SEC File No. 0-14189
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the 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 Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
CELTIC INVESTMENT, INC.
(Name of Registrant as Specified In Its Charter)
CELTIC INVESTMENT
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rule 14a-6(i)(4) and
0-11.
1) Title of each class of securities to which transaction
applies:
N/A
2) Aggregate number of securities to which transaction applies:
N/A
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
N/A
4) Proposed maximum aggregate value of transaction:
N/A
[ ] 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 free 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: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
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<PAGE>
November 6, 1997
U.S. Securities and
Exchange Commission
Washington, DC 20546
Re: Celtic Investment, Inc. (the "Company") 1997 Form 14A
To Whom It May Concern:
Attached please find a Preliminary Proxy Statement (Form 14A) for the
Company in connection with its Annual Meeting of Shareholders. In addition to
the election of Directors at the Meeting, shareholders will be asked to vote
upon a proposal to reincorporate the Company in Illinois, through a merger into
a wholly-owned Illinois subsidiary. Shareholders will also be asked to vote upon
a proposal to ratify the Company's1997 Stock Option Plan and certain specific
grants of options. The following exhibits are attached to the Proxy Statement:
(1) Exhibit A: Certificate of Incorporation for Celtic Investment, Inc., an
Illinois corporation ("Celtic Illinois");
(2) Exhibit B: Bylaws for Celtic Illinois;
(3) Exhibit C: Delaware Corporate Law regarding appraisal rights;
(4) Exhibit D: 1997 Stock Option Plan;
In addition, pursuant to Instruction 3 of Rule 14a-101 (Item 10)(b)(G),
attached as Appendix 1 are copies of the Option Agreements for specific grants
of options to voted upon as Proposal 4 at the Annual Meeting of Shareholders.
Also attached as Appendix 2, pursuant to Rule 14a-101 (Item 14)(a)(3) is an
Agreement and Plan of Merger between Celtic Delaware and Celtic Ilinois. This
Agreement and Plan of Merger is not a part of the Proxy Statement and will not
be delivered to security holders.
If you have any questions in connection with the foregoing, please contact
A.O. "Bud" Headman, Jr. at 801-532-2666.
Sincerely,
COHNE, RAPPAPORT & SEGAL
A. O. Headman, Jr.
<PAGE>
CELTIC INVESTMENT, INC.
17W220 22nd Street, Suite 420
Oakbrook Terrace, IL 60181
------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
------------
To Be Held January 12, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Celtic Investment, Inc., a Delaware
corporation (the "Company"), to be voted at the Annual Meeting of Shareholders
to be held January 12, 1998 (the "Meeting") and at any adjournment(s) thereof.
The Meeting will be held at __________________________________________
_________________________________ at 6:00 p.m. local time. This Proxy Statement,
the Notice of Annual Meeting of Shareholders, and the Proxy were first sent or
given to the Company's shareholders on or about December 10, 1997.
Matters to come before the Meeting are: (1) the election of five directors
to the Board of Directors to serve until the 1998 Annual Meeting of Shareholders
and thereafter until their successors are elected and are qualified; (2) to
consider and act upon a proposal to approve and adopt a Plan of Reorganization
and Agreement of Merger which provides for the merger of the Company with and
into its wholly-owned subsidiary in order to change the state of incorporation
of the Company from Delaware to Illinois; (3) to consider and act upon a
proposal to approve and adopt a Stock Option Plan; and (4) to consider and act
upon a proposal to ratify specific 1996 and 1997 grants of stock options to
certain employees of U.S. Commercial Funding Corp. ("USCF"), Salt Lake Mortgage
Corp. ("SLM") and Advantage Realty, Inc. ("ARI"), all of which are wholly-owned
subsidiaries of the Company, all as are more fully described herein.
There is being mailed herewith to each shareholder of record the Company's
Annual Report on Form 10-KSB for the fiscal year ended June 30, 1997. The date
of this Proxy Statement is the approximate date on which this Proxy Statement
and form of Proxy were first sent or given to shareholders.
RECORD DATE AND VOTING SECURITIES
The securities of the Company entitled to vote at the Meeting consist of
shares of the Company's common stock, $.001 par value. Only shareholders of
record at the close of business on December 10, 1997, the record date for the
Meeting, will be entitled to notice of and to vote at the Meeting. On the record
date, the Company had outstanding 4,406,477 shares of common stock. See
"Principal Shareholders and Security Ownership of Management" for information
concerning beneficial ownership of the Company's common stock.
Assuming a quorum is present, the five (5) nominees receiving the highest
number of votes cast by the holders of the common stock will be elected as
directors. There will be no cumulative voting in the election of directors. A
majority of the shares issued and outstanding must be voted in favor of the
proposal to change the Company's domicile through a reincorporation merger -
Proposal 2. Assuming a quorum is present, the affirmative vote of the holders of
a majority of the shares of common stock present in person or represented by
proxy is required for approval of Proposals 3 and 4.
3
<PAGE>
Abstentions are treated as present and entitled to vote at the Meeting.
Therefore, abstentions will be counted in determining whether a quorum is
present and will have the effect of a vote against a matter. A broker non-vote
on a matter (i.e., shares held by brokers or nominees as to which instructions
have not been received from the beneficial owners or persons entitled to vote
and as to which the broker or nominee does not have discretionary power to vote
on a particular matter) is considered not entitled to vote on that matter and,
thus, will not be counted in determining whether a quorum is present or whether
a matter requiring approval of a majority of the shares present and entitled to
vote has been approved.
All Proxies received pursuant to this solicitation will be voted at the
Meeting and at any adjournments thereof as indicated in the Proxy. If no
instructions are given, the persons named in the Proxy solicited by the Board of
Directors of the Company intend to vote for the nominees for election as
directors of the Company listed below and for Proposals 2, 3 and 4.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date, or by attending the Meeting and voting in person.
GENERAL INFORMATION ABOUT THE COMPANY
The Company is a Delaware corporation with its principal and executive
offices located at 17W220 22nd Street, Suite 420, Oakbrook Terrace, Illinois
60181, (630) 993-9010. The Company, through its wholly-owned subsidiary, USCF,
is engaged in the business of purchasing accounts receivable ("Factoring") and
through its wholly-owned subsidiaries SLM and ARI, it is engaged in the mortgage
banking business and the real estate brokerage business.
PRINCIPAL SHAREHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information regarding shares of the
Company's common stock owned beneficially as of December 10, 1997 by each
director and nominee for director, each of the executive officers of the
Company, all officers and directors as a group and each person known by the
Company to beneficially own 5% or more of the outstanding shares of the
Company's common stock. Except as may be indicated in the footnotes to the
table, each of such persons has sole voting and investment power with respect to
the shares beneficially owned. Beneficial ownership has been determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Under this Rule, certain shares may be deemed to be
beneficially owned by more than one person (such as where persons share voting
power or investment power). In addition, shares are deemed to be beneficially
owned by a person if the person has the right to acquire the shares (for
example, upon exercise of an option) within 60 days of the date as of which the
information is provided; in computing the percentage ownership of any person,
the amount of shares outstanding is deemed to include the amount of shares
beneficially owned by such person (and only such person) by reason of these
acquisition rights. As a result, the percentage of outstanding shares of any
person as shown in the following table does not necessarily reflect the person's
actual voting power at any particular date:
4
<PAGE>
Name and Address Percentage
of Beneficial Owner Shares Owned (8) Owned
Douglas P. Morris (1)(2) 448,765 9.01%
330 East Main Street, Suite 206
Barrington, IL 60010
Howard D. Talks (1)(3) 451,384 9.06%
P.O. Box 250
Palm Beach, FL 33480
Larry D. Meek (1)(4) 287,901 5.78%
17W220 22nd Street, #420
Oakbrook Terrace, IL 60181
Pam Davis (1) -0- -0-
102 West 500 South, Suite 300
Salt Lake City, UT 84101
Frank Lucchese (1)(5) 123,528 2.48%
17W220 22nd Street, #420
Oakbrook Terrace, IL 60181
Reese Howell, Jr.(1)(6) 554,500 11.13%
102 West 500 South, #300
Salt Lake City, UT 84101
Roger Davis(7) 545,500 10.95%
102 West 500 South, #300
Salt Lake City, UT 84101
Laurence J. Pino 308,257 6.19%
c/o Open University
Orlando, FL 33480
All Officers and Directors 1,866,132 37.46%
as a group (6 people)
- - -----------
(1) Each of these persons is an officer and/or director of the Company.
(2) The 448,765 total includes 208,527 shares owned by Mr. Morris, 140,239
shares owned of record by Hyacinth Resources. Inc., an affiliate of Mr. Morris,
and 100,000 shares which may be issued upon the exercise of an option
exercisable at a price of $1.00 per share. Such option is currently exercisable.
5
<PAGE>
(3) The 451,384 total includes 351,384 shares owned of record by Mr. Talks
and his wife Carol Hall as joint owners and 100,000 shares which may be issued
upon the exercise of an option exercisable at a price of $1.00 per share. Such
option is currently exercisable.
(4) The 287,901 total includes 20,401 shares owned of record by Mr. Meek,
and 267,500 shares which may be issued upon the exercise of stock options
granted in connection with Mr. Meek's employment at an exercise price of $1.00
per share. Such options are currently exercisable. Mr. Meek also owns options to
an additional 87,500 shares of the Company's common stock but such options are
not currently exercisable and are not included in the 287,901 total.
(5) The 123,528 total includes 16,028 shares owned of record by Mr.
Lucchese, his wife and his minor children, and 107,500 shares which may be
issued upon the exercise of stock options granted in connection with Mr.
Lucchese's employment at an exercise price of $1.00 per share. Mr. Lucchese also
owns options to an additional 37,500 shares of the Company's common stock but
such options are not currently exercisable and are not included in the 123,528
total.
(6) The 554,500 shares are owned of record by Mr. Howell. Of these 554,500
shares, 250,000 are held in escrow pending the achievement of certain financial
goals, however, all of such shares are entitled to be voted at the Meeting. Not
included in the 554,500 total, are 250,000 shares which may be issued at the
price of $1.00 per share upon the exercise of stock options owned by Mr. Howell.
Such options are not currently exercisable.
(7) The 545,500 shares are owned of record by Mr. Davis. Of these 545,500
shares, 250,000 are held in escrow pending the achievement of certain financial
goals, however, all of such shares are entitled to be voted at the Meeting. Not
included in the 545,500 total, are 250,000 shares which may be issued at the
price of $1.00 per share upon the exercise of stock options owned by Mr. Davis.
Such options are not currently exercisable.
(8) The Company had 4,406,477 shares outstanding on December 10, 1997.
Additionally, a total of 575,000 shares are issuable upon the exercise of
currently exercisable options held by directors and officers. Therefore, for
purposes of the above set forth chart, 4,981,477 shares are deemed to be issued
and outstanding.
PROPOSAL 1: ELECTION OF DIRECTORS
General
The Board of Directors are elected annually by the shareholders of the
Company. The Board of Directors of the Company, appoints the Board of Directors
of the Company's wholly-owned subsidiaries, USCF, SLM and ARI. Pursuant to the
Bylaws of the Company, the number of directors of the Company has been set at
five members. It is proposed to elect five directors at this Meeting to hold
office for a one-year term until the 1998 Annual Meeting of Shareholders and
until their successors are duly elected and qualified. It is intended that the
accompanying form of Proxy will be voted for the nominees set forth below, each
of whom is presently a director of the Company. If, in the Board of Directors'
judgment, some unexpected occurrence should make necessary the substitution of
some other person or persons for any of the nominees, shares will be voted for
such other person or persons as the Board of Directors may select. The Board of
Directors is not aware that any nominee may be unable or unwilling to serve as a
director.
The following table sets forth for each nominee for election as a
director his name, all positions with the Company held by him, his principal
occupation, his age and the year in which he first became a director of the
Company.
6
<PAGE>
<TABLE>
<CAPTION>
Director
Nominees Principal Occupation Age Since
- - -------- -------------------- --- ---------
<S> <C> <C> <C>
Douglas P. Morris Mr. Morris has been an officer and director of the Company 42 1994
since July, 1994. Mr. Morris is also a director of the each of
the Company's subsidiaries, USCF, SLM and ARI. Mr. Morris
is, and has been since 1988, the owner of H & M Capital
Investments, Inc., a privately-held business consulting firm.
Mr. Morris is Vice-President of Capital Markets and a director
of Millenniun Electronics, Inc., a publicly-held
computer/electronics company. Mr. Morris is a director of
Dauphin Technology, Inc., a publicly-traded electronic
manufacturing and computer company.
Howard D. Talks Mr. Talks has been a director of the Company since July 1, 43 1994
1994. Mr. Talks has been involved in the real estate industry
for the past 19 years. Mr. Talks has developed and/or purchased
commercial and residential real estate properties in Florida.
Larry Meek Mr. Meek became a director of the Company and President of 45 1995
USCF in August 1995. He has over twenty years experience in
sales, marketing, general management, and business
development.
Reese Howell, Jr. Mr. Howell was appointed Senior Vice-President and a director 29 1997
of the Company in January 1997. He also serves as President
and CEO of SLM and is a director of ARI. Mr. Howell was the
founder of SLM and has been in the mortgage industry since
1990.
Pamela Davis Ms. Davis has been a director of the Company since January 31, 33 1997
1997. She is employed by Westin Hotel Resorts where she is
Manager of Computer Operations in the Central Technology
Center in Salt Lake City, Utah.
</TABLE>
Committees and Meetings
The Board of Directors held eleven (11) meetings during the last fiscal
year. All of the directors of the Company attended all meetings in person or
telephonically. The Board of Directors also took various actions through
unanimous written consent in lieu of meetings of directors.
The Board of Directors presently has no standing audit, compensation or
nominating committee.
Executive Compensation
The following table sets forth the aggregate compensation paid by the
Company for services rendered during the last fiscal year to the Company's
officers.
7
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation(1) Awards Payouts
------------------- Restricted Securities
Name and Fiscal Other Annual Stock Underlying LTIP All Other
Principal Position Year Salary Bonus Compensation Award(s) Options Payouts Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Douglas P. Morris 1997 $26,000 $-0- $-0- $-0- #-0- $-0- $-0-
1996 $26,000 $-0- $-0- $-0- #-0- $-0- $-0-
1995 $24,000 $-0- $-0- $-0- #-0- $-0- $-0-
Larry Meek 1997 $133,337 $18,583 $-0- $-0- # 75,000(3) $-0- $-0-
1996 $125,000 $-0- $-0- $-0- # 280,000(2) $-0- $-0-
1995 $ 4,800 $50,000 $-0- $-0- #-0- #-0- $-0-
Frank Lucchese 1997 $91,062 $12,882 $-0- $-0- # 75,000(3) $-0- $-0-
1996 $85,000 $-0- $-0- $-0- # 70,000(2) $-0- $-0-
1995 $4,904 $-0- $-0- $-0- #-0- $-0- $-0-
Reese Howell Jr. 1997 $37,500 $-0- $-0- $-0- #250,000(2) $-0- $-0-
1996 $-0- $-0- $-0- $-0- #-0- $-0- $-0-
1995 $-0- $-0- $-0- $-0- #-0- $-0- $-0-
</TABLE>
(1) See the discussions under the caption "Employment Contracts"
regarding certain other compensation to which the named officer may be
entitled upon certain specified events.
(2) These options were granted pursuant to Employment Agreements. The
number of options indicated give effect to an agreement between the
Company and the option holder wherein one-half of the options
originally issued were cancelled, and the option price was reduced from
$3.00 per share to $1.00 per share.
(3) These options were granted as performance bonus for fiscal year
1996 pursuant to Employment Agreements and/or the Merger Agreement. The
number of options indicated give effect to an agreement between the
Company and the option holder wherein one-half of the options
originally issued were cancelled and the option price was reduced from
$3.00 per share to $1.00 per share.
Stock Options Granted in Last Fiscal Year
The following table set forth grants of stock options made during the
fiscal year ended June 30, 1997 to the employees of the Company.
<TABLE>
<CAPTION>
Individual Grants
-----------------
% of Total
Options/SARs
Number of Securities Granted to Exercise or
Underlying Options/ Employees in Base Price
Name SARs Granted (#) Fiscal Year ($/Share) Expiration Date
<S> <C> <C> <C> <C>
Douglas P. Morris -0- N/A N/A N/A
Reese Howell Jr. (1,4) 250,000 35.8% $1.00 (1)
Roger Davis (1,4) 250,000 35.8% $1.00 (1)
Larry Meek (2,4) 75,000 10.8% $1.00 (2)
Frank Lucchese (2,4) 75,000 10.8% $1.00 (2)
Other Employees (3) 45,000 3.2% $3.00 (3)
</TABLE>
8
<PAGE>
(1) These options are granted as part of the Stock for Stock Exchange in the
acquisition of SLM and ARI and related employment agreements. They have an
expiration date of January 31, 2001 and January 31, 2007. One hundred fifty
thousand of the options are time-based and 350,000 of the options are
performance-based on a profitability formula relating to SLM and ARI
operations.
(2) These options are granted pursuant to certain employment agreements and
have a July 17, 2003 expiration date.
(3) These options are granted pursuant to certain employment agreements and
have expiration dates of May 15, 2000 through May 15, 2003.
(4) On June 29, 1997 the Company offered and various employees agreed to cancel
one-half of their outstanding options in consideration of reducing the
exercise price from $3.00 to $1.00 per share. Mr. Howell and Mr. Davis each
canceled 250,000 share options. Mr. Meek canceled 355,000 options shares.
Mr. Lucchese canceled 145,000 options shares.
Aggregate Option Exercises and Number/Value of Unexercised Options
The following table provides information concerning the exercise of
options during the last fiscal year by persons named in the Summary Compensation
Table, the number of unexercised options held by such persons at the end of the
last fiscal year, and the value of such unexercised options as of such date:
<TABLE>
<CAPTION>
Total Number of Value of Unexercised
Shares Acquired Values Unexercised Options In-the-Money Options
Name on Exercise (1) Realized ($) at 6/30/97 (1.2) at 6/30/97 (1.2)
- - ------ --------------- ------------ ---------------------------- ----------------------------
Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Douglas P. Morris -0- -0- 100,000 0 $0 $0
Larry Meek -0- -0- 217,500 137,500 $0 $0
Frank Lucchese -0- -0- 57,500 87,000 $0 $0
Reese Howell, Jr. -0- -0- 0 250,000 $0 $0
</TABLE>
1 An "In-the-Money" stock option is an option for which the market
price of the Company's common stock underlying the option on June 30,
1997 exceeded the option exercise price. The value shown is calculated
by multiplying the number of unexercised options by the difference
between (i) the average of the bid and ask price for the common stock
on the NASDAQ Small Cap Market on June 30, 1997 of $1.00 and (ii) the
exercise price of the stock options of $1.00 per share.
The Company has not granted any stock appreciation rights.
2 On June 29, 1997 the Company offered, and various employees agreed,
to cancel one-half of their outstanding options in consideration of
reducing the Exercise Price from $3.00 to $1.00. Mr. Meek canceled
355,000 options shares. Mr. Lucchese canceled 145,000 options shares.
Mr. Howell canceled 250,000 option shares.
Compensation of Directors
During the year ended June 30, 1997 the Company paid no compensation to
directors except under employment agreements set forth above in the Summary
Compensation Table and below in "Employment Agreements."
9
<PAGE>
Employment Agreements
The Company is currently a party to the following Employment
Agreements:
Douglas P. Morris. In July 1994, the Company and Mr. Morris entered into an
Employment Agreement for a five year term. The agreement provides for a first
year salary of $24,000 which will increase by ten percent per year. Under his
Employment Agreement, Mr. Morris is required to devote only part-time to the
service of the Company. Mr. Morris has been granted options to purchase 100,000
shares of the Company's common stock. (See "Present Shareholders" herein.)
Larry D. Meek. On June 28, 1995, the Company and Mr. Meek entered into a
three year Employment Agreement. The agreement provides for a signing bonus of
$50,000 and a salary of $125,000 with annual cost of living adjustments not
greater than 10%. Mr. Meek is eligible for bonuses in subsequent years subject
to the discretion of the Board of Directors. Mr. Meek has been granted options
to purchase 560,000 shares at $3.00 of the Company's common stock. Mr. Meek was
granted 150,000 share options at $3.00 per share in July 1996. On June 1, 1996,
the Company and Mr. Meek agreed to extend the Employment Agreement for one
additional year. In June 1997, Mr. Meek canceled 355,000 options shares in
consideration of the reduction in the exercise price from $3.00 to $1.00 per
share. The Company has agreed to use its best effort to register the option
shares on Form S-8.
Frank Lucchese. On June 28, 1995, the Company and Mr. Lucchese entered into
a three-year Employment Agreement. The agreement provides for a salary of
$85,000 with annual cost of living adjustments not greater than 10%. Mr.
Lucchese is eligible for bonuses in subsequent years subject to the discretion
of the Board of Directors. Mr. Lucchese has been granted options to purchase
140,000 shares at $3.00 per share of the Company's common stock. Mr. Lucchese
was granted 150,000 options on the Company's shares at $3.00 per share in July
1996. On June 1, 1996, the Company and Mr. Lucchese agreed to extend the
Employment Agreement for one additional year. In June 1997, Mr. Lucchese
canceled 145,000 option shares in consideration of the reduction in the exercise
price from $3.00 to $1.00. The Company has agreed to use its best effort to
register the option shares on Form S-8.
Martha Marroquin. On September 26, 1995, the Company and Ms. Marroquin
entered into a three- year Employment Agreement. The agreement provides for a
salary of $45,000 with annual cost of living adjustments not greater than 10%.
Ms. Marroquin is eligible for bonuses in subsequent years subject to the
discretion of the Board of Directors. Ms. Marroquin has been granted options to
purchase 50,000 shares at $3.00 per share of the Company's common stock. In June
1997, Ms. Marroquin canceled 25,000 option shares in consideration of the
reduction of the exercise price from $3.00 to $1.00 per share. The Company has
agreed to use its best effort to register the option shares on Form S-8.
Reese Howell Jr. On January 31, 1997, the Company and Mr. Howell
entered into a five-year Employment Agreement. The agreement provides for a
salary of $90,000 with annual cost of living adjustments not greater than 10%.
Mr. Howell is entitled to a bonus of 7.5% of pre-tax profits of SLM and ARI
until such time as his annual compensation reaches $150,000. After the $150,000
threshold is met, Mr. Howell is entitled to an additional bonus of 1.5% of the
pre-tax profits of SLM and ARI. Mr. Howell has been granted time-based and
performance-based options to purchase 500,000 shares of the Company's stock at
$3.00 per share. The performance-based options are contingent on the
profitability of SLM and ARI. In June 1997, Mr. Howell agreed to cancel 250,000
options shares in consideration of the reduction in the exercise price from
$3.00 to $1.00 per share.
10
<PAGE>
Roger Davis. On January 31, 1997, the Company and Mr. Davis entered
into a five-year Employment Agreement. The agreement provides for a salary of
$90,000 with annual cost of living adjustments not greater than 10%. Mr. Davis
is entitled to a bonus of 7.5% of pre-tax profits of SLM and ARI until such time
as his annual compensation reaches $150,000. After the $150,000 threshold is
met, Mr. Davis is entitled to an additional bonus of 1.5% of the pre-tax profits
of SLM and ARI. Mr. Davis has been granted time-based and performance-based
options to purchase 500,000 shares of the Company's stock at $3.00 per share.
The performance-based options are contingent on the profitability of SLM and
ARI. In June 1997, Mr. Davis agreed to cancel 250,000 option shares in
consideration of the reduction in the exercise price from $3.00 to $1.00 per
share.
Recommendation of Board of Directors
The Board of Directors recommends a vote FOR all of the aforementioned
nominees for directors.
PROPOSAL 2: REINCORPORATION PROPOSAL
The Company's Board of Directors has unanimously approved and, for the
reasons described below, unanimously recommends that the Company's shareholders
approve a proposal which provides, among other things, for the change of the
Company's state of incorporation from Delaware to Illinois (the "Reincorporation
Proposal"). Approval of the Reincorporation Proposal will not result in a change
in the name of the Company nor will it result in any change in the business,
management, board of directors, assets or liabilities of the Company. In
particular, persons elected as directors of the Company at the 1997 Annual
Meeting will serve as directors of Celtic Investment, Inc., the Illinois
corporation. The Board of Directors of the Company has adopted a Plan of
Reorganization and Agreement of Merger (the "Merger Agreement") in order to
change the state of incorporation of the Company from Delaware to Illinois. The
Merger Agreement provides for the merger (the "Merger") of the Company into its
Illinois Subsidiary.
The Company, which is currently incorporated in the State of Delaware,
is hereafter referred to as "Celtic Delaware". In order to change the domicile
of Celtic Delaware to the State of Illinois, Celtic Delaware has formed a
wholly-owned subsidiary corporation in the State of Illinois ("Celtic Illinois")
for the sole purpose of reincorporating in Illinois and, if the Company's
shareholders approve this Proposal 2, Celtic Delaware will merge into Celtic
Illinois and Celtic Illinois will be the surviving company. As the result of
such merger, the Company will then be an Illinois corporation and will be
domiciled in Illinois. Prior to the Merger, the Surviving Corporation will not
engage in any business or have any assets or liabilities. As a result of the
Merger, Celtic Illinois will succeed to all the rights and will be vested with
all the properties and be subject to all the liabilities of the Company. Celtic
Illinois will continue the activities currently conducted by the Company.
When the Merger becomes effective, each outstanding share of common
stock of the Company will be converted into one share of common stock of Celtic
Illinois. Shares will continue to be listed on NASDAQ without interruption. It
will not be necessary for holders of shares of common stock of the Company to
exchange their existing stock certificates for stock certificates of the
Surviving Corporation as each outstanding certificate representing shares of the
Company will continue to represent the same number of shares of Celtic Illinois.
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Purposes of the Reincorporation Proposal- Change of State of Domicile
The Company's Board of Directors believes that the best interests of
the Company and its shareholders will be served by changing the Company's place
of incorporation from Delaware to Illinois. The Board of Directors believes that
the franchise tax imposed by the State of Delaware is an unnecessary expense for
the Company. Because the Company is incorporated in Delaware, it is required to
pay franchise taxes to the State of Delaware. Because the Company does business
in Illinois, it also pays franchise taxes in Illinois. In Illinois, the basis
for computation of the franchise tax payable by a corporation incorporated in
Illinois and by a corporation incorporated in another state and qualified to do
business in Illinois is the same. Accordingly, as a result of the Merger, Celtic
Illinois would, under current law, pay an annual franchise tax in Illinois
determined on the same basis as that being paid by the Company, but it would be
relieved of the expense of the annual franchise tax payable in Delaware. For the
foregoing reasons, the Board of Directors believes that the activities of the
Company can be carried on to better advantage if the Company is able to operate
under the laws of Illinois. (See "Comparison of Shareholders' Rights Under
Illinois and Delaware Law" herein.)
In the year ended June 30, 1997 the Delaware franchise tax amounted to
$6,800. Because the estimated expenses of the Merger will be approximately
$3,000, the cost savings resulting from the Merger will not begin to be realized
for approximately six (6) months. Additional reasons for incorporating in
Illinois are that the Company's principal place of business is located in
Illinois and that based on a recent analysis, Illinois is the state where
approximately one hundred (100) of the holders of record of shares of common
stock of the Company reside. This represents 64% of the total number of the
Company's shareholders. In addition, Illinois residents held approximately
2,400,000 Company shares, or 55% of the total 4,406,477 shares of common stock
then outstanding.
The following discussion summarizes important aspects of the
Reincorporation Proposal. The Board of Directors believes that there is no
negative impact on shareholder rights from the change of domicile. This summary
does not purport to be a complete description of the Reincorporation Proposal.
Copies of the existing Certificate of Incorporation of the Company, the Articles
of Incorporation of Celtic Illinois, the Bylaws of Celtic Illinois and the
Merger Agreement are available for inspection at the Company's offices and
copies will be sent to shareholders upon request.
