of common stock is necessary for approval of the Classified Board
Amendment. Therefore, abstentions and broker non-votes effectively count as
votes against the Amendment.
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<PAGE> 25
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE PROPOSED
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO PROVIDE FOR A
CLASSIFIED BOARD OF DIRECTORS.
PROPOSAL THREE
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO REMOVE THE ABILITY OF STOCKHOLDERS TO
ACT BY WRITTEN CONSENT
Proposal
The Board of Directors has unanimously approved and recommended for
stockholder approval an amendment to the Certificate of Incorporation to add a
new article removing the ability of stockholders to act by written consent, the
text of which is set forth in Exhibit B to this Proxy Statement (the "Action by
Written Consent Amendment"). Under Delaware law, the amendment would become
effective upon stockholder approval and filing of the amendment to the
Certificate of Incorporation.
Currently, any action which may be taken at any annual or special
meeting of stockholders of the Company may be taken without a meeting, without
prior notice, and without a vote, if a written consent or consents, setting
forth the action so taken, is signed by the holders of the shares having not
less than the minimum number of votes necessary to take such action at a meeting
at which the holders of all shares entitled to vote on the action were present
and voted. In short, this provision allows a stockholder or group of
stockholders who own 50% of the outstanding shares (or more with respect to
provisions requiring supermajority approval) to take action, such as electing or
removing directors, by written consent without the necessity of holding a
meeting
The Action by Written Consent Amendment provides that, after this 2001
Annual Meeting, stockholder action may only be taken at annual and special
meetings of stockholders duly called and held. The Company's Board of Directors
believes that the Action by Written Consent Amendment will provide all
stockholders of the Company entitled to vote on a particular matter notice of,
and the opportunity to participate in, the determination of any proposed action
on such matter and the chance to take judicial or other action to protect their
interests. In addition, the Board of Directors believes that the elimination of
stockholder action by written consent is desirable to avoid untimely action in a
context that might not permit stockholders to have the full benefit of the
knowledge, advise and participation of the Company's management and Board of
Directors
By prohibiting stockholder action by written consent, it may have the
effect of delaying, deferring or preventing a change of control of the Company
since stockholder action may only be taken at annual and special meeting of
stockholders duly called and held. The Board of Directors believes that this
prohibition will enhance the capacity of the Board of Directors to defend
against undesirable takeover attempts and, in the event of the sale of the
Company, would enhance the Board of Directors' ability to negotiate a
transaction that is in the stockholders' best interest. The proposed Action by
Written Consent Amendment is not being recommended in response to a pending or
threatened attempt to acquire control of the Company.
Vote Necessary to Approve the Proposal
The affirmative vote of a majority of the shares outstanding is
necessary for approval of the amendment to the Company's Certificate of
Incorporation to remove the ability of stockholders to act by written consent.
Therefore, abstentions and broker non-votes effectively count as votes against
this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE PROPOSED
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO REMOVE THE ABILITY OF
STOCKHOLDERS TO ACT BY WRITTEN CONSENT.
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<PAGE> 26
PROPOSAL FOUR
APPROVAL OF THE ISSUANCE OF UP TO 25 MILLION
SHARES OF THE COMPANY'S COMMON STOCK
Proposal
In December 2000, the Company engaged an exclusive financial advisor
(the "Advisor") to assist the Company in implementing its business plan. In
relying on the recommendations of the Advisor, the Company is seeking to raise
additional capital through a private placement of the Company's preferred stock
(the "Private Placement"). Although the Board of Directors generally has the
authority to issue preferred stock from time to time, under the rules of the
American Stock Exchange, on which the Company's common stock is currently
listed, stockholder approval is required for certain private issuances of the
Company's common stock upon conversion of the preferred stock in an amount that
exceeds twenty percent (20%) of the outstanding common stock.
Based on (i) the aggregate amount of the Company's required
expenditures for plant development, (ii) the aggregate amount of the Company's
required capital for financing potential acquisitions that the Company has and
may identify, (ii) the anticipated amount of the Company's working capital
requirements, (iii) the current market value of the Company's common stock, and
(iv) the fact that the Company may offer and sell securities convertible into
shares of common stock at a discount to the then prevailing market price, the
Company is seeking to offer and sell in the Private Placement a number of shares
of preferred stock that are convertible into shares of common stock that
constitute more than twenty percent (20%) of the Company's common stock issued
and outstanding prior to such offer and sale. The Board of Directors believes
that the Private Placement of the Company's preferred stock will provide the
Company with the appropriate additional capital in a timely manner for the above
described purposes.
The following terms of the Private Placement are preliminary and
subject to change.
Dividends. A cumulative dividend of 7% will be payable in cash or in kind, at
the Company's option, semi-annually in arrears on each share of the Series B
Convertible Preferred Stock (Series B Preferred Stock).
Conversion Feature. Each holder of the Series B Preferred Stock will have the
right, at the holder's option, to convert any or all shares of the Series B
Preferred Stock into the Company's common stock at any time, at a conversion
price to be determined. In addition, the conversion price will have standard
weighted average anti-dilution protection in the event of the issuance of common
stock or common stock equivalents of the Company at a price less than the then
current conversion price.
Liquidation Preference. In the event of a liquidation of the Company, the
holders of the Series B Preferred Stock shall be entitled to receive in
preference to the holders of the Company's common stock an amount to be
determined plus cumulative dividends at the rate of 7% per annum.
Optional Redemption. If the average closing price, as reported on the American
Stock Exchange, equals or exceeds 300% of the conversion price for any 30
consecutive trading day period, the Company may, at its option, redeem the
Series B Preferred Stock , at a redemption price per share equal to the
liquidation value plus accrued and unpaid dividends. The holders of the Series B
Preferred Stock will be given notice of such redemption and will have the right
to convert the Series B Preferred Stock into the Company's common stock prior to
the date specified in the redemption notice.
Registration Rights. The Company shall file a registration statement under the
Securities Act of 1933 and any applicable state securities laws covering the
resale of the shares of common stock underlying the Series B Preferred Stock
within 30 days after the closing of the Private Placement. The Company agrees to
keep such registration statement effective until the shares of common stock
acquirable upon conversion of the Series B Preferred Stock are eligible for sale
pursuant to Rule 144 of the Securities Act without limitation as to volume. The
Company agrees to bear all fees and expenses incurred in connection with the
preparation and filing of the registration statement.
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<PAGE> 27
Voting Rights. The holders of the Series B Preferred Stock will not be entitled
to vote, except as required by law. Notwithstanding the foregoing, the
affirmative vote of a majority of the Series B Preferred Stock outstanding is
necessary for the issuance of securities senior to or on a parity with the
Series B Preferred Stock, the authorization or issuance of securities
convertible into such senior or parity securities, or the amendment of the
Company's Certificate of Incorporation so as to adversely affect the Series B
Preferred Stock, or waiver of any other covenants.
The Company will, however, only consummate the Private Placement after due
consideration by, and approval of, its Board of Directors, of such specific
terms. There can be no assurance that the Company will be successful in raising
capital pursuant to the Private Placement or otherwise.
THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO PURCHASE SECURITIES OF THE COMPANY. ANY OFFER OF
SECURITIES MADE BY THE COMPANY OR OTHER PERSON ON BEHALF OF THE COMPANY MAY BE
MADE ONLY PURSUANT TO MATERIALS AND OTHER OFFERING DOCUMENTS PREPARED BY THE
COMPANY AND DELIVERED TO QUALIFIED PURCHASERS EXPRESSLY FOR USE IN CONNECTION
WITH THE PRIVATE PLACEMENTS, AND ANY SUCH OFFER SHALL BE MADE IN COMPLIANCE
WITH, OR PURSUANT TO AN EXEMPTION FROM, SECTION 5 OF THE SECURITIES ACT OF 1933,
AS AMENDED.
Financial Advisor
The Company's agreement with the Advisor (the "Advisory Agreement")
provides that the Advisor will assist the Company in implementing its business
plan, including advising the Company of various financing alternatives. The
Advisor's current recommendation to the Company is the Private Placement. This
recommendation is subject to certain conditions, including that there be no
material adverse change in the business of the Company or in general market
conditions.
In addition to the financial advisory services rendered to the Company,
the Company has engaged the Advisor to act as the placement agent with respect
to the Private Placement. The Advisor and any co-placement agents will be
provided reasonable and customary compensation for their services in effecting
the Private Placement.
The Private Placement
The Private Placement will consist of the offer and sale of the number
of shares of the Company's Series B Preferred Stock as may be necessary to
generate approximately $35 million in proceeds for the Company. The Series B
Preferred Stock offered and sold in the Private Placement will not possess
preemptive rights. The Series B Preferred Stock will be convertible into shares
of common stock at a conversion price per share to be determined. Further, the
Series B Preferred Stock offered and sold in the Private Placement, and its
underlying common stock, will not be registered under the Securities Act of
1933, as amended (the "Securities Act"), and accordingly such shares cannot be
offered and sold in the United States absent registration or an applicable
exemption from the registration requirements under the Securities Act. As a
result of the restrictions on transfer under the Securities Act on shares to be
issued in the Private Placement, it is possible that the Series B Preferred
Stock will be convertible into shares of common stock at some discount to the
then prevailing market price for common stock customary for private placements
of this nature. The final offering price for the Private Placement will be based
on market conditions and will be approved by the Company's Board of Directors.
In order to minimize any discount to market price necessary in the Private
Placement, the Company has agreed to file a registration statement under the
Securities Act with respect to the resale of the shares of common stock
acquirable upon conversion of the Series B Preferred Stock sold in the Private
Placement, and to use reasonable efforts to have such registration statement
declared effective as soon thereafter as possible.
The Company's management will have broad discretion in applying the net
proceeds generated from the Private Placement. The Company expects, however, to
use the majority of the net proceeds to finance the construction of its first
plant in Wellsville, Ohio. The remainder will be used for general working
capital and potential acquisitions. Although a portion of the net proceeds are
anticipated to be used to fund one or more acquisitions, the Company has not
entered into any definitive agreements with respect to any potential
acquisitions at this time. Therefore, there can be no assurance that the Company
will successfully complete any acquisitions. If the Company is unable to
complete one or more potential acquisitions, such portion of the proceeds will
be available for use at the discretion of management.
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<PAGE> 28
Stockholder Approval Requirement
Although the Board of Directors of the Company possesses the authority
under the Company's Certificate of Incorporation to approve the issuance of
preferred stock, Section 713 of the American Stock Exchange Listed Company Guide
generally requires stockholder approval in connection with the offer and sale of
common stock (or securities convertible into common stock) which equals twenty
percent (20%) or more of the shares of common stock outstanding before the offer
and sale at a price less than market value. The offer and sale of the Series B
Preferred Stock pursuant to the Private Placement will likely be convertible
into a number of shares of common stock that exceeds twenty percent (20%) of the
common stock outstanding prior to any such offer and sale and the conversion
price could be at a price that constitutes a discount to the then prevailing
market price of the Company's common stock. Accordingly, the Board of Directors
of the Company is seeking stockholder approval of the issuance of up to 25
million shares of the Company's common stock, issuable upon conversion of the
Company's Series B Preferred Stock, in order to complete the Private Placement,
if and when the Board of Directors approves the final terms of the Private
Placement. Such final terms will be determined by the Board of Directors in a
manner that it believes to be in the best interest of the Company and its
stockholders.
