As filed with the Securities and Exchange Commission on December 7, 2000
Registration No. 333-
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------------
SUN INTERNATIONAL HOTELS LIMITED
(Exact name of registrant as specified in its charter)
Commonwealth of The Bahamas 98-0136554
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Coral Towers
Paradise Island, The Bahamas
(Address of Principal Executive Offices)
Sun International Hotels Limited
2000 Stock Option Plan
(Full title of the plan)
Charles D. Adamo, Esq.
Sun International Hotels Limited
Executive Offices
Coral Towers
Paradise Island, The Bahamas
(242) 363-6017
(Name, address and telephone number,
including area code, of agent for service)
---------------------------
Copy to:
Philip A. Gelston, Esq.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
---------------------------
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Proposed
Proposed maximum
Title of securities to be Amount to be maximum offering aggregate offering Amount of
registered registered price per share (1) price (1) registration fee
<S> <C> <C> <C> <C>
Ordinary Shares, $.001 par value 3,000,000 $19.19 $57,570,000 $15,198.48
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(h) and Rule 457(c) under the Securities Act of 1933
based on the average of the high and low prices of the registrant's
Ordinary Shares as reported on the New York Stock Exchange on December 6,
2000.
==============================================================================
This Registration Statement, including all exhibits filed herewith, contains
19 pages numbered sequentially.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents filed by Sun International Hotels Limited ("Sun
International") with the Securities and Exchange Commission (the "Commission")
are incorporated herein by reference:
(a) Sun International's Annual Report on Form 20-F for the fiscal
year ended December 31, 1999.
(b) All other reports filed by Sun International pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), since December 31, 1999.
(c) The description of Sun International's Ordinary Shares, par
value $.001 per share (the "Ordinary Shares"), contained in Sun
International's Registration Statement on Form 8-A (Registration No.
1-14226), registering the Ordinary Shares under Section 12(b) of the
Exchange Act, and any amendments or reports filed for the purpose of
updating such description.
All documents filed by Sun International pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date hereof and prior to the
filing of a post-effective amendment to this Registration Statement that
indicates that all securities offered hereby have been sold or that
deregisters all securities then remaining unsold shall be deemed to be
incorporated herein by reference and to be a part hereof from the date of
filing of such documents. Any statement contained in a document incorporated
or deemed to be incorporated herein by reference shall be deemed to be
modified or superseded for the purposes of this Registration Statement to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated herein by reference
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
Item 4. Description of Securities.
Not applicable.
Item 5. Interests of Named Experts and Counsel.
The validity of the Ordinary Shares being offered hereby has been passed
upon by Giselle M. Pyfrom, Esq., Senior Vice President and General Counsel in
the Bahamas of Sun International. Ms. Pyfrom, as an officer and employee of
Sun International, is a participant in the Sun International Hotels Limited
2000 Stock Option Plan.
Item 6. Indemnification of Directors and Officers.
Section 56 of the International Business Companies Act, as amended (the
"IBCA"), empowers a company incorporated under the IBCA to indemnify against
all expenses, including legal fees, and against all judgments, fines and
amounts paid in settlement and reasonably incurred in connection with legal,
administrative or investigative proceedings any person who is or was (a) a
party or is threatened to be made a party to any threatened, pending or
completed proceedings, whether civil, criminal, administrative or
investigative, by reason of the fact that the person is or was a director, an
officer or a liquidator of the company, or (b) at the request of the company,
serving as a director, officer or liquidator of, or in any other capacity for,
another company or a partnership, joint venture, trust or other enterprise,
provided, however, that such indemnification may only be provided to a person
if the person acted honestly and in good faith
<PAGE>
with a view to the best interests of the company and, in the case of criminal
proceedings, the person had no reasonable cause to believe that his conduct
was unlawful. The decision of the directors as to whether the person acted
honestly and in good faith and with a view to the best interests of the
company and as to whether the person had no reasonable cause to believe that
his conduct was unlawful is, in the absence of fraud, sufficient for the
purposes of the IBCA unless a question of law is involved.
