TECH ELECTRO INDUSTRIES, INC.
477 Madison Avenue, 24th Floor
New York, New York 10022
212-583-0900
212-583-0741-Fax
INFORMATION STATEMENT
**WE ARE NOT ASKING FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY**
INTRODUCTION
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This Information Statement is being furnished to the stockholders of record
of Tech Electro Industries, Inc., Inc. (the "Company") as of May 10, 2000
("Record Date"), in connection with the adoption of the Articles of Amendment to
the Articles of Incorporation ("Articles of Amendment") and the 1999 Stock
Option Plan (the "Plan") by the written consent of the holders of a majority in
interest of the Company's voting capital stock consisting of the Company's
outstanding Common Stock, $0.01 par value and outstanding Series A Preferred
Stock, $1.00 par value, (collectively the "Capital Stock"). On January 1, 2000,
the Company's Board of Directors approved and recommended that the Articles of
Incorporation be amended in order to:
* Increase the number of authorized shares of Common Stock from 10,000,000 to
50,000,000.
The Articles of Amendment was approved by the written consent dated
February 1, 2000 of the stockholders owning a majority of the outstanding
Capital Stock, and the Articles of Amendment were filed and accepted by the
Texas Secretary of State on May 12, 2000, with a delaying provision that it will
not become effective until June 30, 2000.
The Company' s Board of Directors also recommended that the Company adopt
the Plan which was previously approved by the Board of Directors by written
consent on November 14, 1999. Stockholders owning a majority of the outstanding
Capital Stock approved the Plan by written consent dated May 8, 2000.
The elimination of the need for a special meeting of stockholders to
approve the Articles of Amendment is made possible by Articles 9.10 of the Texas
Business Corporation Act ("TBCA"), which provides that the written consent of
the holders of outstanding shares of voting stock, having not less than the
minimum number of votes which would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted, may be substituted for such a special meeting. Pursuant to Article
9.10, a majority of the outstanding shares of voting stock entitled to vote
thereon are required in order to amend the Company's Articles of Incorporation
and approve the Plan. In order to eliminate the costs and time involved in
holding a special meeting and in order to effect the Articles of Amendment and
approve the Plan as early as possible in order to accomplish the purposes of the
Company as hereafter described, the Board of Directors of the Company voted to
utilize the written consent of the holders of a majority in interest of the
voting stock of the Company.
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On February 1, 2000 and May 8, 2000, there were 7,155,362 and 8,223,727,
respectively, outstanding shares of Capital Stock and approximately 591
stockholders of record. The approval of the Articles of Amendment and the Plan
requires the written consent of the holders of a majority of the outstanding
shares of Capital Stock, and each share of Capital Stock was entitled to one
vote with respect to the approval of the Articles of Amendment and the Plan. By
written consent in lieu of a meeting dated February 1, 2000, holders of
4,424,364 shares of our Common Stock, representing approximately 62% of our then
outstanding voting power, approved the Articles of Amendment. Also, by written
consent in lieu of a meeting dated May 8, 2000, holders of 4,424,364 shares of
our Common Stock, representing approximately 54.6% of our then outstanding
voting power, approved the Plan.
Under applicable federal securities laws, the Articles of Amendment and
approval of the Plan cannot be effected until at least 20 calendar days after
this information statement is sent or given to the stockholders of the Company.
The approximate date on which this information statement is first being sent or
given to stockholders is June 8, 2000.
ARTICLES OF AMENDMENT
---------------------
On January 1, 2000, the Board of Directors approved, subject to the
approval of the Company's stockholders, the Articles of Amendment, which:
* increases the number of authorized shares of Common Stock from 10,000,000 to
50,000,000.
In February 2000, stockholders owning a majority of the outstanding Capital
Stock approved the Articles of Amendment. A copy of the Articles of Amendment is
attached to this document as Exhibit A.
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Current Use of Shares
As of May 10, 2000, 8,103,139 shares of Common Stock were issued and
outstanding and 9,061,081 shares of Common Stock were subject to outstanding
options and warrants and reserved for future issuance. As a result, the Company
does not have any authorized but unissued shares of Common Stock available for
future issuance. An additional 7,164,220 shares will need to be reserved for
future issuance in connection with the outstanding options and warrants.
As of May 10, 2000, the Company also had authorized 1,000,000 shares of
Series A Preferred Stock, 120,588 of which were outstanding.
Rights of Additional Stock
The additional Common Stock to be authorized by the Articles of Amendment
will have rights identical to currently outstanding Common Stock. The Articles
of Amendment will not affect the rights of the holders of currently outstanding
Common Stock, except for effects identical to increasing the number of shares of
Common Stock outstanding upon any issuance of these additional shares.
The Board of Directors may issue the Preferred Stock in one or more series
with such voting powers, designations, and preferences as the Board of Directors
may determine.
Effect of the Articles of Amendment
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After the Articles of Amendment becomes effective, the Board of Directors
will have the authority to issue additional shares of authorized Common Stock
and Preferred Stock for such purposes and consideration and on such terms as the
Board of Directors may approve without requiring future stockholder approval
except as may be required by law and, when and if the Company is listed with
NASDAQ, the regulations thereof. The increase in the authorized number of shares
of Common Stock and Preferred Stock and the subsequent issuance of such shares
(within the limits imposed by applicable law) could have the effect of delaying
or preventing a change in control and discouraging hostile takeover attempts.