General Effect of Issuance of Common Stock on Existing Stockholders
Adoption of this proposal and any issuance of common stock upon
conversion of the Series B Preferred Stock, would not affect the rights of the
holders of currently outstanding common stock, except for effects incidental to
increasing the outstanding number of shares of common stock, such as dilution of
earnings per share and voting rights of current holders of common stock.
Vote Necessary to Approve the Proposal
Under the American Stock Exchange Rules, the affirmative vote of a
majority of the shares present in person or by proxy and entitled to vote at the
meeting is necessary for the approval of the issuance of up to 25 million shares
of the Company's common stock. For this purpose, an abstention will have the
same effect as a vote against the proposal to issue the Company's common stock.
Broker non-votes will not be counted as a vote either for or against the
proposal and will not be counted in determining the number of shares entitled to
vote on the proposal. If stockholders approve this proposal, no further
stockholder approval will be sought with respect to the Private Placement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL TO
APPROVE THE ISSUANCE OF UP TO 25 MILLION SHARES OF
THE COMPANY'S COMMON STOCK.
PROPOSAL FIVE
APPROVAL OF AN AMENDMENT TO THE
1999 OMNIBUS STOCK AND INCENTIVE PLAN,
AS AMENDED AND RESTATED
Proposal
The Company is requesting stockholder approval of an amendment to the
1999 Omnibus Stock and Incentive Plan, as amended and restated (the "1999
Plan"), for Probex Corp., which was adopted by stockholders on July 19, 2000.
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<PAGE> 29
The Board of Directors believes that the Company's continued ability to
attract, motivate and retain experienced and highly qualified employees will
have a direct impact on the future success and profitability of the Company. The
purpose of the 1999 Plan is to advance the interests of the Company and increase
stockholder value by providing additional incentives to attract, retain and
motivate those qualified and competent employees, Directors and Consultants upon
whose efforts and judgment its success is largely dependent.
The Board of Directors believes that an additional share reserve of
3,000,000 shares, which was approved by the Board in January 2001, is necessary
to enable the Company to attract, maintain and motivate qualified individuals
and industry experts. The ability of the Company to attract and maintain such
qualified individuals is critical to the Company during this period in which the
Company is evolving from a development corporation to an operational
corporation. In order to accomplish the foregoing, the Board of Directors has
approved, and recommends to the Company's stockholders that they approve an
amendment to the 1999 Plan which will increase the shares reserved under the
1999 Plan from 5,750,000 to 8,750,000. The Compensation Committee of the Board
of Directors has indicated that, if the amendment to the 1999 Plan is approved
by the stockholders, it intends to award, from the additional 3,000,000 shares,
incentive stock options and nonqualified stock options to purchase an aggregate
661,500 shares of common stock to certain directors and officers of the Company
as follows:
NEW PLAN BENEFITS
AMENDED 1999 OMNIBUS INCENTIVE AND STOCK PLAN
<TABLE>
<CAPTION>
Exercise Number of
Name and Position Price ($) Options
----------------- --------- ---------
<S> <C> <C>
Executive Officer Group $1.875 55,000 (1)
Non-Executive Director Group $1.50 - $1.75 142,500 (2)
Non-Executive Officer Employee Group $1.4375 - $2.56 464,000 (1)
</TABLE>
(1) Represents 519,000 shares acquirable upon the exercise of options
granted to employees that generally vest ratably over three years from
the date of grant and expire as provided in the option, but not later
than tenth anniversary of the date of grant.
(2) Shares purchasable upon the exercise of options granted to directors
vest immediately upon grant and expire as provided in the option, but
not later than the tenth anniversary of the date of grant. The exercise
price of these options was based upon the closing price of the
Company's common stock as reported on the American Stock Exchange on
the date of grant.
If the amendment to the 1999 Plan to increase its available shares to
8,750,000 is not approved by the stockholders, the foregoing awards of options
will not be made and the Company will continue to operate under the original
July 19, 2000 version of the 1999 Plan, with its maximum of 5,750,000 shares,
and under which there currently are no shares available to be awarded.
The principal features of the 1999 Plan are described below, but the
description is qualified in its entirety by reference to the full text of the
1999 Plan on file with Securities and Exchange Commission.
General Information
The 1999 Plan is administered by the Compensation Committee of the
Board of Directors (the "Committee"), unless, and to the extent, the Board is
required to, or expressly elects to, itself act as the Committee. The 1999 Plan
provides for the granting of options, restricted stock awards and performance
awards. The Committee has the authority, consistent with the terms of the 1999
Plan: (i) to select the officers, directors, key employees of and consultants to
the Company to whom awards may from time to time be granted; (ii) to determine
whether and to what extent awards are to be granted to one or more eligible
persons; (iii) to determine the number of
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<PAGE> 30
shares to be covered by each such award granted; and (iv) to determine the terms
and conditions, not inconsistent with the terms of the 1999 Plan, of any award
granted (including, but not limited to, the agreed value and any restriction or
limitation, or any vesting acceleration or waiver of forfeiture restrictions,
based in each case on such factors as the Committee shall determine in its sole
discretion), and to amend or waive any such terms and conditions to the extent
not otherwise prohibited by the terms and conditions of the 1999 Plan.
Notwithstanding the forgoing, during any calendar year, beginning with the
calendar year 2000, the maximum number of shares for which an award may be
granted under the 1999 Plan to any person, whose compensation is subject to the
limitation on deductibility under Section 162(m) of the Code, is 1,100,000
shares. The Committee is authorized, in its sole discretion to interpret all of
the terms and provisions of the 1999 Plan, and will also make all other
determinations that it decides are necessary or desirable in the interpretation
and administration of the 1999 Plan.
Under the 1999 Plan, as proposed to be amended, the maximum number of
shares of common stock that the Company may issue under awards will be
8,750,000, plus shares which are reacquired pursuant to the special share
repurchase plan. Under the share repurchase plan, which is expressly set forth
in the 1999 Plan, shares may be (i) repurchased by the Company in the open
market, or (ii) (at discretion of the Board of Directors) deemed as repurchased
from authorized but unissued, or treasury, shares at a deemed reacquisition
price equal to the closing price of the shares on the date of the deemed
reacquisition, provided that each actual purchase or deemed repurchase under the
share repurchase plan must be done only with the cash proceeds (not previously
used for such purpose) received by the Company with respect to exercised options
granted under the Plan. Also shares delivered to the Company in full or partial
payment of the exercise price of an option issued under the Plan will be
considered repurchased shares. Notwithstanding the foregoing, the aggregate
number of repurchased shares available under the Plan shall not exceed 75% of
the shares authorized for grant under the 1999 Plan at the time of reference,
and none of the repurchased shares can be subject to an incentive stock option.
Awards under the 1999 Plan
Stock Options. A stock option ("Option"), which may be a non-qualified
or an incentive stock option, is the right to purchase a specified number of
shares of common stock at a price ("Option Price") fixed by the Committee. The
Option Price shall be any price determined by the Committee; provided, however,
that in the case of an incentive stock option, the Option Price per share may
not be less than the fair market value of a share on the date of grant. The
aggregate fair market value (determined as of the date of grant) of the shares
with respect to which an incentive stock option is exercisable for the first
time by an optionee during any calendar year may not exceed $100,000. Generally,
the Committee, in its sole discretion, may change the terms of an outstanding
award, provided it obtains the holder's approval where required by the terms of
the award or the 1999 Plan. The Committee is required to change the terms of
Options outstanding under the 1999 Plan, with respect to the Option Price or the
number of available shares subject to the Options, or both, when the Committee,
in its sole discretion, determines that such adjustments are appropriate by
reason of certain corporate transactions, such as the declaration of a stock
dividend or through any recapitalization resulting in a stock split-up,
combination or exchange of shares.
The forfeitable (non-vested) portion of awards typically terminate
within a short period (i.e. 30 days) following a holder's termination of
employment by the Company. The period from termination of employment to
termination of the award is extended, in the case of an Option to: (i) 12
months, where the termination is by reason of death; (ii) 3 months, where the
termination is by reason of disability; and (iii) such other period as may be
provided in the Option. In all cases, Options will terminate not later than ten
years after their date of grant. The Committee, in its sole discretion, may
accelerate the date on which all or any portion of an otherwise unexercisable
Option may be exercised or a restriction will lapse. Additionally, the Committee
may condition the exercise of any Option upon the attainment of specified
performance goals or other factors as the Committee may determine in its sole
discretion.
Incentive stock options shall not be granted to any person owning
directly (or indirectly pursuant to Section 425(d) of the Internal Revenue Code)
at the date of grant, stock representing more than 10% of the total combined
voting power of all classes of stock of the Company at the date of grant, unless
the Option Price is at least 110% of the fair market value on the date of grant
and the exercise period shall not exceed five (5) years from the date of grant.
26
<PAGE> 31
Non-Qualified Stock Options. Non-qualified stock options may be granted
under the 1999 Plan and shall contain such terms and provisions as shall be
determined by the Committee.
Restricted Shares Award. A restricted shares award is an award of
common stock which is subject to a substantial risk of forfeiture during its
period of restriction, which period shall be selected by the Committee. The
restrictions on restricted shares shall lapse in whole, or in installments, over
the periods selected by the Committee; provided, however, that a complete lapse
always shall occur on or before the ninth anniversary of the date of grant.
Further, the Committee may accelerate the date on which restrictions lapse with
respect to any restricted shares.
Each eligible person receiving a restricted shares award will have all
of the rights of a stockholder with respect to the restricted shares, such as
voting rights and the right to receive any dividends. Such restricted shares
will be registered in the holder's name and bear a restrictive legend disclosing
the restrictions; provided, however, such certificates shall be deposited with
the Company endorsed in blank with the necessary stock powers or other
instruments of assignment. During the restricted period, any distributions in
the form of shares, cash or other property (other than regular cash dividends)
made with respect to shares shall be subject to the same restrictions as the
corresponding shares, and such restrictions shall lapse at the same time the
restrictions on the corresponding shares(s) lapse; and all such restricted share
distributions will remain in the custody of the Company until that lapse date.
Restricted shares shall constitute issued and outstanding common stock for all
corporate purposes. Once the restrictions shall have lapsed, the stock
certificates and any related distributions, will be delivered to the entitled
holder.
Performance Awards. The Committee may grant performance awards, which
may in the sole discretion of the Committee represent a common share or be
related to the increase in the value of a common share, or be contingent on the
Company's achievement of the specified performance measures during the
performance period, including, without limitation, performance shares,
convertible preferred stock, convertible debentures, exchangeable securities and
restricted share awards or options valued by reference to earnings per share or
subsidiary performance. Such performance awards may be granted alone, in
addition to, or in tandem with other awards made under, or outside, the 1999
Plan.
The Committee is required to establish the performance measures for
each performance period, and such performance measures, and the duration of such
performance period, may differ with respect to each eligible person who receives
a performance award, or with respect to separate performance awards issued to
the same eligible person. Generally, the eligible person must remain employed by
the Company until the expiration of the performance period to be entitled to the
performance award; provided, however, that the Committee may specify in the
performance award agreement that a specified amount earned under the performance
award will be payable to the holder for the period between the date of grant and
date of termination of employment.
Other Provisions.
In the event of either a change in control, or a potential change in
control, unless otherwise expressly provided by the Committee prior to such
event, (i) all awards, shall become fully exercisable, nonforfeitable, or the
restricted periods shall terminate, as the case may be, and (ii) the value of
all outstanding non-qualified stock options shall be cashed out on the basis of
the change in control price, effective as of the date of the change in control,
or on such other date as determined by the Committee.