General
Celtic Illinois is a wholly-owned subsidiary of Celtic Delaware and was
recently organized for the sole purpose of effecting the reincorporation of the
Company in Illinois. The reincorporation transaction will involve the merger of
Celtic Delaware with and into Celtic Illinois (the "Merger").
Existing stock certificates will remain valid and there is no need for
shareholders to exchange existing stock certificates for new ones. At the
Effective Time (as defined in the Merger Agreement), the separate existence of
Celtic Delaware will cease and Celtic Illinois will succeed, to the extent
permitted by law, to all the business, properties, assets and liabilities of
Celtic Delaware. Each common share of Celtic Delaware, $ .001 par value
("Delaware Common Stock" or "Common Stock") issued immediately prior to the
Effective Time will, by virtue of the Reincorporation Proposal, be converted
into one fully-paid share of common stock, par value $ .001 per share, of Celtic
Illinois ("Illinois Common Stock"). At the Effective Time, certificates which
immediately prior to the Effective Time represented Delaware Common Stock will
be deemed for all corporate purposes to represent the same number of shares of
Illinois Common Stock into which such Delaware Common Stock has been converted.
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It is anticipated that the Merger will become effective (the "Effective
Time") within sixty (60) days from the date of the Annual Meeting of
Shareholders. However, the Merger Agreement provides that the Merger may be
abandoned by the Board of Directors of either Celtic Illinois or Celtic Delaware
prior to the Effective Time thereof, either before or after shareholder
approval. In addition, the Merger Agreement may be amended prior to the
Effective Time of the Merger, either before or after shareholder approval
thereof; provided, however, that the Merger Agreement may not be amended after
shareholder approval if such amendment would (1) alter or change the amount or
kind of shares or other consideration to be received by shareholders in the
Merger, (2) alter or change any term of the Celtic Illinois Articles of
Incorporation, (3) alter or change any of the terms and conditions of the Merger
Agreement if such alteration or change would adversely affect the shareholders,
or (4) otherwise violate applicable law.
The affirmative vote of the holders of a majority of the outstanding
Delaware Common Stock is required for approval of the Reincorporation Proposal.
A vote for approval of the Reincorporation Proposal will constitute specific
approval of the Merger as well as other matters included in the Reincorporation
Proposal described in this Proxy Statement. Shareholders of the Company whose
shares are not voted in favor of the Reincorporation Proposal will have
statutory dissenter's rights under Delaware law. (See "Dissenting Shareholder's
Rights" herein.)
Other Effects of the Reincorporation
Approval of the Merger Agreement and the Reincorporation Proposal by
the Company's shareholders will also constitute approval of the provisions of
the Celtic Illinois Articles of Incorporation and the Celtic Illinois Bylaw
Provisions. For a description of the differences between the Celtic Illinois
Articles of Incorporation and Celtic Illinois Bylaw Provisions and the Celtic
Delaware Certificate and Bylaws, see "Differences in Charter Document
Provisions" herein. In addition, as shareholders of a Illinois corporation, the
rights of shareholders of Celtic Illinois will be governed by Illinois rather
than Delaware law. (See "Comparison of Shareholders' Rights Under Illinois and
Delaware Law" herein.)
Differences in Charter Document Provisions
Except for the elimination of liability for money damages (See
"Comparison of Shareholders' Right Under Illinois and Delaware Law - Limitation
of Damages"), there are no substantive differences between the Celtic Delaware
and Celtic Illinois Articles and Bylaws. The Articles of Incorporation of Celtic
Delaware presently authorize the issuance of 25,000,000 shares of Common Stock,
$ .001 par value, and 7,500,000 shares of preferred stock. Celtic Illinois has
been formed with the same authorized capital. In addition, terms of the Illinois
Common Stock will be identical to those of the Delaware Common Stock. For
example, neither shares have preemptive rights or cumulative voting rights.
Further, similar to Delaware law, Illinois law permits the Board of Directors to
issue the Preferred Stock in one or more series, and to fix, among other things,
the designation and number of shares to constitute each series and the relative
rights and preferences of shares of each series. Illinois law and Delaware law
contain generally similar provisions for the indemnification of directors and
officers. Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to directors or
officers under the Celtic Illinois Articles and Bylaws, it is the position of
the Securities and Exchange Commission that such indemnification would be
against public policy as expressed in the Securities Act and therefore
unenforceable.
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Comparison of Shareholders' Rights Under Illinois and Delaware Law
Although it is impracticable to compare all of the aspects in which the
general corporation laws of Illinois and Delaware differ, the following is a
summary of certain significant corporate issues:
Action by Shareholder Consent. Both Illinois and Delaware law provide
that shareholder action may be taken without a meeting if a written consent is
signed by the shareholders holding the number of shares necessary to authorize
the action at a meeting of shareholders. The Bylaws of Celtic Illinois and the
Bylaws of Celtic Delaware also provide for action by shareholder consent.
Call of Shareholders Meetings. Special meetings of shareholders of
Illinois corporations may be called at any time by shareholders entitled to cast
at least one-fifth of the votes entitled to be cast on any issue proposed to be
considered at the particular meeting. The Bylaws of Celtic Illinois also provide
that a Special Meeting of Shareholders may be called by the owners of one-fifth
of the total shares issued and outstanding. Delaware law has no such provision,
but the Bylaws of Celtic Delaware provide that a special meeting of shareholders
may be called by the owners of one-fourth of the total shares issued and
outstanding.
Charter Amendments. Under Delaware law, charter amendments must be
approved by the holders of a majority of the shares issued and outstanding.
Under Illinois law, charter amendments must be approved by the holders of
two-thirds of the shares issued and outstanding unless otherwise provided for
the in the corporation's Articles of Incorporation. The Articles of
Incorporation of Celtic Illinois do provide that charter amendments may be
approved by the holders of a simple majority of the shares issued and
outstanding rather than by a two-thirds majority except for charter amendments
to increase authorized capital which must be approved by the holders of
two-thirds of the shares issued and outstanding.
Class Voting. Pursuant to Illinois law, holders of a particular class
of shares are entitled to vote as a separate class if the rights of such class
are affected in certain respects by mergers, consolidations or amendments to the
articles of incorporation. The Delaware law requires voting by separate classes
only with respect to amendments to the certificate of incorporation which
adversely affect the holders of such classes or which increase or decrease the
aggregate number of authorized shares or the par value of the shares of any such
classes.
Appraisal Rights. Under Illinois law, dissenting shareholders are
entitled to appraisal rights in connection with the lease, sale, exchange,
transfer or other disposition of all or substantially all of the assets of a
corporation made in the usual or regular course of its business. In addition,
shareholders of a Illinois corporation being merged into a surviving corporation
or being consolidated into a new corporation are also entitled to appraisal
rights. Under Delaware law, appraisal rights are available only in connection
with statutory mergers or consolidations. Even in such case, unless the
certificate of incorporation otherwise provides, (that of Celtic Delaware does
not so provide), the Delaware law does not recognize dissenters' rights if the
shares of the merged corporation are listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by NASDAQ or held of record by more than 2,000 shareholders.
Cumulative Voting. Under Illinois law, shareholders are entitled to
vote cumulatively in elections for directors, unless the articles of
incorporation limit or eliminate such right. Under Delaware law, shareholders do
not have cumulative voting rights unless so provided in the certificate of
incorporation. Since the Certificate of Incorporation of the Company does not
grant shareholders cumulative voting rights and since
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the Articles of Incorporation of Celtic Illinois expressly deny such rights, the
Merger will not effect any change in the manner of electing directors for the
Company.
Director Removal. Under Delaware law and Illinois law, a director may
be removed, with or without cause, by a majority of shareholders entitled to
vote at an election of directors, unless in the case of a staggered board, the
certificate of incorporation provides otherwise. Neither Celtic Delaware's
Certificate of Incorporation nor the Articles of Incorporation of Celtic
Illinois provide for a staggered board.
Super Majority Vote Requirements. Under Illinois law, the affirmative
vote of the holders of at least two-thirds of outstanding shares entitled to
vote is required in order to effectuate certain mergers, consolidations,
mandatory share exchanges, sales of substantially all assets and charter
amendments, unless the articles of incorporation supersede that requirement by
specifying a smaller or larger vote requirement. The Articles of Incorporation
of Celtic Illinois supercedes the two-thirds majority requirement and such
actions may be approved by shareholders owning a majority of the shares issued
and outstanding. Under Delaware law, the affirmative vote of the holders of a
majority of outstanding shares entitled to vote is required in order to approve
such transactions, unless the Certificate of Incorporation provides for a larger
vote requirement. The Certificate of Incorporation of Celtic Delaware does not
so provide.
Preemptive Rights. Under Illinois law and Delaware law, shareholders do
not have preemptive rights to subscribe for additional shares, except to the
extent provided in the Articles of Incorporation or Certificate of
Incorporation. Neither the Certificate of Incorporation of Celtic Delaware nor
the Articles of Incorporation of Celtic Illinois grants preemptive rights to
shareholders.
Indemnification. Under Illinois law and Delaware law, a corporation may
indemnify directors and officers who are or are threatened to be made parties to
civil, criminal, administrative or investigative proceedings by reason of the
fact that such person was a director or officer of the corporation against
expenses, judgments, fines and amounts paid in settlement, if such person acted
in good faith and in a manner reasonably believed to be in, or not opposed to,
the best interests of the corporation and with respect to criminal proceedings,
had no reasonable cause to believe that the conduct was unlawful. Both Illinois
and Delaware law provide that their statutory provisions shall not be deemed to
be exclusive of any rights to which a person seeking indemnification may be
entitled under any by-law, agreement, vote of shareholders of disinterested
directors or otherwise. Both Illinois and Delaware law provide that a
corporation may purchase insurance on behalf of any director or officer against
liability incurred by such person in such capacity whether or not the
corporation would have the power to indemnify such person against such liability
under the relevant statutory provisions.
Under Illinois law, expenses incurred by a director or officer in
defending a proceeding may be advanced by the corporation prior to final
disposition of the matter if such person undertakes to repay such amount unless
it shall ultimately be determined that such person is entitled to be indemnified
by the corporation pursuant to the statute. Under Delaware law, expenses
incurred by a director or officer in defending a proceeding may be advanced by
the corporation prior to final disposition of the matter if such person
undertakes to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation pursuant to the
statute.
The Articles of Incorporation and Bylaws of Celtic Illinois and the
Certificate of Incorporation of Celtic Delaware provide for indemnification of
directors and officers in accordance with the foregoing statutory provisions;
however, both provide that, notwithstanding anything therein to the contrary, no
director or officer shall be indemnified or insured against any liability to the
Company or to its shareholders to which
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such person would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence with respect to the duties involved in the conduct of
such person's office. Under Illinois law, a corporation is required to notify
its shareholders when indemnity has been paid or expenses advanced. There is no
similar provision under Delaware law.
Limitation of Damages. Under Delaware and Illinois law, a corporation
may adopt a provision in its charter eliminating or limiting the personal
liability of directors to the corporation or its shareholders for monetary
damages for violations of their duties of care. The Articles of Incorporation of
Celtic Illinois includes such a provision. The Certificate of Incorporation of
Celtic Delaware does not contain such a provision.
Preferred Shares. As permitted by Delaware law, the Certificate of
Incorporation of Celtic Delaware and the Articles of Incorporation of Celtic
Illinois grant power to the Board of Directors to provide for the issuance of
preferred shares in one or more series, with such distinctive designations as
the Board determines, and to fix the designation, rights, preferences and
limitations of the shares of any series, including the number of shares of any
series the dividend rate, the redemption right and price, the rights in respect
of a liquidation, dissolution or winding up, the voting rights, the obligation
to retire any such shares, the conversion terms and conditions and any other
rights, preferences or limitations.
Board of Directors Vacancy. As permitted by Delaware law and Illinois
law, the Bylaws of Celtic Delaware and the Bylaws of Celtic Illinois provide
that vacancies in the Board of Directors may be filled by the remaining
Directors. A director so appointed would, however, serve only until the next
meeting of shareholders at which directors for that class are to be elected.
Amendments to Bylaws. As permitted by Delaware law and Illinois law,
the Bylaws of the Company and of Celtic Illinois provide that the Bylaws may be
amended, repealed or new Bylaws adopted by the affirmative vote of the
shareholders or by the Board of Directors. No Bylaws adopted or amended by the
shareholders may be amended or repealed by the Board of Directors.
Interested Shareholder Provisions. Delaware and Illinois each have a
law that is similar in concept that prevents an "interested shareholder"
(defined as a holder who acquires 15% or more of a target company's stock) from
entering into a business combination with the target company within three years
after the date it acquired such stock. However, a business combination is
permitted (i) if prior to the date the shareholder became an interested
shareholder, the board of directors of the target company approved either the
business combination or such acquisition of stock, (ii) if at the time the
interested shareholder acquired such 15% interest, it acquired 85% or more of
the outstanding stock of the corporation, excluding shares held by directors,
who are also officers, and shares held under certain employee stock plans, or
(iii) if the business combination is approved by the target company's board of
directors and two-thirds of the outstanding shares voting at an annual meeting
of shareholders, excluding shares held by the interested shareholder. This
provision applies automatically, except in the case of corporations with less
than 2,000 shareholders of record and without voting stock listed on a national
exchange or authorized for quotation with a registered national securities
association. Additional exceptions allow corporations, in certain instances, to
adopt charters or bylaws that elect not to be governed by these provisions.
Neither the Company nor Celtic Illinois has so elected; any amendment to effect
such an election would not be effective for twelve months and would not apply to
those who were already interested shareholders. In addition, the Illinois law
limits its application to domestic corporations which have equity securities
registered under the Exchange Act a condition that will exist in the case of
Celtic Illinois and which either have their principal place of business in
Illinois or have certain levels of assets and resident shareholders located in
Illinois.
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Director Decisions. Illinois law contains a provision that provides
that, in considering the best long-term and short-term interests of the
corporation, the directors may consider the effects of any action (including
without limitation action which may involve or relate to a change or potential
change in control of the corporation) upon employees, suppliers and customers of
the corporation, communities in which offices of the corporation are located and
all other pertinent factors. Delaware law does not contain a similar provision.
Fair Price Provision. Illinois law contains a fair price provision that
is designed to provide a means of obtaining substantially equal treatment of
shareholders in connection with certain business combination transactions.
Delaware law does not contain a similar provision. The Illinois law applies
automatically to a domestic corporation with a class of equity securities
registered under the Exchange Act a condition that will exist in the case of
Celtic Illinois, or to a domestic corporation which specifically adopts the
provisions of the statutory section in its charter. Illinois law provides that,
along with any affirmative vote required by law, certain business combinations
must be approved by (i) the affirmative vote of the holders of at least 80% of
the voting power of all outstanding voting stock voting together as a single
class and (ii) the affirmative vote of the holders of at least a majority of the
voting power of outstanding voting stock held by disinterested (i.e. not
"interested", as defined below) shareholders voting together as a single class.
Transactions subject to such approval include mergers, consolidations, mandatory
share exchanges, sales of assets having a fair market value equal to 10% or more
of the corporation's net worth, certain issuances of securities, liquidations,
dissolutions, reclassifications of securities or recapitalizations (each a
"Business Combination") entered into between the corporation and an "interested
shareholder" (generally the direct or indirect beneficial owner of 10% or more
of the corporation's voting stock). These provisions do not apply if (i) a
Business Combination has been approved by two-thirds of the directors of the
corporation who were directors prior to the time the interested shareholder
attained such status and are themselves neither interested shareholders nor
affiliates or associates of an interested shareholder or (ii) the Business
Combination meets certain price criteria and procedural requirements designed to
ensure that all shareholders of the corporation receive a fair price for their
shares.
Federal Income Tax Consequences of the Merger
The Company believes that for federal income tax purposes the Merger
will constitute a reorganization under Section 368(a)(1)(F) of the Internal
Revenue Code of 1954, as amended (the "Code"), and that consequently the holders
of the Delaware Common Stock will not recognize any gain or loss as a result of
the Merger. For federal income tax purposes, each shareholder of the Company
will retain the same tax basis in his Illinois Common Stock as he had in the
corresponding Delaware Common Stock held by him immediately prior to the
Effective Time of the Merger, and his holding period of the Illinois Common
Stock will include the period during which he held the corresponding Delaware
Common Stock, provided that such corresponding Delaware Common Stock was held by
him or her as a capital asset at the Effective Time of the Merger.
Although it is not anticipated that state or local income tax
consequences to shareholders will vary from the federal income tax consequences
described above, holders should consult their own tax advisors as to the effect
of the reorganization under state, local or foreign income tax laws. The Company
anticipates that it will not recognize any gain, loss or income for federal
income tax purposes as a result of the Merger, and that Celtic Illinois will
succeed, without adjustment, to the tax attributes of Celtic Delaware.
ALL COMPANY SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER.
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Dissenting Shareholders' Rights
The Company's shareholders are entitled to dissenting shareholders'
rights pursuant to Section 262 of the Delaware General Corporation Law. Under
Delaware law, shareholders electing to exercise dissenting shareholders' rights
must comply with the procedure set forth in such laws. A shareholder exercising
his or her dissenter rights pursuant to Delaware law will be entitled to sell
his or her shares to the Company for the fair value of the shares as determined
in accordance with Delaware law. A copy of such Section 262 is attached hereto
as an exhibit.
Vote Required: Board Recommendation
The affirmative vote of a majority of the outstanding Common Stock of
the Company is required for approval of the Reincorporation Proposal. A vote for
the Reincorporation Proposal will constitute approval of all transactions and
proceedings which are included in the Reincorporation Proposal described in this
Proxy Statement. The Board of Directors has unanimously approved the
Reincorporation Proposal and unanimously recommends that you vote for the
Reincorporation Proposal. Proxies solicited by the Board of Directors will be
voted for the Reincorporation Proposal unless a vote against the Proposal or
abstention is specifically indicated.
PROPOSAL 3: RATIFICATION AND APPROVAL OF 1997 STOCK OPTION PLAN
On November 5, 1997, the Board of Directors of the Company adopted the
1997 Stock Option Plan (the "Plan"), subject to approval by the shareholders of
the Company. Incentive stock options, intended to qualify under Section 422 of
the Code, and non-qualified stock options may be granted under the Plan. The
following is a summary of the material provisions of the Plan.
Purpose
The purpose of the Plan is to advance the interests of the Company by
encouraging and enabling the acquisition of a larger personal proprietary
interest in the Company by key employees, consultants and independent
contractors who are employed by, or perform services for, the Company and its
subsidiaries and upon whose judgment and keen interest the Company is largely
dependent for the successful conduct of its operations. It is also expected that
the opportunity to acquire such a proprietary interest will enable the Company
and its subsidiaries to attract and retain desirable personnel, directors and
other service providers. Officers or directors of the Company may not be granted
options under the Plan.
Administration
The Plan is administered by a Committee (the "Committee") of the Board
of Directors, which must consist of two or more directors of the Company.
Initially, the Committee will consist of the entire Board of Directors of the
Company. The Committee may grant options to key employees, consultants and
independent contractors to the Company. The term of each option may not exceed
ten years from the date of grant. The exercise price of an option shall be
determined by the Committee, but in the case of an incentive stock option (as
described below), the per share exercise price may not be less than 100% of the
fair market value of a share of Common Stock on the date of grant. The options
generally vest at a rate determined by the Committee at the time of grant.
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Determinations of the Committee as to any question which may arise with
respect to the interpretation of the provisions of the Plan and options are
final. The Committee may authorize and establish such rules, regulations and
revisions thereof not inconsistent with the provisions of the Plan, as it may
deem advisable to make the Plan and options effective, or provide for their
administration, and may take such other action with regard to the Plan and
options as it deems desirable to effectuate their purpose.
Major Provisions of the Plan
Types of Options to Be Granted. Under the Plan, the Committee may grant
either an "incentive stock option" ("ISO") within the meaning of Section 422 of
the Code or options which do not satisfy Section 422 of the Code ("non-qualified
stock options" or "NSOs"). Options with respect to which no designation is made
by the Committee are deemed to ISOs to the extent they meet the requirements for
ISOs. No option which is intended to qualify as an ISO may be granted under the
Plan to any individual who, at the time of such grant, is not an employee of the
Company.
Eligibility. The potential recipients of options under the Plan are key
employees (excluding officers and directors) of the Company (and its
subsidiaries), and consultants and independent contractors used by the Company
and its subsidiaries (collectively the "Eligible Participants") each
individually as determined by the Committee in its sole discretion. At November
5, 1997, approximately 25 persons were eligible to participate in the Plan. No
option which is intended to qualify as an ISO may be granted under this Plan to
any employee who, at the time the option is granted, owns shares possessing more
than ten percent of the total combined voting power or value of all classes of
stock of the Company, unless the exercise price under such option is at least
110% of the fair market value of a share of Common Stock on the date such option
is granted and the duration of such option is no more than five years.
Shares of Common Stock Subject to the Plan. The Board of Directors
proposes for shareholder approval that the Plan provide that the number of
shares of Common Stock that may be the subject of Options may not exceed
1,000,000 in the aggregate, which Common Stock may be held in treasury or
authorized but unissued. The maximum number of shares which may be the subject
of options granted to any individual during any calendar year shall not exceed
100,000 shares. If any Option shall expire, be canceled or terminate for any
reason without having been exercised in full, the unpurchased shares subject
thereto may again be made subject to options under the Plan; however, any option
granted to a "covered employee" as defined under Section 162(m) of the Code
which is canceled or repriced shall continue to be counted against the maximum
number of shares subject to options granted to such employee, in accordance with
Section 162(m) of the Code.
Grant of Options. The Committee, in its sole discretion (subject to the
Plan) determines the number of shares of Common Stock subject to each option
granted to any eligible participant under the Plan. The terms of the Plan do not
prohibit the issuance of options at different times to the same person.
Option Exercise Price and Duration. The Committee fixes the price per
share of the Common Stock to be purchased pursuant to the exercise of any
option; however, the per share exercise price under an ISO may not be less than
the Fair Market Value (as defined in the Plan) of a share of Common Stock on the
day on which the option is granted. Under the Plan, the option price for an NSO
granted may not be less than the 50% of Fair Market Value. The Committee fixes
the duration of an option up to a maximum of ten years from the date of grant.
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Payment for Shares. The Company must obtain such consideration for the
grant of an option as the Committee in its discretion may request. The
Committee, in its discretion, may permit a particular optionee to pay all or a
portion of the option price and/or the tax withholding liability with respect to
the exercise of an option either by surrendering shares of stock already owned
by such optionee or by withholding shares of option stock, provided that the
Committee determines that the Fair Market Value of such surrendered stock or
withheld option stock is equal to the corresponding portion of such option price
and/or tax withholding liability, as the case may be, to be paid for therewith.
If the Committee permits an optionee to pay any portion of the option price
and/or tax withholding liability with shares of stock with respect to the
exercise of an option (the "Underlying Option") then the Committee, in its
discretion, may grant to such optionee (but only if optionee remains an Eligible
Participant at that time) additional NSOs, the number of shares of option stock
called for thereunder to be equal to all or a portion of the Common Stock so
surrendered or withheld (a "Replacement Option"). Each Replacement Option will
be evidenced by an option agreement. Unless otherwise set forth therein, each
Replacement Option will be immediately exercisable upon such grant (without any
vesting period) and will be coterminous with the Underlying Option. The
Committee, in its sole discretion, may establish such other terms and conditions
for Replacement Options as it deems appropriate.
Exercise of Options. An option, once granted, will be exercisable by
the holder (or if deceased, by his estate) at such rate and times as may be
fixed by the Committee.
Termination of Options. To the extent not previously exercised, each
option will terminate upon the expiration of the option period specified in the
option agreement; provided, however, that an option will terminate (a) ninety
days after the date that the optionee ceases to be an Eligible Participant for
any reason, other than by reason of death or disability or a Just Cause
Termination; (b) twelve months after the date that the optionee ceases to be an
Eligible Participant by reason of such person's death or disability; or, (c)
immediately as of the date that the optionee ceased to be an Eligible
Participant by reason of a Just Cause Termination. For purposes of the Plan, the
term "Just Cause Termination" shall mean a termination by the Company of an
optionee's employment by and/or service to the Company in connection with the
good faith determination of the Company's Board that the optionee has engaged in
any acts involving dishonesty or moral turpitude or in any acts that materially
and adversely affect the business, affairs or reputation of the Company or its
subsidiaries.
Adjustment of Shares. The Plan contains usual anti-dilution provisions
in the event of certain corporate transactions.
Amendment and Termination of the Plan. The Board of Directors or the
Committee may at any time withdraw or from time to time amend the Plan and any
options not theretofore granted. With respect to any outstanding option, the
Board of Directors or the Committee, with the consent of the affected holder of
an option, may at any time withdraw or from time to time amend the Plan and the
terms and conditions of any outstanding option. Notwithstanding the foregoing,
any amendment by the Board of Directors or the Committee which would increase
the number of shares of Common Stock issuable under options, increase the number
of options which may be granted to any individual during a calendar year, or
change the class of persons to whom options may be granted, shall be subject to
the approval of the stockholders of the Company. No option shall be granted
under the Plan after November 5, 2006.
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Federal Income Tax Considerations
The following general discussion of federal income tax consequences is
only a summary of principal considerations based upon the tax laws and
regulations of the United States existing as of the date hereof, all of which
may be subject to modification or change at any time, in some cases
retroactively. This discussion is also qualified by certain exceptions and the
particular circumstances of individual optionees, which may substantially alter
or modify the consequences herein discussed. Optionees, in addition, may be
subject to state, estate or other taxation.
The 1997 Plan does not constitute a qualified retirement plan under
Section 401(a) of the Code (which generally covers trusts forming part of a
stock bonus, pension or profit sharing plan funded by the employer and/or
employee contributions which are designed to provide retirement benefits to
participants under certain circumstances) and is not subject to the Employee
Retirement Income Security Act of 1974 (the pension reform law which regulates
most types of privately funded pension, profit sharing and other employee
benefit plans).
Incentive Stock Options. With respect to ISOs granted under the 1997
Plan, an optionee generally will not recognize any income upon the grant or the
exercise of the option. Upon a subsequent disposition of the stock, the optionee
will generally recognize long-term capital gain or loss equal to the difference
between the amount paid for the stock and the amount realized on its
disposition, provided that the stock is not disposed of for at least two years
from the date the option is granted and for at least one year from the date the
stock is transferred to the optionee.
If the stock received pursuant to the exercise of an ISO is disposed of
prior to the aforementioned two-year or one-year periods (a "disqualifying
disposition"), the optionee will generally recognize ordinary compensation
income upon the making of such disqualifying disposition, in an amount equal to
the lesser of (i) the fair market value of the option shares on the exercise
date, minus the exercise price, and (ii) the amount realized on the disposition,
minus the exercise price. Any amount realized upon disposition in excess of the
fair market value of the shares on the date of exercise will generally be
treated as long-term or short-term capital gain, depending upon whether the
shares have been held for more than one year.
If an optionee exercises an ISO, in whole or in part, with previously
acquired stock of the Company, the exchange will not affect the ISO treatment of
the exercise. Upon such exchange, and except as otherwise described herein, no
gain or loss is recognized by the optionee upon delivering previously acquired
stock to the Company, and the shares of stock received by the optionee, equal in
number to the previously-acquired shares of stock exchanged therefor, will have
the same tax basis and holding period for long-term capital gain purposes as
such previously-acquired stock. (The optionee will not, however, be able to
utilize the prior holding period for the purpose of satisfying the ISO statutory
holding period requirements.) Shares of stock received by an optionee in excess
of the number of such previously-acquired shares of stock will have a tax basis
of zero and a holding period which commences as of the date of exercise. If the
exercise of an ISO is effected using stock previously-acquired through the
exercise of an ISO, the exchange of such previously acquired shares of stock
will be considered a disposition of such stock for the purpose of determining
whether a disqualifying disposition has occurred.