Sun International provides for indemnification of its directors and
officers pursuant to Article 85 of its Articles of Association, as amended,
which provides that, net of any indemnification an officer or director of Sun
International receives from another source, Sun International will indemnify
its officers and directors to the fullest extent permitted by the IBCA.
Pursuant to Section 57 of the IBCA, a company incorporated under the IBCA
may purchase and maintain insurance in relation to any person who is or was
(a) a director, a registered agent, an officer or a liquidator of the company,
or (b) at the request of the company, serving as a director, a registered
agent, an officer or a liquidator, or in any other capacity for, another
company or a partnership, joint venture, trust or other enterprise against an
liability asserted against and incurred by such person in that capacity,
whether or not the company has or would have had the power to indemnify the
person against the liability under Section 56 of the IBCA as described above.
Sun International has purchased directors' and officers' liability
insurance policies indemnifying its officers and directors and the officers
and directors of its subsidiaries against claims and liabilities (with stated
exceptions) to which they may become subject by reason of their positions with
Sun International or its subsidiaries as directors and officers.
Item 7. Exemption From Registration Claimed.
Not applicable.
Item 8. Exhibits.
Exhibit
Number Description
4.1* Articles of Association of Sun International adopted April 28, 1995,
as amended (incorporated by reference to Exhibits 3.3 and 3.4 of Sun
International's Registration Statement on Form F-3 (Registration No.
33-80477))
4.2 Sun International Hotels Limited 2000 Stock Option Plan
4.3* Form of Ordinary Share Certificate (incorporated by reference to
Exhibit 4.1 of Sun International's Registration Statement on Form
F-3 (Registration No. 33-80477))
5.1 Opinion of Giselle M. Pyfrom, Esq., as to the validity of the
securities being registered
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Giselle M. Pyfrom, Esq. (included in Exhibit 5.1)
24.1 Power of Attorney
------------------------------
* Previously filed.
<PAGE>
Item 9. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to
include any material information with respect to the plan of distribution
not previously disclosed in this Registration Statement or any material
change to such information in this Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933 (the "Securities Act"), each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof;
and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered hereunder which remain
unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in this Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the undersigned Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Commonwealth of The Bahamas, on December 7,
2000.
SUN INTERNATIONAL HOTELS LIMITED
By /s/ Charles D. Adamo
------------------------------
Charles D. Adamo
Authorized Signatory
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
* Chairman of the Board December 7, 2000
-------------------------- of Directors and Chief
Solomon Kerzer Executive Officer (Principal
Executive Officer)
* Director December 7, 2000
--------------------------
Derek Hawton
-------------------------- Director
Peter Buckley
* Director December 7, 2000
--------------------------
Howard Marks
* Director December 7, 2000
--------------------------
Eric Siegel
* Chief Financial Officer December 7, 2000
-------------------------- and Secretary (Principal
John Allison Financial and Accounting
Officer and Authorized
Representative in the
United States)
*By /s/ Charles D. Adamo
----------------------
Charles D. Adamo
Attorney-in-fact
<PAGE>
EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
4.1* Articles of Association of Sun International
adopted April 28, 1995, as amended (incorporated
by reference to Exhibits 3.3 and 3.4 of Sun
International's Registration Statement on Form F-3
(Registration No. 33-80477))
4.2 Sun International Hotels Limited 2000 Stock Option 7
Plan
4.3* Form of Ordinary Share Certificate (incorporated
by reference to Exhibit 4.1 of Sun International's
Registration Statement on Form F-3 (Registration
No. 33-80477))
5.1 Opinion of Giselle M. Pyfrom, Esq., as to the 17
validity of the securities being registered
23.1 Consent of Arthur Andersen LLP 18
23.2 Consent of Giselle M. Pyfrom, Esq. (included in
Exhibit 5.1)
24.1 Power of Attorney 19
------------------------------
* Previously filed.