If at any time while the 1999 Plan is in effect or awards with respect
to available shares are outstanding, there shall be any increase or decrease in
the number of issued and outstanding shares through the declaration of a stock
dividend or through any recapitalization resulting in a stock split-up,
combination or exchange of shares, then and in such event appropriate
adjustments shall be made to the maximum number of available shares which may be
granted, and in the case of each award, the number of shares subject to the
award and (where applicable) the consideration to be paid by the holder in order
to acquire the shares. Except as otherwise provided in the 1999 Plan, no
adjustment shall be made to the available shares for shares of any class, or
securities convertible into shares of capital stock of any class, either in
connection with a direct sale to an unrelated party or for fair market value, or
upon the exercise of rights or warrants subscribed therefor, or upon conversion
of shares or obligations of the Company convertible into such shares or other
securities.
27
<PAGE> 32
No holder or other person shall be, or have any of the rights and
privileges of, the owner of the shares subject to an award unless and until
certificates representing such common stock shall have been issued and delivered
to such holder or other person. An award is not transferable except to the
holder's beneficiary, or (except for an incentive stock option), with the
consent of the Committee, to the holder's immediate family or to a charity.
Certain Federal Income Tax Consequences of Options
For purposes of this discussion, the term "employer" shall be deemed to
include a person's employer and the Company for whom a non-employee performs
services.
An employee to whom an incentive option which qualifies under Section
422 of the U.S. Internal Revenue Code of 1986, as amended (the "Code"), is
granted will not recognize income at the time of the grant or exercise of such
Option. No federal income tax deduction will be allowable to the employee's
employer upon the grant or exercise of such option. However, upon the exercise
of an incentive stock option, special alternative minimum tax rules apply for
the employee. Additionally, when the employee sells the shares attributable to
the exercise of an incentive stock option more than one year after the date of
exercise and more than two years after the date of grant (the "Minimum ISO
Period"), the employee will normally recognize a capital gain or loss equal to
the difference, if any, between the sales price of such shares and the exercise
price. If the employee does not hold such shares for the Minimum ISO Period,
when the employee sells such shares, the employee will recognize ordinary
compensation income equal (per share) to the excess of the exercise price over
the lesser of (i).the fair market value of the share on the date of exercise, or
(ii) the amount realized on the sale, and any amount of gain realized on the
sale which is in excess of the gain under (i) (if applicable) will be capital
gain. Subject to the applicable provisions of the Code and regulations
thereunder, including Section 162(m) of the Code, the employee's employer will
generally be entitled to a federal income tax deduction in the amount of
employee's ordinary compensation income.
An individual to whom a non-qualified option is granted will not
recognize income at the time of the grant of such option. When such optionee
exercises such non-qualified option, the optionee will recognize ordinary
compensation income equal to the difference, if any, between the option price
paid and the fair market value, as of the date of the option exercise, of the
shares the optionee receives. The tax basis of such shares to such optionee will
be equal to the option price paid plus the amount includable in the optionee's
gross income, and the optionee's holding period for capital gain treatment upon
the sale of such shares will commence on the day on which the optionee exercises
the option and recognizes taxable income with respect to such shares. Subject to
the applicable provisions of the Code and regulations thereunder, including
those in Section 162(m) of the Code, the employer of such optionee will
generally be entitled to a federal income tax deduction with respect to the
exercise of such non-qualified option in an amount equal to the ordinary
compensation income recognized by the optionee. Any compensation includable in
the gross income of an employee with respect to the exercise of a non-qualified
option will be subject to appropriate federal income withholding and employment
taxes.
The discussion above does not purport to be a complete analysis of all
potential tax consequences relevant to recipients of options or their employers
or to describe tax consequences based on particular circumstances and does not
address awards other than options. It is based on federal income tax law and
interpretational authorities as of the date of this proxy statement, which are
subject to change at any time.
Vote Necessary to Approve the Proposal
The affirmative vote of a majority of the shares of common stock
present and voting at the meeting is necessary for the approval of the amendment
to the 1999 Plan.
28
<PAGE> 33
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE PROPOSAL
TO APPROVE THE AMENDMENT TO 1999 OMNIBUS STOCK AND
INCENTIVE PLAN, AS AMENDED AND RESTATED.
PROPOSAL SIX
RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS THE COMPANY'S INDEPENDENT AUDITORS
Proposal
The Audit Committee has recommended and the Board of Directors has
selected Ernst & Young LLP to act as the Company's independent auditors. Ernst &
Young LLP served as the Company's auditors for the 2000 fiscal year. A
representative of Ernst & Young LLP is expected to attend the 2001 Annual
Meeting to respond to appropriate questions and will have the opportunity to
make a statement, if desired.
Vote Necessary to Approve the Proposal
The affirmative vote of a majority of the shares of common stock
present and entitled to vote at the meeting is necessary for the ratification of
the appointment of Ernst & Young LLP as the Company's independent auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF ERNST & YOUNG LLP AS THE
COMPANY'S INDEPENDENT AUDITORS.
OTHER BUSINESS
The Company is not aware of any business to be acted upon at the Annual
Meeting other than that which is explained in this Proxy Statement. In the event
that any other business calling for a vote of the stockholders is properly
presented at the meeting, the holders of the proxies will vote your shares in
accordance with their best judgment.
SUBMISSION OF STOCKHOLDER PROPOSALS
The Company anticipates that it will hold its next annual meeting for
the year ending September 30, 2001, in February 2002. Any stockholder who wishes
to present a proposal for action at the 2002 Annual Meeting of stockholders and
who wishes to have it set forth in the proxy statement and identified in the
form of proxy prepared by the Company, must deliver such proposal to the Company
at its principal executive offices, no later than October 31, 2001, in such form
as is required under regulations promulgated by the Securities and Exchange
Commission. On request, the Secretary of the Company will provide you with
detailed instructions for submitting proposals.
INDEPENDENT AUDITORS
M.C. Hunter & Associates served as our independent auditors for the
fiscal year ended September 30, 1999, and was subsequently dismissed in February
2000. The firm of Ernst & Young LLP served as our independent auditors the
fiscal year ended September 30, 2000. A representative of Ernst & Young LLP is
expected to be at our 2001 Annual Meeting of Stockholders to respond to
appropriate questions and to make a statement if desired.
ADDITIONAL INFORMATION AND QUESTIONS
A copy of these materials and the Company's report on Form 10-KSB for
the year ended September 30, 2000 will be furnished without charge to any person
solicited hereby upon written request by writing to the Vice President of
Investor Relations at the address listed below.
If you have any questions or need more information about the annual
meeting, you may write to:
Mr. Les Van Dyke
Vice President of Investor Relations
13355 Noel Road, Suite 1200
Dallas, Texas 75240
If you have any questions or concerns, please call the Vice President
of Investor Relations at 972-788-4772 or go to www.probex.com.
29
<PAGE> 34
EXHIBIT A
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
PROBEX CORP.
Probex Corp., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions proposing and declaring advisable the following amendment to the
Certificate of Incorporation of the Corporation:
Section 5 shall be amended to read in its entirety as follows:
"5. (a) The number of directors of the Corporation shall be fixed from
time to time in the manner provided by the Bylaws of the Corporation; provided,
however, that at any time there is only one stockholder of the Corporation, the
number of directors may not be less than one.
(b) The Board of Directors shall initially consist of six
members until changed in accordance with the Bylaws of the Corporation. There
shall be three classes of directors (each, a "Class"), known as Class I, Class
II and Class III. The initial Class I, Class II and Class III directors shall
serve in office as follows: Class I shall retire at the annual meeting of
stockholders to be held in year 2002, Class II shall retire at the annual
meeting of stockholders to be held in year 2003, and Class III shall retire at
the annual meeting to be held in year 2004. This annual sequence shall be
repeated thereafter. Each director in a Class shall be eligible for re-election
if nominated, and such director's seat shall be open for election of a director,
at the annual meeting of stockholders of the Corporation at which such Class
shall retire, to hold office for three years or until his successor is elected
or appointed.
Any additional directors elected or appointed shall be elected or
appointed to such Class as will ensure that the number of directors in each
Class remains as nearly equal as possible, and if all Classes have an equal
number of directors or if one Class has one director more than the other two
Classes, then any additional directors elected or appointed shall be elected or
appointed to the Class that does not have more directors than any other Class
and is subject to election at an ensuing annual meeting before any other such
Class.
Vacancies due to resignation, death, increases in the number of
directors, or any other cause shall be filled only by the Board of Directors
(unless there are no directors, in which case vacancies will be filled by the
stockholders) in accordance with the rule that each Class of directors shall be
as equal in number of directors as possible. Notwithstanding such rule, in the
event of any change in the authorized number of directors each director then
continuing to serve as such will nevertheless continue as a director of the
Class of which he or she is a member, until the expiration of his or her current
term or his earlier death, resignation or removal. If any newly created
directorship or vacancy on the Board of Directors, consistent with the rule that
the three Classes shall be as nearly equal in number as possible, may be
allocated to one or two or more Classes, then the Board of Directors shall
allocate it to that of the available Classes whose term of office is due to
expire at the earliest date following such allocation. When the Board of
Directors fills a vacancy, the director chosen to fill the vacancy shall be of
the same Class as the director he or she succeeds and shall hold office until
such director's successor shall have been elected and qualified or until such
director shall resign or shall have been removed. No reduction of the authorized
number of directors shall have the effect of removing any director prior to the
expiration of such director's term of office.
A-1
<PAGE> 35
(c) Election of Directors need not be by written ballot unless
the Bylaws shall so provide. No holders of Common Stock of the Corporation shall
have any rights to cumulate votes in the election of directors."
SECOND: That the Certificate of Amendment has been approved by the
Corporation pursuant to a resolution of its Board of Directors and duly adopted
by the majority of the shares outstanding entitled to vote thereon.
THIRD: The Certificate of Amendment was duly adopted in accordance with
the provisions of Sections 242 and 222 of Delaware General Corporation Law.
FOURTH: That the Certificate of Amendment shall become effective on the
date this Certificate of Amendment is duly filed with the Secretary of State of
the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Amendment has been duly
executed as of the __th day of February, 2001.
PROBEX CORP.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
A-2
<PAGE> 36
EXHIBIT B
CERTIFICATE OF AMENDMENT
TO THE
CERTIFICATE OF INCORPORATION
OF
PROBEX CORP.
Probex Corp., a corporation organized and existing under and by virtue
of the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify:
FIRST: That the Board of Directors of the Corporation duly adopted
resolutions proposing and declaring advisable the following amendment to the
Certificate of Incorporation of the Corporation:
Section 11 shall be added to read in its entirety as follows:
"11. Any action required or permitted to be taken by the stockholders
of the Corporation must be effected only at a duly called annual or special
meeting of the stockholders, and may not be effected by any consent in writing
by the stockholders."
SECOND: That the Certificate of Amendment has been approved by the
Corporation pursuant to a resolution of its Board of Directors and duly adopted
by the majority of the shares outstanding entitled to vote thereon.
THIRD: The Certificate of Amendment was duly adopted in accordance with
the provisions of Sections 242 and 222 of Delaware General Corporation Law.