When the optionee exercises an ISO granted under the 1997 Plan, the
difference between the exercise price paid and the then-fair market value of the
stock will constitute an "item of adjustment" which may subject the optionee to
the alternative minimum tax ("AMT") imposed by Section 55 of the Code. However,
21
<PAGE>
if a disqualifying disposition occurs in the year in which the option is
exercised, the maximum amount that will be included as AMT income is the gain
realized on the disposition of the stock. If there is a disqualifying
disposition in a year other than the year of exercise, the income on the
disposition will not be considered income for AMT purposes. In addition, the
basis of the stock for determining gain or loss for AMT purposes will be the
exercise price for the stock, increased by the amount that the AMT income was
increased due to the earlier exercise of the ISO.
The Company will generally not be entitled to any federal income tax
deduction with respect to ISOs granted or exercised under the 1997 Plan.
However, if the optionee makes a disqualifying disposition, then the Company
generally will be entitled to a deduction in the year of such disqualifying
disposition in an amount equal to the income includable by the optionee with
respect to the transaction.
Non-Qualified Stock Options. An optionee who is granted an option to
acquire Common Stock under the 1997 Plan that does not qualify for ISO treatment
(an NSO) will not realize any income upon the grant of such option, but
generally will realize ordinary income when the NSO is exercised. The amount of
income to be recognized by the optionee is equal to the difference between the
amount paid for the stock and the fair market value of the stock received. The
ordinary income received will constitute compensation for which tax withholding
may be required.
If, however, a profitable sale of the stock subject to an NSO under the
1997 Plan could subject the optionee to suit under Section 16(b) of the Exchange
Act, then such optionee will generally recognize ordinary income on the date
when such optionee is no longer subject to such liability (or, if earlier, six
months from the transfer of the stock to the optionee) in an amount equal to the
fair market value of the shares on such date less the exercise price. However,
the optionee may elect within thirty days of the date of exercise to recognize
ordinary income as of the date of exercise.
Shares received pursuant to the exercise of a NSO granted under the
1997 Plan will have a tax basis equal to their fair market value on the exercise
date or other relevant date on which ordinary income is recognized, and the
holding period for the shares received generally will begin on the date of
exercise or other relevant date. Upon the subsequent sale of such shares, the
optionee will generally recognize long-term or short-term capital gain or loss,
depending upon whether the shares have been held for more than one year (and
provided that the shares constitute capital assets in the hands of the selling
stockholder), in an amount equal to the difference between the selling price and
the stockholder's tax basis in the shares sold.
If an optionee exercises a NSO, in whole or in part, with
previously-acquired stock of the Company, the optionee will recognize ordinary
income in the amount by which the fair market value of the stock received by the
optionee exceeds the exercise price. The optionee will not recognize gain or
loss upon delivering such previously acquired stock to the Company. Shares of
stock received by an optionee, equal in number to the previously acquired shares
of stock exchanged therefor, will have the same tax basis and holding period as
such previously acquired stock. Shares of stock received by an optionee in
excess of the number of such previously acquired shares of stock will have a tax
basis equal to the fair market value of such additional shares of stock as of
the date ordinary income is received, and the holding period for such additional
shares of stock will commence as of the date of exercise or such other relevant
date.
With respect to the grant and exercise of NSO under the 1997 Plan, the
Company generally will be entitled to a federal income tax deduction in its tax
year within which the optionee recognizes income (that
22
<PAGE>
is, the taxable year of the Company in which or with which the optionee's
taxable year of income recognition ends) equal to the amount of income
recognized by the optionee.
Withholding
Generally, the Company will be required to make arrangements for
withholding or reporting applicable taxes with respect to ordinary income
recognized by an optionee in connection with awards made under the 1997 Plan.
Special rules will apply in cases where the recipient of an award pays the
exercise or purchase price of the award or applicable withholding tax
obligations by delivering previously-owned shares or by reducing the number of
shares otherwise issuable pursuant to the award. Such delivery of shares will in
certain circumstances result in the recognition of income with respect to such
shares.
Section 280G of the Code
In addition to the federal income tax consequences discussed above,
Section 280G of the Code provides that if an officer, stockholder or highly
compensated individual receives a payment which, if in the nature of
compensation and which is contingent upon a change in control of the employer,
and such payment equals or exceeds three times his base salary, then any amount
received in excess of base salary shall be considered an "excess parachute
payment." An individual's base salary is equal to his average annual
compensation over the five-year period (or period of employment, if shorter)
ending with the close of the individual's taxable year immediately preceding the
taxable year in which the change in control occurs. In addition to any income
tax which would otherwise be owed on such payment, the individual will be
subject to an excise tax equal to 20% of such excess payment (and the Company
will not be allowed any deduction which might otherwise have been allowed for
such excess payment). If the taxpayer establishes, by clear and convincing
evidence, that the amount received is reasonable compensation for past or future
services, all or a portion of such amount shall be deemed not to be an excess
parachute payment.
Section 280G provides that payments made pursuant to a contract entered
into within one year of the change in control are presumed to be parachute
payments unless the individual establishes, by clear and convincing evidence,
that such contract was not entered into in contemplation of a change in control.
In addition, the General Explanation of the Tax Reform Act of 1984 prepared by
the Staff of the Joint Committee on Taxation indicates that the grant of an
option within one year of the change in control or the acceleration of an option
because of a change in control may be considered a parachute payment, in an
amount equal to the value of the option or the value of the accelerated portion
of the option, as the case may be. Pursuant to proposed regulations, the
acceleration of a NSO because of a change in control will be considered a
parachute payment. Even if the grant of an option, if any, within one year of
the change in control or the acceleration of an option, if any, is not a
parachute payment for purposes of Section 280G, the exercise of an option
granted within one year of the change in control or the exercise of the
accelerated portion of an option may result in a parachute payment, in an amount
equal to the excess of the fair market value of the shares received upon
exercise of the option over the exercise price. Payments received for the
cancellation of an option, if any, because of a change in control may also
result in parachute payments.
No Options Granted
No options have been granted under the Plan.
Vote Required for Approval
23
<PAGE>
The affirmative vote of a majority of the votes cast on the proposal to
approve the Plan is required for approval of the Plan.
Recommendation of Board of Directors
The Board of Directors of the Company recommends a vote FOR approval of
the Plan.
PROPOSAL 4: RATIFICATION AND APPROVAL OF 1996 AND
1997 EMPLOYEE OPTION GRANTS
The Company believes it is in the best interests of the Company and its
shareholders to provide stock options to employees for the purpose of promoting
the success of the Company and to advance the interests of the Company and its
shareholders by providing an additional means, through the grant of stock
options, to attract, motivate, retain and reward employees with incentives for
high levels of individual performance and improved financial performance of the
Company.
On July 1, 1996, the Company granted stock options to Larry Meek and
Frank Lucchese, President and Chief Financial Officer, respectively, of USCF.
Such options entitle Mr. Meek and Mr. Lucchese to purchase up to 150,000 shares
of the Company's common stock at $3.00 per share. Mr. Meek is also a director of
the Company and Mr. Lucchese is the Chief Financial Officer of the Company. As
part of their Employment Agreements, Mr. Meek and Mr. Lucchese were previously
granted options to purchase 560,000 and 140,000 shares of the Company's common
stock, respectively, which were previously approved by the Company's
shareholders. The bid price the Company's Common Stock on June 30, 1996 was
approximately $3.00.
On January 31, 1997, the Company acquired SLM and in connection
therewith, entered into Employment Agreements with Reese Howell, Jr. and Roger
D. Davis. In connection therewith, Mr. Howell and Mr. Davis were each granted
stock options to purchase 500,000 shares of the Company's common stock at a
price of $3.00 per share. The bid price for the Company's common stock on
January 31, 1997 was approximately $1.87 per share.
In June 1997, the Company's Board of Directors of the Company believed
that it would be in the best interest of the Company to reduce the number of
management stock options issued and outstanding in order to reduce market
overhang. Each of the officers and directors of the Company, and its
subsidiaries agreed to reduce the number of options owned by fifty percent
(50%). In consideration of such individuals agreeing to cancel one-half of their
options, the Company agreed to reduce the exercise price of the remaining
options from $3.00 per share to $1.00 per share. The trading price of the
Company's common stock on such date of cancellation of options was $1.00. All
information set forth below as to grants of options give effect to such
cancellation of options and to the corresponding reduction in the exercise price
of the remaining options.
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<PAGE>
Meek - Lucchese Options
The Options granted to Mr. Meek and Mr. Lucchese are exercisable at a price
of $1.00 per share and vest in three equal portions over a period of two years
pursuant to the following vesting schedule:
Name Vesting Date Number of Shares
Larry Meek 7/1/96 25,000*
7/1/97 25,000*
7/1/98 25,000
Frank Lucchese 7/1/96 25,000*
7/1/97 25,000*
7/1/98 25,000
*Currently vested
The options are exercisable for a term of five years from the date of
vesting. However, the options are not exercisable for six months from the date
of shareholder approval. The options will terminate; (i) ninety days (180 days
for NSOs) after the date that an optionee ceases to be an employee of the
Company for any reason, other than by reason of death or disability or
termination based upon just cause; (ii) three months after the date that an
optionee ceases to be an employee by reason of death or disability; (iii)
immediately as of the date that the optionee ceases to be an employee by reason
of termination for cause.
The Company has a right to repurchase the shares of common stock issued
to an optionee pursuant to the exercise of the options. In the event an
optionee's employment is terminated for cause, the Company may repurchase, for a
period of 90 days from termination, all of the shares issued at a price of $1.00
per share plus an 8% carrying cost. In the event the optionee's employment is
terminated other than for cause, the Company shall have the first right of
refusal to purchase the shares if the Optionee desires to sell all or a portion
of the shares within 90 days from the date of termination of employment.
Howell - Davis Options
The options to purchase 250,000 shares granted to each Mr. Howell and
to Mr. Davis are exercisable at a price of $1.00 per share and include
time-based options to purchase 75,000 shares which vest over a two year period
and performance-based options to purchase 175,000 shares which vest if certain
financial results are achieved by SLM and ARI.
Time Based Options. Mr. Howell and Mr. Davis are each granted options to
purchase 75,000 shares (the "Time Based Options") which vest in two equal
installments ("Vesting Periods") each of which shall entitle each of them to
purchase 37,500 Option Shares. The time-based options for each of Mr. Howell and
Mr. Davis shall vest as follows:
Number of
Vesting Date Option Shares
January 31, 1998 37,500
January 31, 1999 37,500
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<PAGE>
Performance-Based Options. Mr. Howell and Mr. Davis were also each
issued options to purchase an additional 175,000 option shares (the
"Performance-Based Options"). The Performance-Based Options shall vest, if at
all, over a period of three years and five months commencing on January 31, 1999
and ending on June 30, 2002. The vesting schedule shall be based on four periods
during which the "Performance-Based Options" shall vest and such periods are as
follows:
Period 1 - Commencing January 31, 1999, ending June 30, 1999.
Period 2 - Commencing July 1, 1999, ending June 30, 2000.
Period 3 - Commencing July 1, 2000, ending June 30, 2001.
Period 4 - Commencing July 1, 2001, ending January 31, 2002.
(a) The first group ("First Option") to purchase 24,306 option shares,
shall vest, subject to the achievement of the performance criteria for the First
Option, on June 30, 1999. In order for the First Option to vest, Adjusted Pretax
Profits, as defined in the Option Agreement, for the twelve-month period ending
on June 30, 1999, must be not less than 118% of the Adjusted Pretax Profits as
stated in the June 30, 1998 fiscal year ending audited financial statements.
(b) The second group ("Second Option") to purchase 58,333 option
shares, shall vest, subject to the achievement of the performance criteria for
the Second Option, on June 30, 2000. In order for the Second Option to vest,
Adjusted Pretax Profits for the twelve-month period ending on June 30, 2000,
must be not less than 118% of the Adjusted Pretax Profits as stated in the June
30, 1999 fiscal year ending audited financial statements.
(c) The third group ("Third Option") to purchase 58,333 option shares,
shall vest, subject to the achievement of the performance criteria for the Third
Option, on June 30, 2001. In order for the Third Option to vest, Adjusted Pretax
Profits for the twelve-month period ending on June 30, 2001, must be not less
than 118% of the Adjusted Pretax Profits as stated in the June 30, 2000 fiscal
year ending audited financial statements.
(d) The fourth group ("Fourth Option") to purchase 34,028 option
shares, shall vest subject to the achievement of the performance criteria for
the Fourth Options, on June 30, 2002. In order for the Fourth Option to vest,
Adjusted Pretax Profits for the twelve-month period ending on June 30, 2002,
must be not less than 118% of the Adjusted Pretax Profits as stated in the June
30, 2001 fiscal year ending audited financial statements.
Adjusted Pretax Profits as defined in the Option Agreement means all
amounts which, in conformity with GAAP, would be included in the pre-tax net
income on a consolidated income statement of SLM and ARI for such period subject
to certain adjustments.
Each group of Performance-Based Options shall vest or be void in total
on a group basis and there shall be no prorata vesting of Options within a
group. If the performance criteria is not met for a group of Performance-Based
Options, then no options from that group shall vest except for the provisions
provided for in the employment agreement.
The options are exercisable for a term of five years from the date of
vesting. However, the options are not exercisable for six months from the date
of shareholder approval. The options will terminate; (i) ninety days (180 days
for NSOs) after the date that an optionee ceases to be an employee of the
Company for any reason, other than by reason of death or disability or
termination based upon just cause; (ii) three months after
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<PAGE>
the date that an optionee ceases to be an employee by reason of death or
disability; (iii) immediately as of the date that the optionee ceases to be an
employee by reason of termination for cause.
The Company has a right to repurchase the shares of common stock issued
to an optionee pursuant to the exercise of the options. In the event an
optionee's employment is terminated for cause, the Company may repurchase, for a
period of 90 days from termination, all of the shares issued at a price of $1.00
per share plus an 8% carrying cost. In the event the optionee's employment is
terminated other than for cause, the Company shall have the first right of
refusal to purchase the shares if the optionee desires to sell all or a portion
of the shares within 90 days from the date of termination of employment.
Each option shall be deemed to be an ISO to the maximum amount allowed
by the Code and an NSO to the extent not deemed to be an ISO.
Option Grant Table
The following table shows certain information with respect to the stock
options which were granted in June, 1996, and in January, 1997, subject to
shareholder approval:
NEW PLAN BENEFITS
- - --------------------------------------------------------------------------------
Plan Name
- - --------------------------------------------------------------------------------
Name and Position Dollar Value ($) Number of Units
- - --------------------------- -------------------------- -----------------------
Larry Meek (1) 75,000
Frank Lucchese (1) 75,000
Reese Howell, Jr. (1) 250,000
Roger D. Davis (1) 250,000
- - --------------------------- -------------------------- -----------------------
(1) The "Plan" is limited to written Option Agreements entered into by
the Company and each optionee. Inasmuch as the exercise price of the
options granted equaled the market price of the Company's common stock
on the date of grant there currently is no determinable value to the
options.
(2) The options granted were one-time grants of options to the four
named option holders. No other person participated in the receipt of
such options.
Transferability
The Options are not transferable by an optionee otherwise than at his
or her death by will or by the laws of descent and distribution and are
exercisable during the lifetime of the optionee only by the optionee. The shares
of the Company's common stock underlying the option have not been registered
under the Securities Act, and such common stock may not be freely transferable
and must be held indefinitely unless such common stock is either registered
under the Securities Act or an exemption from registration is available. The
Company has agreed to register the shares underlying the options and intends to
do so in the near future.
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<PAGE>
Tax Information
The options granted are both ISOs and NSOs. The Option Agreements
provide that each vested installment shall be deemed to be an ISO to the maximum
amount allowed by the Code and an NSO to the extent not deemed to be an ISO.
Under the Code, the maximum amount of ISOs which are first exercisable by an
employee in a given year may not be for stock worth more than $100,000. To the
extent the fair market value exceeds $100,000, such excess shares are deemed to
be NSOs rather than ISOs. For additional information concerning the tax
consequences of the options, see the discussion of Tax Matters in Proposal 3
above.
Recommendation of Board of Directors
The Board of Directors recommends a vote FOR the proposal to ratify
1996 grants of stock options to Larry Meek and Frank Lucchese and 1997 grants of
stock options to Reese Howell, Jr. and Roger Davis.
RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS
McGladdery & Pullen has served as the Company's independent auditor
since 1996. It is not expected that any representative of McGladdery & Pullen
will be present at the Annual Meeting.
GENERAL
Management of the Company does not know of any matters other than the
foregoing that will be presented for consideration at the Meeting. However, if
other matters properly come before the Meeting, it is the intention of the
persons named in the enclosed proxy to vote thereon in accordance with their
judgment.
Shareholder proposals intended for presentation at the Company's 1998
Annual Meeting of Shareholders must be received by the Company at its principal
offices at 17W220 22nd Street, Suite 420, Oakbrook Terrace, IL 60181 not later
than August 23, 1998.
The entire cost of soliciting management proxies will be borne by the
Company. Proxies will be solicited by mail and may be solicited personally by
directors, officers or regular employees of the Company, who will not be
compensated for their services. The Company will reimburse banks, brokerage
firms, and other custodians, nominees and fiduciaries for reasonable expenses
incurred in sending proxy material to their proposals and obtaining their
proxies. A professional proxy solicitor will not be engaged.
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<PAGE>
IN ORDER THAT YOUR SHARES MAY BE REPRESENTED, IF YOU DO NOT PLAN TO
ATTEND THE MEETING, PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY. IN THE
EVENT YOU ARE ABLE TO ATTEND, WE WILL, IF YOU REQUEST, CANCEL THE PROXY.
By Order of the Board of Directors
/s/ Douglas P. Morris
Douglas P. Morris
President
December 10, 1997
Exhibits
Celtic Illinois Articles of Incorporation
Celtic Illinois Bylaws
Delaware Dissenter's Rights Statute
Stock Option Plan
29
<PAGE>
PROXY
CELTIC INVESTMENT, INC.
ANNUAL MEETING OF SHAREHOLDERS
January 12, 1998
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
The undersigned hereby appoints Douglas P. Morris, President and
director of Celtic Investment, Inc., or any member of the Board of Directors,
with power of substitution, to represent and vote on behalf of the undersigned
all shares of common stock of Celtic Investment, Inc. which the undersigned is
entitled to vote at the Annual Meeting of Shareholders to be held on January 12,
1998, at 6:00 p.m. and at any adjournment or adjournments thereof, hereby
revoking all proxies heretofore given with respect to such stock, upon the
following proposals more fully described in the Proxy Statement for the meeting,
receipt of which is hereby acknowledged.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR (2) (3) and (4).
<TABLE>
<S> <C> <C>
1. ELECTION OF DIRECTORS FOR all nominees listed below NO AUTHORITY
(except as marked to the to vote for all nominees listed
contrary below) ____ below ____
</TABLE>
Howard M. Talks, Douglas P. Morris, Larry Meek, Reese Howell, Jr. and
Pamela Davis
INSTRUCTION: To withhold authority to vote for any individual
nominee write that nominee's name on the space
provided below.
-------------------------------------------------------------------.
<TABLE>
<S> <C> <C> <C>
2. Reincorporation Merger For ____ Against ____ Abstain ____
3. 1997 Stock Option Plan: For ____ Against ____ Abstain ____
4. 1996 and 1997 Grants of Stock Options: For ____ Against ____ Abstain ____
</TABLE>
5. IN THEIR DISCRETION, Proxy holders are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED FOR ALL PROPOSALS SET FORTH ABOVE.
Please sign exactly as the name appears on your stock certificate. When
shares are held by joint tenants, both should sign. Please return this Proxy in
the enclosed envelope.
Dated:______________________ __________________________________
Signature
____________________________ __________________________________
Number of shares owned Please print name clearly
Return Proxy To:
Celtic Investment, Inc.
17W220 22nd Street, Suite 420
Oakbrook Terrace, Illinois 60181
30
<PAGE>
CELTIC INVESTMENT, INC.
NOTICE OF THE ANNUAL MEETING OF SHAREHOLDERS
To Be Held January 12, 1998
TO THE SHAREHOLDERS OF CELTIC INVESTMENT, INC.
The Annual Meeting of the Shareholders of Celtic Investment, Inc. (the
"Company") will be held at the _________________________________, _______,
Illinois ____on January 12, 1998, at 6:00 p.m. local time, for the following
purposes:
1. To elect five (5) directors each to serve until the next Annual Meeting of
Shareholders or until their successors shall have been duly elected and
qualified.
2. To consider and act upon a proposal to approve and adopt a Plan of
Reorganization and Agreement of Merger which provides for the merger of the
Company with and into its wholly-owned subsidiary in order to change the
state of incorporation of the Company from Delaware to Illinois as set
forth in the Proxy Statement.
3. To approve the adoption of the Company's 1997 Stock Option Plan;
4. To ratify and approve 1996 and 1997 grants of stock options to certain
employees of U.S. Commercial Funding Corp, Salt Lake Mortgage Corp. and
Advantage Realty, Inc., all of which are subsidiaries of the Company
5. To transact such other business as may come before the meeting or any
adjournment or adjournments thereof.
The Board of Directors has fixed the close of business on December 10,
1997 as the record date for the determination of shareholders entitled to notice
of and to vote at the meeting and any adjournments thereof.
By Order of the Board of Directors
/s/ Douglas P. Morris
Douglas P. Morris President
Oakbrook Terrace, Illinois
December 10, 1997
===============================================================================
All shareholders are cordially invited to attend the meeting in
person. However, to assure your representation at the meeting, you are urged to
sign and return the enclosed proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if he or she has returned a proxy.
===============================================================================
ARTICLES OF INCORPORATION
OF
CELTIC INVESTMENT, INC.
The undersigned incorporator hereby forms a corporation pursuant to the
Corporation Law of the State of Illinois.
ARTICLE I - NAME. The name of the corporation is Celtic Investment, Inc.
(the "Corporation").
ARTICLE II - REGISTERED OFFICE. The registered office of the Corporation in
the State of Illinois is 140 South Dearborn Street, Suite 1400, Chicago,
Illinois, Cook County, 60603. The registered agent in charge thereof at such
address is Robert B. Chapman.
ARTICLE III - PURPOSES. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the
Illinois Business Corporation Act.
ARTICLE IV- CAPITAL STOCK. The total number of shares of all classes of
capital stock which the Corporation has the authority to issue is 32,500,000
shares which are divided into two classes as follows:
7,500,000 shares of Preferred Stock (Preferred Stock) $.001 par
value per share, and
25,000,000 shares of Common Stock (Common Stock) $.001 par
value per share.
The designations, voting powers, preferences and relative,
participating, optional or other special rights, and qualification, limitations
or restrictions of the above classes of stock are as follows:
Preferred Stock
1. Issuance in Series. Shares of Preferred Stock may be issued
in one or more series at such time or times, and for such consideration
or considerations as the Board of Directors may determine. All shares
of any one series of Preferred Stock will be identical with each other
in all respects, except that shares of one series issued at different
times may differ as to dates from which dividends thereon may be
cumulative. All series will rank equally and be identical in all
respects, except as permitted by the following provisions of paragraph
2.
2. Authority of the Board with Respect to Series. The Board of
Directors is authorized, at any time and from time to time, to provide
for the issuance of shares of Preferred Stock in one or more series
with such designations, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof as are stated and expressed in the resolution or
resolutions providing for the issue
31
<PAGE>
thereof adopted by the Board of Directors, including, but not limited
to, determination of any of the following:
(a) the distinctive serial designation and the number of shares constituting a
series;
(b) the dividend rate or rates, whether dividends are cumulative and, if so,
from which date, the payment date or dates for dividends, and the
participating or other special rights, if any, with respect to dividends;
(c) the voting powers, full or limited, if any, of the shares of the series;
(d) whether the shares are redeemable and, if so, the price or prices at which,
and the terms and conditions on which, the shares may be redeemed;
(e) the amount or amounts payable upon the shares in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation prior
to any payment or distribution of the assets of the Corporation to any
class or classes of stock of the Corporation ranking junior to the
Preferred Stock;
(f) whether the shares are entitled to the benefit of a sinking or retirement
fund to be applied to the purchase or redemption of shares of a series and,
if so entitled, the amount of the fund and the manner of its application,
including the price or prices at which the shares may be redeemed or
purchased through the application of the fund;
(g) whether the shares are convertible into, or exchangeable for, shares of any
other class or classes of stock of the Corporation and, if so convertible
or exchangeable, the conversion price or prices, or the rates of exchange,
and the adjustments thereof, if any, at which the conversion or exchange
may be made, and any other terms and conditions of the conversion or
exchange; and
(h) any other preferences, privileges and powers, and relating participating,
optional or other special rights, and qualifications, limitations or
restrictions of a series, as the Board of Directors may deem advisable and
as are not inconsistent with the provisions of these Articles of
Incorporation.
3. Dividends. Before any dividends on any class or classes of
stock of the Corporation ranking junior to the Preferred Stock (other
than dividends payable in shares of any class or classes of stock of
the corporation ranking junior to the Preferred Stock) may be declared
or paid or set apart for payment, the holders of shares of Preferred
Stock of each series are entitled to such cash dividends, but only when
and as declared by the Board of Directors out of funds legally
available therefor, as they may be adopted by the Board of Directors
providing for the issue of the series, payable on such dates in each
year as may be
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fixed in the resolution or resolutions. The term "class or classes of
stock of the Corporation ranking junior to the Preferred Stock" means
the Common Stock and any other class or classes of stock of the
Corporation hereafter authorized which rank junior to the Preferred
Stock as to dividends or upon liquidation.
4. Reacquired Shares. Shares of Preferred Stock which have
been issued and reacquired in any manner by the Corporation (excluding,
until the Corporation elects to retire them, shares which are held as
treasury shares but including shares redeemed, shares purchased and
retired and shares which have been converted into shares of Common
Stock) will have the status of authorized and unissued shares of
Preferred Stock and may be reissued.
5. Voting Rights. Unless and except to the extent otherwise
required by law or provided in the resolution or resolutions of the
Board of Directors creating any series of Preferred Stock the holders
of the Preferred Stock shall have no voting power with respect to any
matter whatsoever.
Common Stock
1. Dividends. Subject to the preferential rights of the
Preferred Stock, the holders of the Common Stock are entitled to
receive, to the extent permitted by law, such dividends as may be
declared from time to time by the Board of Directors.
2. Liquidation. In the event of the voluntary or involuntary
liquidation, dissolution, distribution of assets or winding up of the
Corporation, after distribution in full of the preferential amounts, if
any, to be distributed to the holders of shares of Preferred Stock,
holders of Common Stock shall be entitled to receive all of the
remaining assets of the Corporation of whatever kind available for
distribution to Stockholders ratably in proportion to the number of
shares of Common Stock held by them respectively. The Board of
Directors may distribute in kind to the holders of Common Stock such
remaining assets of the Corporation or may sell, transfer or otherwise
dispose of all or any part of such remaining assets to any other
corporation, trust or other entity and receive payment therefor in
cash, stock or obligations of such other corporation, trust or other
entity, or any combination thereof, and may sell all or any part of the
consideration so received and distribute any balance thereof in kind to
holders of Common Stock. The merger or consolidation of the Corporation
into or with any other corporation, or the merger or any other
corporation into it, or any purchase or redemption of shares of stock
of the Corporation of any class, shall not be deemed to be a
dissolution, liquidation or winding up of the Corporation for the
purposes of this paragraph.
3. Voting Rights. Except as may be otherwise required by law
or these Articles of Incorporation, each holder of Common Stock has one
vote in respect of each share of stock held by him or record on the
books of the corporation on all matters voted upon by the
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Stockholders. No Shareholder may cumulate his voted in the election of
directors. The right of cumulative voting is eliminated in all circumstances.
Other Provisions
1. Cumulative Voting. Cumulative Voting Rights of all shareholders are
eliminated in all circumstances.
2. Changes in Authorized Capital Stock. Subject to the protective conditions
and restrictions of any outstanding Preferred Stock, any amendment to these
Articles of Incorporation which increases or decreases the authorized
capital stock of any class or classes may be adopted by the affirmative
vote of the holders of a majority of the outstanding shares of the voting
stock of the Corporation.