<PAGE>
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THIS DOCUMENT CONSTITUTES PART OF A
PROSPECTUS COVERING SECURITIES THAT HAVE BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933
-----------------------------------------------------------------------
SUN INTERNATIONAL HOTELS LIMITED
3,000,000 ORDINARY SHARES
($.001 Par Value)
-----------------------------------------------------
OFFERED UNDER THE SUN INTERNATIONAL
HOTELS LIMITED 2000 STOCK OPTION PLAN
-----------------------------------------------------
This document contains information about the Sun
International Hotels Limited 2000 Stock Option Plan (the "Plan") and
the Ordinary Shares, $.001 par value each (the "Ordinary Shares"), of
Sun International Hotels Limited (the "Company"), to be offered to
certain employees, officers and directors of the Company under the
terms of the Plan. The Ordinary Shares to be offered under the Plan
have been approved for listing on the New York Stock Exchange, subject
to official notice of issuance.
No person has been authorized to give any information or to
make any representations, other than as contained or incorporated by
reference herein or delivered as described herein, in connection with
the offer of Ordinary Shares under the Plan, and if given or made,
such information or representation must not be relied upon as having
been authorized by the Company. This document does not constitute an
offer to sell the securities to which this document relates in any
jurisdiction to any person to whom it is unlawful to make such an
offer in such jurisdiction. Additional updating information may be
furnished to participants in the Plan from time to time by means of
supplements to this document. Neither delivery of this prospectus nor
any sales hereunder shall under any circumstance create any
implication that there has been no change in the affairs of the
Company since the date hereof.
-----------------------------------------------------
The date of this Prospectus is December 7, 2000.
<PAGE>
TABLE OF CONTENTS
Page
Additional Information.......................................... 3
Incorporation of Certain Documents by Reference................. 3
Introduction.................................................... 4
The Plan........................................................ 4
<PAGE>
ADDITIONAL INFORMATION
This document is delivered in compliance with the Securities
Act of 1933, as amended (the "Securities Act"), and, together with the
documents incorporated by reference as described below, constitutes a
prospectus within the meaning of Section 10(a) of the Securities Act.
A registration statement on Form S-8 (the "Registration Statement")
has been filed by the Company under the Securities Act with the
Securities and Exchange Commission (the "Commission") with respect to
the Ordinary Shares offered hereby. As permitted by the rules and
regulations of the Commission, this document omits certain information
contained in the Registration Statement on file with the Commission.
A copy of the Company's most recent Form 20-F filing under
the Securities Exchange Act of 1934 (the "Exchange Act") accompanies
this Prospectus or has been delivered to participants.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated by reference into
the Registration Statement and this document and will be provided to
participants without charge upon written or oral request at the
address and telephone number specified below:
(a) The Company's annual report on Form 20-F for the fiscal year
ended December 31, 1999;
(b) The description of the Company's Ordinary Shares, $.001 par
value each, contained in or incorporated by reference in the
Company's Registration Statements filed pursuant to Section
12 of the Securities Exchange Act of 1934 (the "Exchange
Act") and any amendments or reports filed for the purpose of
updating such description; and
(c) All other reports filed pursuant to Section 13(a) or 15(a)
of the Exchange Act since December 31, 1999.
All documents filed by the Company pursuant to Section
13(a), 13(c), 14 and 15(d) of the Exchange Act, after the date hereof
and prior to the filing of a post effective amendment which indicates
that all securities offered have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing of
such documents.
<PAGE>
Written or oral requests for the above-referenced documents,
or for information about the Plan and its administrators, should be
directed to:
Sun International, Bahamas
Paradise Island
P.O. Box N-4777
Nassau, Bahamas
Attn: Charles A. Adamo, Esq.
Executive Vice President - Corporate
Development and General Counsel
Telephone: (242)363-6017
The Company will send to Plan participants who do not
otherwise receive such materials, copies of all reports, proxy
statements and other communications distributed to the Company's
shareholders generally no later than the time such material is sent to
shareholders.
INTRODUCTION
Sun International Hotels Limited, a Bahamian corporation
(the "Company"), has its principal executive offices at Coral Towers,
Paradise Island, The Bahamas and its telephone number is (242)
363-6000. This Prospectus relates to a maximum of 3,000,000 Ordinary
Shares which may be offered under the Company's Plan.