Any such issuance of additional stock could have the effect of diluting the
earnings per share and book value per share of outstanding Common Stock and
Preferred Stock, and such additional shares would dilute the stock ownership and
voting rights of stockholders.
The Board of Directors is not aware of any existing or planned effort to
accumulate material amounts of the Company' s Common Stock, or to acquire the
Company by means of a merger, tender offer, solicitation of proxies in
opposition to management, or otherwise, or to change the Company's management.
Nor is the Board of Directors aware of any person having made any offer to
acquire the Company' s Common Stock or assets.
Reason for the Articles of Amendment
The increase in authorized Common Stock to be effected by the Articles of
Amendment is necessary to enable the Company to reserve enough shares for the
outstanding options and warrants and the Plan as well as complete any future
private placement of the Common Stock. However, other than the reservation of
shares of Common Stock for the outstanding options and warrants, the Company has
no current plans, arrangements or agreements to issue any shares associated with
the increase in authorized Common Stock or Preferred Stock.
Furthermore, the Board of Directors believes that the limited number of
currently authorized but unissued shares of Common Stock and Preferred Stock
unduly restricts the Company's ability to respond to business needs and
opportunities that may arise in the future. The Articles of Amendment will
afford the Company added flexibility by increasing the number of authorized but
unissued shares of Common Stock, as well as Preferred Stock, for financing
requirements, stock splits or other corporate purposes.
1999 STOCK OPTION PLAN
----------------------
On November 14, 1999, the Board of Directors approved, subject to the
approval of the Company's stockholders, a stock option plan entitled the 1999
Stock Option Plan (the "Plan"). In May 2000, stockholders owning a majority of
the outstanding Common Stock approved the Plan. A copy of the Plan is attached
hereto as Exhibit B.
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The Plan reserves an aggregate of 1,300,000 shares of the Company's Common
Stock for issuance pursuant to the exercise of stock options which may be
granted to key employees and non-employee directors of the Company and
independent contractors and consultants to the Company. The Board of Directors
has determined that the Plan will increase the proprietary interest in the
Company of key employees, non-employee directors, and independent contractors
and consultants and will align more closely their interests with the interests
of the Company. The Plan will also increase the Company's ability to attract and
retain the services of experienced and highly qualified employees and
non-employee directors.
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The Plan will be administered by a committee whose members will be selected
by the Board (the "Committee"), or in the absence of such committee, the Plan
shall be administered by the entire Board. The Committee or the Board of
Directors will determine, without limitation, the persons who will be granted
options under the Plan, the type of option to be granted and the number of
shares subject to each option and the option price. The Committee or the Board
of Directors also may determine the time or times when an option becomes
exercisable, the duration of the exercise period for options, and the form or
forms of the instruments evidencing options granted under the Plan. The
Committee or the Board of Directors may adopt, amend, and rescind such rules and
regulations as in its opinion may be advisable for the administration of the
Plan. The Committee or the Board of Directors may amend or rescind the Plan
without stockholder approval, except when an amendment would (a) materially
increases the number of securities that may be issued under the Plan or (b)
materially modify the requirements of eligibility for participation in the Plan.
Options granted under the Plan may be either options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or options that do not so qualify
("Non-qualified Options," collectively with Incentive Options, the "Options").
Any Incentive Option granted under the Plan must provide for an exercise price
of not less than 100% of the fair market value of the underlying shares on the
date of such grant, but the exercise price of any Incentive Option granted to an
eligible employee owning more than 10% of the Company' s Common Stock must be at
least 110% of such fair market value as determined on the date of the grant. The
exercise price of Non-qualified Options will be determined by the Committee or
the Board of Directors.
Key employees and non-employee directors of the Company and independent
contractors or consultants for the Company and its subsidiaries are eligible to
receive Non-qualified Options under the Plan. Only key employees are eligible to
receive Incentive Options. At the Board of Directors' option, the Plan allows
for the proportionate adjustment of the number of shares for outstanding options
and the option price per share in the event of stock dividends, recapitalization
resulting in stock splits or combinations or exchanges of shares, but any such
adjustment will not change the total purchase price payable upon the exercise in
full of options granted under the Plan.
Options granted under the Plan are nonassignable and nontransferrable,
except by will or the laws of descent and distribution. Except in the case of
death or disability of an optionee, options granted may be exercised only by the
optionee. The expiration date of an option is determined by the Committee at the
time of the grant and is set forth in the applicable stock option agreement. In
no event may an option be exercisable after ten years from the date it is
granted.
If an optionee dies or becomes disabled (within the meaning of Section
22(e)(3) of the Code) prior to termination of his right to exercise an option in
accordance with the provisions of his option agreement, the option agreement may
provide that the option may be exercised, to the extent of the shares with
respect to which the option could have been exercised by the optionee on the
date of his death or disability, (i) in the case of death, by the optionee's
estate or by the person who acquired the right to exercise the option by bequest
or inheritance or by reason of the death of the optionee or (ii) in the case of
disability, by the optionee or his personal representative, provided the option
is exercised prior to the date of its expiration or not more than one year from
the date of the optionee's death or disability, whichever first occurs. The date
of disability of an optionee will be determined by the Committee.