3. Approval of Actions. The two-thirds vote requirement of Sections 10.20,
11.20, 11.60, 12.15, and any other sections of the Illinois Business
Corporation Act which permits a vote of two-thirds of the shareholders to
be superseded by the provisions of the Articles of Incorporation, are
superseded so that each such action will be approved upon receiving the
affirmative vote of the holders of at least the majority of the total
outstanding shares entitled to vote on the action and the affirmative vote
of the holders of at least a majority of the outstanding shares of each
class or series of shares entitled to vote as a class on the action;
provided, however, that any amendment to Article VI of these Articles of
Incorporation will require the affirmative vote of the holders of at least
two-thirds of the total outstanding shares entitled to vote on that
amendment.
ARTICLE V - CERTAIN CONTRACTS. No contract or transaction between the
Corporation and one partnership and one or more of its directors or officers or
between the Corporation and any other corporation, partnership, association, or
other organization in which one or more of its directors or officers are
directors or officers or have a financial interest, will be void or voidable
solely for this reason, or solely because the director or officer is present at
or participates in the meeting of the board of committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if:
1. The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee, and the Board or committee, in good faith, authorizes the contract or
transaction by a vote sufficient for such purpose without counting the vote of
the interested director or directors; or
2. The material facts as to his interest and as to the contract or
transaction are disclosed or are known to the shareholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by vote of the shareholders; or
3. The contract or transaction is fair as to the Corporation as of the
time it is authorized, approved, or ratified, by the Board of Directors, a
committee thereof, or the shareholders.
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Interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
ARTICLE VI - INDEMNIFICATION.
1. The Corporation has the power to indemnify any person who was or is
a party, or is threatened to be made a party, to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee, or agent of
the Corporation, or who is serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against expenses (including attorneys'
fees) judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit, or proceeding if he
or she acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. The termination of any action, suit, or proceeding by
judgment or settlement or conviction or upon a plea of nolo contendere or its
equivalent, will not, of itself, create a presumption that the person did not
act in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the Corporation, or with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
2. In addition to any other provision of these Articles of
Incorporation no director of this Corporation will be liable to this Corporation
or its shareholders for monetary damages for breach of fiduciary duty as a
director, provided that the provision does not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
Corporation or its shareholders, (ii) for acts or omissions not in good faith or
that involve intentional misconduct or a knowing violation of law, (iii) under
Section 8.65 of the Illinois Business Corporation Act of 1983, as amended, or
(iv) for any transaction from which the director derived an improper personal
benefit. No such provision will eliminate or limit the liability of a director
for any act or omission occurring before the date when the provision becomes
effective.
3. The Corporation has the power to indemnify any person who was or is
a party, or is threatened to be made a party, to any pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee, or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he or she acted in good faith an in a
manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Corporation, provided that no indemnification will be made with
respect to any claim, issue, or matter as to which such person has been adjudged
to have been liable to the Corporation unless and only to the extent that the
court in which such action or suit was brought will determine upon application
that, despite the adjudication of liability, but in the view of all the
circumstances of the
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case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court will deem proper.
4. To the extent that a director, officer, employee, or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2, or in defense of any
claim, issue, or matter therein, he or she will be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or her in
connection therewith.
5. Any indemnification under Sections 1 and 2 of this Article (unless
ordered by a court) will be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee, or agent is proper in the circumstances because he or she has
met the applicable standard of conduct set forth in Sections 1 and 2 of this
Article. Such determination will be made (a) by the board of directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (c) by the shareholders.
6. Expenses incurred in defending a civil or criminal action, suit or
proceeding may be paid by the Corporation in advance of the final disposition of
such action, suit or proceeding, as authorized by the board of directors in the
specific case, upon receipt of an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it is ultimately determined
that he or she is not entitled to be indemnified by the Corporation as
authorized in this Article.
7. The indemnification and advancement of expenses provided by or
granted under the other Sections of this Article will not be deemed exclusive of
any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any contract, agreement, vote of shareholders, or
disinterested directors or otherwise, both as to action in his or her official
capacity and as to action in another capacity while holding such office.
8. The Corporation will have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee, or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against any liability asserted against him
or her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the corporation would have the power to
indemnify him or her against such liability under the provisions of this
Article.
9. If the Corporation has paid indemnity or has advanced expenses to a
director, officer, employee, or agent, the Corporation will report the
indemnification or advance in writing to the shareholders with or before the
notice of the next shareholders meeting.
10. The definitions set forth in Sections 8.75(i) and (j) of the
Illinois Business Corporation Action of 1983, as amended, are hereby
incorporated into this Article VI as if here set
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forth. The board of directors may authorize the payment of expenses incurred to
the full extent provided by Section 8.75(e) of the Illinois Business Corporation
Act of 1983, as amended. All sections of this Article will comply with and be
governed and interpreted by, Section 8.75 of the Illinois Business Corporation
Act of 1983, as amended.
11. The indemnification and advancement of expenses provided by or
granted under this Article will, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and will inure to the benefit of the heirs, executors and
administrators of that person.
12. For the purposes of this Article VI, references to "the
Corporation" include all constituent corporations absorbed in a consolidation or
merger as well as the resulting or surviving corporation so that any person who
is or was a director, officer, employee or agent of a constituent corporation or
is or was serving at the request of constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise will stand in the same position under the provisions
of this Article VI with respect to the resulting or surviving corporation as he
would if he had served the resulting or surviving corporation in the same
capacity.
13. For purposes of this Article VI, references to "other enterprises"
include employee benefit plans; references to "fines" include any excise taxes
assessed on a person with respect to an employee benefit plan; and references to
"serving at the request of the Corporation" include any service as a director,
officer, employee, or agent of the Corporation which imposes duties on, or
involves services by such director, officer, employee, or agent with respect to
an employee benefit, plan, its participants, or beneficiaries. A person who
acted in good faith and in a manner he or she reasonably believed to be in the
best interests of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interest of
the Corporation" as referred to in this Article VI.
ARTICLE VII - AMENDMENT. The Corporation reserves the right to amend,
alter, change or repeal any provision contained in these Articles of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation
ARTICLE VIII - INCORPORATOR. The name and mailing address of the
incorporator of the Corporation is Robert B. Chapman, 140 South Dearborn Street,
Suite 1400, Chicago, IL 60603.
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The undersigned incorporator hereby declares, under penalties of
perjury, that the statements made in the foregoing Articles of Incorporation are
true.
Dated: April 16, 1997
/s/ Robert B. Chapman
Robert B. Chapman
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BY-LAWS OF
CELTIC INVESTMENT, INC.
ARTICLE I
Offices
The principal office of the corporation in the State of Illinois is
identical to the chief executive office of the corporation. The corporation may
have such other offices, both within and without the State of Illinois, as the
business of the corporation may require from time to time.
The registered office of the corporation required by the Business
Corporation Act of 1983, as amended, to be maintained in the State of Illinois
may be, but need not be, identical with the principal office in the State of
Illinois, and the address of the registered office may be changed from time to
time by the board of directors.
ARTICLE II
Shareholders
SECTION 1. ANNUAL MEETINGS. The board of directors is authorized to set
the time, date, and place of the annual meeting of shareholders in each year.
The annual meeting of shareholders will elect directors and transact such other
business as may properly be brought before the meeting.
SECTION 2. AGENDA OF MEETINGS. The board of directors may provide the
agenda for meetings of the shareholders. In the absence of an agenda provided by
the board of directors, the chairman of the board of directors may provide the
agenda for meetings of the shareholders. Any item proposed by a shareholder to
be included in the agenda of a meeting of the shareholders must be submitted in
writing by a shareholder of record entitled to vote at the meeting to the
secretary of the corporation no later than (i) with respect to an item to be
considered at an annual meeting of shareholders, 180 days after the date of the
preceding annual meeting of shareholders and (ii) with respect to an item to be
considered at a special meeting of shareholders, with the notice of, or request
for, the special meeting. The submission of the item must be accompanied by the
information required by Rule 14a-8 of the Securities and Exchange Commission as
then in effect.
SECTION 3. NOMINATION OF DIRECTORS. Nominations for the election or
directors may be made by the board of directors or by any shareholder entitled
to vote for the election of directors. Any shareholder entitled to vote for the
election of directors at a meeting may nominate persons for election as
directors only if written notice of that shareholder's intent to make such
nomination is given, either by personal delivery or by United States mail,
postage prepaid, to the secretary of the corporation not later than (a) with
respect to an election to be held at an annual
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meeting of shareholders, 180 days after the preceding annual meeting of
shareholders and (b) with respect to an election to be held at a special meeting
of shareholders for the election of directors, at the time of the giving of
notice of, or the request for, the special meeting of shareholders. Each notice
must set forth: (a) the name and address of the shareholder who intends to make
the nomination and of the person or persons to be nominated, (b) a
representation that the nominating shareholder is a holder of record of stock of
the corporation entitled to vote at the meeting for which the nomination is made
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice, (c) a description of all arrangements
or understandings between the shareholder and each nominee and any other person
or persons (naming each such person or persons) pursuant to which the nomination
or nominations are to be made by the shareholder, (d) such other information
regarding each nominee proposed by the nominating shareholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission had each nominee been nominated, or
intended to be nominated by the board of directors, (e) the acknowledgment of
the person or persons nominated that the information supplied as to him or her
or them is accurate, and (f) the consent of each nominee to serve as a director
of the corporation if elected. The chairman of a shareholder meeting may refuse
to acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
SECTION 4. CONDUCT OF MEETINGS. The chairman of the board of directors
will preside at each meeting of shareholders. In the absence or the chairman of
the board of directors, the meeting will be chaired by an officer of the
corporation in accordance with the following order; vice chairman, president,
and vice presidents in the order of their titles or seniority. In the absence of
such officers, the meeting will be chaired by a person chosen by the vote of a
majority in interest or the shareholders present in person or represented by
proxy and entitled to vote at the meeting. The secretary or in his or her
absence an assistant secretary or in the absence of the secretary and all
assistant secretaries, a person whom the chairman of the meeting appoints will
act as secretary or the meeting and keep a record or the proceedings thereof.
The board of directors or the chairman will be entitled to make those rules or
regulations for the conduct of meetings of shareholders as they deem necessary,
appropriate, or convenient. Subject to the rules and regulations of the board of
directors, if any, the chairman of the meeting has the right and authority to
prescribe those rules, regulations, and procedures and to do all such acts as,
in the judgment of the chairman, are necessary, appropriate, or convenient for
the proper conduct of the meeting including, without limitation, establishing an
agenda or order of business for the meeting, rules and procedures for
maintaining order at the meeting and the safety of those present, limitations on
participation in the meeting to shareholders of record and their duly authorized
and constituted proxies, and such other persons as the chairman may permit,
restrictions on entry to the meeting after the time for the commencement of the
meeting, limitations on the time allotted to questions or comments by
participants and regulation of the opening and closing of the polls for
balloting, on matters which are to be voted on by ballot. Meetings of
shareholders shall not be required to be held in accordance with rules of
parliamentary procedure or by any particular "Rules of Order".
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SECTION 5. SPECIAL MEETINGS. Special meetings of the shareholders may
be called by the chairman of the board of directors, the president, the board of
directors, or the holders of not less than one-fifth (1/5) of the outstanding
shares entitled to vote on the matter for which the meeting is called.
SECTION 6. PLACE OF MEETING. The board of directors may designate any
place, either within or without Illinois, as the place of meeting for any annual
meeting or for any special meeting called by the board of directors. A waiver of
notice signed by all shareholders may designate any place, either within or
without Illinois, as the place for the holding of an annual meeting. If no
designation is made, or if a special meeting be otherwise called, the place of
meeting will be the registered office of the corporation in Illinois, except as
otherwise provided in Section 5 of this Article.
SECTION 7. NOTICE OF MEETINGS. Written notice stating the place, day,
and hour of a shareholder meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, must be delivered not less
than 10 nor more than 60 days before the date of the meeting, or in the case of
a merger, consolidation, share exchange, dissolution, or sale, lease, or
exchange of assets, not less than 20 nor more than 60 days before the meeting,
either personally or by mail by or at the direction of the chairman of the board
of directors, the president, the secretary, or the officer or persons calling
the meeting, to each shareholder of record entitled to vote at the meeting. If
mailed, notice will be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
records of the corporation, with postage prepaid.
SECTION 8. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders, or shareholders entitled to receive payment of any
dividend, or in order to make a determination of shareholders for any other
proper purpose, the board of directors of the corporation may provide that the
share transfer books will be closed for the stated period but not to exceed, in
any case, 60 days. If the share transfer books are closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, the transfer books will be closed for at least 10 days, or in the
case of a merger or consolidation at least 20 days, immediately preceding the
meeting. In lieu of closing the share transfer books, the board of directors may
fix a date as the record date for any determination of shareholders. The record
date may not be more than 60 days and, for a meeting of shareholders, not less
than 10 days, or in the case of a merger, consolidation, share exchange,
dissolution, or sale, lease or exchange of assets not less than 20 days,
immediately preceding the meeting. If the share transfer books are not closed
and no record date is fixed for the determination of shareholders entitled to
notice of or to vote at a meeting of shareholders or shareholders entitled to
receive payment of a dividend, the date on which notice of the meeting is mailed
or the date on which the resolution of the board of directors declaring a
dividend is adopted will be the record date for the determination of
shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this Section, that
determination will apply to any adjournment thereof.
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SECTION 9. VOTING LISTS. The officer or agent having charge of the
transfer books for shares of the corporation will make, within 20 days after the
record date for a meeting of shareholders or 10 days before each meeting of
shareholders, whichever is earlier, a complete list of the shareholders entitled
to vote at the meeting. The shareholder list will be arranged in alphabetical
order and will contain the address of and the number of shares held by each
shareholder. The list will be kept at the registered office of the corporation
for 10 days prior to the meeting. The shareholder list may be inspected by any
shareholder at any time during usual business hours. The shareholder list will
also be produced and kept open at the meeting and will be subject to inspection
of any shareholder during the whole time of the meeting. The original share
ledger or transfer books, or a duplicate thereof kept in Illinois, is prima
facie evidence as to who are the shareholders entitled to examine such list or
share ledger or transfer book or to vote at any meeting of shareholders. Failure
to comply with the requirements of this Section will not affect the validity of
any action taken at such meeting.
SECTION 10. QUORUM. A majority of the outstanding shares of the corporation
entitled to vote on a matter, represented in person or by proxy, will constitute
a quorum at any meeting of shareholders.
SECTION 11. ACTION OF SHAREHOLDERS. If a quorum is present at any meeting
of shareholders, the affirmative vote of the majority of the votes of the shares
represented at the meeting will be the act of the shareholders.
SECTION 12. PROXIES. At all meetings of shareholders, a shareholder may
vote by proxy executed in writing by the shareholder and delivered to the person
appointed. Each proxy must be filed with the secretary of the corporation before
or at the time of the meeting. No proxy will be valid after eleven 11 months
from the date of its execution, unless otherwise provided in the proxy.
SECTION 13. VOTING OF SHARES. Each outstanding share, regardless of
class, will have that number of votes as provided in the description of the
class of shares in the Articles of Incorporation upon each matter submitted to
vote at a meeting of shareholders. In the absence of any designation of the
number of votes for shares of a class or a series in the Articles of
Incorporation, each share will be entitled to one vote per share upon each
matter submitted to vote at a meeting of shareholders. In all elections for
directors, no shareholder will have cumulative voting rights.
SECTION 14. VOTING OF SHARES BY CERTAIN HOLDERS. Shares registered in
the name of another corporation, domestic or foreign, may be voted by any
officer, agent, proxy, or other legal representative authorized to vote such
shares under the law of incorporation of such corporation. The corporation will
treat the president of such corporation as authorized to vote such shares unless
such other corporation will otherwise designate another person.
Shares registered in the name of a deceased person, a minor ward, or an
incompetent person under a legal disability, may be voted by his administrator,
executor, or court appointed guardian, either in person or by proxy without a
transfer of such shares into the name of such administrator,
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executor, or court appointed guardian. Shares registered in the name of a
trustee may be voted by him, either in person or by proxy.
Shares registered in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without the transfer thereof into his or her name if authority so
to do be contained in an appropriate order of the court by which such receiver
was appointed.
A shareholder whose shares are pledged will be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee will be entitled to vote the shares so transferred.
Shares of its own stock belonging to this corporation will not be
voted, directly or indirectly, at any meeting and will not be counted in
determining the total number of outstanding shares at any given time, but shares
of its own stock held by it in a fiduciary capacity may be voted and will be
counted in determining the total number of outstanding shares at any given time.
SECTION 15. INSPECTORS. At any meeting of shareholders, the chairman of
the meeting may, or upon the request of any shareholder will, appoint one or
more persons as inspectors for the meeting. The inspectors will ascertain and
report the number of shares represented at the meeting, based upon their
determination of the validity and effect of proxies; count all votes and report
the results; and do other acts as are proper to conduct the election and voting
with impartiality and fairness to all the shareholders.
Each report of an inspector will be in writing and signed by him or her
or by a majority of them if there is more than one inspector. The report of a
majority will be the report of the inspectors. The report of the inspector or
inspectors on the number of shares represented at the meeting and the results of
the voting will be prima facie evidence thereof.
SECTION 16. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be
taken at any annual or special meeting of the shareholders, or any other action
which may be taken at a meeting of the shareholders, may be taken without a
meeting and without a vote, if a consent in writing, setting forth the action so
taken, is signed by holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take action at a
meeting at which all the shares entitled to vote thereon were present and voting
and all of the provisions of Section 7.10 of the Illinois Business Corporation
Act of 1983, as amended, are complied with, or by all of the shareholders
entitled to vote with respect to the matter.
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ARTICLE III
Directors
SECTION 1. GENERAL POWERS. The business affairs of the corporation will be
managed under the direction of its board of directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The corporation will have
a board of directors composed of not less than eight nor more than thirteen
directors. Each director will hold office until the next annual meeting of
shareholders or until his successor is elected and qualified. The number of
directors may be changed at any time by the board of directors. A decrease in
the number of directors will not shorten the term of an incumbent director's
term. Directors need not be residents of Illinois or shareholders of the
corporation.
SECTION 3. REGULAR MEETINGS. A regular meeting of the board of
directors will be held without other notice than this by-law, immediately after,
and at the same place as, the annual meeting of shareholders. The board of
directors may provide, by resolution, the time and place, either within or
without the State of Illinois, for the holding of additional regular meetings
without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by or at the request of the president or any two directors. The
person or persons authorized to call special meetings of the board of directors
may fix any place, either within or without the State of Illinois, as the place
for holding any special meeting of the board of directors called by them.
SECTION 5. NOTICE. Notice of any special meeting will be given at least
2 days prior to the date of the special meeting by notice delivered personally,
by mail, by overnight delivery service, or by fax, or other means as is likely
to provide notice to each director at his business address or address that he or
she has requested that notice be given. If mailed, notice will be deemed to be
delivered when deposited in the United States mail so addressed, with postage
thereon prepaid. If sent by overnight delivery service, notice will be deemed
delivered on the next business day. If sent by fax, notice will be deemed to be
delivered at the time when received at the receiving machine as indicated on the
record of the sending machine. Any director may waive notice of any meeting. The
attendance of a director at any meeting will constitute a waiver of notice of
the meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting is not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any regular or special meeting of the board of directors need be
specified in the notice or waiver of notice of the meeting.
SECTION 6. QUORUM. A majority of the directors then in office will
constitute a quorum for the transaction of business at any meeting of the board
of directors, provided, that if less than a quorum is present, a majority of the
directors present may adjourn the meeting from time to time
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without further notice. Any director may attend and participate in any meeting
of the board of directors or any committee of the board and be recorded as being
present at that meeting through the use of a conference telephone or other
communications equipment by means of which all persons participating in the
meeting can hear each other.
SECTION 7. MANNER OF ACTING. The act of a majority of the directors present
at a meeting at which a quorum is present will be the act of the board of
directors.
SECTION 8. VACANCIES. Any vacancy occurring in the board of directors and
any directorship to be filled by reason of an increase in the number of
directors or otherwise may be filled by the board of directors for the unexpired
portion of the term.
SECTION 9. INFORMAL ACTION BY DIRECTORS. Any action required to be
taken at a meeting of the board of directors, or any other action which may be
taken at a meeting of the board of directors, may be taken without a meeting if
one or more consents in writing, setting forth the action so taken, are signed
by all of the directors entitled to vote on the matter. All approvals evidencing
the approval will be delivered to the secretary to be filed in the corporate
records. The action taken will be effective when all the directors have approved
the consent unless the consent specifies a different effective date.
SECTION 10. COMPENSATION. The board of directors, by the affirmative
vote of a majority of the directors then in office, and irrespective of any
personal interest of any of its members, will have authority to establish
reasonable compensation of all directors for services to the corporation as
directors, officers or otherwise. By resolution of the board of directors, the
directors may be paid their expenses, if any, of attendance at each meeting of
the board.
SECTION 11. PRESUMPTION OF ASSENT. A director of the corporation who is
present at a meeting of the board of directors at which action on any corporate
matter is taken will be conclusively presumed to have assented to the action
taken unless his dissent is entered in the minutes of the meeting or unless he
or she files his written dissent to such action with the person acting as
secretary of the meeting before the adjournment of that meeting or forwards his
dissent by registered mail to the secretary of the corporation immediately after
the adjournment of the meeting. This right to dissent will not apply to a
director who voted in favor of any action as to which he or she later proposes
to dissent.
SECTION 12. COMMITTEES OF THE BOARD. The board of directors may, by
resolution of the majority of the whole board of directors, create one or more
committees and appoint members of the board to serve on the committee or
committees. Each committee will have 2 or more members, who will serve at the
pleasure of the board. Each committee will have that authority as established by
the resolutions creating the committee or expanding or contracting its scope of
authority. Within its scope of authority, each committee, if so authorized by
the board of directors may exercise the authority of the board of directors as
permitted in Section 8.05 of the Illinois
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Business Corporation Act, provided, however, no committee may take those actions
prohibited by Section 8.40 (c) of the Illinois Business Corporation Act.
ARTICLE IV
Officers
SECTION 1. NUMBER. The officers of the corporation will be a chairman
of the board of directors, a president, a secretary, and those vice presidents,
treasurer, assistant secretaries, assistant treasurers, and other officers as
may be elected or appointed by the board of directors. Any vice president may
have additional seniority or operational designations as the board of directors
deems advisable. Any two or more offices may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation
will be elected by the board of directors at the first meeting of the board of
directors held after each annual meeting of shareholders to serve in their
respective offices at the pleasure of the board of directors. Vacancies may be
filled or new offices filled at any meeting of the board of directors. Each
officer will hold office until his successor has been duly elected, and is
qualified or until his death, or until he or she resigns or is removed in the
manner provided in these by-laws. Election or appointment of an officer or agent
will not of itself create contract rights.
SECTION 3. REMOVAL. Any officer or agent elected or appointed by the
board of directors may be removed by the board of directors whenever in its
judgment the best interests of the corporation would be served thereby, but
removal will be without prejudice to the contract rights, if any, of the person
so removed.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification, or otherwise, may be filled by the board
of directors for the unexpired portion of the term.
SECTION 5. CHAIRMAN OF THE BOARD AND VICE CHAIRMAN OF THE BOARD.
The chairman of the board of directors is the chief executive officer of the
corporation. Subject to the direction of the board of directors, the chairman of
the board of directors has general charge and supervision of the business of the
corporation and the full authority to take all lawful actions necessary to
implement corporate and business policy established by the board of directors.
In addition, the chairman of the board of directors will perform the duties, and
possess the other powers that are assigned to him or her by the board of
directors. Unless otherwise provided by the board of directors, the chairman of
the board of directors will preside at all meetings of the shareholders and the
board of directors. The board of directors may appoint a vice chairman of the
board of directors who may, in the absence or disability of the chairman,
perform the duties and exercise the powers of the chairman. The board of
directors may assign other duties and grant other powers to the vice chairman.
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SECTION 6. PRESIDENT. The president is the chief operating officer of
the corporation and has charge and supervision of the day-to-day business
operations of the corporation, subject to the authority of the chairman of the
board of directors and of the board of directors. Unless the board of directors
or chairman of the board of directors otherwise directs, all executive officers
of the corporation will report, directly or through their immediate superior
officers, to the president. The president will perform such other duties and
have such other powers as the board of directors may from time to time
prescribe.
SECTION 7. VICE PRESIDENT. The vice presidents will perform such duties
and have such powers as the board of directors, chairman of the board of
directors, or the president may from time to time prescribe. The vice
presidents, in the order designated by the board of directors if there is more
than once vice president, will discharge the duties of the president when the
president, for any reason, cannot discharge the duties of his office. The vice
presidents will have the other titles and powers and perform the other duties as
prescribed by the board of directors.
SECTION 8. TREASURER. The treasurer, if one is elected by the board of
directors, will, if required by the board of directors, give a bond for the
faithful discharge of his duties in the amount and with the surety or sureties
as the board of directors determines. He or she will perform the duties and have
the responsibilities as designated from time to time by the board of directors,
the chairman of the board of directors, or the president. The decrease in any
duties, responsibilities, or authority from time to time will not be deemed to
constitute a constructive termination of the treasurer. In lack of a designation
of duties, the treasurer will: (a) be the custodian of, and be responsible for,
all monies and securities of the corporation which will come into his or her
hand; (b) keep full and accurate records accounts in books belonging to the
corporation, showing the transactions of the corporation, its assets,
liabilities, and financial condition; (c) see that all expenditures are duly
authorized and are evidenced by proper receipts or vouchers; (d) deposit in the
name of the corporation in the depositaries as are designated by the board of
directors, all monies that may come into his hands for the corporation's account
and endorse for collection or deposit all bills, notes, checks, and other
negotiable instruments of the corporation, and generally, under the direction
and supervision of the president, have charge of the finances of the
corporation; (e) keep the books and accounts of the corporation open at all
times during business hours for the inspection of all directors of the
corporation; (f) make a full report of the financial condition of the
corporation for the annual meeting of the shareholders and make other reports
and statements as may be required of him or her by the president, the chairman
of the board of directors, or by the board of directors; and (g) in general
perform all the duties incident to the office of treasurer and such other duties
as from time to time may be assigned to him or her by the president, the
chairman of the board of the directors, or by the board of directors.
SECTION 9. SECRETARY. The secretary will: (a) supervise the keeping of
the minutes of all meetings of the shareholders and of the board of directors
and of all committees appointed by the board of directors in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these by-laws or as required by law; (c) be custodian of
the corporate records of the corporation and if a corporate seal is adopted by
the board of directors,
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see that the seal of the corporation is affixed to all certificates for shares
prior to the issue thereof and to all documents the execution of which on behalf
of the corporation under its seal is duly authorized in accordance with the
provisions of these by-laws; (d) keep a register of the address of each
shareholder furnished to the secretary by each shareholder, or in lieu thereof
supervise the registrar and transfer agent if either is appointed; (e) sign with
the chairman of the board of directors, the president, or a vice president or
any other officer authorized by the board of directors, certificates for shares
of the corporation, the issue of which is authorized by resolution of the board
of directors; (f) have general charge of the share transfer books of the
corporation;(g) certify the by-laws, resolutions of the shareholders and board
of directors and committees thereof, and other documents of the corporation; and
(h) in general perform all duties incident to the office of secretary and such
other duties as from time to time may be assigned by the chairman of the board
of directors, the president, or by the board of directors.
SECTION 10. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The
assistant treasurers will respectively, if required by the board of directors,
give bonds for the faithful discharge of their duties in such sums and with such
sureties as the board of directors will determine. The assistant secretaries as
thereunto authorized by the board of directors may sign with the chief executive
officer, the president or a vice president or any other officer thereunto
authorized by the board of directors, certificates for shares of the
corporation, the issue of which will have been authorized by a resolution of the
board of directors. The assistant treasurers and assistant secretaries, in
general, will perform such duties as will be assigned to them by the treasurer
or the secretary, respectively, or by the chief executive officer, the president
or the board of directors.
SECTION 11. COMPENSATION. The officers' compensation will be fixed from
time to time by the board of directors and no officer will be prevented from
receiving compensation because he or she is also a director of the corporation.