The principal provisions of the Plan are summarized below.
Such summary does not purport to be complete and is subject in all
respects to the provisions of the Plan.
THE PLAN
Adoption and Purpose. On August 4, 2000, the shareholders
approved the Sun International Hotels Limited 2000 Stock Option Plan
(the "Plan") for the purpose of granting stock options to directors,
officers and employees of the Company and of certain direct or
indirect controlled subsidiaries of the Company. The general purpose
of the Plan is to promote the interests of the Company and the
relevant subsidiaries of the Company by providing to their directors,
officers and employees incentives to continue and increase their
efforts with respect to, and remain in the employ of, the Company and
such subsidiaries.
The Plan is not subject to the Employee Retirement Income
Security Act of 1974, as amended, and is not a
<PAGE>
"qualified plan" under Section 401(a) of the Internal Revenue Code of
1986, as amended (the "Code").
Administration. The Plan is administered by the Board of
Directors of the Company (the "Board"), whose decision on all disputes
is final. Subject to the express provisions of the Plan, the Board has
plenary authority, in its discretion, to administer the Plan and to
exercise all powers and authority either specifically granted to it
under the Plan or necessary and advisable in the administration of the
Plan, including, without limitation, the authority to (i) interpret
the Plan, (ii) prescribe, amend and rescind rules and regulations
relating to the Plan, (iii) determine the terms of all options granted
under the Plan (which need not be identical), the purchase price of
the securities covered by each option, the individuals to whom, and
the time or times at which, options shall be granted, when an option
can be exercised, and whether in whole or in installments, and the
number of shares covered by each option and (iv) make all other
necessary or advisable determinations with respect to the Plan.
Participants. The Board from time to time selects the
directors, officers, and employees of the Company and of its relevant
subsidiaries to whom options are to be granted, and who will, upon
such grants, become participants in the Plan (each a "participant",
and collectively, "participants").
Shares Subject to Plan. The options that may be granted
under the Plan are to purchase Ordinary Shares. The Board may not
grant options under the Plan for more than 3,000,000 Ordinary Shares,
subject to any applicable adjustments. Ordinary Shares to be optioned
and sold may be made available from either authorized but unissued
Ordinary Shares or Ordinary Shares held by the Company in its
treasury. Ordinary 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 reoffered under the Plan.
Grant of Options. All options under the Plan are granted by
the Board. The Board determines the number of Ordinary Shares to be
offered from time to time by means of options to participants of the
Plan.
Each grant of options is evidenced by a stock option
agreement or certificate containing such terms, provisions and rules
as are approved by the Board, consistent with the Plan. The Company
executes stock option agreements or certificates upon instructions
from the Board.
<PAGE>
Option Price. The purchase price of the Ordinary Shares
under each option equals (i) 100 percent of the per share market value
of the Ordinary Shares on the date the option is granted or (ii) an
amount as may otherwise be determined by the Board.
Option Period. Each option expires no later than the day
before the tenth anniversary of the date on which such option was
granted. Unless otherwise specified by the Board, options may be
exercised by a participant at any time (i) after one year from the
date such options were granted in respect of not more than 1/3 of such
options, (ii) after two years from the date such options were granted
in respect of not more than 2/3 of such options, less any such options
exercised pursuant to clause (i) above and (iii) after three years
from the date such options were granted in respect of 100 percent of
such options, less any such options exercised pursuant to clauses (i)
or (ii) above.
Notwithstanding the foregoing, the Board shall have the
discretion to accelerate the exercisability of an option granted to a
participant pursuant to the Plan at any time, including in the event
that such participant's employment is terminated, including, without
limitation, by reason of death, retirement or disability.