FOURTH: That the Certificate of Amendment shall become effective on
the date this Certificate of Amendment is duly filed with the Secretary of State
of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Amendment has been duly
executed as of the __th day of February, 2001.
PROBEX CORP.
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
B-1
<PAGE> 37
EXHIBIT C
PROBEX CORP.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
GENERAL
The role of the Audit Committee is to assist the Board of Directors in
fulfilling its oversight responsibilities by:
o Serving as an independent and objective party to monitor the
Corporations financial reporting process and internal control
system.
o Reviewing and appraising the audit efforts of the
Corporation's independent accountants.
o Providing an open avenue of communication among the
independent accountants, financial and senior management and
the Board of Directors.
COMPOSITION
The Audit Committee shall consist of three or more directors as
determined by the Board, each of whom shall be independent directors; provided,
however, that so long as the Corporation shall meet the definition of "small
business issuer" for purposes of, and files reports under, Regulation S-B
promulgated by the Securities and Exchange Commission, the Audit Committee shall
consist of two or more members, a majority of whom shall be independent
directors. Each independent director shall be free from any relationship that,
in the opinion of the Board, would interfere with the exercise of his or her
independent judgment as a member of the Committee. In determining whether any
director is independent, the Board shall take into consideration the
requirements of the principal exchange or system on which the Corporation's
common stock is traded. Directors who are affiliates of the Company, or officers
or employees of the Company or of its subsidiaries, will not be considered
independent. Notwithstanding the first sentence of this paragraph, until June
14, 2001, the Committee may consist of two or more directors meeting the
qualifications of this section.
All members of the Committee must be able to read and understand
fundamental financial statements, including a corporation's balance sheet,
income statement, and cash flow statement or become able to do so within a
reasonable period of time after his or her appointment to the Committee, and at
least one member of the Committee is to have past employment experience in
finance or accounting, requisite professional certification in accounting, or
any other comparable experience or background which results in the member's
financial sophistication, including being or having been a chief executive
officer, chief financial officer or other senior officer with financial
oversight responsibilities; provided, however, that so long as the Corporation
shall continue to be a "small business issuer," the requirements of the
foregoing paragraph shall not be mandatory upon the Corporation.
C-1
<PAGE> 38
The members of the Committee are to be elected by the Board and shall
serve until their successors are duly elected and qualified. Unless a Chair is
elected by the full Board, the members of the Committee may designate a Chair by
majority vote of the full Committee membership.
MEETINGS
The Committee shall hold regular meetings as may be necessary and
special meetings as may be called by the Chairman of the Committee. As part of
its job to foster open communication, the Committee should meet at least
annually with management and the independent accountants in separate executive
sessions to discuss any matters that the Committee or either of these groups
believe should be discussed privately. In addition, the Committee or its Chair
should meet with the independent accountants and management quarterly to review
the Corporation's financial statements.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
The Corporation's independent accountants are to be ultimately
accountable to the Board and the Committee, and the Committee and the Board
shall have the ultimate authority and responsibility to select, evaluate and,
where appropriate, replace the independent accountants (or nominate the outside
auditor to be proposed for shareholder approval in any proxy statement).
RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
Documents/Reports Review
1. Review and assess the adequacy of this Charter at least annually, and
otherwise as conditions dictate.
2. Review the Corporation's annual financial statements and any reports or
other financial information submitted to the Securities and Exchange
Commission or the public, including any certification, report, opinion,
or review rendered by the independent accountants.
3. Review with financial management and the independent accountants the
Corporation's filings with the Securities and Exchange Commission on
Form10-Q or Form 10-QSB, as applicable, prior to their filing or prior
to the release of earnings. The Chair of the Committee may represent
the entire Committee for purposes of this review.
Independent Accountants
Recommend to the Board the selection of the independent accountants, considering
independence and effectiveness, and approve the fees and other compensation to
be paid to the independent accountants.
4. On an annual basis, obtain from the independent accountants, and review
and discuss with the independent accountants, a formal written
statement delineating all relationships the independent accountants
have with the Corporation, consistent with Independence Standards Board
Standard 1, and actively engage in a dialogue with the independent
accountants with respect to any disclosed relationships or services
that may impact the objectivity and independence of the independent
accountants.
5. Recommend to the Board any appropriate action to oversee the
independence of the independent accountants.
6. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
7. Periodically consult with the independent accountants out of the
presence of management about internal controls and the fullness and
accuracy of the Corporation's financial statements.
C-2
<PAGE> 39
Financial Reporting Processes
8. In consultation with the independent accountants, review the integrity
of the organization's financial reporting processes, both internal and
external.
9. Consider the independent accountant's judgments about the quality and
appropriateness of the Corporation's accounting principles as applied
in its financial reporting.
10. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the independent accountants or management.
11. Establish regular and separate reporting to the Committee by each of
management and the independent accountants regarding any significant
judgments made in management's preparation of the financial statements
and the view of each as to appropriateness of such judgments.
12. Following completion of the annual audit, review separately with each
of management and the independent accountants any significant
difficulties encountered during the course of the audit, including any
restrictions on the scope of work or access to required information.
13. Review any significant disagreement among management and the
independent accountants in connection with the preparation of the
financial statements.
14. Review with the independent accountants and management the extent to
which changes or improvements in financial or accounting practices, as
approved by the Committee, have been implemented.
Ethical and Legal Compliance
15. Establish, review and update periodically a Code of Conduct and ensure
that management has established a system to enforce this Code.
16. Review, with the Corporation's counsel, any legal matter that could
have a significant impact on the Corporation's financial statements.
17. Perform any other activities consistent with this Charter, the
Corporation's bylaws and governing law, as the Committee or the Board
deems necessary or appropriate.
Adopted by Resolution of the Board of Directors
May 25, 2000
C-3
<PAGE> 40
[PROBEX LOGO]
PROBEX CORP.
<PAGE> 41
1999 Omnibus Stock and Incentive Plan, as amended.
Filed supplementally as an appendix to the Proxy Statement;
Not included as part of the Proxy Statement
<PAGE> 42
PROBEX CORP.
FIRST AMENDMENT TO 1999 OMNIBUS STOCK AND INCENTIVE PLAN,
AS AMENDED AND RESTATED
THIS FIRST AMENDMENT TO THE 1999 OMNIBUS STOCK AND INCENTIVE PLAN, AS
AMENDED AND RESTATED (the "Amendment"), is executed and delivered this 5th day
of January, 2001 by Probex Corp., a Delaware corporation (the "Company").
R E C I T A L S:
A. The Company previously has adopted the 1999 Omnibus Stock and
Incentive Plan, as amended and restated (the "Plan") which has been approved and
adopted by the shareholders of the Company.
B. The Board of Directors of the Company has adopted this Amendment to
the Plan for the purpose of providing the Company with additional Available
Shares for issuance thereunder.
C. The Board of Directors of the Company has recommended that this
Amendment be submitted to the shareholders of the Company for their approval and
adoption.
A G R E E M E N T S:
NOW, THEREFORE, the Plan is hereby amended as follows:
1. Increase in the number of Available Shares. The first sentence in
Section 3 of the Plan is hereby amended to read in its entirety as follows:
"As of the Effective Date, 2,750,000 Shares shall automatically, and
without further action, become Available Shares, as of March 30, 2000, an
additional 3,000,000 Shares shall automatically, without further action, become
Available Shares, and as of January 5, 2001, an additional 3,000,000 Shares
shall automatically, without further action, become Available Shares."
2. Effective Date. The Amendment shall be effective as of the date
hereof, the date of its adoption by the Board of Directors of the Company
("Effective Date"), although it is subject to shareholder approval as provided
in Section 3.
3. Shareholder Approval. All Awards granted under the Plan as amended
by this Amendment are subject to, and may not be exercised before, and will be
rescinded and become void in the absence of, the approval of this Amendment by a
majority of the shareholders voting thereon at the 2001 Annual Meeting of
Shareholders scheduled to be held February 28, 2001.
4. Defined Terms: Effect Upon Plan. All initially capitalized terms
used without definition herein shall have the meanings set forth therefor in the
Plan. Except as expressly amended hereby, the Plan shall remain in full force
and effect.
<PAGE> 43
IN WITNESS WHEREOF, this First Amendment to 1999 Omnibus Stock and
Incentive Plan, as amended and restated, is executed and delivered as of the
date first above written.
Probex Corp.
By: /s/ CHARLES M. RAMPACEK
------------------------------------------
Name: Charles M. Rampacek
----------------------------------------
Title: President and Chief Executive Officer
---------------------------------------
-2-
<PAGE> 44
1999 OMNIBUS STOCK AND INCENTIVE PLAN
FOR
PROBEX CORP.
<PAGE> 45
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Purpose..............................................................1
2. Definitions..........................................................1
(a) "Affiliate".................................................1
(b) "Award".....................................................1
(c) "Available Shares"..........................................1
(d) "Board".....................................................1
(e) "Cause".....................................................1
(f) "Change in Control".........................................2
(g) "Change in Control Price"...................................3
(h) "Code"......................................................3
(i) "Committee".................................................3
(j) "Common Stock"..............................................3
(k) "Company"...................................................3
(l) "Consultant"................................................3
(m) "Date of Grant".............................................3
(n) "Director"..................................................3
(o) "Disability"................................................3
(p) "Effective Date"............................................3
(q) "Eligible Person"...........................................4
(r) "Fair Market Value".........................................4
(s) "Holder"....................................................4
(t) "Immediate Family"..........................................4
(u) "Incentive Stock Option"....................................4
(v) "Non-qualified Stock Option"................................4
(w) "Option"....................................................4
(x) "Optionee"..................................................4
(y) "Option Price"..............................................4
(z) "Option Proceeds"...........................................5
(aa) "Outside Director"..........................................5
(bb) "Parent"....................................................5
(cc) "Performance Award".........................................5
(dd) "Performance Period"........................................5
(ee) "Plan"......................................................5
(ff) "Plan Year".................................................5
(gg) "Potential Change In Control"...............................5
(hh) "Reacquired Shares".........................................5
(ii) "Restriction(s)"............................................5
(jj) "Restricted Period".........................................6
(kk) "Restricted Shares".........................................6
(ll) "Restricted Share Award"....................................6
(mm) "Restricted Share Distributions"............................6
(nn) "Share(s)"..................................................6
</TABLE>
<PAGE> 46
<TABLE>
<S> <C>
(oo) "Spread"....................................................6
(pp) "Subsidiary"................................................6
(qq) "1933 Act"..................................................6
(rr) "1934 Act"..................................................6
3. Award of Available Shares............................................6
4. Conditions for Grant of Awards.......................................7
5. Grant of Options.....................................................8
6. Option Price.........................................................9
7. Exercise of Options..................................................9
8. Exercisability of Options............................................9
9. Termination of Option Period........................................10
10. Incentive Stock Options for 10% Shareholder.........................10
11. Non-qualified Stock Options.........................................10
12. Restricted Share Awards.............................................11
13. Performance Awards..................................................11
14. Acceleration........................................................12
15. Adjustment of Available Shares......................................13
16. Transferability of Awards...........................................14
17. Issuance of Shares..................................................14
18. Administration of the Plan..........................................15
19. Tax Withholding.....................................................16
20. Interpretation......................................................17
21. Amendment and Discontinuation of the Plan...........................17
22. Section 83(b) Election..............................................18
23. Effective Date and Termination Date.................................18
</TABLE>
<PAGE> 47
1999 OMNIBUS STOCK AND INCENTIVE PLAN
FOR
PROBEX CORP.