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Federal Income Tax Consequences
Incentive Options. Under the Code, an optionee generally is not subject to
------------------
ordinary income tax upon the grant or exercise of an Incentive Option. However,
an employee who exercises an Incentive Option by delivering shares of Common
Stock previously acquired pursuant to the exercise of an Incentive Option is
treated as making a Disqualifying Disposition (defined below) of these shares if
the employee delivers the shares before the expiration of the holding period
applicable to these shares. The applicable holding period is the longer of two
years from the date of grant or one year from the date of exercise. The effect
of this provision is to prevent "pyramiding" the exercise of an Incentive Option
(i.e., the exercise of the Incentive Option for one share and the use of that
share to make successive exercise of the Incentive Option until it is completely
exercised) without the imposition of current income tax.
The amount by which the fair market value of the shares acquired at the
time of exercise of an Incentive Option exceeds the purchase price of the shares
under such Option will be treated as an adjustment to the Optionee's alternative
minimum taxable income for purposes of the alternative minimum tax. If, however,
there is a Disqualifying Disposition in the year in which the Option is
exercised, the maximum amount of the item of adjustment for such year is the
gain on the disposition of the shares. If there is Disqualifying Disposition in
a year other than the year of exercise, the dispositions will not result in an
adjustment for the other year.
If, subsequent to the exercise of an Incentive Option (whether paid for in
cash or in shares), the Optionee holds the shares received upon exercise for a
period that exceeds (a) two years from the date such Incentive Option was
granted or, if later, (b) one year from the date of exercise (the "Required
Holding Period"), the difference (if any) between the amount realized from the
sale of such shares and their tax basis to the holder will be taxed as long-term
capital gain or loss. If the holder is subject to the alternative minimum tax in
the year of disposition, the holder's tax basis in his or her shares will be
increased for purposes of determining his alternative minimum tax for that year,
by the amount of the item of adjustment recognized with respect to such shares
in the year the Option was exercised.
In general, if, after exercising an Incentive Option, an employee disposes
of the acquired shares before the end of the Required Holding Period (a
"Disqualifying Disposition"), an Optionee would be deemed to receive ordinary
income in the year of the Disqualifying Disposition, in an amount equal to the
excess of the fair market value of the shares at the date the Incentive Option
was exercised over the exercise price. If the Disqualifying Disposition is a
sale or exchange which would permit a loss to be recognized under the Code (were
a loss in fact to be sustained), and the sales proceeds are less than the fair
market value of the shares on the date of exercise, the Optionee's ordinary
income would be limited to the gain (if any) from the sale. If the amount
realized upon disposition exceeds the fair market value of the shares on the
date of exercise, the excess would be treated as short-term or long-term capital
gain, depending on whether the holding period for such shares exceeded one year.
The Company is not allowed an income tax deduction for the grant or
exercise of an Incentive Option or the disposition, after the Required Holding
Period, of shares acquired upon exercise. In the event of a Disqualifying
Disposition, the Company will be allowed to deduct an amount equal to the
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ordinary income to be recognized by the Optionee, provided that such amount is
an ordinary and necessary business expense to the Company and is reasonable, and
would satisfy the Company' s withholding obligation for this income.
Non-qualified Options. An Optionee granted a Non-qualified Option under the
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Plan will generally recognize, at the date of exercise of such Non-qualified
Option, ordinary income equal to the difference between the exercise price and
the fair market value of the shares of Common Stock subject to the Non-qualified
Option. This taxable ordinary income will be subject to Federal income tax
withholding. The Committee or the Board of Directors may establish such rules
and procedures as it considers desirable in order to satisfy any obligation of
the Company to withhold the statutory prescribed minimum amount of federal
income taxes or other taxes with respect to the exercise of any Option granted
under the Plan. If the Common Stock is traded in the over-the-counter market or
upon any securities exchange, such rules and procedures may provide that the
withholding obligation will be satisfied by the Company withholding shares of
Common Stock otherwise issuable upon exercise of an Option in shares of Common
Stock in an amount equal to the statutory prescribed minimum withholding
applicable to the ordinary income resulting from the exercise of that Option.
If an Optionee exercises a Non-qualified Option by delivering other shares,
the Optionee will not recognize gain or loss with respect to the exchange of
such shares, even if their then fair market value is different from the
Optionee's tax basis. The Optionee, however, will be taxed as described above
with respect to the exercise of the Non-qualified Option as if he had paid the
exercise price in cash, and the Company will generally be entitled to an
equivalent tax deduction. Provided a separate identifiable stock certificate is
issued therefor, the Optionee's tax basis in that number of shares received on
such exercise which is equal to the number of shares surrendered on such
exercise will be equal to his tax basis in the shares surrendered and his
holding period for such number of shares received will include his holding
period for the shares surrendered. The Optionee's tax basis and holding period
for the additional shares received on exercise of a Non-qualified Option paid
for, in whole or in part, with shares will be the same as if the Optionee had
exercised the Non-qualified Option solely for cash.
The above discussion is based on federal income tax laws and regulations in
effect as of the date hereof. It does not purport to be a complete description
of the federal income tax consequences of the Plan, nor does it describe the
consequences of state, local or foreign tax laws which may be applicable.
Accordingly, any person receiving a grant under the Plan should consult his own
tax advisor.