ARTICLE V
Indemnification of Officers, Directors, Employees and Agents
SECTION 1. GENERAL. The corporation has the power to indemnify any
person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he or she is or was a
director, officer, employee, or agent of the corporation, or who is serving at
the request of the corporation as a director, officer, employee, or agent of
another corporation, partnership, joint venture, trust, or other enterprise,
against expenses (including attorneys' fees) judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him or her in connection with
such action, suit, or proceeding if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
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proceeding, had no reasonable cause to believe his or her conduct was unlawful.
The termination of any action, suit, or proceeding by judgment or settlement or
conviction or upon a plea of nolo contendere or its equivalent, will not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he or she reasonably believed to be in or not opposed to the best
interests of the corporation, or with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. LIMITATION OF DIRECTOR PERSONAL LIABILITY. In addition to
any other provision of these by-laws, no director of this corporation will be
liable to this corporation or its shareholders for monetary damages for breach
of fiduciary duty as a director, provided that the provision does not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the corporation or its shareholders, (ii) for acts or omissions
not in good faith or that involve intentional misconduct or a knowing violation
of law, (iii) under Section 8.65 of the Illinois Business Corporation Act of
1983, as amended, or (iv) for any transaction from which the director derived an
improper personal benefit. No such provision will eliminate or limit the
liability of a director for any act or omission occurring before the date when
the provision becomes effective.
SECTION 3. SUITS IN THE NAME OF THE CORPORATION. The corporation has
the power to indemnify any person who was or is a party, or is threatened to be
made a party, to any pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that he
or she is or was a director, officer, employee, or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee, or agent of another corporation, partnership, joint venture, trust, or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in, or not opposed to, the best interests of the
corporation, provided that no indemnification will be made with respect to any
claim, issue, or matter as to which such person has been adjudged to have been
liable to the corporation unless and only to the extent that the court in which
such action or suit was brought will determine upon application that, despite
the adjudication of liability, but in the view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the court will deem proper.
SECTION 4. SUCCESSFUL DEFENSE. To the extent that a director, officer,
employee, or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in Section 1
and 2, or in defense of any claim, issue, or matter therein, he or she will be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith.
SECTION 5. DETERMINATION OF INDEMNIFICATION. Any indemnification under
Sections 1 and 2 (unless ordered by a court) will be made by the corporation
only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee, or agent is proper in the
circumstances because he or she has met the applicable standard of conduct set
forth in Sections 1 and 2. Such determination will be made (a) by the board of
directors by a
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majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even
if obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (c) by the shareholders.
SECTION 6. EXPENSES INCURRED. Expenses incurred in defending a civil or
criminal action, suit or proceeding may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding, as authorized by the
board of directors in the specific case, upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it is
ultimately determined that he or she is not entitled to be indemnified by the
corporation as authorized in this Article.
SECTION 7. NON-EXCLUSIVE. The indemnification and advancement of
expenses provided by or granted under the other Sections of this Article will
not be deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any contract,
agreement, vote of shareholders, or disinterested directors or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding such office.
SECTION 8. INSURANCE. The corporation will have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee, or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust, or other enterprise against any
liability asserted against him or her and incurred by him or her in any such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such liability
under the provisions of this Article.
SECTION 9. REPORT TO SHAREHOLDERS. If the corporation has paid
indemnity or has advanced expenses to a Director, officer, employee, or agent,
the corporation will report the indemnification or advance in writing to the
shareholders with or before the notice of the next shareholders meeting.
SECTION 10. DEFINITIONS. The definitions set forth in Sections 8.75(i)
and (j) of the Illinois Business Corporation Action of 1983, as amended, are
hereby incorporated into this Article V as if here set forth. The board of
directors may authorize the payment of expenses incurred to the full extent
provided by Section 8.75(e) of the Illinois Business Corporation Act of 1983, as
amended. All sections of this Article will comply with and be governed and
interpreted by, Section 8.75 of the Illinois Business Corporation Act of 1983,
as amended.
SECTION 11. CONTINUANCE OF RIGHT OF INDEMNIFICATION. The
indemnification and advancement of expenses provided by or granted under this
Article will, unless otherwise provided when authorized or ratified, continue as
to a person who has ceased to be a director, officer, employee or agent and will
inure to the benefit of the heirs, executors and administrators of that person.
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ARTICLE VI
Contracts, Loans, Checks and Deposits
SECTION 1. CONTRACTS. The board of directors may authorize any officer
or officers, agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans will be contracted on behalf of the corporation
and no evidences of indebtedness will be issued in its name unless authorized by
a resolution of the board of directors. The authority may be general or confined
to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts, or other orders for
the payment of money, notes, or other evidences of indebtedness issued in the
name of the corporation, will be signed by the officer or officers, agent or
agents of the corporation and in the manner as from time to time determined by
resolution of the board of directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise
employed will be deposited from time to time to the credit of the corporation in
the banks, trust companies, or other depositories as the board of directors
selects.
ARTICLE VII
Certificates for Shares and their Transfer
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of
the corporation will be in such form as may be determined by the board of
directors. All certificates will be signed by the chairman of the board of
directors, the president, or a vice president and by the secretary or an
assistant secretary. All signatures may be by facsimile, as long as one
signature on each certificate, which may be that of the registrar or transfer
agent, is an original signature. All certificates for shares will be
consecutively numbered or otherwise identified. The name of the person to whom
the shares represented by the certificates are issued, with the number of shares
and date of issue, will be entered on the books of the corporation. All
certificates surrendered to the corporation for transfer will be canceled. No
new certificate will be issued until the former certificate for a like number of
shares is surrendered and canceled, except that in case of a lost, destroyed, or
mutilated certificate, a new one may be issued upon the terms and indemnity to
the corporation that the board of directors may prescribe.
SECTION 2. TRANSFER OF SHARES. Transfers of shares of the corporation
will be made only on the books of the corporation by the holder of record or by
his legal representative, who must furnish proper evidence of authority to
transfer, or by his attorney authorized by power of attorney duly executed and
filed with the secretary of the corporation, and on surrender for
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cancellation of the certificate for such shares. The person in whose name shares
stand on the books of the corporation will be deemed the owner thereof for all
purposes as regards the corporation.
SECTION 3. CERTIFICATELESS SHARES. The board of directors may authorize
the issuance of a series or class of shares of capital stock of this corporation
as uncertificated shares. The board of directors may also provide that any
existing series or class of shares of capital stock of this corporation will be
converted into uncertificated shares, provided that the resolution will not
apply to shares represented by a certificate until the certificate is
surrendered to the corporation.
ARTICLE VIII
Fiscal Year
The fiscal year of the corporation will be established by the board of
directors from time to time.
ARTICLE IX
Dividends
The board of directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE X
Waiver of Notice
Whenever any notice whatsoever is required to be given under the
provisions of these by-laws or under the provisions of the Articles of
Incorporation or under the provisions of the Illinois Business Corporation Act
of 1983, as amended, a waiver thereof in writing, signed by the person or
persons entitled to notice, whether before or after the time stated therein,
will be deemed equivalent to the giving of notice.
ARTICLE XI
Amendments
These by-laws may be altered, amended, or repealed and new by-laws may
be adopted at any meeting of the board of directors by an affirmative vote of a
majority of the directors then in office or at any meeting of the shareholders
of the corporation by an affirmative vote of the votes represented at the
meeting. No by-law adopted by the shareholders may be revoked, amended, or
superseded by the board of directors.
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Exhibit To Proxy Statement
ss. 262 General Corporation Law State of Delaware - Appraisal rights
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to ss. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss. 251 (other than a merger effected pursuant to ss.
251(g) of this title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of
this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by more
than 2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote of the
stockholders of the surviving corporation as provided in subsection (f) of ss.
251 of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the shares of any
class or series of stock of a constituent corporation if the holders thereof are
required by the terms of an agreement of merger or consolidation pursuant to
pages 251, 252, 254, 257, 258, 263 and 264 of this title to accept for such
stock anything except:
(a) Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
(b) Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the effective
date of the merger or consolidation will be either listed on a national
securities exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc. or held of record by more than 2,000 holders;
(c) Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
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(d) Any combination of the shares of stock, depository receipts and cash in
lieu of fractional shares or fractional depository receipts described in the
foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under ss. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal
rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the
meeting, shall notify each of its stockholders who was such on the record date
for such meeting with respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) hereof that appraisal rights are available for
any or all of the shares of the constituent corporations, and shall include in
such notice a copy of this section. Each stockholder electing to demand the
appraisal of his shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of his
shares. Such demand will be sufficient if it reasonably informs the corporation
of the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to take
such action must do so by a separate written demand as herein provided. Within
10 days after the effective date of such merger or consolidation, the surviving
or resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in favor of
or consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to
ss. 228 or ss. 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice is given on or after the effective date of the merger or consolidation,
such notice shall be given by the surviving or resulting corporation to all such
holders of any class or series of stock of a constituent corporation that are
entitled to appraisal rights. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the appraisal of
such holder's shares. If such notice did not notify stockholders of the
effective date of the merger or consolidation, either (i) each such constituent
corporation shall send a second notice before the effective date of the merger
or consolidation notifying each of the holders of any class or series of stock
of such constituent corporation
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that are entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such a
second notice to all such holders on or within 10 days after such effective
date; provided, however, that if such second notice is sent more than 20 days
following the sending of the first notice, such second notice need only be sent
to each stockholder who is entitled to appraisal rights and who has demanded
appraisal of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the transfer agent of
the corporation that is required to give either notice that such notice has been
given shall, in the absence of fraud, be prima facie evidence of the facts
stated therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the notice is given,
provided, that if the notice is given on or after the effective date of the
merger or consolidation, the record date shall be such effective date. If no
record date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the day on
which the notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal
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proceedings; and if any stockholder fails to comply with such direction, the
Court may dismiss the proceedings as to such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
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(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
57
CELTIC INVESTMENT, INC.
1997
STOCK OPTION PLAN
ARTICLE 1 - PURPOSES, EFFECTIVENESS AND TYPE OF PLAN
1.1. Purposes. The purpose of this Stock Option Plan is to advance the
interests of the Corporation by encouraging and enabling the acquisition of a
larger personal proprietary interest in the Corporation by key employees,
consultants and independent contractors who are employed by, or perform services
for, the Corporation and its Subsidiaries and upon whose judgment and keen
interest the Corporation is largely dependent for the successful conduct of its
operations. It is anticipated that the acquisition of such proprietary interest
in the Corporation will stimulate the efforts of such key employees, consultants
and independent contractors on behalf of the Corporation and its Subsidiaries
and strengthen their desire to remain with the Corporation and its Subsidiaries.
It is also expected that the opportunity to acquire such a proprietary interest
will enable the Corporation and its Subsidiaries to attract desirable personnel
and other service providers.
1.2. Effectiveness. This Plan shall be effective as of October __,
1997, subject to shareholder approval within twelve (12) months hereafter. If
this Plan is not approved by the shareholders of the Company, any options
granted under this Plan will be rescinded and will be void. This Plan will
remain in effect until it is terminated by the Committee or until November 5,
2006, whichever occurs first.
1.3. Type of Plan. This Plan shall enable the Committee to grant
Incentive Stock Options ("ISO's") or Non-Qualified Stock Options ("NSO's") to
Participants.
1.4. Eligibility. The Company may grant Options under this Plan only to
persons who are Eligible Participants as of the time of such grant. Subject to
the provisions of sections 3.22 and 4.2, hereof, there is no limitation on the
number of Options that may be granted to an Eligible Participant.
ARTICLE 2 - DEFINITIONS
2.1. Definitions. Unless the context requires otherwise, the following
defined terms will govern the construction of this Plan and of any stock option
agreements entered into pursuant to this Plan:
2.1.1. "10% Shareholder" shall mean a person who owns, either
directly or indirectly, by virtue of the ownership attribution provisions set
forth in Section 424(d) of the Code at the time he or she is granted on Option,
stock possessing more than ten percent (10%) of the total combined voting power
or value of all classes of stock of the Company and/or its Subsidiaries.
2.1.2. "Beneficiary" shall mean the person, persons, trust or
trusts entitled by will or the laws of descent and distribution to receive the
benefits specified in the Option Agreement and under this Plan in the event of a
Participant's death, and shall mean the Participant's personal representative,
executor or administrator if no other Beneficiary is identified and able to act
under the circumstances.
2.1.3. "Board" shall mean the Board of Directors of the Company.
2.1.4. "Change in Control Event" shall mean any of the following:
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(a) Approval by the shareholders of the Company of the dissolution or
liquidation of the Company;
(b) Approval by the shareholders of the Company of an agreement to merge or
consolidate, or otherwise reorganize, with or into one or more entities
that are not Subsidiaries, as a result of which less than 50% of the
outstanding voting securities of the surviving or resulting entity
immediately after the reorganization are, or will be, owned by shareholders
of the Company immediately before such reorganization (assuming for
purposes of such determination that there is no change in the record
ownership of the Company's securities from the record date for such
approval until such reorganization and that such record owners hold no
securities of the other parties to such reorganization);
(c) Approval by the shareholders of the Company of the sale of substantially
all of the Company's business and/or assets to a person or entity which is
not a Subsidiary;
(d) Any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) (other than a person having such ownership at the time of
adoption of this Plan) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing more than 50% of the combined voting power of the
Company's then-outstanding securities entitled to then vote generally in
the election of directors of the Company; or
(e) During any period not longer than two consecutive years, individuals who at
the beginning of such period constituted the Board cease to constitute at
least a majority thereof, unless the election, or the nomination for
election by the Company's shareholders, of each new Board member was
approved by a vote of at least three-fourths of the Board members then
still in office who were Board members at the beginning of such period
(including for these purposes, new members whose election or nomination was
so approved).
2.1.5. "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
2.1.6. "Commission" shall mean the Securities and Exchange Commission.
2.1.7. "Committee" shall mean a committee appointed by the Board to
administer the Plan, which committee shall be comprised of two or more directors
or such greater number of directors as may be required under applicable law.
2.1.8. "Common Stock" shall mean the Common Stock of the Company and such
other securities or property as may become subject to Options, pursuant to an
adjustment made under Section 4.4 of this Plan.
2.1.9. "Company" shall mean Celtic Investment, Inc.
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2.1.10. "Eligible Participant" shall mean persons who, at a particular
time, are employees, officers or consultants (including non-employee directors
who are not on the Committee) of the Company or its Subsidiaries.
2.1.11. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
2.1.12. "Fair Market Value" shall mean:
(a) If the stock was traded on a stock exchange on
the date in question, then the Fair Market Value will be equal
to the closing price reported by the applicable composite-
transactions report for such date;
(b) If the stock was traded over-the-counter on the
date in question and was classified as a national market
issue, then the Fair Market Value will be equal to the last-
transaction price quoted by the NASDAQ system for such date;
(c) If the stock was traded over-the-counter on the
date in question but was not classified as a national market
issue, then the Fair Market Value will be equal to the average
of the last reported representative bid and asked prices
quoted by the NASDAQ system for such date; and
(d) If none of the foregoing provisions is
applicable, then the Fair Market Value will be determined by
the Committee in good faith on such basis as it deems
appropriate.
2.1.13. "Grant Date" shall mean the date upon which an Option is granted.
2.1.14. "ISO" shall mean "incentive stock option," as defined in Section
422 of the Code.
2.1.15. "Just Cause Termination" shall mean a termination by the Company of
an Optionee's employment by and/or service to the Company in connection with the
good faith determination of the Company's Board that the Optionee has engaged in
any acts involving dishonesty or moral turpitude or in any acts that materially
and adversely affect the business, affairs or reputation of the Company or its
Subsidiaries.
2.1.16. "NSO" shall mean any Option granted under this Plan whether
designated by the Committee as a "non-qualified stock option," a "non-statutory
stock option" or otherwise, other than an Option designated by the Committee as
an ISO, or any Option so designated by the Committee as an ISO, or any Option so
designated but which, for any reason, fails to qualify as an ISO pursuant to
Section 422 of the Code and the rules and regulations thereunder.
2.1.17. "Option" shall mean an option to purchase Common Stock under this
Plan.
2.1.18. "Option Agreement" shall mean any writing setting forth the terms
of an Option that has been authorized by the Committee.
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2.1.19. "Option Period" shall mean the period beginning on the Grant Date
and ending on the expiration date of such Option.
2.1.20."Option Price" with respect to any particular Option means the
exercise price at which the Optionee may acquire each share of the Option Stock
called for under such Option.
2.1.21. "Option Stock" means stock issued or issuable by the Company
pursuant to the valid exercise of an Option.
2.1.22. "Optionee" means an Eligible Participant to whom Options are
granted hereunder, and any transferee thereof pursuant to a Transfer authorized
under this Plan.
2.1.23. "Participant" shall mean a person who has been granted an Option
under this Plan.
2.1.24. "Personal Representative" shall mean the person or persons who,
upon the disability or incompetence of a Participant, shall have acquired on
behalf of the Participant, by legal proceeding or otherwise, the power to
exercise the rights or receive benefits under this Plan and who shall have
become the legal representative of the Participant.
2.1.25. "Plan" shall mean this 1997 Stock Option Plan.
2.1.26. "QDRO" shall mean a qualified domestic relations order as defined
in Section 414(p) of the Code or Title I, Section 206(d)(3) of ERISA.
2.1.27. "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
2.1.28. "Subsidiary" shall mean any corporation or other entity, a majority
of whose outstanding voting stock or voting power is beneficially owned directly
or indirectly by the Company.
2.1.29. "Total Disability" shall mean a "permanent and total disability"
within the meaning of Section 22(e)(3) of the Code, and such other disabilities,
infirmities, afflictions or conditions as the Committee by rule may include.
2.1.30. "Transfer" with respect to Option Stock, includes, without
limitation, a voluntary or involuntary sale, assignment, transfer, conveyance,
pledge, hypothecation, encumbrance, disposal, loan, gift, attachment or levy of
such Option Stock, including without limitation, an assignment for the benefit
of creditors of the Optionee, a transfer by operation of law, such as a transfer
by will or under the laws of descent and distribution, an execution of judgment
against the Option Stock or the acquisition of record or beneficial ownership
thereof by a lender or creditor, a transfer pursuant to a QDRO, or to any decree
of divorce, dissolution or separate maintenance, any property settlement, any
separation agreement or any other agreement with a spouse (except for estate
planning purposes) under which a part or all of the shares of Option Stock are
transferred or awarded to the spouse of the Optionee or are required to be sold;
or a transfer resulting from the filing by the Optionee of a petition for
relief, or the filing of an involuntary petition against such Optionee, under
the bankruptcy laws of the United States or of any other nation.
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ARTICLE 3 - ADMINISTRATION
3.1. Committee. This Plan shall be administered by the Committee. All
actions of the Committee with respect to the administration of this Plan shall
be taken pursuant to a majority vote or by the unanimous written consent of its
members. If the Board, in its discretion, does not appoint such a Committee, the
Board itself shall administer this Plan and take such actions as the Committee
is authorized to take hereunder.
3.2. Authority and Discretion of Committee. The Committee will have
full and final authority in its discretion, at any time and from time to time,
subject only to the express terms, conditions and other provisions of the
Company's certificate of incorporation, by-laws and this Plan, and the specific
limitations on such discretion set forth herein:
(a) to select and approve the persons who will be granted
Options under this Plan from among the Eligible Participants, and to
grant to any person so selected one or more Options to purchase such
number of shares of Option Stock as the Committee may determine;
(b) to determine the period or periods of time during which
Options may be exercised, the Option Price and the duration of such
Options, and other matters to be determined by the Committee in
connection with specific Option grants and Options Agreements as
specified under this Plan;
(c) to interpret this Plan, to prescribe, amend and rescind
rules and regulations relating to this Plan, and to make all other
determinations necessary or advisable for the operation and
administration of this Plan; and
(d) to delegate all or a portion of its authority under
subsections (a) and (b) of this section 3.2 to one or more directors of
the Company, but only in connection with Options granted to Eligible
Participants who are not subject to the reporting and liability
provisions of Section 16 of the Exchange Act, as amended, and the rules
and regulations thereunder, and subject to such restrictions and
limitations (such as the aggregate number of shares of Option Stock
called for by such Options that may be granted) as the Committee may
decide to impose on such delegate directors.
3.3. Limitation on Authority. Notwithstanding the foregoing, or any
other provision of this Plan, the Committee will have no authority to grant
Options to any of its members, whether or not approved by the Board. The
Committee may not grant options for more than 100,000 shares in any fiscal year
to any one person.
3.4. Designation of Options. Except as otherwise provided herein, the
Committee will designate any Option granted hereunder either as an ISO or as an
NSO. To the extent that the Fair Market Value (determined at the time the Option
is granted) of stock with respect to which all ISOs are exercisable for the
first time by any individual during any calendar year (pursuant to this Plan and
all other plans of the Company and/or its subsidiaries) exceeds $100,000, such
option will be treated as an NSO. Notwithstanding the general eligibility
provisions of Section 1.4 hereof, the Committee may grant ISOs only to persons
who are employees of the Company and/or its subsidiaries.
3.5. Option Agreements. Options will be deemed granted hereunder only
upon the execution and delivery of an Option Agreement by the Optionee and a
duly authorized officer of the Company. Options will not be deemed granted
hereunder merely upon the authorization of such grant by the Committee.
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3.6. Binding Determinations. Any action taken by, or inaction of, the
Company, the Board or the Committee relating or pursuant to this Plan shall be
within the absolute discretion of that entity or body and shall be conclusive
and binding upon all persons. No member of the Board or the Committee or officer
of the Company or any Subsidiary, shall be liable for any such action or
inaction of the entity or body, of another person or, except in circumstances
involving bad faith, of himself or herself. Subject only to compliance with the
express provisions hereof, the Board and the Committee may act in their absolute
discretion in matters within their authority related to this Plan.
3.7. Reliance on Experts. In making any determination or in taking or
not taking any action under this Plan, the Committee may obtain and may rely
upon the advice of experts, including professional advisors to the Company. No
director, officer or agent of the Company shall be liable for any such action or
determination taken or made or omitted in good faith.
3.8. Delegation. The Committee may delegate ministerial, non-discretionary
functions to individuals who are officers or employees of the Company.
ARTICLE 4 - SHARES AVAILABLE FOR OPTIONS
4.1. Shares Available for Options. The capital stock that may be
delivered under this Plan shall be shares of the Company's authorized but
unissued Common Stock and any shares of its Common Stock held as treasury
shares.
4.2. Number of Shares. The maximum number of shares of Common Stock of
the Company that may be issued pursuant to Options granted to Participants under
this Plan is 1,000,000 shares (the "Option Pool"), subject to adjustments
contemplated by Section 4.4.
4.3. Calculation of Available Shares and Replenishment. Shares subject
to outstanding Options shall be reserved for issuance. If any Option shall
expire or be canceled or terminated without having been exercised in full, the
unpurchased shares subject thereto shall again be available for the purposes of
the Plan, subject to any applicable limitations under Rule 16b-3. If the Company
withholds shares of Common Stock pursuant to Section 6.1, the number of shares
that would have been deliverable with respect to an Option but that are withheld
pursuant to the provisions of Section 6.1 may in effect not be issued, but the
aggregate number of shares issuable with respect to the applicable Option and
under the Plan shall be reduced by the number of shares withheld, and such
shares shall not be available for additional Options under this Plan.
4.4. Adjustments. If there shall occur any extraordinary dividend or
other extraordinary distribution with respect to the Common Stock (whether in
the form of cash, Common Stock, other securities or other property) or any
recapitalization, stock split, reorganization, merger, combination,
consolidation, split-up, spin-off, combination, repurchase or exchange of Common
Stock or other securities of the Company, or if there shall occur any other like
corporate transaction or event with respect to the Common Stock, then the
Committee shall, in such manner and to such extent (if any) as it deems
appropriate and equitable: (a) proportionately adjust any or all of (i) the
number and type of Common Stock which thereafter may be made the subject of
Options (including the specific maximum number of shares set forth elsewhere in
this Plan), (ii) the amount of Common Stock subject to any or all outstanding
Options, (iii) the grant, purchase or exercise price of any or all outstanding
Options, and (iv) the Common Stock issuable upon exercise of any or all
outstanding Options; or (b) in the case of an extraordinary dividend or other
distribution, merger, reorganization, consolidation, combination, sale of
assets, split-up, exchange or spin-off, make provision for
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a cash payment or for the substitution or exchange of any or all outstanding
Common Stock deliverable to the holder of any or all outstanding Options based
upon the distribution or consideration payable to holders of the Common Stock or
other securities of the Company upon or with respect to such event.
ARTICLE 5 - TERMS OF STOCK OPTIONS AGREEMENTS
5.1. Terms of Stock Option Agreements. Each Option granted pursuant to
this Plan will be evidenced by an agreement (an "Option Agreement") between the
Company and the person to whom such Option is granted, in form and substance
satisfactory to the Committee in its sole discretion, consistent with this Plan.
5.2. Covenants of Optionee. Nothing contained in this Plan, any Option
Agreement or in any other agreement executed in connection with the granting of
an Option under this Plan will confer upon any Optionee any right with respect
to the continuation of his or her status as an employee of, consultant or
independent contractor to, or director of, the Company or its Subsidiaries.
5.3. Vesting Periods. Except as otherwise provided herein, each Option
Agreement may specify the period or periods of time within which each Option or
portion thereof will first become exercisable (the "Vesting Period") with
respect to the total number of shares of Option Stock called for thereunder (the
"Total Award Option Stock"). Such Vesting Periods will be fixed by the Committee
in its discretion, and may be accelerated or shortened by the Committee in its
discretion.
5.4. Exercise of the Option. An Option may be exercised to the extent
exercisable (a) by giving written notice of exercise to the Company, specifying
the number of full shares of Option Stock to be purchased, accompanied by full
payment of the Option Price thereof and the amount of applicable withholding
taxes; and (b) by giving assurances satisfactory to the Company that the shares
of Option Stock to be purchased upon such exercise are being purchased for
investment and not with a view to resale in connection with any distribution of
such shares in violation of the Securities Act; provided, however, that in the
event the Option Stock called for under the Option is registered under the
Securities Act, or in the event resale of such Option Stock without such
registration would otherwise be permissible, this second condition will be
inoperative if, in the opinion of counsel for the Company, such condition is not
required under the 1933 Act, or any other applicable law, regulation or rule of
any governmental agency.
5.5. Payment of Option Price. Each Option Agreement will specify the
Option Price with respect to the exercise of Option Stock thereunder, to be
fixed by the Committee in its discretion, but in no event will the Option Price
for an ISO granted hereunder be less than the Fair Market Value (or, in case the
Optionee is a 10% Stockholder, one hundred ten percent (110%) of such Fair
Market Value) of the Option Stock at the time such ISO is granted, and in no
event will the Option Price for an NSO granted hereunder be less than the 50% of
Fair Market Value. The Option Price will be payable to the Company in United
States dollars in cash or by check or such other legal consideration as may be
approved by the Committee in its discretion. The Committee, in its discretion,
may permit a particular Optionee to pay all or a portion of the Option Price
and/or the tax withholding liability with respect to the exercise of an Option
either by surrendering shares of stock already owned by such Optionee or by
withholding shares of Option Stock, provided that the Committee determines that
the Fair Market Value of such surrendered stock or withheld Option Stock is
equal to the corresponding portion of such Option Price and/or tax withholding
liability, as the case may be, to be paid for therewith. If the Committee
permits an Optionee to pay any portion of the Option Price and/or tax
withholding liability with shares of stock with respect to the exercise of an
Option (the "Underlying Option") as provided
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in this paragraph 5.5, then the Committee, in its discretion, may grant to such
Optionee (but only if Optionee remains an Eligible Participant at that time)
additional non-statutory stock options, the number of shares of Option Stock
called for thereunder to be equal to all or a portion of the Common Stock so
surrendered or withheld (a "Replacement Option"). Each Replacement Option will
be evidenced by an Option Agreement. Unless otherwise set forth therein, each
Replacement Option will be immediately exercisable upon such grant (without any
Vesting Period) and will be coterminous with the Underlying Option. The
Committee, in its sole discretion, may establish such other terms and conditions
for Replacement Options as it deems appropriate.