1. PURPOSE. The purpose of this Plan is to advance the interests of Probex
Corp. and increase shareholder value by providing additional incentives to
attract, retain and motivate those qualified and competent employees, Directors
and Consultants upon whose efforts and judgment its success is largely
dependent.
2. DEFINITIONS. As used herein, the following terms shall have the meaning
indicated:
(a) "AFFILIATE" means any entity other than the Parent that is
designated by the Board as a participating employer under the Plan, provided
that the Parent directly or indirectly owns at least 20% of the combined voting
power of all classes of stock of such entity or at least 20% of the ownership
interests in such entity.
(b) "AWARD" shall mean either an Option, a Restricted Share Award, or a
Performance Award, except that where it shall be appropriate to identify the
specific type of Award, reference shall be made to the specific type of Award.
(c) "AVAILABLE SHARES" shall mean, at each time of reference, the total
number of Shares described in SECTION 3 with respect to which the Committee may
grant an Award, all of which Available Shares shall be held in the Parent's
treasury or shall be made available from authorized and unissued Shares.
(d) "BOARD" shall mean the Board of Directors of the Parent.
(e) "CAUSE" shall mean either (a) an Optionee's material failure or
refusal to perform his duties if Optionee has failed to cure such failure or
refusal to perform within thirty (30) days after the Company notifies Optionee
in writing of such failure or refusal to perform, or (b) that the Optionee is
involuntarily terminated from employment based upon his commission of any of the
following:
(i) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with the
Company;
(ii) intentional wrongful damage to property of the Company or
any other willful gross misconduct that causes material economic harm
to the Company or that brings substantial discredit to the Company's
reputation;
(iii) intentional wrongful disclosure of trade secrets or
confidential information of the Company;
(iv) willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final cease and desist
order, including, but not limited
<PAGE> 48
to, a final, nonappealable conviction of an Optionee for commission of
a felony involving moral turpitude; or
(v) intentional breach of fiduciary duty owed to the Company
involving personal profit.
For the purpose of this Agreement, no act, or failure to act, on the
part of the Optionee shall be deemed "intentional" unless the Board of Directors
finds, in its sole discretion, that the act or failure to act was done, or
omitted to be done, by the Optionee in other than good faith and without
reasonable belief that his action or omission was in the best interest of the
Company. Any determination that an Optionee has been terminated For Cause shall
be made by the Board of Directors in its sole and absolute discretion.
(f) "CHANGE IN CONTROL" shall mean the first to occur of (i) a merger,
consolidation, statutory share exchange or sale, lease, exchange or other
transfer (in one transaction or a series of related transactions) of all or
substantially all of the assets of the Company that requires the consent or vote
of the holders of the Parent's Common Stock, other than a consolidation, merger
or share exchange of the Parent in which the holders of the Parent's Common
Stock immediately prior to such transaction have the same proportionate
ownership of common stock of the surviving corporation immediately after such
transaction; (ii) the shareholders of the Parent approve any plan or proposal
for the liquidation or dissolution of the Company; (iii) the cessation of
control (by virtue of their not constituting a majority of Directors) of the
Board of Directors of the Parent by the individuals (the "Continuing Directors")
who (x) on the Effective Date were Directors or (y) become Directors after the
date of this Agreement and whose election or nomination for election by the
Parent's shareholders was approved by a vote of at least two-thirds of the
Directors then in office who were Directors at the Effective Date or whose
election or nomination for election was previously so approved; (iv) the
acquisition of beneficial ownership (within the meaning of Rule 13d-3 under the
Exchange Act) of an aggregate of 21% or more of the voting power of the Parent's
outstanding voting securities by any person or group (as such term is used in
Rule 13d-5 under the Exchange Act) who beneficially owned less than 15% of the
voting power of the Parent's outstanding voting securities on the Effective
Date, or the acquisition of beneficial ownership of an additional 6% of the
voting power of the Parent's outstanding voting securities by any person or
group who beneficially owned at least 15% of the voting power of the Parent's
outstanding voting securities on the Effective Date; provided, however, that
notwithstanding the foregoing, an acquisition shall not be described hereunder
if the acquiror is (x) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company and acting in such capacity, (y) a
wholly-owned subsidiary of the Parent or a corporation owned, directly or
indirectly, by the shareholders of the Parent in the same proportions as their
ownership of voting securities of the Parent or (z) any other person whose
acquisition of shares of voting securities is approved in advance by a majority
of the Continuing Directors; or (v) in a Title 11 bankruptcy proceeding, the
appointment of a trustee or the conversion of a case involving the Company to a
case under Chapter 7.
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<PAGE> 49
(g) "CHANGE IN CONTROL PRICE" shall mean the highest price per share
paid in any transaction reported on the NYSE or such other exchange or market as
is the principal trading market for the Common Stock, or paid or offered in any
bona fide transaction related to a Potential or actual Change in Control at any
time during the 60 day period immediately preceding such occurrence, in each
case as determined by the Committee.
(h) "CODE" shall mean the Internal Revenue Code of 1986, as now or
hereafter amended.
(i) "COMMITTEE" shall mean the a Committee of the Board, not less than
2 in number, appointed by the Board, unless, and to the extent, the Board is
required to, or expressly elects to, act as the Committee.
(j) "COMMON STOCK" shall mean the common stock, no par value, of the
Parent.
(k) "COMPANY" shall mean the Parent, its Subsidiaries and Affiliates,
except when it shall be appropriate to refer only to Probex Corp., then it shall
be referred to as "Parent".
(l) "CONSULTANT" shall mean any person or entity who or which is
engaged by the Company to render services but is not carried on the books of the
Company as an employee, and any director of the Employer whether compensated for
such services or not; provided that, in the event the Company registers any
security under Section 12 of the Securities Exchange Act of 1934, as amended,
the term Consultant shall thereafter not include Directors who are not
compensated for their services and are paid only a director's fee by the
Employer.
(m) "DATE OF GRANT" shall mean the date on which the Committee takes
formal action to grant an Award, provided that it is followed, as soon as
reasonably possible, by written notice to the Eligible Person receiving the
Award.
(n) "DIRECTOR" shall mean a member of the Board.
(o) "DISABILITY" shall mean a Holder's present incapacity resulting
from an injury or illness (either mental or physical) which, in the reasonable
opinion of the Committee based on such medical evidence as it deems necessary,
will result in death or can be expected to continue for a period of at least
twelve (12) months and will prevent the Holder from performing the normal
services required of the Holder by the Company, provided, however, that such
disability did not result, in whole or in part: (i) from chronic alcoholism;
(ii) from addiction to narcotics; (ii) from a felonious undertaking; or (iv)
from an intentional self-inflicted wound.
(p) "EFFECTIVE DATE" shall mean July 22, 1999.
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<PAGE> 50
(q) "ELIGIBLE PERSON" shall mean employees of the Company who have
completed six months (or more) of employment or who are expressly designated as
eligible by the Committee, Consultants, and Directors, in each case limited to
those persons so described who the Committee determines have the capacity to
substantially contribute to the success of the Company.
(r) "FAIR MARKET VALUE" shall mean, as of a particular date, the
closing sale price of Shares, which shall be (i) if the Shares are listed or
admitted for trading on any United States national securities exchange, the last
reported sale price of the Shares on such exchange as reported in any newspaper
of general circulation, or (ii) if the Shares are quoted on NASDAQ, the closing
high bid quotation for such day on such system. If neither clause (i) nor clause
(ii) is applicable, the fair market value shall be determined by the Committee
by any fair and reasonable means.
(s) "HOLDER" shall mean, at each time of reference, each person
(including, but not limited to an Optionee) with respect to whom an Award is in
effect, except that where it should be appropriate to distinguish between a
Holder with respect to an Option and a Holder with respect to a different type
of Award, reference shall be made to Optionee; and provided further that to the
extent provided under, and subject to the conditions of, the Award, it shall
refer to the person who succeeds to the rights of the Holder upon the death of
the Holder.
(t) "IMMEDIATE FAMILY" means any child, stepchild, grandchild, parent
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter- in-law, brother-in-law, or sister-in-law, and shall
include adoptive relationships.
(u) "INCENTIVE STOCK OPTION" shall mean an Option that is an incentive
stock option as defined in Section 422 of the Code.
(v) "NON-QUALIFIED STOCK OPTION" shall mean an Option that is not an
Incentive Stock Option.
(w) "OPTION" (when capitalized) shall mean any Incentive Stock Option
and Non-qualified Stock Option granted under this Plan, except that, where it
shall be appropriate to identify a specific type of Option, reference shall be
made to the specific type of Option; provided, further, without limitation, that
a single Option may include both Incentive Stock Option and Non-qualified Stock
Option provisions.
(x) "OPTIONEE" shall mean a person to whom an Option is granted (often
referred to as a Holder).
(y) "OPTION PRICE" shall mean the price per Share which is required to
be paid by the Optionee in order to exercise his right to acquire the Share
under the terms of the Option.
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(z) "OPTION PROCEEDS" shall mean the cash proceeds received by the
Company from the exercise of Options reduced by any such amounts previously used
to purchase Reacquired Shares.
(aa) "OUTSIDE DIRECTOR" means a member of the Board who is not an
officer or employee of the Company.
(bb) "PARENT" means Probex Corp., a Colorado corporation.
(cc) "PERFORMANCE AWARD" shall mean the award which is granted
contingent upon the attainment of the performance objectives during the
Performance Period, all as described more fully in SECTION 13.
(dd) "PERFORMANCE PERIOD" shall mean the period described in SECTION 13
with respect to which the performance objectives relate.
(ee) "PLAN" shall mean this 1999 Omnibus Stock and Incentive Plan For
Probex Corp.
(ff) "PLAN YEAR" shall mean the Parent's fiscal year.
(gg) "POTENTIAL CHANGE IN CONTROL" shall mean the first to occur of (i)
approval by shareholders of an agreement by the Parent, the consummation of
which would result in a Change in Control; or (ii) the acquisition of beneficial
ownership, directly or indirectly, by any entity, person or group (other than
the Company or any Company employee benefit plan) of securities of the Company
representing 5% or more of the combined voting power of the Parent's outstanding
securities and the adoption by the Committee of a resolution to the effect that
a Potential Change in Control has occurred for purposes of this Plan.
(hh) "REACQUIRED SHARES" shall mean Shares, if any, which are (i)
delivered to the Company in full or partial payment of the Option Price of an
Option, (ii) reacquired by the Company on the open market with the Option
Proceeds, or (iii) designated by the Board as being deemed to have been
reacquired as Reacquired Shares from authorized but unissued or treasury Shares
as of a specific future date and at the deemed reacquisition price on the deemed
reacquisition date; provided, in each case described in (ii) or (iii), that such
reacquisition is specifically approved and directed in writing by the Board, and
that, in the case of (iii) the deemed reacquisition price shall be the Fair
Market Value of the Shares on the deemed reacquisition date; and provided,
finally, that the aggregate of such Reacquired Shares may not exceed
seventy-five percent (75%) of the aggregate Shares (excluding Reacquired Shares)
authorized in SECTION 3, as SECTION 3 is amended at the time of reference.
(ii) "RESTRICTION(S)" shall mean the restrictions applicable to
Available Shares subject to an Award which prohibit the "transfer" of such
Available Shares, and which constitute "a substantial risk of forfeiture" of
such Available Shares, as those terms are defined under Section 83(a)(1) of the
Code.