Unless otherwise set forth in the applicable stock option
agreement or certificate, all options granted pursuant to this Plan
shall become immediately exercisable upon a change in control. A
change in control ("Change in Control") is considered to have occurred
if any entity or group of entities that are unrelated to Sun
International Investments Limited ("SIIL") or its affiliates, acting
in concert acquire beneficial ownership (within the meaning of Rule
13d-3(a)(1) under the Exchange Act), directly or indirectly, of 25% or
more of the outstanding Ordinary Shares or (b) during any period of 24
consecutive months, individuals who at the beginning of such period
constituted the Board (together with any new or replacement directors
whose election by such Board, or whose nomination for reelection, was
approved by a vote of at least a majority of the directors then still
in office who were either directors at the beginning of such period or
whose election or nomination for reelection was previously so
approved) cease for any reason to constitute a majority of the
directors then in office; provided, however, that no Change in Control
shall exist for so long as SIIL and its affiliates continue to be the
beneficial owner of 30% or more of the Ordinary Shares and no entity
is the owner of more of the Ordinary Shares than SIIL and its
affiliates.
<PAGE>
Termination of Employment. Except as specifically provided
below, in the event of the termination of employment of any
participant, the participant holding such options shall (unless
otherwise resolved by the Board) be entitled to exercise that number
of options which such participant is entitled to exercise at
termination of employment. Such options must be exercised within
forty- five days from the date of the termination of employment, at
which time all such options shall lapse.
In the event that a participant's employment is terminated
for cause (which, for these purposes, shall have the meaning
established by the Board or, in the absence thereof, shall include,
but not be limited to, insubordination, dishonesty, incompetence,
moral turpitude, other misconduct of any kind and the refusal to
perform duties and responsibilities for any reason other than illness
or incapacity), then all options that had been granted to such
participant and not exercised shall immediately lapse, unless
otherwise resolved by the Board; provided, however, that if such
termination occurs within 12 months of a Change in Control, then such
participant may exercise all such options within forty-five days of
the date of the termination of employment.
In the event that a participant's employment is terminated
as a result of such participant's death, such participant's heirs or
the executors or administrators of such participant's estate shall be
entitled to exercise that number of options which such participant
would have been entitled to exercise at his death. Such options must
be exercised within a period of twelve months following the date of
death or such longer period (not exceeding two years from the date of
death) as the Board may determine.
In the event that a participant's employment is terminated
as a result of such participant's retirement or disability before
options granted to such participant have been fully exercised, then
such participant shall be entitled to exercise that number of options
which such participant is entitled to exercise at his retirement or
disability. Such options must be exercised within a period of three
months following the date of such retirement or disability.
Payment; Method of Exercise. Payment upon the exercise of
options must be made in cash unless the Board, in its discretion,
permits a participant to make payment with any other form of
consideration, including without limitation, Ordinary Shares already
owned by the holder of the option or a note issued to the Company by
such participant. No Ordinary Shares may be issued upon exercise
<PAGE>
of any option until payment of the purchase price therefor has been
made, and a participant has none of the rights of a stockholder until
such Ordinary Shares are issued to such participant.
An option is exercised by written notice to the Company.
Such notice must state that the holder of the option elects to
exercise the option, the number of Ordinary Shares in respect of which
it is being exercised and the manner of payment for such Ordinary
Shares and must either (i) be accompanied by payment of the full
purchase price of such Ordinary Shares or (ii) fix a date (not more
than 10 business days from the date of exercise) for the payment of
the full purchase price of such Ordinary Shares. Cash payments must be
made in cash or by check payable to the order of the Company. Payments
by Ordinary Shares (valued at market value on the date of exercise)
must be made by delivery of stock certificates in negotiable form. If
certificates representing Ordinary Shares are used to pay all or part
of the purchase price of an option, a separate certificate must be
delivered by the Company, representing the same number of Ordinary
Shares as each certificate so used, and an additional certificate must
be delivered, representing the additional shares to which the holder
of the option is entitled as a result of the exercise of the option.
Ordinary Shares will be issued within 30 days of the date of exercise.