5.6. Termination of the Option. Except as otherwise provided herein,
each Option Agreement will specify the period of time, to be fixed by the
Committee in its discretion, during which the Option granted therein will be
exercisable, not to exceed ten years from the date of grant in the case of an
ISO, provided that such Option Period will not exceed five years from the date
of grant in the case of an ISO granted to a 10% Stockholder. To the extent not
previously exercised, each Option will terminate upon the expiration of such
Option Period specified in the Option Agreement; provided, however, that each
such Option will terminate (a) ninety days after the date that the Optionee
ceases to be an Eligible Participant for any reason, other than by reason of
death or disability or a Just Cause Termination; (b) twelve months after the
date that the Optionee ceases to be an Eligible Participant by reason of such
person's death or disability; or, (c) immediately as of the date that the
Optionee ceased to be an Eligible Participant by reason of a Just Cause
Termination. In the event of a sale of all or substantially all of the assets of
the Company, or a merger or consolidation or other reorganization in which the
Company is not the surviving corporation, or in which the Company becomes a
subsidiary of another corporation (any of the foregoing events, a "Corporate
Transaction"), then notwithstanding anything else herein, the right to exercise
all then-outstanding Options will vest immediately prior to such Corporate
Transaction and will terminate immediately after such Corporate Transaction;
provided, however, that if the Board, in its sole discretion, determines that
such immediate vesting of the right to exercise outstanding Options is not in
the best interests of the Company, then the successor corporation must agree to
assume the outstanding Options or substitute therefor comparable options of such
successor corporation or a parent or subsidiary of such successor corporation.
5.7. Qualification of Stock. The right to exercise an Option will be
further subject to the requirement that if at any time the Board determines, in
its discretion, that the listing, registration or qualification of the shares of
Option Stock called for thereunder upon any securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
authority, is necessary or desirable as a condition of or in connection with the
granting of such Option or the purchase of shares of Option Stock thereunder,
the Option may not be exercised, in whole or in part, unless and until such
listing, registration, qualification, consent or approval is effected or
obtained free of any conditions not acceptable to the Board, in its discretion.
5.8. Stock Certificates. Certificates representing the Option Stock
issued pursuant to the exercise of Options will bear all legends required by law
and necessary to effectuate this Plan's provisions. The Company may place a
"stop transfer" order against shares of the Option Stock until all restrictions
and conditions set forth in this Plan and in the legends referred to in this
section 5.8 have been complied with.
5.9. Notices. Any notice to be given to the Company under the terms of
an Option Agreement will be addressed to the Company at its principal executive
office, Attention: Corporate Secretary, or at such other address as the Company
may designate in writing. Any notice to be given to an Optionee will be
addressed to the Optionee at the address provided to the Company by the
Optionee. Any such notice will be deemed to have been duly given if and when
enclosed in a properly sealed envelope, addressed as aforesaid, registered
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and deposited, postage and registry fee prepaid, in a post office or branch post
office regularly maintained by the United States Government.
5.10. Other Provisions. The Option Agreement may contain such other
terms, provisions and conditions, including such special forfeiture conditions,
rights of repurchase, rights of first refusal and other restrictions on Transfer
of Option Stock issued upon exercise of any Options granted hereunder, not
inconsistent with this Plan, as may be determined by the Committee in its sole
discretion.
ARTICLE 6 - TAX WITHHOLDING
6.1. Tax Withholding. Upon any exercise of any Option, the Company
shall have the right at its option to require the Participant (or Personal
Representative or Beneficiary, as the case may be) to pay or provide for payment
of the amount of any taxes which the Company may be required to withhold with
respect to such transaction. In any case where a tax is required to be withheld
in connection with the delivery of Common Stock under this Plan, the Committee
may grant (either at the time the Option is granted or thereafter) to the
Participant the right to elect, pursuant to such rules and subject to such
conditions as the Committee may establish, to have the Company reduce the number
of shares to be delivered by (or otherwise reacquire) the appropriate number of
shares valued at their then-Fair Market Value, to satisfy such withholding
obligation.
6.2. Tax Loans. The Committee may, in its discretion, authorize a loan
to a Participant in the amount of any taxes which the Company may be required to
withhold with respect to Common Stock received by the Participant. Such a loan
shall be for a term, at a rate of interest and pursuant to such other terms and
conditions as the Committee, under applicable law, may establish.
ARTICLE 7 - TRANSFER RESTRICTIONS
7.1. No Transferability of Options. Options shall not be transferable
otherwise than by will or by the laws of descent and distribution or as provided
in this Section 7.1. Notwithstanding the preceding, the Committee may, in its
discretion, authorize a transfer of all or a portion of any Option, other than
an Option which is intended to qualify as an ISO, by the initial holder to (a)
the spouse, children, stepchildren, grandchildren or other family members of the
initial holder ("Family Members"); (b) a trust or trusts for the exclusive
benefit of such Family Members; (c) a corporation or partnership in which such
Family Members and the initial holder are the only shareholders or partners; or,
(d) such other persons or entities which the Committee may permit; provided,
however, that subsequent transfers of such Options shall be prohibited except by
will or the laws of descent and distribution. Any transfer of such an Option
shall be subject to such terms and conditions as the Committee shall approve,
including that such Option shall continue to be subject to the terms and
conditions of the Option and of the Plan as amended from time to time. The
events of termination of employment or service under Section 5.6 shall continue
to be applied with respect to the initial holder, following which a transferred
Option shall be exercisable by the transferee only to the extent and for the
periods specified under Section 5.6. An Option which is intended to qualify as
an ISO shall not be transferable otherwise than by will or by the laws of
descent and distribution and shall be exercisable during the holder's lifetime
only by the holder thereof.
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ARTICLE 8 - PLAN AMENDMENT, TERMINATION AND SUSPENSION
8.1. Amendment and Discontinuance. The Board may amend, suspend or
discontinue this Plan at any time or from time to time, provided that no action
of the Board will cause ISOs granted under this Plan not to comply with Section
422 of the Code unless the Board specifically declares such action to be made
for that purpose and provided further than no such action may, without the
approval of the stockholders of the Company, materially increase (other than by
reason of an adjustment pursuant to section 4.4 hereof) the maximum aggregate
number of shares of Option Stock in the Option Pool that may be issued under
Options granted pursuant to this Plan or materially increase the benefits
accruing to Plan participants or materially modify eligibility requirements for
the Participants. Moreover, no such action may alter or impair any Option
previously granted under this Plan without the consent of the holder of such
Option.
ARTICLE 9 - MISCELLANEOUS
9.1. Choice of Law. This Plan, all Options, all Option Agreements and
all other related documents shall be governed by, and construed in accordance
with, the laws of the State of Illinois.
9.2. Compliance with Laws. This Plan, the granting and vesting of
Options under this Plan and the issuance and delivery of Common Stock under this
Plan or under Options granted hereunder are subject to compliance with all
applicable federal and state laws, rules and regulations (including, but not
limited to, state and federal securities laws and federal margin requirements)
and to such approvals by any listing, regulatory or governmental authority as
may, in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Any securities delivered under this Plan shall be subject
to such restrictions, and the person acquiring such securities shall, if
requested by the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure compliance with
all applicable legal requirements.
9.3. Severability. In the event that any provision of this Plan shall
be held by a court of competent jurisdiction to be invalid and unenforceable,
the remaining provisions of this Plan shall continue in full force and effect.
9.4. Captions. Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate reference. Such
headings shall not be deemed in any way material or relevant to the construction
or interpretation of this Plan or any provision thereof.
9.5. Non-Exclusivity of Plan. Nothing in this Plan shall limit or be
deemed to limit the authority of the Board or the Committee to grant Options or
authorize any other compensation, with or without reference to the Common Stock,
under any other plan or authority.
9.6. Plan Compliance with Rule 16b-3. With respect to persons subject
to Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by the Plan
administrators fails so to comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Plan administrators.
9.7. Copies of Plan. A copy of this Plan will be delivered to each
Optionee at or before the time he or she executes an Option Agreement.
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This Plan was adopted November 5, 1997 by the Board of Directors of the
Company and was approved by the Company's shareholders on _____________, 1997.
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THESE OPTIONS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR STATE
SECURITIES LAWS. THESE OPTIONS CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR
OTHERWISE DISPOSED OF EXCEPT AS PERMITTED BY THIS AGREEMENT AND BY APPLICABLE
FEDERAL AND STATE SECURITIES LAWS.
- - -------------------------------------------------------------------------------
CELTIC INVESTMENT INC.
STOCK OPTION AGREEMENT
This Agreement is entered into this 31st day of January, 1997, by and
between Celtic Investment, Inc., a Delaware corporation ("Corporation") and
Reese Howell, Jr. ("Employee").
RECITALS:
WHEREAS, Salt Lake Mortgage ("SLM") and Corporation have entered into
an Employment Agreement (the "Employment Agreement") wherein there are jointly
referred to as "Employer" whereby they have agreed to hire Employee and whereby
Employee has agreed to be employed by Employer pursuant to the terms and
conditions set forth therein; and approved by the Board of Directors of Employer
and meets the requirements of SEC Rule 16(b)(3) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
WHEREAS, under the Employment Agreement, the Corporation has agreed to
grant stock options to Employee entitling Employee to purchase shares of the
Corporation's common stock ("Shares"); and
WHEREAS, the purpose of granting these options to Employee is to
promote the success of the Corporation and SLM and to advance the interests of
the Corporation and SLM by providing an additional means, through the grant of
these stock options, to motivate, retain and reward Employee with an incentive
for high levels of individual performance and improved financial performance of
the Corporation and SLM;
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
1.1 Definitions. For the purposes of this Option Agreement, the
following terms shall have the following meanings:
1.1.1. Adjusted Pretax Profits. For purposes of this Agreement, Adjusted
Pretax Profits shall have the same meaning as "API" has in the Escrow Agreement
(hereafter defined) and shall be calculated in the same manner it is calculated
in the Escrow Agreement.
1.1.2. Bonus Period. "Bonus Period shall have the same meaning it does in
the Employment Agreement.
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1.1.3 Escrow Agreement. "Escrow Agreement" shall have the same meaning it
does in the Employment Agreement.
1.1.4. Termination for Cause. "Termination For Cause" shall have the same
meaning it does in the Employment Agreement.
1.1.5. Voluntary Termination. "Voluntary Termination" shall have the same
meaning it does in the Employment Agreement.
1.1.6. Good Reason Resignation. "Good Reason Resignation" shall have the
same meaning it does in the Employment Agreement.
1.1.7. Termination Without Cause. "Termination Without Cause" shall have
the same meaning it does in the Employment Agreement.
2. Grant of Option, Option Types and Exercise Period.
2.1 Grant of Options. Subject to the terms and conditions of
this Agreement, the Corporation hereby grants to the Employee, options
("Options") to purchase from the Corporation up to 500,000 Shares ("Option
Shares") at a price of $3.00 per Share ("Exercise Price"). The Options granted
hereunder shall be allocated between Time Based Options, as defined below, and
Performance Based Options, as defined below.
2.2. Time Based Options. Options to purchase 150,000 of the
Option Shares (the "Time Based Options") shall vest in two equal installments
("Vesting Periods") each of which shall entitle the Employee to purchase 75,000
Option Shares. The Time Based Options shall vest as follows:
Number of
Vesting Date Option Shares
January 31, 1998 75,000
January 31, 1999 75,000
2.3. Performance Based Options. Options to purchase the
remaining 350,000 Option Shares (the "Performance Based Options") shall vest, if
at all, over a period of three years and five months commencing on January 31,
1999 and ending on June 30, 2002. The vesting schedule shall be based on four
periods during which the "Performance Based Options" shall vest and such periods
are as follows:
Period 1 - Commencing January 31, 1999, ending June 30, 1999.
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Period 2 - Commencing July 1, 1999, ending June 30, 2000.
Period 3 - Commencing July 1, 2000, ending June 30, 2001.
Period 4 - Commencing July 1, 2001, ending January 31, 2002.
(a) The first group ("First Option") to purchase 48,611 Option Shares,
shall vest, subject to the achievement of the Performance Criteria for the First
Option, on June 30, 1999. In order for the First Option to vest, Adjusted Pretax
Profits for the twelve month period ending on June 30, 1999, must be not less
than 118% of the Adjusted Pretax Profits as stated in the June 30, 1998 fiscal
year ending audited financial statements.
(b) The second group ("Second Option") to purchase 116,667 Option
Shares, shall vest, subject to the achievement of the Performance Criteria for
the Second Option, on June 30, 2000. In order for the Second Option to vest,
Adjusted Pretax Profits for the twelve month period ending on June 30, 2000,
must be not less than 118% of the Adjusted Pretax Profits as stated in the June
30, 1999 fiscal year ending audited financial statements.
(c) The third group ("Third Option") to purchase 116,667 Option Shares,
shall vest, subject to the achievement of the Performance Criteria for the Third
Option, on June 30, 2001. In order for the Third Option to vest, Adjusted Pretax
Profits for the twelve month period ending on June 30, 2001, must be not less
than 118% of the Adjusted Pretax Profits as stated in the June 30, 2000 fiscal
year ending audited financial statements.
(d) The fourth group ("Fourth Option") to purchase 68,055 Option
Shares, shall vest subject to the achievement of the Performance Criteria for
the Fourth Options, on June 30, 2002. In order for the Fourth Option to vest,
Adjusted Pretax Profits for the twelve month period ending on June 30, 2002,
must be not less than 118% of the Adjusted Pretax Profits as stated in the June
30, 2001 fiscal year ending audited financial statements.
An example of the operation of the Performance Criteria is as
follows: if the Adjusted Pretax Profits for the twelve month period ending June
30, 1999 are $1,000,000, then in order for the Second Option to vest, Adjusted
Pretax Profits must be $1,180,000 for the 12 month period ending on June 30,
2000.
2.4. No Prorata Vesting For Performance Based Options. Each
group of Performance Based Options shall vest or be void in total on a group
basis and there shall be no prorata vesting of Options within a group. If the
Performance Criteria is not met for a group of Performance Based Options, then
no Options from that group shall vest except for the provisions provided for in
the employment agreement.
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2.5. Exercise Period. Once vested under paragraph 2.2 or 2.3, an Option
shall be exercisable for a period of five years.
3. ISO's and NSO's. Each Option granted hereunder shall be deemed to be
an Incentive Stock Option ("ISO") to the maximum amount allowed by the Internal
Revenue Code ("IRC") and a Non-Statutory Stock Option ("NSO'") to the extent not
deemed to be an ISO.
4. Exercise of Option. Each Option shall become exercisable by the
Employee beginning on the date of vesting and must be exercised, if at all prior
to termination of such Option. Notwithstanding the foregoing, if required in
order to be deemed to be an ISO, a Option shall not become exercisable until six
months following the date on which shareholder approval for this Agreement is
obtained. The Corporation shall seek shareholder approval of the grant of these
Options at its next meeting of shareholders.
4.1. Manner of Exercise. An Option granted hereunder which has
vested, may be exercised in whole or in part by delivery to the Corporation,
from time to time, of a written notice signed by the Employee, specifying the
number of Option Shares that the Employee then desires to purchase, together
with cash, certified check, or bank draft payable to the order of the
Corporation or with some other form of payment acceptable to the Board of
Directors of the Corporation, for an amount equal to the Exercise Price of such
Option Shares. Employee may make payment of all or a portion of the Exercise
Price in installments over a period of not more than three (3) years and in such
event, the Employee shall deliver a promissory note, in form satisfactory to the
Corporation for the deferred portion of the Exercise Price secured by a pledge,
also in form satisfactory to the Corporation, of the Option Shares purchased by
such exercise of Option. This pledge shall provide that any sale by pledgee
shall be conducted in a manner as to not give rise to any of the liability for
the pledgor under Section 16 of the Exchange Act. Employee may pay all or a
portion of the Exercise Price, and/or the tax withholding liability with respect
to the exercise of the Option either by surrendering shares of stock already
owned by Employee or by withholding Option Shares, provided that the Board of
Directors of the Corporation determines that the fair market value of such
surrendered stock or withheld Option Shares is equal to the corresponding
portion of such Exercise Price and/or tax withholding liability, as the case may
be, to be paid for therewith.
4.2. Certificates. Promptly after any exercise in whole or in
part of the Option by the Employee, the Corporation shall deliver to the
Employee a certificate or certificates for the number of Option Shares with
respect to which the Option was so exercised, registered in the Employee's name.
5. Representations and Warranties of Employee. Employee hereby represents
and warrants to the Corporation that:
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5.1. Information. Employee has received and read all reports
filed by the Corporation with the Securities and Exchange Commission ("SEC
Reports") during 1995 and 1996. Employee acknowledges that all documents,
records and books pertaining to an investment in the Corporation have been made
available to Employee.
5.2. Legal and Tax Counsel. Employee has consulted with his
own attorney and tax advisor regarding legal matters concerning this Option and
an investment in the Corporation and the tax consequences of this Option and of
such an investment.
5.3. No Guaranties. Employee acknowledges that he is aware that there is no
assurance with respect to the profitability of the Corporation.
5.4. Knowledge. Employee is, by reason of his business or
financial experience, capable of evaluating the merits and risks of an
investment in the Corporation and of protecting Employee's own interests in
connection with his acquisition of this Option and an investment in the
Corporation.
5.5. Restricted Option and Shares. Employee acknowledges that
this Option and the Option Shares are restricted and will be restricted unless
registered under applicable securities laws. Employee is aware that it may not
be possible to liquidate his investment in the Corporation. Employee agrees,
that until registered, certificates evidencing the Option Shares shall bear a
legend restricting the transfer thereof consistent with the foregoing and that
stock transfer instructions may be issued to the Corporation's transfer agent
restricting the transfer of the Option Shares.
6. Duration of Option. Each Option, granted hereunder, to the extent
vested and not previously exercised, shall terminate upon the earliest of the
following dates:
6.1. Five (5) years from the date of vesting;
6.2. If the Employment Agreement is terminated by the Employer
for cause, for reason of disability or for reason of death pursuant to
paragraphs 2.3, 2.5 or 2.6 of the Employment Agreement, or if the Employment
Agreement is voluntarily terminated by the Employee pursuant to paragraph 2.7 of
the Employment Agreement, then:
(a) the Time Based Options for the year of termination shall
be accelerated and shall vest immediately through the date of
termination but shall be prorated. The number of Time Based Option
Shares which Employee shall be entitled to purchase under this
paragraph 6.2 shall be prorated on the basis of the percentage of the
Vesting Period which has been completed as of the date of Termination
for Cause. An example of this provision, is as follows:
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In the event Employee has a Time Based Option to
purchase 12,000 Time Based Option Shares which Option vests on
the first anniversary date of this Agreement, and if Employee
is terminated pursuant to paragraphs 2.3, 2.5 or 2.6 of the
Employment Agreement or if there is a Voluntary Termination of
the Employment Agreement pursuant to paragraph 2.7 thereof,
nine months after the date of of this Agreement, then Employee
shall have the right to purchase 9,000 Time Based Option
Shares immediately after the date of such termination pursuant
to the applicable terms and conditions of this Agreement. The
right to purchase the remaining 3,000 Time Based Option Shares
shall be terminated immediately as of the date of such
termination. Employee shall have no right to purchase Time
Based Option Shares for any Vesting Period which is subsequent
to the Vesting Period in which such termination occurred.
(b) all previously vested Time Based Options shall be
exercisable according to the terms of this Agreement;
(c) all Time Based Options which have not vested prior to such
termination or which do not vest pursuant to paragraph 6.2 (a) hereof,
shall immediately expire;
(d) the vesting of Performance Based Options shall be
accelerated. The number of Performance Based Option Shares which
Employee shall be entitled to purchase shall be prorated on the basis
of the percentage of the Bonus Period which has been completed as of
the date of such termination. The Performance Based Option Shares which
may be purchased under this paragraph 6.2(d) will not be determinable
until the completion of the Corporation's consolidated audited
financial statements for the Bonus Period in which such termination
occurs. An example of this provision is as follows:
If, under this Agreement, Employee would be entitled
to purchase 150,000 Performance Based Option Shares had he
worked for the entire Bonus Period, and if Employee's
employment was terminated immediately after sixty percent
(60%) of the Bonus Period had been completed, then Employee
shall be entitled to purchase 90,000 of the Performance Based
Option Shares attributed to such Bonus Period. Employee shall
not be entitled to purchase any Performance Based Option
Shares which underlie Performance Based Options for Bonus
Periods which are subsequent to the Bonus Period in which such
termination occurred.
(e) all previously vested Performance Based Options shall be
exercisable according to the terms of this Agreement; and
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(f) all Performance Based Options which have not vested prior
to such termination or which do not vest pursuant to paragraph 6.2 (d),
shall immediately expire.
6.3. if the Employee's employment is terminated by Employer
Without Cause pursuant to paragraph 2.4 of the Employment Agreement or by the
Good Reason Resignation by Employee pursuant to paragraph 2.8 of the Employment
Agreement, then:
(a) the Time Based Options for the Vesting Period in which
such termination occurred shall be accelerated and shall vest
immediately. An example of this provision, is as follows:
In the event Employee has a Time Based Option to
purchase 12,000 shares of Employers common stock which vests
on the first anniversary date of this Agreement, and if
Employee 's employment is Terminated Without Cause or
employment is terminated by Employee pursuant to paragraph 2.8
of the Employment Agreement nine months after the date of this
Agreement, then Employee shall have the right to purchase all
12,000 shares of Employer's common stock immediately after the
date of such termination pursuant to the applicable terms and
conditions of this Agreement. Employee shall have no right to
purchase Time Based Option Shares for any Vesting Period which
is subsequent to the Vesting Period in which such termination
occurred ;
(b) all previously vested Time Based Options shall be
exercisable according to the terms of this Agreement;
(c) all Time Based Options which have not vested prior to such
termination or which do not vest pursuant to Section 6.3 (a), shall
immediately expire;
(d) the vesting of Performance Based Options shall be
accelerated and the number of Performance Based Option shares which
Employee is entitled to purchase shall be that number of Performance
Based Option Shares which Employee would be entitled to purchase if he
had been employed during the entire Bonus Period. The Performance Based
Option Shares which may be purchased under this paragraph 6.3(d) will
not be determinable until the completion of the Corporation's
consolidated audited financial statements for the Bonus Period in which
such termination occurred. An example of this provision is as follows:
If, under this Agreement, Employee would be entitled
to purchase 150,000 Performance Based Option Shares had he
worked for the entire Bonus Period, and if Employee's
employment was Terminated without
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Cause or is terminated pursuant to paragraph 2.8 of the
Employment Agreement immediately after sixty percent (60%) of
the Bonus Period had been completed, then Employee shall be
entitled to purchase all 150,000 Performance Based Option
Shares attributed to such Bonus Period. Employee shall not be
entitled to purchase any Performance Based Option Shares which
underlie Performance Based Options for Bonus Periods which are
subsequent to the Bonus Period in which such termination
occurred.
(e) all previously vested Performance Based Options shall be
exercisable according to the terms of this Agreement; and
(f) all Performance Based Options which have not vested prior
to such termination or which do not vest pursuant to paragraph 6.3 (d)
hereof shall immediately expire.
7. Restriction on Transfer. This Option is not transferable by the
Employee otherwise than by testamentary will or the laws of descent and
distribution and, during the Employee's lifetime, may be exercised only by the
Employee or the Employee's guardian or legal representative. Except as permitted
by the preceding sentence, neither this Option nor any of the rights and
privileges conferred thereby shall be transferred, assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise), and no such
option, right, or privilege shall be subject to execution, attachment, or
similar process. Upon any attempt to transfer this Option, or of any right or
privilege conferred thereby, contrary to the provisions hereof, or upon the levy
of any attachment or similar process upon such option, right, or privilege, this
Option and any such rights and privileges shall immediately become null and
void.
8. Exercise in Event of Death or Disability. Whenever the word
"Employee" is used in any provision of this Agreement under circumstances when
the provision should logically be construed to apply to the Employee's guardian,
legal representative, executor, administrator, or the person or persons to whom
the Option may be transferred by testamentary will or by the laws of descent and
distribution, the word "Employee" shall be deemed to include such person or
persons.
9. No Rights As Shareholder Prior To Exercise. The Employee shall not,
by virtue hereof, be entitled to any rights of a shareholder in the Corporation,
either at law or equity. Prior to exercise, the rights of the Employee are
limited to those expressed in this Option and are not enforceable against the
Corporation except to the extent set forth herein.
10. Registration of Option Shares. The Option Shares have not been
registered with the Securities and Exchange Commission. The Company shall use
its best efforts to register the the shares underlying the options on Form S-8
and keep such Registration in
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effect with the Securities and Exchange Commission as soon as practical and not
later than six months from the date hereof.
11. Anti-Dilution Provisions. The number and kind of Shares purchasable
upon the exercise of this Option and the exercise price shall be subject to
adjustment from time to time as follows:
11.1. In case the Corporation shall (i) pay a dividend or make
a distribution on the outstanding Shares payable in Shares, (ii) subdivide the
outstanding Shares into a greater number of Shares, (iii) combine the
outstanding Shares into a lesser number of Shares, or (iv) issue by
reclassification of the Shares any Shares of the Corporation, the Employee shall
thereafter be entitled, upon exercise, to receive the number and kind of shares
which, if this Option had been exercised immediately prior to the happening of
such event, the Employee would have owned upon such exercise and been entitled
to receive upon such dividend, distribution, subdivision, combination, or
reclassification.
11.2. In case the Corporation shall consolidate or merge into
or with another corporation, or in case the Corporation shall sell or convey to
any other person or persons all or substantially all the property of the
Corporation, the Employee shall thereafter be entitled, upon exercise, to
receive the kind and amount of shares, other securities, cash, and property
receivable upon such consolidation, merger, sale, or conveyance by a holder of
the number of Shares which might have been purchased upon exercise of this
Option immediately prior to such consolidation, merger, sale, or conveyance, and
shall have no other conversion rights. In any such event, effective provision
shall be made, in the certificate or articles of incorporation of the resulting
or surviving corporation, in any contracts of sale and conveyance, or otherwise
so that, so far as appropriate and as nearly as reasonably may be, the
provisions set forth herein for the protection of the rights of the Employee
shall thereafter be made applicable.
11.3. Whenever the number of Shares purchasable upon exercise
of this Option is adjusted pursuant to this Section, the exercise price per
Share shall be adjusted simultaneously by multiplying that exercise price per
Share in effect immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Shares purchasable upon exercise of this Option
immediately prior to such adjustment, and of which the denominator shall be the
number of Shares so purchasable immediately after such adjustment, so that the
aggregate exercise price of this Option remains the same.
11.4. The existence of the Option shall not affect in any way
the right or power of the Corporation or its shareholders to make or authorize
any adjustments, recapitalization, reorganization, or other changes in the
Corporation's capital structure or its business, or any merger or consolidation
of the Corporation, or any issue of bonds, debentures, preferred shares with
rights greater than or affecting the Shares, or the dissolution or liquidation
of the Corporation, or any sale or transfer of all or any part of its
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assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
12. No Waiver of Corporation's Right to Terminate Employment. Nothing
in this Agreement shall affect in any manner whatsoever the right or power of
the Corporation or SLM to terminate Employee's employment for any reason, with
or without cause.
13. Notices. Any notices permitted or required under this Agreement
shall be deemed given upon the date of personal delivery or 72 hours after
deposit in the United States mail, postage fully prepaid, return receipt
requested, addressed to the Corporation at its principal placement of business
and to Employee at his residence.
14. Corporation's Right to Repurchase Shares. In the event Employee's
employment is Terminated for Cause the Corporation may repurchase from Employee
any Option Shares purchased by Employee hereunder. The purchase price to be paid
for such shares shall be the Exercise Price paid by the Employee for the Option
Shares, plus an eight percent (8%) carrying cost. The Corporation's right to
repurchase Option Shares pursuant to this Section 14, shall terminate ninety
days from the date of such Termination for Cause. Any Option Shares repurchased
by the Corporation hereunder shall be paid for by certified funds. Any
repurchase by the Corporation shall be conducted in a manner as to not give rise
to any liability for the employee under Section 16 of the Exchange Act.