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<PAGE> 52
(jj) "RESTRICTED PERIOD" shall mean the period during which Restricted
Shares shall be subject to Restrictions.
(kk) "RESTRICTED SHARES" shall mean the Available Shares granted to an
Eligible Person which are subject to Restrictions.
(ll) "RESTRICTED SHARE AWARD" shall mean the award of Restricted
Shares.
(mm) "RESTRICTED SHARE DISTRIBUTIONS" shall mean any amounts, whether
Shares, cash or other property (other than regular cash dividends) paid or
distributed by the Parent with respect to Restricted Shares during a Restricted
Period.
(nn) "SHARE(S)" shall mean a share or shares of Common Stock.
(oo) "SPREAD" shall mean the difference between the Option Price of the
Share(s), and the Fair Market Value of such Share(s), on the date of reference.
(pp) "SUBSIDIARY" shall mean any corporation (other than the Parent) in
any unbroken chain of corporations beginning with the Parent if, at the time of
the granting of the Award, each of the corporations, other than the last
corporation in the unbroken chain, owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such unbroken chain.
(qq) "1933 ACT" shall mean the Securities Act of 1933, as amended.
(rr) "1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
3. AWARD OF AVAILABLE SHARES.
(a) As of the Effective Date, 2,750,000 Shares shall automatically, and
without further action, become Available Shares, and as of March 30, 2000, on
additional 3,000,000 Shares shall automatically, and without further action,
become Available Shares. Thereafter, the number of Available Shares shall be
increased automatically by the number of Reacquired Shares. To the extent any
Award shall terminate, expire or be canceled, or the Award shall be paid in
cash, the Available Shares subject to such Award (or with respect to which the
Award is measured), shall remain Available Shares.
(b) Notwithstanding the forgoing, Incentive Stock Options may not be
issued in whole or in part with respect to Reacquired Shares; provided, further,
that where an Award other than an Incentive Stock Option is granted at a time
when Reacquired Shares are available for grant under the Plan (i.e. are not
subject to a previous grant), for purposes of this SECTION 3(b) the Award shall
be deemed granted with respect to Reacquired Shares, and to the extent an Award
granted with respect to Reacquired Shares shall terminate, expire or be
canceled, or the Award shall be paid in cash, the Available Shares subject to
such Award (or with respect to which the Award is measured), shall remain
Available Shares and continue to be considered Reacquired Shares for purposes of
this SECTION 3(b). Further, notwithstanding
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<PAGE> 53
any provision hereof to the contrary, no person whose compensation is subject to
the limitations on deductibility under Section 162(m) of the Code shall be
eligible to receive Awards during any Plan Year with respect to more than
1,100,000 shares. The Administrator shall maintain records sufficient to carry
out the purposes of this SECTION 3(b).
4. CONDITIONS FOR GRANT OF AWARDS.
(a) Without limiting the generality of the provisions hereof which deal
specifically with each form of Award, Awards shall only be granted to such one
or more Eligible Persons as shall be selected by the Committee; provided
further, and without limitation, that nothing herein shall be deemed to prohibit
the Committee from granting an Award contingent on the Eligible Person receiving
the Award surrendering an existing Award.
(b) In granting Awards, the Committee shall take into consideration the
contribution the Eligible Person has made or may be reasonably expected to make
to the success of the Company and such other factors as the Committee shall
determine. The Committee shall also have the authority to consult with and
receive recommendations from officers and other personnel of the Company with
regard to these matters. The Committee may from time to time in granting Awards
under the Plan prescribe such other terms and conditions concerning such Awards
as it deems appropriate, including, without limitation, relating an Award to
achievement of specific goals established by the Committee or to the continued
employment of the Eligible Person for a specified period of time, provided that
such terms and conditions are not inconsistent with the provisions of this Plan.
(c) Incentive Stock Options may be granted only to Employees, and all
other Awards may be granted to either Employees, Consultants or Outside
Directors.
(d) The Plan shall not confer upon any Holder any right with respect to
continuation of employment by, or consulting relationship with, the Company, nor
shall it interfere in any way with his right or the Company's right to terminate
his employment, consulting relationship or Directorship at any time, nor shall
the reference to "Company" confer an employment relationship on a Consultant.
(e) The Awards granted to Eligible Persons shall be in addition to
regular salaries, pension, life insurance or other benefits related to their
service to the Company. Neither the Plan nor any Award granted under the Plan
shall confer upon any person any right to continuance of employment by the
Company; and provided, further, that nothing herein shall be deemed to limit the
ability of the Company to enter into any other compensation arrangements with
any Eligible Person.
(f) The Committee shall determine in each case whether periods of
military or government service shall constitute a continuation of employment for
the purposes of this Plan or any Award.
(g) Notwithstanding any provision hereof to the contrary, each Award
which in whole or in part involves the issuance of Available Shares may provide
for the issuance of
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<PAGE> 54
such Available Shares for consideration consisting of such consideration as the
Committee may determine, including (without limitation) as compensation for past
services rendered.
5. GRANT OF OPTIONS.
(a) The Committee may grant to Optionees from time to time Options
alone, in addition to, or in tandem with, other Awards granted under the Plan
and/or cash Awards made outside of the Plan, to purchase some or all of the
Available Shares. An Option granted hereunder shall be either an Incentive Stock
Option or a Non-qualified Stock Option, shall be evidenced by a written
agreement that shall contain such provisions as shall be selected by the
Committee, which may incorporate the terms of this Plan by reference, and which
clearly shall state whether it is (in whole or in part) an Incentive Stock
Option or a Non-qualified Stock Option.
(b) The aggregate Fair Market Value (determined as of the Date of
Grant) of the Available Shares with respect to which any Incentive Stock Option
is exercisable for the first time by an Optionee during any calendar year under
the Plan and all such plans of the Company (as defined in Section 425 of the
Code) shall not exceed $100,000.
(c) A Non-qualified Stock Option shall not be transferable by the
Holder without the prior written consent of the Committee other than (i)
transfers by the Holder to a member of his or her Immediate Family or a trust
for the benefit of the optionee or a member of his or her Immediate Family, or
(ii) transfers by will or by the laws of descent and distribution. An Incentive
Stock Option shall not be transferable by the Holder otherwise than by will or
by the laws of descent and distribution. All Options shall be exercisable,
during the Holder's lifetime, only by the Holder.
(d) In the case of a Non-qualified Stock Option or a Holder who elects
to make a disqualifying disposition (as defined in Section 422(a)(1) of the
Code) of Shares acquired pursuant to the exercise of an Incentive Stock Option,
the Committee may provide that, at such time as the Company files an income tax
return on which it shows taxable income, or upon the later exercise of the
Non-qualified Stock Option or disqualifying disposition of an Incentive Stock
Option, the Optionee will be paid a cash bonus in an amount equal to some or all
of the federal and state, if any, income tax incurred (or deemed incurred) by
the Holder (i) as a result of such exercise or disqualifying disposition, and
(ii) as a result of the payment of such cash bonus; and provided, further, that
the amount of such cash bonus may be expressed in the case of an Non-Qualified
Stock Option as a percentage of the Spread on the date of exercise, and may be
expressed in the case of a disqualifying disposition as a percentage of the
ordinary income reportable as a result of such disqualifying disposition;
provided, further, that in each case the Committee shall determine the
percentage in its sole discretion and separately with respect to each Optionee
and each Option.
(e) If the Option agreement so provides at Date of Grant or (except in
the case of an Incentive Stock Option) is amended after Date of Grant and prior
to exercise to so provide (with the Holder's consent), the Committee may require
that all or part of the Shares to be issued with respect to the Spread take the
form of Restricted Stock, which shall be
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<PAGE> 55
valued on the date of exercise on the basis of the Fair Market Value of such
Restricted Stock determined without regard to the transferability and forfeiture
restrictions involved.
(f) Without limitation, the Committee may condition the exercise of any
Option upon the attainment of specified performance goals or other factors as
the Committee may determine in its sole discretion. Unless specifically provided
to the contrary in the Option agreement, any such performance conditioned Option
shall vest twelve (12) months prior to its expiration if the conditions to
exercise have not theretofore been satisfied.
6. OPTION PRICE.
(a) The Option Price shall be any price determined by the Committee;
provided, however, that in the case of an Incentive Stock Option, the Option
Price shall not be less than one hundred percent (100%) of the Fair Market Value
per Share (as reasonably determined in the sole discretion of the Committee) on
the Date of Grant.
(b) Unless further limited by the Committee in any Option, the Option
Price shall be paid solely in cash, by certified or cashier's check, by wire
transfer, by money order, with Shares (but only to the extent expressly
permitted under the terms of the Option), or by a combination of the above;
provided, however, that the Committee, in its discretion, may accept a personal
check in full or partial payment. Without limitation, in the Committee's sole
discretion (but only to the extent expressly permitted under the terms of the
Option), the Option Price of an Option can be paid in full or in part by the
surrender of Vested Shares subject to the Option or to any other Award
hereunder. If the Option Price is permitted to be, and is, paid in whole or in
part with Shares, the value of the Share(s) surrendered shall be their Fair
Market Value on the date they are delivered to the Company.
7. EXERCISE OF OPTIONS. An Option shall be deemed exercised when (i) the
Committee has received written notice of such exercise in accordance with the
terms of the Option, and (ii) full payment of the aggregate Option Price of the
Available Shares as to which the Option is exercised has been made. Separate
stock certificates shall be issued by the Parent for any Available Shares
acquired as a result of exercising an Incentive Stock Option and a Non-
qualified Stock Option.
8. EXERCISABILITY OF OPTIONS.
(a) Each Option shall become exercisable in whole or in part and
cumulatively, and shall expire, according to the terms of the Option to the
extent not inconsistent with the express provisions of this Plan; provided,
further and without limitation, that each Option may have a different maximum
period of exercisability prior to its expiration date.
(b) The Committee, in its sole discretion, may accelerate the date on
which all or any portion of an otherwise unexercisable Option may be exercised
or a restriction will lapse.
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<PAGE> 56
9. TERMINATION OF OPTION PERIOD.
(a) As provided in SECTION 5, and without limitation, each Option shall
be evidenced by an agreement that may contain any provisions selected by the
Committee; provided, however, that in each case, unless terminated earlier under
the express terms of the Option, the unexercised portion of an Option shall
automatically and without notice terminate and become null and void on the
earlier of (i) the date that Optionee ceases to be employed by the Company, if
such cessation is for Cause, (ii) the anniversary of the date of the Optionee's
cessation of employment by reason of Optionee's death, (iii) the three month
anniversary of the date of Optionee's cessation of employment by reason of
Optionee's Disability, (iv) the tenth (10th) anniversary of the Date of Grant;
and (v) solely in the case of an Incentive Stock Option, three months after the
date that Optionee ceases to be employed by the Company regardless of the reason
therefor, other than a cessation by reason of death, in which case the date of
termination may be extended under the terms of the Incentive Stock Option
agreement.
(b) Notwithstanding any provision of SECTION 15(a) to the contrary, if
provided in an Option, the Committee may, by giving written notice
("CANCELLATION NOTICE"), cancel, effective upon the date of the consummation of
any of the transactions described in SUBSECTION 15(a), all or any portion of
such Option which remains unexercised on such date. Such Cancellation Notice
shall be given a reasonable period of time (but not less than 15 days) prior to
the proposed date of such cancellation, and may be given either before or after
shareholder approval of such corporate transaction.