SECURITY OWNERSHIP OF PRINCIPAL SHAREHOLDERS AND MANAGEMENT
-----------------------------------------------------------
The following table sets forth information concerning the beneficial
ownership of the Company' s Common Stock and Preferred Stock as of the Record
Date, by (i) each person who is known by the Company to own beneficially more
than 5% of the Common Stock, (ii) each director of the Company, (iii) each of
the executive officers of the Company, and (iv) all directors and executive
officers of the Company as a group.
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-------------- ------ -------- ---------- --------- -------
Common Series A
Stock Stock
------ --------
Amount Amount
and and
Nature of Nature of % of
Beneficial % of Beneficial % of Voting
Name and Address Ownership(1) Class(2) Ownership(1) Class(2) Power(3)
---------------- ---------- --------- ---------- ------ -------
William Tan 3,467,546 42.79% 5,000 4.18% 13.45%
Kim Wah, President Direct (through
and CEO and Indirect ownership of
No. 18 Jalan Sri (4) 5,000 units)
Semantan 1
Damansara Heights
50490
Kuala Lumpur
Malaysia
------------ ------------ --------- ---------- ------ -------
Gin Securities,Ltd. 1,163,636(5) 14.36% 0 0 7.18%
11 Jalan Medang Direct
Bukit Bandaraya
59100 Kuala Lumpur
Malaysia
------------ ------------ --------- ---------- ------ -------
Pricewaterhouse 1,100,000 13.57% 0 0 13.57%
Coopers, Inc. Direct
145 King Street W
Toronto Ontario
Canada
M5H 1V8
------------------ ------------ --------- ---------- ------ -------
Jenny Jechart 1,094,696(6) 13.51% 0 0 6.28%
10724 Wilshire Blvd. Direct and
Los Angeles,CA 90024 Indirect
------------------ ------------ --------- ---------- ------ -------
Jason Tan Highway 668,000(7) 8.24% 0 0 4.12%
Wisma Cosway #12-02, Direct
Jln.
Raja Chulan
50200 Kuala Lumpur,
Maylysia
------------------ ------------ --------- ---------- ------ -------
Wooi Hou Tan 666,000(8) 8.21% 0 0 4.11%
First Floor Flat Direct
53 Gloucester Road
London, England SW74QN
United Kingdom
------------------ ------------ --------- ---------- ------ -------
Mutsuko Gomi 666,000(8) 8.21% 0 0 4.11%
1367-31 Kawana Direct
Ito-Shi,
Japan 414
------------------ ------------ --------- ---------- ------ -------
Craig D. La Taste 542,979(9) 6.70% 0 0 6.42%
4300 Wiley Post Rd. Direct
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Dallas, TX 75244
USA
------------------ ------------ --------- ----------- ------ -------
Mee Mee Tan, 535,000(10) 6.61% 0 0 2.53%
Secretary Direct and
477 Madison Ave, Indirect
24th Floor
New York, NY 10022
------------------ ------------ --------- ----------- ------- -------
Sadasuke Gomi, 487,150(11) 6.01% 0 0 2.56%
Director
477 Madison Avenue
24th Floor
New York, N Y 10022
------------------ ------------ --------- ------------ ------- -------
Ian Colin Edmonds 200,000(12) 2.47% 0 0 0
Vice President and
Director
477 Madison Ave,
24th Floor
New York, NY 10022
------------------ ------------ --------- ------------ ------- -------
All Directors 4,689,696 57.97% 5,000 2.70% 20.10%
and Executive
Officers as a Group
(4 persons)
(1) Except as otherwise indicated and subject to
applicable community property and similar laws, the
Company assumes that each named person has the sole
voting and investment power with respect to his or
her shares (other than shares subject to options).
(2) Percent of class is based on the number of shares
outstanding as of the Record Date. In addition,
shares which a person had the right to acquire within
60 days are also deemed outstanding in calculating
the percentage ownership of the person but not deemed
outstanding as to any other person. Does not include
shares issuable upon exercise of any warrants,
options or other convertible rights issued by the
Company which are not exercisable within 60 days from
the date hereof.
(3) In order to reflect the voting rights of the Common
Stock and Series A Stock as of the Record Date based
on shares which a holder has the right to acquire
within 60 days, if such right has not been exercised
as of the Record Date. However, all shares which a
holder has the right to acquire within 60 days, are
accounted for in the percentage of class calculations
for each of the individual type of securities
accounted for in this table. See footnote 2 above.
(4) Includes (i) 75,000 shares directly held by Mr. Tan,
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(ii) options to acquire 500,000 shares of common
stock exercisable within 60 days of the Record Date.
(iii) 288,000 shares of common stock, 100,000 options
to purchase common stock and 1,050,000 warrants to
purchase stock held by Placement & Acceptance, Inc.,
(both exercisable within 60 days of the Record Date),
a company of which Mr Tan is a director and officer.
(iv) 727,273 shares of common stock and 727,273
warrants to purchase shares of common stock held by
Ventures International, Ltd., a company of which Mr.
Tan is a director and officer. (v) 5,000 Units, with
each Unit convertible within 60 days of the Record
Date into one share of common stock and one share of
Preferred Stock, of which one share of Preferred
Stock is convertible into two shares of Common stock.