Withholding Taxes. If the Board shall so require, as a
condition of exercise, each participant shall agree that (a) no later
than the date of exercise of any option, the participant will pay to
the Company or make arrangements satisfactory to the Company regarding
payment of any taxes of any kind required by law to be withheld upon
the exercise of such option (any such tax, a "Withholding Tax"); and
(b) the Company shall, to the extent permitted or required by law,
have the right to deduct from any payment of any kind otherwise due to
the participant, any such Withholding Tax.
Effect of Certain Changes. If there is any change in the
number of outstanding Ordinary Shares by reason of any stock dividend,
stock split, recapitalization, combination, exchange of shares,
merger, consolidation, liquidation, split-up, spin-off or other
similar change in capitalization, any distribution to common
shareholders, including a rights offering, other than cash dividends,
or any like change, then the number of Ordinary Shares available for
options, the number of such shares covered by outstanding options and
the option price shall be proportionately adjusted by the Board to
reflect such change or distribution. Any fractional shares resulting
from such adjustment shall be eliminated.
<PAGE>
Restrictions on Transfer. Options may not be transferred
other than by will or by the laws of descent and distribution.
However, options may be transferred or assigned by a participant to
(i) a trust with respect to which such participant or a member of his
or her family is a beneficiary or (ii) a corporation or other entity
with respect to which the participant holds directly or indirectly
more than 50 percent of the outstanding common stock or other equity
interests.
During a participant's lifetime, options granted to a
participant may be exercised only by the participant, by his or her
guardian or legal representative or by a transferee specified in the
preceding paragraph. Any purported transfer or assignment of an option
inconsistent with the foregoing restrictions shall cause the option to
lapse. Each option agreement or certificate shall contain a statement
to this effect.
Federal Income Tax Consequences. Options granted under the
Plan will be nonqualified options under the Code.
If shares are issued to the original holder of an option,
then
(1) no income will be recognized by the holder at the time
of grant of the option;
(2) upon exercise of the option the holder will recognize
taxable ordinary income in an amount equal to the excess of the
fair market value of the shares acquired, measured at the time of
exercise, over the option price;
(3) subject to the limitation described below, the Company
will be entitled to a deduction at the same time and in the same
amount as the holder has income under clause (2); and
(4) upon a subsequent sale of the shares so acquired, the
holder will have short-term or long-term capital gain or loss, as
the case may be, in an amount equal to the difference between the
amount realized on such sale and the tax basis of the shares
sold.
If payment of the option price is made entirely in cash, the
tax basis of the shares will be equal to their fair market value on
the date of exercise, but not less than the option price, and their
holding period will begin on the day after the tax basis of the shares
is so determined.
<PAGE>
If the optionee uses previously owned shares to exercise an
option in whole or in part, the transaction will not be considered to
be a taxable disposition of the previ ously owned shares. The holder's
tax basis and holding period of the previously owned shares will be
carried over to the equivalent number of shares received on exercise.
The tax basis of the additional shares received upon exer cise will be
the fair market value of the shares on the date of exercise, but not
less than the amount of cash used in payment, and the holding period
for such additional shares will begin on the day after the tax basis
of the shares is so determined. In order to facilitate recordkeeping
by optionees, when an option is exercised with previously owned
shares, the Company will deliver separate stock certificates to the
optionee representing the shares surrendered and the additional shares
to which the optionee is entitled as a result of the exercise.
If the exercisability of an option is accelerated as a
result of a Change in Control, all or a portion of the value of the
option at that time may be a parachute payment for purposes of
determining whether a 20% excise tax is payable by the employee as a
result of the receipt of an excess parachute payment pursuant to
Section 4999 of the Code and whether the Company will lose the
deduction otherwise available to it.
Options transferred otherwise than by will or by the laws of
descent and distribution may subject the employee to federal gift tax
at the time of such transfer. Special income tax rules apply on the
exercise of the option by the transferee.
Limitation on Company's Deduction. Pursuant to Code Section
162(m), the Company's tax deduction for all compensation paid to
specified officers in any one year after 1993 is limited to
$1,000,000. It is anticipated that the Company's deduction arising
from an officer's exercise of a stock option will be subject to this
limitation.