15. Right of First Refusal to Repurchase Shares. In the event
Employee's employment is Terminated Without Cause and in the event Employee
desires to sell all or a portion of the Option Shares within ninety days of such
termination of employment, the Corporation shall have the first right of refusal
to purchase such shares. In such event, the Employee shall give written notice
to the Corporation of his intent to sell all or a portion of the Option Shares.
After receiving such notice, the Corporation shall have twenty (20) days to
purchase from Employee all of the Option Shares which Employee intends to sell.
Any Option Shares purchased hereunder shall be paid for by certified funds and
the price per share shall be the "bid" price of the Company's common stock on
the date of Employee's notice of intent to sell, provided, however, that if
Employee has received and accepted a bona fide offer for the purchase of the
Option Shares, the price paid by the Corporation shall be the offered price,
rather the "bid" price.
16. Miscellaneous
16.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Utah.
16.2. Titles and Captions. All section titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the context
nor effect the interpretation of this Agreement.
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. 16.3. Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
16.4. Binding Agreement. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
16.5. Computation of Time. In computing any period of time pursuant to this
Agreement, the day of the act, event or default from which the designated period
of time begins to run shall be included, unless it is a Saturday, Sunday, or a
legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday, or legal holiday. In the event that the last
day of any period falls on a Saturday, Sunday or legal holiday, such period
shall run until the end of the next day thereafter which is not a Saturday,
Sunday, or legal holiday.
16.6. Pronouns and Plurals. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular, or plural as
the identity of the person or persons may require.
16.7. Arbitration. If at any time during the term of this Agreement any
dispute, difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association, and judgment upon the award rendered by
the arbiter may be entered in any court having jurisdiction thereof.
16.8. Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
16.9. Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
16.10. Parties in Interest. Nothing herein shall be construed to be to the
benefit of any third party, nor is it intended that any provision shall be for
the benefit of any third party.
16.11. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this
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Agreement, or the application of such provision to persons or circumstances
other than those as to which it is held invalid, shall not be affected thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above-written.
Celtic Investment, Inc. Employee:
By /s/ Douglas P. Morris /s/ Reese Howell, Jr.
Douglas P. Morris, President Reese Howell, Jr.
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THESE OPTIONS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR STATE
SECURITIES LAWS. THESE OPTIONS CANNOT BE SOLD, TRANSFERRED, ASSIGNED OR
OTHERWISE DISPOSED OF EXCEPT AS PERMITTED BY THIS AGREEMENT AND BY APPLICABLE
FEDERAL AND STATE SECURITIES LAWS.
- - -------------------------------------------------------------------------------
CELTIC INVESTMENT INC.
STOCK OPTION AGREEMENT
This Agreement is entered into this 31st day of January, 1997, by and
between Celtic Investment, Inc., a Delaware corporation ("Corporation") and
Roger D. Davis ("Employee").
RECITALS:
WHEREAS, Salt Lake Mortgage ("SLM") and Corporation have entered into
an Employment Agreement (the "Employment Agreement") wherein there are jointly
referred to as "Employer" whereby they have agreed to hire Employee and whereby
Employee has agreed to be employed by Employer pursuant to the terms and
conditions set forth therein; and approved by the Board of Directors of Employer
and meets the requirements of SEC Rule 16(b)(3) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
WHEREAS, under the Employment Agreement, the Corporation has agreed to
grant stock options to Employee entitling Employee to purchase shares of the
Corporation's common stock ("Shares"); and
WHEREAS, the purpose of granting these options to Employee is to
promote the success of the Corporation and SLM and to advance the interests of
the Corporation and SLM by providing an additional means, through the grant of
these stock options, to motivate, retain and reward Employee with an incentive
for high levels of individual performance and improved financial performance of
the Corporation and SLM;
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
1.1 Definitions. For the purposes of this Option Agreement, the
following terms shall have the following meanings:
1.1.1. Adjusted Pretax Profits. For purposes of this
Agreement, Adjusted Pretax Profits shall have the same meaning as "API" has in
the Escrow Agreement (hereafter defined) and shall be calculated in the same
manner it is calculated in the Escrow Agreement.
1.1.2. Bonus Period. "Bonus Period shall have the same meaning it does in
the Employment Agreement.
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1.1.3 Escrow Agreement. "Escrow Agreement" shall have the same meaning it
does in the Employment Agreement.
1.1.4. Termination for Cause. "Termination For Cause" shall have the same
meaning it does in the Employment Agreement.
1.1.5. Voluntary Termination. "Voluntary Termination" shall have the same
meaning it does in the Employment Agreement.
1.1.6. Good Reason Resignation. "Good Reason Resignation" shall have the
same meaning it does in the Employment Agreement.
1.1.7. Termination Without Cause. "Termination Without Cause" shall have
the same meaning it does in the Employment Agreement.
2. Grant of Option, Option Types and Exercise Period.
2.1 Grant of Options. Subject to the terms and conditions of
this Agreement, the Corporation hereby grants to the Employee, options
("Options") to purchase from the Corporation up to 500,000 Shares ("Option
Shares") at a price of $3.00 per Share ("Exercise Price"). The Options granted
hereunder shall be allocated between Time Based Options, as defined below, and
Performance Based Options, as defined below.
2.2. Time Based Options. Options to purchase 150,000 of the
Option Shares (the "Time Based Options") shall vest in two equal installments
("Vesting Periods") each of which shall entitle the Employee to purchase 75,000
Option Shares. The Time Based Options shall vest as follows:
Number of
Vesting Date Option Shares
January 31, 1998 75,000
January 31, 1999 75,000
2.3. Performance Based Options. Options to purchase the
remaining 350,000 Option Shares (the "Performance Based Options") shall vest, if
at all, over a period of three years and five months commencing on January 31,
1999 and ending on June 30, 2002. The vesting schedule shall be based on four
periods during which the "Performance Based Options" shall vest and such periods
are as follows:
Period 1 - Commencing January 31, 1999, ending June 30, 1999.
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Period 2 - Commencing July 1, 1999, ending June 30, 2000.
Period 3 - Commencing July 1, 2000, ending June 30, 2001.
Period 4 - Commencing July 1, 2001, ending January 31, 2002.
(a) The first group ("First Option") to purchase 48,611 Option Shares,
shall vest, subject to the achievement of the Performance Criteria for the First
Option, on June 30, 1999. In order for the First Option to vest, Adjusted Pretax
Profits for the twelve month period ending on June 30, 1999, must be not less
than 118% of the Adjusted Pretax Profits as stated in the June 30, 1998 fiscal
year ending audited financial statements.
(b) The second group ("Second Option") to purchase 116,667 Option
Shares, shall vest, subject to the achievement of the Performance Criteria for
the Second Option, on June 30, 2000. In order for the Second Option to vest,
Adjusted Pretax Profits for the twelve month period ending on June 30, 2000,
must be not less than 118% of the Adjusted Pretax Profits as stated in the June
30, 1999 fiscal year ending audited financial statements.
(c) The third group ("Third Option") to purchase 116,667 Option Shares,
shall vest, subject to the achievement of the Performance Criteria for the Third
Option, on June 30, 2001. In order for the Third Option to vest, Adjusted Pretax
Profits for the twelve month period ending on June 30, 2001, must be not less
than 118% of the Adjusted Pretax Profits as stated in the June 30, 2000 fiscal
year ending audited financial statements.
(d) The fourth group ("Fourth Option") to purchase 68,055 Option
Shares, shall vest subject to the achievement of the Performance Criteria for
the Fourth Options, on June 30, 2002. In order for the Fourth Option to vest,
Adjusted Pretax Profits for the twelve month period ending on June 30, 2002,
must be not less than 118% of the Adjusted Pretax Profits as stated in the June
30, 2001 fiscal year ending audited financial statements.
An example of the operation of the Performance Criteria is as
follows: if the Adjusted Pretax Profits for the twelve month period ending June
30, 1999 are $1,000,000, then in order for the Second Option to vest, Adjusted
Pretax Profits must be $1,180,000 for the 12 month period ending on June 30,
2000.
2.4. No Prorata Vesting For Performance Based Options. Each
group of Performance Based Options shall vest or be void in total on a group
basis and there shall be no prorata vesting of Options within a group. If the
Performance Criteria is not met for a group of Performance Based Options, then
no Options from that group shall vest except for the provisions provided for in
the employment agreement.
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2.5. Exercise Period. Once vested under paragraph 2.2 or 2.3, an Option
shall be exercisable for a period of five years.
3. ISO's and NSO's. Each Option granted hereunder shall be deemed to be
an Incentive Stock Option ("ISO") to the maximum amount allowed by the Internal
Revenue Code ("IRC") and a Non-Statutory Stock Option ("NSO'") to the extent not
deemed to be an ISO.
4. Exercise of Option. Each Option shall become exercisable by the
Employee beginning on the date of vesting and must be exercised, if at all prior
to termination of such Option. Notwithstanding the foregoing, if required in
order to be deemed to be an ISO, a Option shall not become exercisable until six
months following the date on which shareholder approval for this Agreement is
obtained. The Corporation shall seek shareholder approval of the grant of these
Options at its next meeting of shareholders.
4.1. Manner of Exercise. An Option granted hereunder which has
vested, may be exercised in whole or in part by delivery to the Corporation,
from time to time, of a written notice signed by the Employee, specifying the
number of Option Shares that the Employee then desires to purchase, together
with cash, certified check, or bank draft payable to the order of the
Corporation or with some other form of payment acceptable to the Board of
Directors of the Corporation, for an amount equal to the Exercise Price of such
Option Shares. Employee may make payment of all or a portion of the Exercise
Price in installments over a period of not more than three (3) years and in such
event, the Employee shall deliver a promissory note, in form satisfactory to the
Corporation for the deferred portion of the Exercise Price secured by a pledge,
also in form satisfactory to the Corporation, of the Option Shares purchased by
such exercise of Option. This pledge shall provide that any sale by pledgee
shall be conducted in a manner as to not give rise to any of the liability for
the pledgor under Section 16 of the Exchange Act. Employee may pay all or a
portion of the Exercise Price, and/or the tax withholding liability with respect
to the exercise of the Option either by surrendering shares of stock already
owned by Employee or by withholding Option Shares, provided that the Board of
Directors of the Corporation determines that the fair market value of such
surrendered stock or withheld Option Shares is equal to the corresponding
portion of such Exercise Price and/or tax withholding liability, as the case may
be, to be paid for therewith.
4.2. Certificates. Promptly after any exercise in whole or in
part of the Option by the Employee, the Corporation shall deliver to the
Employee a certificate or certificates for the number of Option Shares with
respect to which the Option was so exercised, registered in the Employee's name.
5. Representations and Warranties of Employee. Employee hereby represents
and warrants to the Corporation that:
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5.1. Information. Employee has received and read all reports
filed by the Corporation with the Securities and Exchange Commission ("SEC
Reports") during 1995 and 1996. Employee acknowledges that all documents,
records and books pertaining to an investment in the Corporation have been made
available to Employee.
5.2. Legal and Tax Counsel. Employee has consulted with his
own attorney and tax advisor regarding legal matters concerning this Option and
an investment in the Corporation and the tax consequences of this Option and of
such an investment.
5.3. No Guaranties. Employee acknowledges that he is aware that there is no
assurance with respect to the profitability of the Corporation.
5.4. Knowledge. Employee is, by reason of his business or
financial experience, capable of evaluating the merits and risks of an
investment in the Corporation and of protecting Employee's own interests in
connection with his acquisition of this Option and an investment in the
Corporation.
5.5. Restricted Option and Shares. Employee acknowledges that
this Option and the Option Shares are restricted and will be restricted unless
registered under applicable securities laws. Employee is aware that it may not
be possible to liquidate his investment in the Corporation. Employee agrees,
that until registered, certificates evidencing the Option Shares shall bear a
legend restricting the transfer thereof consistent with the foregoing and that
stock transfer instructions may be issued to the Corporation's transfer agent
restricting the transfer of the Option Shares.
6. Duration of Option. Each Option, granted hereunder, to the extent
vested and not previously exercised, shall terminate upon the earliest of the
following dates:
6.1. Five (5) years from the date of vesting;
6.2. If the Employment Agreement is terminated by the Employer
for cause, for reason of disability or for reason of death pursuant to
paragraphs 2.3, 2.5 or 2.6 of the Employment Agreement, or if the Employment
Agreement is voluntarily terminated by the Employee pursuant to paragraph 2.7 of
the Employment Agreement, then:
(a) the Time Based Options for the year of termination shall
be accelerated and shall vest immediately through the date of
termination but shall be prorated. The number of Time Based Option
Shares which Employee shall be entitled to purchase under this
paragraph 6.2 shall be prorated on the basis of the percentage of the
Vesting Period which has been completed as of the date of Termination
for Cause. An example of this provision, is as follows:
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In the event Employee has a Time Based Option to
purchase 12,000 Time Based Option Shares which Option vests on
the first anniversary date of this Agreement, and if Employee
is terminated pursuant to paragraphs 2.3, 2.5 or 2.6 of the
Employment Agreement or if there is a Voluntary Termination of
the Employment Agreement pursuant to paragraph 2.7 thereof,
nine months after the date of of this Agreement, then Employee
shall have the right to purchase 9,000 Time Based Option
Shares immediately after the date of such termination pursuant
to the applicable terms and conditions of this Agreement. The
right to purchase the remaining 3,000 Time Based Option Shares
shall be terminated immediately as of the date of such
termination. Employee shall have no right to purchase Time
Based Option Shares for any Vesting Period which is subsequent
to the Vesting Period in which such termination occurred.
(b) all previously vested Time Based Options shall be
exercisable according to the terms of this Agreement;
(c) all Time Based Options which have not vested prior to such
termination or which do not vest pursuant to paragraph 6.2 (a) hereof,
shall immediately expire;
(d) the vesting of Performance Based Options shall be
accelerated. The number of Performance Based Option Shares which
Employee shall be entitled to purchase shall be prorated on the basis
of the percentage of the Bonus Period which has been completed as of
the date of such termination. The Performance Based Option Shares which
may be purchased under this paragraph 6.2(d) will not be determinable
until the completion of the Corporation's consolidated audited
financial statements for the Bonus Period in which such termination
occurs. An example of this provision is as follows:
If, under this Agreement, Employee would be entitled
to purchase 150,000 Performance Based Option Shares had he
worked for the entire Bonus Period, and if Employee's
employment was terminated immediately after sixty percent
(60%) of the Bonus Period had been completed, then Employee
shall be entitled to purchase 90,000 of the Performance Based
Option Shares attributed to such Bonus Period. Employee shall
not be entitled to purchase any Performance Based Option
Shares which underlie Performance Based Options for Bonus
Periods which are subsequent to the Bonus Period in which such
termination occurred.
(e) all previously vested Performance Based Options shall be
exercisable according to the terms of this Agreement; and
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(f) all Performance Based Options which have not vested prior
to such termination or which do not vest pursuant to paragraph 6.2 (d),
shall immediately expire.
6.3. if the Employee's employment is terminated by Employer
Without Cause pursuant to paragraph 2.4 of the Employment Agreement or by the
Good Reason Resignation by Employee pursuant to paragraph 2.8 of the Employment
Agreement, then:
(a) the Time Based Options for the Vesting Period in which
such termination occurred shall be accelerated and shall vest
immediately. An example of this provision, is as follows:
In the event Employee has a Time Based Option to
purchase 12,000 shares of Employers common stock which vests
on the first anniversary date of this Agreement, and if
Employee 's employment is Terminated Without Cause or
employment is terminated by Employee pursuant to paragraph 2.8
of the Employment Agreement nine months after the date of this
Agreement, then Employee shall have the right to purchase all
12,000 shares of Employer's common stock immediately after the
date of such termination pursuant to the applicable terms and
conditions of this Agreement. Employee shall have no right to
purchase Time Based Option Shares for any Vesting Period which
is subsequent to the Vesting Period in which such termination
occurred ;
(b) all previously vested Time Based Options shall be
exercisable according to the terms of this Agreement;
(c) all Time Based Options which have not vested prior to such
termination or which do not vest pursuant to Section 6.3 (a), shall
immediately expire;
(d) the vesting of Performance Based Options shall be
accelerated and the number of Performance Based Option shares which
Employee is entitled to purchase shall be that number of Performance
Based Option Shares which Employee would be entitled to purchase if he
had been employed during the entire Bonus Period. The Performance Based
Option Shares which may be purchased under this paragraph 6.3(d) will
not be determinable until the completion of the Corporation's
consolidated audited financial statements for the Bonus Period in which
such termination occurred. An example of this provision is as follows:
If, under this Agreement, Employee would be entitled
to purchase 150,000 Performance Based Option Shares had he
worked for the entire Bonus Period, and if Employee's
employment was Terminated without
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Cause or is terminated pursuant to paragraph 2.8 of the
Employment Agreement immediately after sixty percent (60%) of
the Bonus Period had been completed, then Employee shall be
entitled to purchase all 150,000 Performance Based Option
Shares attributed to such Bonus Period. Employee shall not be
entitled to purchase any Performance Based Option Shares which
underlie Performance Based Options for Bonus Periods which are
subsequent to the Bonus Period in which such termination
occurred.
(e) all previously vested Performance Based Options shall be
exercisable according to the terms of this Agreement; and
(f) all Performance Based Options which have not vested prior
to such termination or which do not vest pursuant to paragraph 6.3 (d)
hereof shall immediately expire.
7. Restriction on Transfer. This Option is not transferable by the
Employee otherwise than by testamentary will or the laws of descent and
distribution and, during the Employee's lifetime, may be exercised only by the
Employee or the Employee's guardian or legal representative. Except as permitted
by the preceding sentence, neither this Option nor any of the rights and
privileges conferred thereby shall be transferred, assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise), and no such
option, right, or privilege shall be subject to execution, attachment, or
similar process. Upon any attempt to transfer this Option, or of any right or
privilege conferred thereby, contrary to the provisions hereof, or upon the levy
of any attachment or similar process upon such option, right, or privilege, this
Option and any such rights and privileges shall immediately become null and
void.
8. Exercise in Event of Death or Disability. Whenever the word
"Employee" is used in any provision of this Agreement under circumstances when
the provision should logically be construed to apply to the Employee's guardian,
legal representative, executor, administrator, or the person or persons to whom
the Option may be transferred by testamentary will or by the laws of descent and
distribution, the word "Employee" shall be deemed to include such person or
persons.
9. No Rights As Shareholder Prior To Exercise. The Employee shall not,
by virtue hereof, be entitled to any rights of a shareholder in the Corporation,
either at law or equity. Prior to exercise, the rights of the Employee are
limited to those expressed in this Option and are not enforceable against the
Corporation except to the extent set forth herein.
10. Registration of Option Shares. The Option Shares have not been
registered with the Securities and Exchange Commission. The Company shall use
its best efforts to register the the shares underlying the options on Form S-8
and keep such Registration in
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effect with the Securities and Exchange Commission as soon as practical and not
later than six months from the date hereof.
11. Anti-Dilution Provisions. The number and kind of Shares purchasable
upon the exercise of this Option and the exercise price shall be subject to
adjustment from time to time as follows:
11.1. In case the Corporation shall (i) pay a dividend or make
a distribution on the outstanding Shares payable in Shares, (ii) subdivide the
outstanding Shares into a greater number of Shares, (iii) combine the
outstanding Shares into a lesser number of Shares, or (iv) issue by
reclassification of the Shares any Shares of the Corporation, the Employee shall
thereafter be entitled, upon exercise, to receive the number and kind of shares
which, if this Option had been exercised immediately prior to the happening of
such event, the Employee would have owned upon such exercise and been entitled
to receive upon such dividend, distribution, subdivision, combination, or
reclassification.
11.2. In case the Corporation shall consolidate or merge into
or with another corporation, or in case the Corporation shall sell or convey to
any other person or persons all or substantially all the property of the
Corporation, the Employee shall thereafter be entitled, upon exercise, to
receive the kind and amount of shares, other securities, cash, and property
receivable upon such consolidation, merger, sale, or conveyance by a holder of
the number of Shares which might have been purchased upon exercise of this
Option immediately prior to such consolidation, merger, sale, or conveyance, and
shall have no other conversion rights. In any such event, effective provision
shall be made, in the certificate or articles of incorporation of the resulting
or surviving corporation, in any contracts of sale and conveyance, or otherwise
so that, so far as appropriate and as nearly as reasonably may be, the
provisions set forth herein for the protection of the rights of the Employee
shall thereafter be made applicable.
11.3. Whenever the number of Shares purchasable upon exercise
of this Option is adjusted pursuant to this Section, the exercise price per
Share shall be adjusted simultaneously by multiplying that exercise price per
Share in effect immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Shares purchasable upon exercise of this Option
immediately prior to such adjustment, and of which the denominator shall be the
number of Shares so purchasable immediately after such adjustment, so that the
aggregate exercise price of this Option remains the same.
11.4. The existence of the Option shall not affect in any way
the right or power of the Corporation or its shareholders to make or authorize
any adjustments, recapitalization, reorganization, or other changes in the
Corporation's capital structure or its business, or any merger or consolidation
of the Corporation, or any issue of bonds, debentures, preferred shares with
rights greater than or affecting the Shares, or the dissolution or liquidation
of the Corporation, or any sale or transfer of all or any part of its
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assets or business, or any other corporate act or proceeding, whether of a
similar character or otherwise.
12. No Waiver of Corporation's Right to Terminate Employment. Nothing
in this Agreement shall affect in any manner whatsoever the right or power of
the Corporation or SLM to terminate Employee's employment for any reason, with
or without cause.
13. Notices. Any notices permitted or required under this Agreement
shall be deemed given upon the date of personal delivery or 72 hours after
deposit in the United States mail, postage fully prepaid, return receipt
requested, addressed to the Corporation at its principal placement of business
and to Employee at his residence.
14. Corporation's Right to Repurchase Shares. In the event Employee's
employment is Terminated for Cause the Corporation may repurchase from Employee
any Option Shares purchased by Employee hereunder. The purchase price to be paid
for such shares shall be the Exercise Price paid by the Employee for the Option
Shares, plus an eight percent (8%) carrying cost. The Corporation's right to
repurchase Option Shares pursuant to this Section 14, shall terminate ninety
days from the date of such Termination for Cause. Any Option Shares repurchased
by the Corporation hereunder shall be paid for by certified funds. Any
repurchase by the Corporation shall be conducted in a manner as to not give rise
to any liability for the employee under Section 16 of the Exchange Act.
15. Right of First Refusal to Repurchase Shares. In the event
Employee's employment is Terminated Without Cause and in the event Employee
desires to sell all or a portion of the Option Shares within ninety days of such
termination of employment, the Corporation shall have the first right of refusal
to purchase such shares. In such event, the Employee shall give written notice
to the Corporation of his intent to sell all or a portion of the Option Shares.
After receiving such notice, the Corporation shall have twenty (20) days to
purchase from Employee all of the Option Shares which Employee intends to sell.
Any Option Shares purchased hereunder shall be paid for by certified funds and
the price per share shall be the "bid" price of the Company's common stock on
the date of Employee's notice of intent to sell, provided, however, that if
Employee has received and accepted a bona fide offer for the purchase of the
Option Shares, the price paid by the Corporation shall be the offered price,
rather the "bid" price.
16. Miscellaneous
16.1. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Utah.
16.2. Titles and Captions. All section titles or captions contained in this
Agreement are for convenience only and shall not be deemed part of the context
nor effect the interpretation of this Agreement.
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. 16.3. Entire Agreement. This Agreement contains the entire understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
16.4. Binding Agreement. This Agreement shall be binding upon the heirs,
executors, administrators, successors and assigns of the parties hereto.
16.5. Computation of Time. In computing any period of time pursuant to this
Agreement, the day of the act, event or default from which the designated period
of time begins to run shall be included, unless it is a Saturday, Sunday, or a
legal holiday, in which event the period shall begin to run on the next day
which is not a Saturday, Sunday, or legal holiday. In the event that the last
day of any period falls on a Saturday, Sunday or legal holiday, such period
shall run until the end of the next day thereafter which is not a Saturday,
Sunday, or legal holiday.
16.6. Pronouns and Plurals. All pronouns and any variations thereof shall
be deemed to refer to the masculine, feminine, neuter, singular, or plural as
the identity of the person or persons may require.
16.7. Arbitration. If at any time during the term of this Agreement any
dispute, difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association, and judgment upon the award rendered by
the arbiter may be entered in any court having jurisdiction thereof.
16.8. Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
16.9. Further Action. The parties hereto shall execute and deliver all
documents, provide all information and take or forbear from all such action as
may be necessary or appropriate to achieve the purposes of the Agreement.
16.10. Parties in Interest. Nothing herein shall be construed to be to the
benefit of any third party, nor is it intended that any provision shall be for
the benefit of any third party.
16.11. Savings Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this
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Agreement, or the application of such provision to persons or circumstances
other than those as to which it is held invalid, shall not be affected thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above-written.
Celtic Investment, Inc. Employee:
By /s/ Douglas P. Morris /s/ Roger D. Davis
Douglas P. Morris, President Roger D. Davis
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CELTIC INVESTMENT INC.
STOCK OPTION AGREEMENT
This Agreement is entered into this 12th day of November, 1996, by and
between Celtic Investment, Inc., a Delaware corporation ("Corporation") and
Larry Meek ("Employee").
RECITALS:
WHEREAS, U.S. Commercial Funding Corp. ("USCF") and Employee whereby USCF
has agreed to hire Employee and Employee has, agreed to be employed by USCF
pursuant to the terms and conditions set forth in such agreement; and
WHEREAS, USCF is a wholly-owned subsidiary of the Corporation; and
WHEREAS, the Corporation has agreed to grant a stock option to Employee
entitling Employee to purchase shares of the Corporation's common stock
("Shares"); and
WHEREAS, the purpose of granting this option to Employee is to promote the
success of the Corporation and USCF and to advance the interests of the
Corporation and USCF by providing an additional means, through the grant of this
stock option, to motivate, retain and reward Employee with an incentive for high
levels of individual performance and improved financial performance of the
Corporation and USCF;
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
1. Grant of Option. Subject to the terms and conditions of this Agreement,
the Corporation hereby grants to the Employee, the option ("Option") to purchase
from the Corporation up to an aggregate of 150,000 Shares ("Option Shares"),
from time to time, at a price of $3.00 per Share ("Exercise Price"). These
Options shall vest in three equal installments each of which shall entitle the
Employee to purchase 50,000 Option Shares. These Options shall vest as followes:
Vesting Date Number of Shares
July 17, 1996 50,000
July 17, 1997 50,000
50,000
2. ISO's and NSO'S. The Option, and each vested installment thereof,
granted hereunder shall be deemed to be an Incentive Stock Option ("ISO") to the
maximum amount allowed by the Internal Revenue Code ("IRC") and a Non-Statutory
Stock Option ("NSO"') to the extent not deemed to be an ISO. Furthermore, the
Company anticipates that a portion of each vested installment of the Option will
be allocated between ISO's and NSO's. The Company shall take such additional
action as may be reasonably necessary or advisable to obtain ISO designation to
the full extent allowed by IRC regulations.
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3. Exercise of Option. The Option shall become exercisable by the Employee
beginning on the date of vesting and must be exercised, if at all, within three
(3) years from the date of vesting.
3.1. Manner of Exercise. This Option may be exercised in whole or in part
by delivery to the Corporation, from time to time, of a written notice signed by
the Employee, specifying the number of Option Shares that the Employee then
desires to purchase, together with: (I) cash, certified check, or bank draft
payable to the order of the Corporation or (ii) other form of payment acceptable
to the Board of Directors, for an amount equal to the Exercise Price of such
Shares. Employee may make payment of all or a portion of the Exercise Price in
installments and in such event, the Employee shall deliver a promissory note, in
form satisfactory to the Board of Directors, for the deferred portion of the
exercise price secured by a pledge, also in form satisfactory to the Board of
Directors, of the Shares purchased by such exercise of the Option. The Employee
may pay all or a portion of the Exercise Price, and/or the tax withholding
liability with respect to the exercise of the Option either by surrendering
shares of stock already owned by Employee or by withholding Option Shares,
provided that the Board determines that the fair market value of such
surrendered stock or withheld Option Shares is equal to the corresponding
portion of such Exercise Price and/or tax withholding liability, as the case may
be, to be paid for therewith.