(5) Includes (i) 581,818 shares of Common Stock and (ii)
581,818 warrants exercisable within 60 days of the
Record Date.
(6) Includes (i) 509,091 shares of Common Stock, (ii)
509,091 warrants exercisable within 60 days of the
Record Date and (iii) 76,514 warrants exercisable
within 60 days of the Record Date owned by AlphaNet
Funding, LLC of which Ms. Jechart is the principal.
(7) Includes options to acquire 334,000 shares of Common
Stock exercisable within 60 days of the Record Date.
(8) Includes options to acquire 333,000 shares of Common
Stock exercisable within 60 days of the Record Date.
(9) Mr. La Taste has direct ownership of 433,732 shares
of Common Stock, and as of the Record Date as a
partner of La Taste Enterprise (with his two
children), he is owner of 16,667 shares of Common
Stock which shares have been included in the percent
of shares shown herein. In addition, Mr. La Taste has
been granted 35,000 options, each to acquire one
share of Common Stock; 26,250 of such options are
exercisable within 60 days of the Record Date, and
are included in the percent of shares shown herein.
Mr. La Taste's wife, Jacqueline Green La Taste, is
the owner of 24,213 shares of Common Stock which she
received in 1994 as an inheritance. Mr. La Taste
disclaims any beneficial interest in these shares.
Mr. La Taste's children are beneficiaries of the La
Taste Children's Trust, which owns 46,317 shares of
Common Stock of the Company. Mr. La Taste also
disclaims any beneficial interest in these shares.
(10) Includes (i) 205,000 shares held by Ms. Tan and the
options to acquire 180,000 shares of common stock
exercisable within 60 days of the Record Date
attributed to her through Equator Holdings, Inc. a
company of which Ms. Tan is a director and officer
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and (ii) options held directly by Ms. Tan to acquire
150,000 shares of common stock within 60 days of the
Record Date.
(11) Includes (i) 2,150 shares held directly by Mr. Gomi,
(ii) 205,000 shares and options to acquire 180,000
shares exercisable within 60 days of the Record Date
attributed to him through Fleet Security Investments,
Inc. of which Mr. Gomi is a director and (iii) an
option granted to Gomi to acquire 100,000 shares that
is exercisable within 60 days of the Record Date.
(12) Represents shares underlying options currently
exercisable by Mr. Edmonds.
OTHER MATTERS
-------------
The information contained in this document is to the best knowledge of the
Company, and the information contained herein with respect to the directors,
executive officers and principal shareholders is based upon information, which
these individuals have provided to us.
By Order Of The Board Of Directors,
William Tan Kim Wah
President and CEO
New York, New York, June 8, 2000
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EXHIBIT A
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ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
TECH ELECTRO INDUSTRIES, INC.
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, the undersigned corporation adopts the following articles of
Amendment to the Articles of Incorporation:
ARTICLE ONE
The name of the corporation is Tech Electro Industries, Inc.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted in
February 2000 by the consent of the shareholders of the Corporation holding a
majority of the shares of common stock, pursuant to Article 9.10A and Article
2.28D of the Texas Business Corporation Act, to increase the authorized common
stock of the Corporation to 50,000,000 shares:
Article Four, subsection A thereof, is hereby deleted in its
entirely and replaced by the following language:
"Article Four
A. The corporation is authorized to issue two classes of shares to be
designated respectively "common stock" and "preferred stock." The corporation is
authorized to issue 1,000,000 shares of preferred stock, $1.00 par value per
share, and 50,000,000 shares of common stock, $0.01 par value per share.
Subsections B through E of Article Four shall remain unchanged.
Page - A 1-
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ARTICLE THREE
The number of shares of the corporation outstanding at the time of such
adoption was 7,155,362; and the number of shares entitled to vote thereon was
7,155,362.
ARTICLE FOUR
The holders of 4,424,364 of the shares of common stock outstanding and
entitled to vote on said amendment have signed a consent in writing pursuant to
Article 9.10 adopting said amendment and any written notice required by Article
9.10 has been given.
ARTICLE FIVE
These Articles of Amendment shall be effective on June 30, 2000.
Dated: May 9, 2000
TECH ELECTRO INDUSTRIES, INC.
By:_______________________
William Tan,
President and CEO
By:_______________________
Mee Mee Tan
Secretary
Page - A 2-
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EXHIBIT B
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TECH ELECTRO INDUSTRIES
1999 STOCK OPTION PLAN
On November 14, 1999, the Board of Directors of Tech Electro Industries,
Inc. adopted the following
1999 Stock Option Plan:
13. PURPOSE. The purpose of the Plan is to provide Key Employees, non-employee
directors, independent contractors and consultants with a proprietary interest
in the Company through the granting of Options which will:
(a) increase the interest of the Key Employees, non-employee directors,
independent contractors and consultants in the Company's welfare;
(b) furnish an incentive to the Key Employees, non-employee directors,
independent contractors and consultants to continue their services for the
Company; and
(c) provide a means through which the Company may attract able persons to
enter its employ, serve on its Board and render services to it.
14. ADMINISTRATION. The Plan will be administered by the Committee.
3. PARTICIPANTS. The Committee may, from time to time, select the particular
Key Employees, non-employee directors, independent contractors and consultants
of the Company and its Subsidiaries to whom Options are to be granted, and who
will, upon such grant, become Participants in the Plan. The Committee has the
authority, in its complete discretion, to grant Options to Participants. A
Participant may be granted more than one Option under the Plan, and Options may
be granted at any time or times during the term of the Plan.