10. INCENTIVE STOCK OPTIONS FOR 10% SHAREHOLDER. Notwithstanding any other
provisions of the Plan to the contrary, an Incentive Stock Option shall not be
granted to any person owning directly (or indirectly through attribution under
Section 425(d) of the Code) at the Date of Grant, stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company (as
defined in Section 425 of the Code) at the Date of Grant, unless the Option
Price of such Incentive Stock Option is at least 110% of the Fair Market Value
on the Date of Grant of the Available Shares subject to such Incentive Stock
Option, and the period during which the Incentive Stock Option may be exercised
does not exceed five (5) years from the Date of Grant.
11. NON-QUALIFIED STOCK OPTIONS. Non-qualified Stock Options may be granted
hereunder and shall contain such terms and provisions as shall be determined by
the Committee, except that each such Non-qualified Stock Option (i) must be
clearly designated as a Non-qualified Stock Option; (ii) may be granted for
Available Shares which become exercisable in excess of the limits contained in
SUBSECTION 5(b); and (iii) shall not be subject to SECTION 10 hereof. If both
Incentive Stock Options and Non-qualified Stock Options are granted to an
Optionee, the right to exercise, to the full extent thereof, Options of either
type shall not be contingent in whole or in part upon the exercise of, or
failure to exercise, Options of the other type.
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12. RESTRICTED SHARE AWARDS.
(a) Each Restricted Share Award shall be evidenced by an agreement that
may contain any provisions selected by the Committee, and not expressly in
conflict with a provision of the Plan. Except as otherwise provided in the
express terms and conditions of each Restricted Share Award, the Eligible Person
receiving the Restricted Share Award shall have all of the rights of a
shareholder with respect to such Restricted Shares including, but not limited
to, voting rights and the right to receive any dividends paid, subject only to
the retention provisions of the Restricted Share Distributions.
(b) The Restrictions on Restricted Shares shall lapse in whole, or in
installments, over whatever Restricted Period shall be selected by the
Committee; provided, however, that a complete lapse of Restrictions always shall
occur on or before the 9th anniversary of the Date of Grant.
(c) The Committee may accelerate the date on which Restrictions lapse
with respect to any Restricted Shares.
(d) During the Restricted Period, the certificates representing the
Restricted Shares, and any Restricted Share Distributions, shall be registered
in the Holder's name and bear a restrictive legend disclosing the Restrictions,
the existence of the Plan, and the existence of the applicable agreement
granting such Restricted Share Award. Such certificates shall be deposited by
the Holder with the Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit the transfer to the
Company of all or any portion of the Restricted Shares, and any assets
constituting Restricted Share Distributions, which shall be forfeited in
accordance with the applicable agreement granting such Restricted Share Award.
Restricted Shares shall constitute issued and outstanding Common Stock for all
corporate purposes and the Holder shall have all rights, powers and privileges
of a Holder of unrestricted Shares except that the Holder will not be entitled
to delivery of the stock certificates until all Restrictions shall have
terminated, and the Company will retain custody of all related Restricted Share
Distributions (which will be subject to the same Restrictions, terms, and
conditions as the related Restricted Shares) until the conclusion of the
Restricted Period with respect to the related Restricted Shares; and provided,
further, that any Restricted Share Distributions shall not bear interest or be
segregated into a separate account but shall remain a general asset of the
Company, subject to the claims of the Company's creditors, until the conclusion
of the applicable Restricted Period; and provided, finally, that any material
breach of any terms of the agreement granting the Restricted Share Award, as
reasonably determined by the Committee will cause a forfeiture of both
Restricted Shares and Restricted Share Distributions.
13. PERFORMANCE AWARDS.
(a) The Committee may grant Performance Awards, which may in the sole
discretion of the Committee represent a Share or be related to the increase in
value of a Share, or be contingent on the Company's achievement of the specified
performance measures during the Performance Period, including, without
limitation, performance shares, convertible
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preferred stock, convertible debentures, exchangeable securities and Restricted
Share Awards or Options valued by reference to earnings per Share or Subsidiary
performance, may be granted either alone, in addition to, or in tandem with,
other Awards and cash awards made outside of the Plan. The Committee shall
establish the performance measures for each Performance Period, and such
performance measures, and the duration of any Performance Period, may differ
with respect to each Eligible Person who receives a Performance Award, or with
respect to separate Performance Awards issued to the same Eligible Person. The
performance measures, the medium of payment, the Performance Period(s) and any
other conditions to the Company's obligation to pay such Performance Award in
full or in part, shall be set forth in the written agreement evidencing each
Performance Award.
(b) Unless otherwise expressly provided in the agreement evidencing the
Performance Award, the Holder of the Performance Award must remain employed by
the Company until the end of the Performance Period in order to be entitled to
any payment under such Performance Award; provided, however, that the Committee
expressly may provide in the agreement granting such Performance Award that such
Holder may become entitled to a specified portion of the amount earned under
such Performance Award based on one or more specified period(s) of time between
the Date of Grant of such Performance Award and such Holder's termination of
employment by the Company prior to the end of the Performance Period.
14. ACCELERATION.
(a) In the event the Holder's termination of employment with the
Company is by reason of the Holder's death, all Awards granted to the Holder
shall become fully exercisable, nonforfeitable, or the Restricted Period shall
terminate as the case may be (hereafter, in this SECTION 14, such Award shall be
"accelerated").
(b) In the event of either a Change in Control, or a Potential Change
in Control, unless otherwise expressly provided by the Committee prior to such
event, (i) all Awards, shall become fully exercisable, nonforfeitable, or the
Restricted Period shall terminate, as the case may be (hereafter, in this
SECTION 14, such Award shall be "accelerated") and (ii) the value of all
outstanding Non-qualified Stock Options, Restricted Stock, and Outside Director
Options shall be cashed out on the basis of the Change in Control Price,
effective as the date of the Change in Control, or on such other date as the
Committee may determine prior to the Change in Control.
(c) Notwithstanding any provisions hereof to the contrary, if an Award
is accelerated under SUBSECTION 14(a) or (b), the portion of the Award which is
accelerated is limited to that portion which can be accelerated without causing
the Holder to have an "excess parachute payment" as determined under Section
280G of the Code, determined by taking into account all of the Holder's
"parachute payments" determined under Section 280G of the Code, all as
reasonably determined by the Committee.
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15. ADJUSTMENT OF AVAILABLE SHARES.
(a) If at any time while the Plan is in effect or Awards with respect
to Available Shares are outstanding, there shall be any increase or decrease in
the number of issued and outstanding Shares through the declaration of a stock
dividend or through any recapitalization resulting in a stock split-up,
combination or exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum
number of Available Shares which may be granted under SECTION 3, and in
the Available Shares which are then subject to each Award, so that the
same proportion of the Parent's issued and outstanding Common Stock
shall continue to be subject to grant under SECTION 3, and to such
Award, and
(ii) in addition, and without limitation, in the case of
each Award (including, without limitation, Options) which requires the
payment of consideration by the Holder in order to acquire Shares, an
appropriate adjustment shall be made in the consideration (including,
without limitation the Option Price) required to be paid to acquire the
each Share, so that (i) the aggregate consideration to acquire all of
the Shares subject to the Award remains the same and, (ii) so far as
possible (and without disqualifying an Incentive Stock Option) as
reasonably determined by the Committee in its sole discretion, the
relative cost of acquiring each Share subject to such Award remains the
same.
(b) The Committee may change the terms of Options outstanding under
this Plan, with respect to the Option Price or the number of Available Shares
subject to the Options, or both, when, in the Committee's judgment, such
adjustments become appropriate by reason of a corporate transaction (as defined
in Treasury Regulation ss. 1.425-1(a)(1)(ii)); provided, however, that if by
reason of such corporate transaction an Incentive Stock Option is assumed or a
new option is substituted therefore, the Committee may only change the terms of
such Incentive Stock Option such that (i) the excess of the aggregate Fair
Market Value of the Shares subject to option immediately after the substitution
or assumption, over the aggregate option price of such Shares, is not more than
the excess of the aggregate Fair Market Value of all Available Shares subject to
the Option immediately before such substitution or assumption over the aggregate
Option Price of such Available Shares, and (ii) the new option, or the
assumption of the old Incentive Stock Option does not give the Optionee
additional benefits which he did not have under the old Incentive Stock Option.
(c) Except as otherwise expressly provided herein, the issuance by the
Parent of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with direct sale
to an unrelated party or for Fair Market Value, or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Parent convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to
Available Shares subject to Awards granted under the Plan.
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<PAGE> 60
(d) Without limiting the generality of the foregoing, the existence of
outstanding Awards with respect to Available Shares granted under the Plan shall
not affect in any manner the right or power of the Parent to make, authorize or
consummate (1) any or all adjustments, recapitalizations, reorganizations or
other changes in the Parent's capital structure or its business; (2) any merger
or consolidation of the Parent; (3) any issue by the Parent of debt securities,
or preferred or preference stock which would rank above the Available Shares
subject to outstanding Awards; (4) the dissolution or liquidation of the Parent;
(5) any sale, transfer or assignment of all or any part of the assets or
business of the Company; or (6) any other corporate act or proceeding, whether
of a similar character or otherwise.
16. TRANSFERABILITY OF AWARDS. Each Award shall provide that such Award
shall not be transferable by the Holder otherwise than by will or the laws of
descent and distribution, or, if so provided in the Award and approved in
writing by the Committee (in its sole discretion), (a) that such Award is
transferable, in whole or in part, without payment of consideration, to members
of the Holder's Immediate Family, to trusts for such Immediate Family members,
or to partnerships whose only partners are such Immediate Family members, or (b)
to a person or other entity for which the Holder is entitled to a deduction for
a "charitable contribution" under Section 170(a)(i) of the Code (provided, in
each such case that no further transfer by any such permitted transferee(s)
shall be permitted).
17. ISSUANCE OF SHARES. No Holder or other person shall be, or have any of
the rights or privileges of, the owner of Shares subject to an Award unless and
until certificates representing such Common Stock shall have been issued and
delivered to such Holder or other person. As a condition of any issuance of
Common Stock, the Committee may obtain such agreements or undertakings, if any,
as the Committee may deem necessary or advisable to assure compliance with any
such law or regulation including, but not limited to, the following:
(i) a representation, warranty or agreement by the Holder
to the Parent, at the time any Shares are transferred, that he is
acquiring the Shares to be issued to him for investment and not with a
view to, or for sale in connection with, the distribution of any such
Shares; and
(ii) a representation, warranty or agreement to be bound by
any legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities law deemed
by the Committee to be applicable to the issuance of the Shares and are
endorsed upon the Share certificates.
Share certificates issued to the Holder receiving such Shares who are
parties to any shareholders agreement or any similar agreement shall bear the
legends contained in such agreements. Notwithstanding any provision hereof to
the contrary, no Shares shall be required to be issued with respect to an Award
unless counsel for the Parent shall be reasonably satisfied that such issuance
will be in compliance with applicable Federal or state securities laws.
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18. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by the Committee and, except for the
powers reserved to the Board in SECTION 21 hereof, the Committee shall have all
of the administrative powers under Plan. If a Committee is not appointed by the
Board at the time of reference, the Plan shall be administered by the Board and
all references herein to the Committee shall refer to the Board. Notwithstanding
the forgoing, no member of the Committee may be present at discussions
concerning, or vote on, matters which materially affect his Award.