3.2. Certificates. Promptly after any exercise in whole or in part
of the Option by the Employee, the Corporation shall deliver to the Employee a
certificate or certificates for the number of Option Shares with respect to
which the Option was so exercised, registered in the Employee's name.
4. Duration of Option. The Option, to the extent vested and not previously
exercised, shall terminate upon the earliest of the following dates:
4.1. July 17, 2003 (the "Expiration Date");
4.2. If the Employee's employment is terminated for cause, the
Option shall terminate at the time of such termination for cause;
4.3. If the Employee's employment is terminated other than for
cause as a result of Employee's disability or death, the Option shall
terminate (a) ninety days after the date of such termination of employment
with respect to ISO shares and (b) one hundred eighty days after the date
of such termination of employment with respect to NSO shares. In such
event, only that portion of the Option which has vested may be exercised
during such thirty day period.
4.4. If the Employee's employment is terminated as a result of his
death or disability (as defined in IRC ss. 22(e)(3), the Option shall
terminate three months after the date of such termination of employment
for death or disability. In such event, only that portion of the Option
which has vested may be exercised during such three month period
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5. Restriction on Transferability. This Option is not transferable by the
Employee otherwise than by testamentary will or the laws of descent and
distribution and, during the Employee's lifetime, may be exercised only by the
Employee or the Employee's guardian or legal representative. Except as permitted
by the preceding sentence, neither this Option nor any of the rights and
privileges conferred thereby shall be transferred, assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise), and no such
option, right, or privilege shall be subject to execution, attachment, or
similar process. Upon any attempt to transfer this Option, or any right or
privilege conferred thereby, contrary to the provisions hereof, or upon the levy
of any attachment or similar process upon such option, right, or privilege, this
option and any such rights and privileges shall immediately become null and
void.
5.1 Exercise in Event of Death or Disability. Whenever the word
"Employee" is used in any provision of this Agreement under circumstances when
the provision should logically be construed to apply to the Employee's guardian,
executor, administrator, or the person to whom the Option may be transferred by
testamentary will or by the laws of descent and distribution, the word
"Employee" shall be deemed to include such person or persons.
5.2 No Rights As Shareholder Prior To Exercise. The Employee shall
not, by virtue hereof, be entitled to any rights of a shareholder in the
Corporation, either at law or equity. The rights of the Employee are limited to
those expressed in this Option and are not enforceable against the Corporation
except to the extent set forth herein.
6. Registration of Option Shares. The Option Shares have not been
registered with the Securities and Exchange Commission. The Company shall use
its best efforts to register the Options Shares on Form S-8 with the Securities
and Exchange Commission as soon as practical or December 31,1998.
7. Anti-Dilution Provisions. The number and kind of Shares purchasable
upon the exercise of this Option and the exercise price shall be subject to
adjustment from time to time as follows:
7.l. In case the Corporation shall (i) pay a dividend or make a
distribution on the outstanding Shares payable in Shares, (ii) subdivide the
outstanding Shares into a greater number of Shares, (iii) combine the
outstanding Shares into a lesser number of Shares, or (iv) issue by
reclassification of the Shares any Shares of the Corporation, the Employee shall
thereafter be entitled, upon exercise, to receive the number and kind of shares
which, if this Option had been exercised immediately prior to the happening of
such event, the Employee would have owned upon such exercise and been entitled
to receive upon such dividend, distribution, subdivision, combination, or
reclassification.
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7.2 In case the Corporation shall consolidate or merge into or with
another corporation, or in case the Corporation shall sell or convey to any
other person or persons all or substantially all the property of the
Corporation, the Employee shall thereafter be entitled, upon exercise, to
receive the kind and amount of shares, other securities, cash, and property
receivable upon such consolidation, merger, sale, or conveyance by a holder of
the number of Shares which might have been purchased upon exercise of this
Option immediately prior to such consolidation, merger, sale, or conveyance, and
shall have no other conversion rights. In any such event, effective provision
shall be made, in the certificate or articles of incorporation of the resulting
or surviving corporation, in any contracts of sale and conveyance, or otherwise
so that, so far as appropriate and as nearly as reasonably may be, the
provisions set forth herein for the protection of the rights of the Employee
shall thereafter be made applicable.
7.3 Whenever the number of Shares purchasable upon exercise of this
Option is adjusted pursuant to this Section, the exercise price per Share shall
be adjusted simultaneously by multiplying that exercise price per Share in
effect immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Shares purchasable upon exercise of this Option
immediately prior to such adjustment, and of which the denominator shall be the
number of Shares so purchasable after such adjustment, so that the aggregate
exercise price of this Option remains the same.
7.4. The existence of the Option shall not affect in any way the
right or power of the Corporation or its shareholders to make or authorize any
adjustments, recapitalization, reorganization, or other changes in the
Corporation's capital structure or its business, or any merger or consolidation
of the Corporation, or any issue of bonds, debentures, preferred shares with
rights greater than or affecting the Shares, or the dissolution or liquidation
of the Corporation, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding wether of a similar character
or otherwise.
8. No Waiver of Corporation's Right to Terminate Employment. Nothing in
this Agreement shall affect in any manner whatsoever the right or power of USCF
to terminate Employee's employment for any reason, with or without cause.
9. Notices. Any notices permitted or required under this Agreement shall
be deemed given upon the date of personal delivery or 48 hours after deposit in
the United States mail, postage fully prepaid, return receipt requested,
addressed to the Corporation at its principal placement of business and to
Employee at his residence.
10. Corporation's Right to Repurchase Shares. In the event Employee's
employment is terminated for cause, the Company may repurchase Employee any
Option Shares purchased by Employee hereunder. The purchase price to be paid for
such shares shall be the Exercise Price paid by the Employee for the Option
Shares, plus an eight percent (8%) carrying cost. The Corporation's right to
repurchase Option Shares pursuant to this Section 10, shall terminate ninety
days from the date of such termination of employment for cause.
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1l. Right of First Refusal to Repurchase Shares. In the event Employee's
employment is terminated other than for cause and in the event Employee desires
to sell all or a portion of the Option Shares within ninety days of such
termination of employment, the Corporation shall have the first right of refusal
to purchase such shares. In such event, the Employee shall give written notice
to the Corporation of his intent to sell all or a portion of the Option Shares.
After receiving such notice, the Corporation shall have twenty (20) days to
purchase from Employee all of the Option Shares which Employee intends to sell.
Any Option Shares purchased hereunder shall be paid at the price per share shall
be the "bid" price of the Company's common stock on the date of Employee's
notice of intent to sell, provided, however, that if Employee has received and
accepted a bona fide offer for the purchase of the Option Shares, the price paid
by the Corporation shall be the offered price rather than the "bid" price.
12. Miscellaneous
12.1. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.
12.2. Titles and Captions. All section titles or captions contained
in this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
12.3. Entire Agreement. This Agreement contains the understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
12.4. Binding Agreement. This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns of the parties hereto.
12.5. Computation of Time. In computing any period of time pursuant
to this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall be included, unless it is a
Saturday, Sunday, or a legal holiday, in which event the period shall begin to
run on the next day which is not a Saturday, Sunday or legal holiday. In the
event that the last day of any period falls on a Saturday, Sunday or legal
holiday period , such period shall run until the end thereafter which is not a
Saturday, Sunday, or legal holiday.
12.6 Pronouns and Plurals. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular, or plural
as the identity of the person or persons may require.
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12.7 Arbitration. If at any time during the term of this Agreement
any dispute, difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association, and judgment upon the award rendered by
the arbiter may be entered in any court having jurisdiction thereof.
12.8 Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
12.9 Further Action. The parties hereto shall execute and deliver
all documents, provide all information and take or forbear from all such action
as may be necessary or appropriate to achieve the purposes of the Agreement.
12.10 Parties in Interest. Nothing herein shall be constructed to
the benefit of any third party nor is it intended that any provision shall be
for the benefit of any third party.
12.11 Saving Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above-written.
Celtic Investment, Inc.
________________________________ _____________________________
By /s/ Douglas P. Morris /s/ Larry Meek
Douglas P. Morris, President Larry Meek
98
CELTIC INVESTMENT INC.
STOCK OPTION AGREEMENT
This Agreement is entered into this 12th day of November, 1996, by and
between Celtic Investment, Inc., a Delaware corporation ("Corporation") and
Frank Lucchese ("Employee").
RECITALS:
WHEREAS, U.S. Commercial Funding Corp. ("USCF") and Employee whereby USCF
has agreed to hire Employee and Employee has, agreed to be employed by USCF
pursuant to the terms and conditions set forth in such agreement; and
WHEREAS, USCF is a wholly-owned subsidiary of the Corporation; and
WHEREAS, the Corporation has agreed to grant a stock option to Employee
entitling Employee to purchase shares of the Corporation's common stock
("Shares"); and
WHEREAS, the purpose of granting this option to Employee is to promote the
success of the Corporation and USCF and to advance the interests of the
Corporation and USCF by providing an additional means, through the grant of this
stock option, to motivate, retain and reward Employee with an incentive for high
levels of individual performance and improved financial performance of the
Corporation and USCF;
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
1. Grant of Option. Subject to the terms and conditions of this Agreement,
the Corporation hereby grants to the Employee, the option ("Option") to purchase
from the Corporation up to an aggregate of 150,000 Shares ("Option Shares"),
from time to time, at a price of $3.00 per Share ("Exercise Price"). These
Options shall vest in three equal installments each of which shall entitle the
Employee to purchase 50,000 Option Shares. These Options shall vest as followes:
Vesting Date Number of Shares
July 17, 1996 50,000
July 17, 1997 50,000
50,000
2. ISO's and NSO'S. The Option, and each vested installment thereof,
granted hereunder shall be deemed to be an Incentive Stock Option ("ISO") to the
maximum amount allowed by the Internal Revenue Code ("IRC") and a Non-Statutory
Stock Option ("NSO"') to the extent not deemed to be an ISO. Furthermore, the
Company anticipates that a portion of each vested installment of the Option will
be allocated between ISO's and NSO's. The Company shall take such additional
action as may be reasonably necessary or advisable to obtain ISO designation to
the full extent allowed by IRC regulations.
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3. Exercise of Option. The Option shall become exercisable by the Employee
beginning on the date of vesting and must be exercised, if at all, within three
(3) years from the date of vesting.
3.1. Manner of Exercise. This Option may be exercised in whole or in part
by delivery to the Corporation, from time to time, of a written notice signed by
the Employee, specifying the number of Option Shares that the Employee then
desires to purchase, together with: (I) cash, certified check, or bank draft
payable to the order of the Corporation or (ii) other form of payment acceptable
to the Board of Directors, for an amount equal to the Exercise Price of such
Shares. Employee may make payment of all or a portion of the Exercise Price in
installments and in such event, the Employee shall deliver a promissory note, in
form satisfactory to the Board of Directors, for the deferred portion of the
exercise price secured by a pledge, also in form satisfactory to the Board of
Directors, of the Shares purchased by such exercise of the Option. The Employee
may pay all or a portion of the Exercise Price, and/or the tax withholding
liability with respect to the exercise of the Option either by surrendering
shares of stock already owned by Employee or by withholding Option Shares,
provided that the Board determines that the fair market value of such
surrendered stock or withheld Option Shares is equal to the corresponding
portion of such Exercise Price and/or tax withholding liability, as the case may
be, to be paid for therewith.
3.2. Certificates. Promptly after any exercise in whole or in part
of the Option by the Employee, the Corporation shall deliver to the Employee a
certificate or certificates for the number of Option Shares with respect to
which the Option was so exercised, registered in the Employee's name.
4. Duration of Option. The Option, to the extent vested and not previously
exercised, shall terminate upon the earliest of the following dates:
4.1. July 17, 2003 (the "Expiration Date");
4.2. If the Employee's employment is terminated for cause, the
Option shall terminate at the time of such termination for cause;
4.3. If the Employee's employment is terminated other than for
cause as a result of Employee's disability or death, the Option shall
terminate (a) ninety days after the date of such termination of employment
with respect to ISO shares and (b) one hundred eighty days after the date
of such termination of employment with respect to NSO shares. In such
event, only that portion of the Option which has vested may be exercised
during such thirty day period.
4.4. If the Employee's employment is terminated as a result of his
death or disability (as defined in IRC ss. 22(e)(3), the Option shall
terminate three months after the date of such termination of employment
for death or disability. In such event, only that portion of the Option
which has vested may be exercised during such three month period
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5. Restriction on Transferability. This Option is not transferable by the
Employee otherwise than by testamentary will or the laws of descent and
distribution and, during the Employee's lifetime, may be exercised only by the
Employee or the Employee's guardian or legal representative. Except as permitted
by the preceding sentence, neither this Option nor any of the rights and
privileges conferred thereby shall be transferred, assigned, pledged, or
hypothecated in any way (whether by operation of law or otherwise), and no such
option, right, or privilege shall be subject to execution, attachment, or
similar process. Upon any attempt to transfer this Option, or any right or
privilege conferred thereby, contrary to the provisions hereof, or upon the levy
of any attachment or similar process upon such option, right, or privilege, this
option and any such rights and privileges shall immediately become null and
void.
5.1 Exercise in Event of Death or Disability. Whenever the word
"Employee" is used in any provision of this Agreement under circumstances when
the provision should logically be construed to apply to the Employee's guardian,
executor, administrator, or the person to whom the Option may be transferred by
testamentary will or by the laws of descent and distribution, the word
"Employee" shall be deemed to include such person or persons.
5.2 No Rights As Shareholder Prior To Exercise. The Employee shall
not, by virtue hereof, be entitled to any rights of a shareholder in the
Corporation, either at law or equity. The rights of the Employee are limited to
those expressed in this Option and are not enforceable against the Corporation
except to the extent set forth herein.
6. Registration of Option Shares. The Option Shares have not been
registered with the Securities and Exchange Commission. The Company shall use
its best efforts to register the Options Shares on Form S-8 with the Securities
and Exchange Commission as soon as practical or December 31,1998.
7. Anti-Dilution Provisions. The number and kind of Shares purchasable
upon the exercise of this Option and the exercise price shall be subject to
adjustment from time to time as follows:
7.l. In case the Corporation shall (i) pay a dividend or make a
distribution on the outstanding Shares payable in Shares, (ii) subdivide the
outstanding Shares into a greater number of Shares, (iii) combine the
outstanding Shares into a lesser number of Shares, or (iv) issue by
reclassification of the Shares any Shares of the Corporation, the Employee shall
thereafter be entitled, upon exercise, to receive the number and kind of shares
which, if this Option had been exercised immediately prior to the happening of
such event, the Employee would have owned upon such exercise and been entitled
to receive upon such dividend, distribution, subdivision, combination, or
reclassification.
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7.2 In case the Corporation shall consolidate or merge into or with
another corporation, or in case the Corporation shall sell or convey to any
other person or persons all or substantially all the property of the
Corporation, the Employee shall thereafter be entitled, upon exercise, to
receive the kind and amount of shares, other securities, cash, and property
receivable upon such consolidation, merger, sale, or conveyance by a holder of
the number of Shares which might have been purchased upon exercise of this
Option immediately prior to such consolidation, merger, sale, or conveyance, and
shall have no other conversion rights. In any such event, effective provision
shall be made, in the certificate or articles of incorporation of the resulting
or surviving corporation, in any contracts of sale and conveyance, or otherwise
so that, so far as appropriate and as nearly as reasonably may be, the
provisions set forth herein for the protection of the rights of the Employee
shall thereafter be made applicable.
7.3 Whenever the number of Shares purchasable upon exercise of this
Option is adjusted pursuant to this Section, the exercise price per Share shall
be adjusted simultaneously by multiplying that exercise price per Share in
effect immediately prior to such adjustment by a fraction, of which the
numerator shall be the number of Shares purchasable upon exercise of this Option
immediately prior to such adjustment, and of which the denominator shall be the
number of Shares so purchasable after such adjustment, so that the aggregate
exercise price of this Option remains the same.
7.4. The existence of the Option shall not affect in any way the
right or power of the Corporation or its shareholders to make or authorize any
adjustments, recapitalization, reorganization, or other changes in the
Corporation's capital structure or its business, or any merger or consolidation
of the Corporation, or any issue of bonds, debentures, preferred shares with
rights greater than or affecting the Shares, or the dissolution or liquidation
of the Corporation, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding wether of a similar character
or otherwise.
8. No Waiver of Corporation's Right to Terminate Employment. Nothing in
this Agreement shall affect in any manner whatsoever the right or power of USCF
to terminate Employee's employment for any reason, with or without cause.
9. Notices. Any notices permitted or required under this Agreement shall
be deemed given upon the date of personal delivery or 48 hours after deposit in
the United States mail, postage fully prepaid, return receipt requested,
addressed to the Corporation at its principal placement of business and to
Employee at his residence.
10. Corporation's Right to Repurchase Shares. In the event Employee's
employment is terminated for cause, the Company may repurchase Employee any
Option Shares purchased by Employee hereunder. The purchase price to be paid for
such shares shall be the Exercise Price paid by the Employee for the Option
Shares, plus an eight percent (8%) carrying cost. The Corporation's right to
repurchase Option Shares pursuant to this Section 10, shall terminate ninety
days from the date of such termination of employment for cause.
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1l. Right of First Refusal to Repurchase Shares. In the event Employee's
employment is terminated other than for cause and in the event Employee desires
to sell all or a portion of the Option Shares within ninety days of such
termination of employment, the Corporation shall have the first right of refusal
to purchase such shares. In such event, the Employee shall give written notice
to the Corporation of his intent to sell all or a portion of the Option Shares.
After receiving such notice, the Corporation shall have twenty (20) days to
purchase from Employee all of the Option Shares which Employee intends to sell.
Any Option Shares purchased hereunder shall be paid at the price per share shall
be the "bid" price of the Company's common stock on the date of Employee's
notice of intent to sell, provided, however, that if Employee has received and
accepted a bona fide offer for the purchase of the Option Shares, the price paid
by the Corporation shall be the offered price rather than the "bid" price.
12. Miscellaneous
12.1. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Illinois.
12.2. Titles and Captions. All section titles or captions contained
in this Agreement are for convenience only and shall not be deemed part of the
context nor effect the interpretation of this Agreement.
12.3. Entire Agreement. This Agreement contains the understanding
between and among the parties and supersedes any prior understandings and
agreements among them respecting the subject matter of this Agreement.
12.4. Binding Agreement. This Agreement shall be binding upon the
heirs, executors, administrators, successors and assigns of the parties hereto.
12.5. Computation of Time. In computing any period of time pursuant
to this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall be included, unless it is a
Saturday, Sunday, or a legal holiday, in which event the period shall begin to
run on the next day which is not a Saturday, Sunday or legal holiday. In the
event that the last day of any period falls on a Saturday, Sunday or legal
holiday period , such period shall run until the end thereafter which is not a
Saturday, Sunday, or legal holiday.
12.6 Pronouns and Plurals. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular, or plural
as the identity of the person or persons may require.
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12.7 Arbitration. If at any time during the term of this Agreement
any dispute, difference, or disagreement shall arise upon or in respect of the
Agreement, and the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association, and judgment upon the award rendered by
the arbiter may be entered in any court having jurisdiction thereof.
12.8 Presumption. This Agreement or any section thereof shall not be
construed against any party due to the fact that said Agreement or any section
thereof was drafted by said party.
12.9 Further Action. The parties hereto shall execute and deliver
all documents, provide all information and take or forbear from all such action
as may be necessary or appropriate to achieve the purposes of the Agreement.
12.10 Parties in Interest. Nothing herein shall be constructed to
the benefit of any third party nor is it intended that any provision shall be
for the benefit of any third party.
12.11 Saving Clause. If any provision of this Agreement, or the
application of such provision to any person or circumstance shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above-written.
Celtic Investment, Inc.
By /s/ Douglas P. Morris /s/ Frank Lucchese
- - ---------------------------------- ------------------------------
Douglas P. Morris, President Frank Lucchese
104
PLAN AND AGREEMENT OF MERGER
BETWEEN
CELTIC INVESTMENT, INC.
(an Illinois corporation)
and
CELTIC INVESTMENT, INC.
(a Delaware corporation)
This Plan and Agreement of Merger made and entered into this ____ day
of January 1998, by and between Celtic Investment, Inc., a Illinois corporation
(herein sometimes referred to as the "Illinois Corporation" or "Surviving
Corporation"), and Celtic Investment, Inc., a Delaware corporation (herein
sometimes referred to as the "Delaware Corporation"), said corporations
hereinafter sometimes referred to jointly as the "Constituent Corporations."
W I T N E S S E T H
WHEREAS, the Illinois Corporation is a corporation organized and
existing under the laws of the State of Illinois, its Articles of Incorporation
having been filed in the office of the Secretary of State of the State of
Illinois on or about April 16, 1997; and
WHEREAS, the total number of shares of common stock which the Illinois
Corporation has authority to issue is 25,000,000 of which 500 shares are now
issued and outstanding, all of which are owned by the Delaware Corporation; and
WHEREAS, the sole purpose of the merger agreed to herein is to change
the domicile of the Delaware Corporation to the State of Illinois; and
WHEREAS, the Delaware Corporation is a corporation organized and
existing under the laws of the State of Delaware, its Certificate of
Incorporation having been filed in the office of the Secretary of State of the
State of Delaware on the ____ day of ________, 19__, and a Certificate of
Incorporation having been issued by said Secretary of State on that date; and
WHEREAS, the aggregate number of shares of common stock which the
Delaware Corporation has authority to issue is 25,000,000 of which 4,406,477
shares are presently issued and outstanding and entitled to vote on the Plan and
Agreement of Merger; and
WHEREAS, the Board of Directors of each of the Constituent Corporations
deems it advisable that the Delaware Corporation be merged into the Illinois
Corporation on the terms and conditions hereinafter set forth, in accordance
with the applicable provisions of the statutes of the States of Illinois and
Delaware respectively, which permit such merger;
NOW THEREFORE, in consideration of the premises and of the agreements,
covenants and provisions hereinafter contained, the Illinois Corporation and the
Delaware Corporation, by their respective Boards of Directors have agreed and do
hereby agree as follows:
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ARTICLE I
The Delaware Corporation and the Illinois Corporation shall be merged
into a single corporation, in accordance with applicable provisions of the laws
of the State of Delaware and of the State of Illinois, by the Delaware
Corporation merging into the Illinois Corporation, which shall be the Surviving
Corporation. Such merger shall be effective on the date Articles of Merger are
filed in the State of Illinois.
ARTICLE II
Upon the merger becoming effective as provided by the applicable laws
of the State of Delaware and of the State of Illinois (the time when the merger
shall so become effective being sometimes herein referred to as the "Effective
Date of the merger") the following shall occur:
1. The two Constituent Corporations shall be a single corporation,
which shall be the Illinois Corporation as the surviving corporation, and the
separate existence of the Delaware Corporation shall cease except to the extent
provided by the laws of the State of Delaware applicable to a corporation after
its merger into another corporation.
2. The Illinois Corporation shall thereupon and thereafter possess all
the rights, privileges, immunities and franchises, of a public or a private
nature, of each of the Constituent Corporations. All property, real or personal,
and all debts due on whatever account, including subscriptions to shares, and
all other choses in action, and all and every other interest of, or belonging
to, or due to each of the Constituent Corporations, shall be taken and deemed to
be vested in the Surviving Corporation without further act or deed; and the
title to all real estate, or any interest therein, vested in either of the
Constituent Corporations shall not revert or be in any way impaired by reason of
the merger.
3. The Illinois Corporation shall thenceforth be responsible and liable
for all of the liabilities and obligations of each of the Constituent
Corporations. Any claim existing or action or proceeding pending by or against
either of the Constituent Corporations may be prosecuted to judgment as if the
merger had not taken place, or the Surviving Corporation may be substituted in
its place, and neither the rights of creditors nor any liens upon the property
of either of the Constituent Corporations shall be impaired by the merger.
4. The aggregate amount of the net assets of the Constituent
Corporations which was available for the payment of dividends immediately prior
to the merger, to the extent that the value thereof is not transferred to stated
capital by the issuance of shares or otherwise, shall continue to be available
for the payment of dividends by the Surviving Corporation.
5. The Bylaws of the Illinois Corporation as existing and constituted
immediately prior to the effective date of merger shall be and constitute the
bylaws of the Surviving Corporation.
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6. The directors and officers of the Surviving Corporation shall, at
the effective date of the merger be as follows:
Douglas P. Morris President/Director
Frank Lucchese Chief Financial Officer
Larry Meek Director
Pam Davis Director
Reese Howell, Jr. Senior Vice President/Secretary/Director
ARTICLE III
The Articles of Incorporation of the Illinois Corporation shall be
amended to change the name of the Illinois Corporation.
ARTICLE IV
The manner and basis of converting the shares of each of the
Constituent Corporations into shares of the Surviving Corporation is as follows:
1. The 500 shares of stock of the Illinois Corporation now owned and
held by the Delaware Corporation shall be canceled and no shares of stock of the
Illinois Corporation shall be issued in respect thereto, and the capital of the
Illinois Corporation shall be deemed to be reduced by the amount of Five Hundred
Dollars ($500) the amount represented by said 500 shares of stock.
2. Each shares of the Delaware Corporation shall be converted into one
fully paid and nonassessable share of capital stock of the Illinois Corporation.
No fractional shares shall be issued in the merger and any fractional shares
shall be rounded up to the next whole number.
After the effective date of the merger, each owner of an outstanding
certificate or certificates theretofore representing shares of the Delaware
Corporation shall be entitled, upon surrendering such certificate or
certificates to the Surviving Corporation, to receive in exchange therefor a
certificate or certificates representing the number of shares of stock of the
Surviving Corporation into which the shares of the Delaware Corporation
theretofore represented by the surrendered certificate or certificates shall
have been converted as hereinbefore provided. Until so surrendered, each
outstanding certificate which, prior to the effective date of the merger,
represented shares of the Delaware Corporation shall be deemed, for all
corporate purposes, to represent the ownership of the common stock of the
Surviving Corporation on the basis hereinbefore provided. The shareholders of
the Delaware Corporation shall be entitled to such dissenting shareholder rights
as are provided by the corporation law of the State of Delaware.
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ARTICLE V
The Delaware Corporation shall pay all expenses of carrying this Plan
and Agreement of Merger into effect and accomplishing the merger herein provided
for.
ARTICLE VI
If at any time the Surviving Corporation shall consider or be advised
that any further assignment or assurance in law is necessary or desirable to
vest in the Surviving Corporation the title to any property or rights of the
Delaware Corporation, the proper officers and directors of the Delaware
Corporation shall, and will execute and make all such proper assignments and
assurances in law and do all things necessary or proper to thus vest such
property or rights in the Surviving Corporation, and otherwise to carry out the
purposes of this Plan and Agreement of Merger.
ARTICLE VII
This Plan and Agreement of Merger has been submitted to and approved by
the shareholders of each of the Constituent Corporations, as provided by law,
and shall take effect upon the filing of Articles of Merger with the Secretary
of State of the State of Illinois. Anything herein or elsewhere to the contrary
notwithstanding, this Plan and Agreement of Merger may be abandoned by either of
the Constituent Corporations by an appropriate resolution of its board of
directors at any time prior to its approval or adoption by the shareholders and
stockholders thereof, or by the mutual consent of the Constituent Corporations
evidenced by appropriate resolutions of their respective boards of directors, at
any time prior to the effective date of the merger.
IN WITNESS WHEREOF, the Illinois Corporation and the Delaware
Corporation, pursuant to the approval and authority duly given by resolutions
adopted by their respective boards of directors and shareholders have caused
this Plan and Agreement of Merger to be executed by the President of each party
hereto.
Celtic Investment, Inc. Celtic Investment, Inc.
a Delaware corporation a Illinois corporation
By /s/ Douglas P. Morris By /s/ Douglas P. Morris
Douglas P. Morris, President Douglas P. Morris, President
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