4. STOCK OWNERSHIP LIMITATION. No Incentive Option may be granted to an
Employee who owns more than 10% of the voting power of all classes of stock of
Page - B 1-
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the Company or its Parent or Subsidiaries. This limitation will not apply if the
Option price is at least 110% of the fair market value of the Common Stock at
the time the Incentive Option is granted and the Incentive Option is not
exercisable more than five years from the date it is granted.
5. SHARES SUBJECT TO PLAN. The Committee may not grant Options under the Plan
for more than 1,300,000 shares of Common Stock and may not grant Options to any
Participant for more than 1,300,000 shares of Common Stock, but these numbers
may be adjusted to reflect, if deemed appropriate by the Committee, any stock
dividend, stock split, share combination, recapitalization or the like of or by
the Company. Shares to be optioned and sold may be made available from either
authorized but unissued Common Stock or Common Stock held by the Company in its
treasury. Shares that by reason of the expiration of an Option or otherwise are
no longer subject to purchase pursuant to an Option granted under the Plan may
be re-offered under the Plan.
6. LIMITATION ON AMOUNT. The aggregate fair market value ( determined at the
date of grant) of the shares of Common Stock which any Key Employee is first
eligible to purchase in any calendar year by exercise of incentive Options
granted under the Plan and all incentive stock option plans (within the meaning
of Section 422 of the Code) of the Company or its Parent or Subsidiaries shall
not exceed $100,000. For this purpose, the fair market value (determined at the
date of grant of each option) of the stock purchasable by exercise of an
Incentive Option (or an installment thereof) shall be counted against the
$100,000 annual limitation for a Key Employee only for the calendar year such
stock is first purchasable under the terms of the Incentive Option.
7. ALLOTMENT OF SHARES. The Committee shall determine the number of shares of
Common Stock to be offered from time to time by grant of Options to Key
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Employees, non-employee directors, independent contractors and consultants of
the Company or its Subsidiaries. The grant of an Option to an individual shall
not be deemed either to entitle the individual to, or to disqualify the
individual from, participation in any other grant of Options under the Plan.
8. GRANT OF OPTIONS. The Committee is authorized to grant Incentive Options,
Non-qualified Options, or a combination of both, under the Plan; provided,
however, Incentive Options may be granted only to Key Employees. The grant of
Options shall be evidenced by Option Agreements containing such terms and
provisions as are approved by the Committee, but not inconsistent with the Plan,
including (without limitation) provisions that may be necessary to assure that
any Option that is intended to be an Incentive Option will comply with Section
422 of the Code. The Company shall execute Option Agreements upon instructions
from the Committee. Except as provided otherwise in Sections 5 and 14 of the
Plan, the terms of any Option Agreement executed by the Company shall not be
amended, modified or changed without the written consent of the Company and the
Participant.
An Option Agreement may provide that the Participant may request approval
from the Committee to exercise an Option or a portion thereof by tendering
Qualifying Shares at the fair market value per share on the date of exercise in
lieu of cash payment of the Option price. The Plan shall be submitted to the
Company's shareholders for approval. Options may be granted under the Plan
before the shareholders of the Company approve the Plan, and those Options will
be effective when granted; but if for any reason the shareholders of the Company
do not approve the plan before one year from the date of adoption of the Plan by
the Board (the "Shareholder Approval Deadline"), all Incentive Options granted
under the Plan before the Shareholder Approval Deadline will be deemed to have
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been granted as Non-qualified Options. No Option granted before shareholder
approval may be exercised, in whole or in part, before approval of the Plan by
the shareholders of the Company.
9. OPTION PRICE. The Option price for an Incentive Option shall not be less
than 100% of the fair market value per share of the Common Stock ( or 110% of
such amount as required by Section 4 of the Plan), and at least the par value
per share of Common Stock, on the date the Option is granted. The Option price
for a Non-qualified Option shall be, as determined by the Committee, any price
per share of the Common Stock that is greater than par value per share of the
Common Stock. For purposes of the Plan, the fair market value of a share of the
Common Stock shall be (i) if the Common Stock is traded in the over-the-counter
market or on any securities exchange, the closing price or, if applicable, the
average of the closing bid and ask prices per share of such Common Stock for the
last business day immediately before the date the Option is granted, and (ii) if
the Common Stock is not so traded, an amount determined by the Committee in good
faith using any reasonable valuation method and based on such factors as it
deems relevant to such determination.
10. OPTION PERIOD. The Option Period will begin on the date the Option is
granted, which will be the date the Committee authorizes the Option unless the
Committee specifies a later date. No Option may terminate later than ten years (
or five years as required by Section 4 of the Plan) from the date the Option is
granted. The Committee may provide for the exercise of Options in installments
and, subject to the provisions hereof, upon such terms, conditions and
restrictions as it may determine. The Committee may provide for termination of
the Option in the case of termination of employment, directorship or independent
contractor or consultant relationship, or any other reason.