Notwithstanding any provision of the Plan to the contrary, the Board, exclusive
of the non- employee Directors, shall act exclusively as the Committee with
respect to all matters relating to the granting of, and administration of the
Plan with respect to, Awards to non-employee Directors.
(b) The Committee, from time to time, may adopt rules and regulations
for carrying out the purposes of the Plan and, without limitation, may delegate
all of what, in its sole discretion, it determines to be ministerial duties to
an officer of the Parent. The determinations under, and the interpretations of,
any provision of the Plan or an Award by the Committee shall, in all cases, be
in its sole discretion, and shall be final and conclusive.
(c) Any and all determinations and interpretations of the Committee
shall be made either (i) by a majority vote of the members of the Committee at a
meeting duly called, with at least 3 days prior notice and a general explanation
of the subject matter given to each member, or (ii) without a meeting, by the
written approval of all members of the Committee.
(d) No member of the Committee shall be liable for any action taken or
omitted to be taken by him or by any other member of the Committee with respect
to the Plan, and to the extent of liabilities not otherwise insured under a
policy purchased by the Company, the Company does hereby indemnify and agree to
defend and save harmless any member of the Committee with respect to any
liabilities asserted or incurred in connection with the exercise and performance
of their powers and duties hereunder, unless such liabilities are judicially
determined to have arisen out of such member's gross negligence, fraud or bad
faith. Such indemnification shall include attorney's fees and all other costs
and expenses reasonably incurred in defense of any action arising from such act
of commission or omission. Nothing herein shall be deemed to limit the Company's
ability to insure itself with respect to its obligations hereunder.
(e) In particular, and without limitation, the Committee shall have the
authority, consistent with the terms of the Plan:
(i) to select the officers, key employees of and consultants
to the Company to whom Awards may from time to time be granted
hereunder;
(ii) to determine whether and to what extent Awards are to be
granted hereunder to one or more eligible persons;
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<PAGE> 62
(iii) to determine the number of Shares to be covered by each
such Award granted hereunder;
(iv) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any Award granted hereunder (including,
but not limited to, the Agreed Value and any restriction or limitation,
or any vesting acceleration or waiver of forfeiture restrictions, based
in each case on such factors as the Committee shall determine, in its
sole discretion); and to amend or waive any such terms and conditions
to the extent permitted by the Plan;
(v) to determine whether and under what circumstances an
Option may be settled in cash or Restricted Shares instead of Shares;
(vi) to determine whether, to what extent, and under what
circumstances Awards under the Plan are to be made, and operate, on a
tandem basis vis-a-vis other Awards under the Plan and/or cash awards
made outside of the Plan;
(vii) to determine whether and to what extent, and under what
circumstances Shares and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the Holder
(including providing for and determining the amount (if any) of any
deemed earnings on any deferred amount during any deferral period); and
(viii) to determine whether to require payment of tax
withholding requirements in Shares and to impose any holding period
required to satisfy Section 16 under the Exchange Act.
(f) The Committee shall have the authority to adopt, alter, and repeal
such rules, guidelines, and practices governing the Plan as it shall, from time
to time, deem advisable; to interpret the terms and provisions of the Plan and
any Award issued under the Plan (and any agreements relating thereto); and to
otherwise supervise the administration of the Plan; provided, however, that to
the extent that this Plan otherwise requires the approval of the Board or the
shareholders of the Parent, all decisions of the Committee shall be subject to
such Board or shareholder approval. Subject to the foregoing, and without
limitation, all decisions made by the Committee pursuant to the provisions of
the Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and Holders.
19. TAX WITHHOLDING. On or immediately prior to the date on which a payment
is made to a Holder hereunder or, if earlier, the date on which an amount is
required to be included in the income of the Holder as a result of an Award, the
Holder shall be required to pay to the Company, in cash or in Shares (including,
but not limited to, the reservation to the Company of the requisite number of
Available Shares otherwise payable to such Holder with respect to such Award)
the amount which the Company reasonably determines to be necessary in order for
the Company to comply with applicable federal or state tax withholding
16
<PAGE> 63
requirements, and the collection of employment taxes, if applicable; provided,
further, that the Committee may require that such payment be made in cash.
20. INTERPRETATION.
(a) If any provision of the Plan is held invalid for any reason, such
holding shall not affect the remaining provisions hereof, but instead the Plan
shall be construed and enforced as if such provision had never been included in
the Plan.
(b) THIS PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF TEXAS.
(c) Headings contained in this Agreement are for convenience only and
shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine, or neuter gender shall be
a reference to such other gender as is appropriate.
(e) The Plan is intended to constitute an "unfunded" plan for incentive
and deferred compensation. With respect to any payments not yet made to a
Holder, nothing contained herein shall give any such Holder any rights that are
greater than those of a general creditor of the Company. In its sole discretion,
the Committee may authorize the creation of trusts or other arrangements to meet
the obligations created under the Plan to deliver Common Stock or payments in
lieu of or with respect to Awards hereunder; provided, however, that, unless the
Committee otherwise determines with the consent of the affected Holder, the
existence of such trusts or other arrangements is consistent with the "unfunded"
status of the Plan.
(f) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to shareholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
21. AMENDMENT AND DISCONTINUATION OF THE PLAN. The Board, or the Committee
(subject to the prior written authorization of the Board), may from time to time
amend the Plan or any Award; provided, however, that [except to the extent
provided in SECTION 9(b) AND 15 hereof] if there are Incentive Stock Options
outstanding on the date of amendment, no such amendment may, without approval by
the shareholders of the Parent, (a) increase the number of Available Shares with
respect to which Incentive Stock Options may be granted, or change the class of
Eligible Persons to which Incentive Stock Options may be granted, (b) permit the
granting of Incentive Stock Options which expire beyond the maximum 10-year
period described in SUBSECTION 9(a)(iv) or beyond the period described in
SUBSECTION 9(a)(v), or (c) extend the termination date of the Plan as set forth
in SECTION 23 with respect the granting of Incentive Stock Options; and
provided, further, that no amendment or suspension of the Plan or any Award
issued hereunder shall, except as specifically permitted in this Plan or under
the terms of such Award, substantially impair any Award previously granted to
any Holder without the consent of such Holder.
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<PAGE> 64
22. SECTION 83(b) ELECTION. If as a result of receiving an Award, a
Holder receives Restricted Shares subject to a "substantial risk of forfeiture",
then such Holder may elect under Section 83(b) of the Code to include in his
gross income, for his taxable year in which the Restricted Shares are
transferred to him, the excess of the Fair Market Value (determined without
regard to any Restriction other than one which by its terms will never lapse),
of such Restricted Shares at the Date of Grant, over the amount paid for the
Restricted Shares. If the Holder makes the Section 83(b) election described
above, the Holder shall (i) make such election in a manner that is satisfactory
to the Committee, (ii) provide the Committee with a copy of such election, (iii)
agree to promptly notify the Company if any Internal Revenue Service or state
tax agent, on audit or otherwise, questions the validity or correctness of such
election or of the amount of income reportable on account of such election, and
(iv) agree to such federal and state income withholding as the Committee may
reasonably require in its sole and absolute discretion.
23. EFFECTIVE DATE AND TERMINATION DATE. The Plan shall be effective
as of its Effective Date, and shall terminate on the tenth anniversary of such
Effective Date.
PROBEX CORP.
-----------------------------------------
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PRELIMINARY COPY
--------------------------------------------------------------------------------
PROBEX CORP.
PROXY 13355 NOEL ROAD, SUITE 1200, DALLAS, TEXAS 75240
ANNUAL MEETING OF STOCKHOLDERS
FEBRUARY 28, 2001
--------------------------------------------------------------------------------
The undersigned hereby appoints Charles M. Rampacek and Bruce A. Hall,
or either of them, with full power of substitution in each, proxies (and if the
undersigned is a proxy, substitute proxies) to vote all common stock of the
undersigned in Probex Corp. at the Annual Meeting of Stockholders to be held at
The University Club 13350 Dallas Parkway, Dallas, Texas 75240, at 10:30 a.m.,
local time, on February 28, 2001, and at any adjournments or postponements
thereof, as specified below:
1. ELECTION OF DIRECTORS
[ ] FOR the nominees listed below: [ ] Withhold Authority
Thomas G. Murray
Thomas G. Plaskett
K. Bruce Jones
Anthony J. Maselli
Charles M. Rampacek
Dr. Bob G. Gower
To vote FOR or WITHHOLD AUTHORITY with respect to all nominees, check the
appropriate box above. To WITHHOLD AUTHORITY with respect to any individual
nominee, check the FOR box and write the name of such nominee in the space
below.
-------------------------------------------------------------------------------
2. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO
PROVIDE FOR A CLASSIFIED BOARD.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION TO
REMOVE THE ABILITY OF STOCKHOLDERS TO ACT BY WRITTEN CONSENT.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. PROPOSAL TO AUTHORIZE THE ISSUANCE OF UP TO 25 MILLION SHARES OF THE
COMPANY'S COMMON STOCK.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. PROPOSAL TO AMEND THE 1999 OMNIBUS STOCK AND INCENTIVE PLAN, AS AMENDED
AND RESTATED, TO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER SUCH
PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
7. In their discretion, the proxies (and if the undersigned is a proxy,
any substitute proxies) are authorized to vote upon such other business
as may properly come before the Annual Meeting.
This proxy, when properly executed, will be voted in the
manner directed herein by the undersigned stockholder. If no direction is made,
this proxy will be voted FOR the election of each of the six directors
nominated for one, two and three year terms, FOR the proposal to amend our
Certificate of Incorporation to provide for a classified Board of Directors,
FOR the proposal to amend our Certificate of Incorporation to remove the
ability of stockholders to act by written consent, FOR the proposal to approve
the issuance of up to 25 million shares of our common stock, FOR the proposal
to amend our 1999 Omnibus Stock and Incentive Plan, as amended and restated, to
increase the number of shares available under such plan, and FOR the
ratification of the appointment of Ernst & Young LLP as our independent
auditors.
<PAGE> 66
Please sign name exactly as it appears on stock certificate. When shares held by
joint tenants all should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
------------------------------------- ----------------------------------------
Printed Name Signature
Dated: , 2001
-------------------------- ----------------------------------------
Title
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS. IF NO SPECIFICATION IS
MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF EACH OF THE SIX
DIRECTORS NOMINATED FOR ONE, TWO AND THREE YEAR TERMS, FOR THE PROPOSAL TO
AMEND OUR CERTIFICATE OF INCORPORATION TO PROVIDE FOR A CLASSIFIED BOARD OF
DIRECTORS, FOR THE PROPOSAL TO AMEND OUR CERTIFICATE OF INCORPORATION TO
REMOVE THE ABILITY OF STOCKHOLDERS TO ACT BY WRITTEN CONSENT, FOR THE
PROPOSAL TO APPROVE THE ISSUANCE OF UP TO 25 MILLION SHARES OF OUR COMMON
STOCK, FOR THE PROPOSAL TO AMEND OUR 1999 OMNIBUS STOCK AND INCENTIVE PLAN,
AS AMENDED AND RESTATED, TO INCREASE THE NUMBERS OF SHARES AVAILABLE UNDER
SUCH PLAN, AND FOR THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP
AS OUR INDEPENDENT AUDITORS.