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11. RIGHTS IN EVENT OF DEATH OR DISABILITY. If a Participant die or becomes
disabled (within the meaning of Section 22(e)(3) of the Code) prior to
termination of his right to exercise an Option in accordance with the provisions
of his Option Agreement, the Option Agreement may provide that it may be
exercised, to the extent of the shares with respect to which the Option could
have been exercised by the Participant on the date of his death or disability,
(i) in the case of death, by the Participant's estate or by the person who
acquire the right to exercise the Option by bequest or inheritance or by reason
of the death of the Participant, or (ii) in the case of disability, by the
Participant or his personal representative, provided the Option is exercised
prior to the date of its expiration or not more than one year from the date of
the Participant's death or disability, whichever first occurs. The date of
disability of a Participant shall be determined by the Committee.
12. PAYMENT. Full payment for shares purchased upon exercising an Option shall
be made in cash or by check or, if the Option Agreement so permits and no legal
or regulatory requirement imposed on the Company or covenant made by the Company
is violated, by tendering Qualifying Shares at the fair market value per share
at the time of exercise, or on such other terms as are set forth in the
applicable Option Agreement. If the Common Stock is traded in the
over-the-counter market or upon any securities exchange, the Committee may
permit a Participant exercising an Option to simultaneously exercise the Option
and sell a portion of the shares acquire, pursuant to a brokerage or similar
arrangement approved in advance by the Committee, and use the proceeds from the
sale as payment of the Option price of the Common Stock being acquire by
exercise of the Option. In addition, the Participant shall tender payment of the
amount as may be reforested by the Company, if any, for the purpose of
satisfying its statutory liability to withhold federal, state or local income or
other taxes incurred by reason of the exercise of an Option. No shares may be
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issued until full payment of the purchase price therefor has been made, and a
Participant will have none of the rights of a shareholder with respect to those
shares until those shares are issued to him.
13. EXERCISE OF OPTION. Options granted under the Plan may be exercised during
the Option Period, at such times, in such amounts, in accordance with such terms
and subject to such restrictions as are set forth in the applicable Option
Agreements. In no event may an Option be exercised or shares be issued pursuant
to an Option if any requisite action, approval or consent of any governmental
authority of any kind having jurisdiction over the exercise of Options shall not
have been taken or secured.
14. CAPITAL ADJUSTMENTS AND REORGANIZATIONS.
(a) The number of shares of Common Stock covered by each outstanding Option
granted under the Plan and the Option price may be adjusted to reflect, as
deemed appropriate by the Board, any stock dividend, stock split, share
combination, exchange of shares, recapitalization, merger, consolidation,
separation, reorganization, liquidation or the like of or by the Company that is
effected without receipt of consideration by the Company. For this purpose, the
term effected without receipt of consideration. I shall not include conversion
or exchange of any convertible or exchangeable securities of the Company.
(b) In the event of the proposed dissolution or liquidation of the Company,
the Board shall notify the Participant at least 20 days prior to such proposed
action. To the extent that an Option has not been previously exercised, such
Option shall terminate immediately before consummation of such proposed
dissolutions or liquidation.
(c) If (i) the Company shall sell all or substantially all of its assets to
an entity that is not an affiliated, as defined in Rule 405 promulgated under
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the Securities Act of 1933, as amended, of the Company immediately before that
sale, (ii) the Company consummates a merger, consolidation, share exchange, or
reorganization with another corporation or other entity and, as a result of such
mergers, consolidation, share exchange, or reorganization, less than a majority
of the combined voting power of the outstanding securities of the surviving
entity (whether the Company or another entity) immediately after such
transaction is held in the aggregate by the holders of securities of the Company
that were entitled to vote generally in the election of directors of the Company
(or its successor) ("Voting Stock") immediately before such transaction, or
(iii) when the Common Stock is traded in the over-the-counter market or on any
securities exchange, pursuant to a tender offer or exchange offer for securities
of the Company, or in any other manner, any person or group within the meaning
of the Securities Exchange Act of 1934, as amended (excluding any employee
benefit plan, or related trust, sponsored or maintained by the Company or any of
its affiliates), acquires beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended) of more than
50% of the Voting Stock (the surviving corporation or purchaser described in
this paragraph, the Purchaser, and any such event described in this paragraph, a
change of Control), then the Company shall negotiate in good faith to reach an
agreement with the Purchaser that the Purchaser will either assume the
obligations of the company under the outstanding Options or convert the
outstanding Options into options of at least quality value as to capital stock
of the Purchaser; but if such an agreement is not reached, then the options
shall become fully vested and exercisable and the Company shall notify each
Participant, not later than 20 days before the effective date of such Change of
Control (except that in the case of a Change of Control under the clause (iii),
notice shall be given as soon as practicable after the Change of Control), that
his Option has become fully vested and exercisable, whether or not such Option
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shall then be exercisable under the terms of his Option Agreement. Any such
arrangement relating to Incentive Options shall comply with the requirements of
Section 422 of the Code and the regulations thereunder. To the extent that the
Participants exercise the Options before or on the effective date of the Change
of Control, the Company shall issue all Common Stock purchased by exercise of
those Options, and those shares of-Common Stock shall be treated as issued and
outstanding for purposes of the Change of Control. Upon a Change of Control,
where the outstanding Options are not assumed by the surviving corporation or
the acquiring corporation, the Plan shall terminate, and any unexercised Options
outstanding under the Plan at that date shall terminate.
15. TAX WITHHOLDING. The Committee may establish such rules and procedures as
it considers desirable in order to satisfy any obligation of the Company to
withhold the statutorily prescribed minimum amount of federal income taxes or
other taxes with respect to the exercise of any Option granted under the Plan.
If the Common Stock is traded in the over-the-counter market or upon any
securities exchange, such rules and procedures may provide that the withholding
obligation shall be satisfied by the Company withholding shares of Common Stock
otherwise issuable upon exercise of an Option in shares of Common Stock in an
amount equal to the statutorily prescribed minimum withholding applicable to the
ordinary income resulting from the exercise of that Option.
16. NON-ASSIGNABILITY. Unless otherwise permitted by the Code and Rule 16b-3
under the Securities Exchange Act of 1934, as amended (if applicable), and
expressly permitted in the Option Agreement, an Option may not be transferred
other than by will or by the laws of descent and distribution. Except in the
case of the death or disability of a Participant, Options granted to a
Participant may be exercised only by the Participant.
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17. INTERPRETATION. The Committee shall interpret the Plan and shall prescribe
such rules and regulations in connection with the operation of the Plan as it
determines to be advisable for the administration of the Plan. The Committee may
rescind and amend its rules and regulations. 18. AMENDMENT OR DISCONTINUANCE.
The Plan may be amended or discontinued by the Board or the Committee without
the approval of the shareholders of the Company, except that any amendment that
would either materially increase the number of securities that may be issued
under the Plan or materially modify the requirements of eligibility for
participation in the Plan must be approved by the shareholders of the Company.
19. EFFECT OF PLAN. Neither the adoption of the Plan nor any action of the
Board or the Committee shall be deemed to give any Employee, non-employee
director, independent contractor or consultant any right to be granted an Option
to purchase Common Stock or any other rights except as may be evidenced by the
Option Agreement, or any amendment thereto, duly authorized by the Committee and
executed on behalf of the Company, and then only to the extent and on the terms
and conditions expressly set forth therein. The existence of the Plan and the
Options granted hereunder shall not affect in any way the right of the Board,
the Committee or the shareholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of bonds, debentures, or shares of preferred stock ahead of or
affecting Common Stock or the rights thereof, the dissolution or liquidation of
the Company or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding. Nothing contained in the
Plan or in any Option Agreement shall confer upon any Employee, non-employee
director, independent contractor or consultant any right to (i) continue in the
employ of the Company or any of its Subsidiaries, or continue as a director,
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independent contractor or consultant to the Company or any of its Subsidiaries,
or (ii) interfere in any way with the right of the Company or any of its
Subsidiaries to terminate his employment, directorship or independent contractor
or consultant relationship at any time.
20. TERM. Unless sooner terminated by action of the Board, this Plan will
terminate on November 13, 2009. The Committee may not grant Options under the
Plan after that date, but Options granted before that date will continue to be
effective in accordance with their terms.
21. DEFINITIONS. For the purpose of the Plan, unless the context requires
otherwise, the following terms shall have the meanings indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Committee" means the committee of the Board appointed to
administer the Plan or, in the absence of such a Committee,
means the Board.
(d) "Common Stock" means the Common Stock which the Company is
currently authorized to issue or may in the future be authorized
to issue (as long as the common stock varies from that currently
authorized, if at all, only in amount of par value ).
(e) "Company" means Tech Electro Industries, Inc., a Texas
corporation.
(f) "Employee" means an individual who is employed, within the
meaning of Section 3401 if the Code, by the Company or by a
Subsidiary. The Committee shall determine when an Employee's
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period of employment terminates and when such period of
employment is deemed to be continued during an approved leave of
absence. (g) "Incentive Option" means an Option granted under
the Plan which meets the requirements of Section 422 of the
Code.
(h) "Key Employee" means any Employee whose performance and
responsibilities are determined by the Committee to have a
direct and significant effect on the performance of the Company
and its Subsidiaries.
(i) "Non-qualified Option" means an Option granted under the Plan
which is not intended to be an Incentive Option.
(j) "Option" means an option granted pursuant to the Plan to
purchase shares of common Stock, whether granted as an Incentive
Option or as a Non-qualified Option.
(k) "Option Agreement" means, with respect to each Option granted to
a Participant, the signed written agreement between the
Participant and the Company setting forth the terms and
conditions of the Option.
(l) "Option Period" means the period during which an Option may be
exercised.
(m) "Parent" means any corporation in an unbroken chain of
corporations ending with the Company if, at the time of granting
of the Option, each of the corporations other than the Company
owns stock possessing 50% or more of the total combined voting
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power of all classes of stock in one of the other corporations
in the chain.
(n) "Participant" means an individual to whom an Option has been
granted under the Plan.
(o) "Plan" means this Tech Electro Industries, Inc. 1999 Stock
Option Plan, as set forth herein and as it may be amended from
time to time.
(p) "Qualifying Shares" means shares of common Stock which either
(i) have been owned by the Participant for more than six months
and have been "paid for" within the meaning of Rule 144
promulgated under the Securities Act of 1933, as amended, or
(ii) were obtained by the Participant in the public market.
(q) "Subsidiary" means any corporation in an unbroken chain of
corporations beginning with the Company if, at the time of the
granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 80%
or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain, and
"Subsidiaries" means more than one of any of such corporations.
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