<PAGE> 1
As filed with the Securities and Exchange Commission on June 26, 1998
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
SEL-DRUM INTERNATIONAL, INC.
(Exact name of Registrant as Specified in Its Charter)
New York 84-1236134
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
501 Amherst Street
Buffalo, New York 14207-2913
(800) 263-9356
(Address of Principal Executive Offices)
--------------------
Sel-Drum International, Inc.
1995 Employee and Non-Employee Director Stock Option Plan
Non-Incentive Stock Option Grant granted as of November 3, 1997 by Sel-Drum
International, Inc. to Raymond C. Sparks
(Full Title of the Plans)
--------------------
Raymond C. Sparks
President and Chief Executive Officer
Sel-Drum International, Inc.
501 Amherst Street
Buffalo, New York 14207-2913
(Name and Address of Agent For Service)
--------------------
(800) 263-9356
Telephone Number, Including Area Code, of Agent for Service
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===========================================================================================================================
Proposed Proposed
Maximum Maximum Amount of
Title of Securities Amount To Be Offering Price Aggregate Registration
Title of Plan to be Registered Registered Per Share(1) Offering Price(1) Fee
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sel-Drum Inter-
national, Inc.
1995 Employee
and Non-Employee Common Stock
Directory Stock par value $.01
Option Plan per share 500,000 $.9688 $484,000 $143
- ---------------------------------------------------------------------------------------------------------------------------
Non-Incentive Stock
Option Grant granted
as of November 3, 1997
by Sel-Drum Inter- Common Stock,
national, Inc. to par value $.01
Raymond C. Sparks per share 250,000 $.40 $100,000 $30
- ---------------------------------------------------------------------------------------------------------------------------
Total 750,000 $584,000 $173
===========================================================================================================================
(1)Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(h)
of the Securities Act of 1933 and based upon the average bid and asked prices as reported on June 22, 1998.
</TABLE>
Pursuant to Rule 416, there are also being registered such additional
shares of Common Stock as may become issuable pursuant to anti-dilution
provisions of the Plans.
================================================================================
<PAGE> 2
PART II. INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents of the Registrant previously filed with the
Securities and Exchange Commission (the "Commission") are incorporated herein by
reference:
(a) Annual Report on Form 10-KSB for the fiscal year ended July 31,
1997, filed on October 29, 1997 pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act");
(b) Quarterly Report on Form 10-QSB for the fiscal quarter ended
October 31, 1997, filed on December 15, 1997 pursuant to Section
13 of the Exchange Act;
(c) Quarterly Report on Form 10-QSB for the fiscal quarter ended
January 31, 1998, filed on March 17, 1998 pursuant to Section 13
of the Exchange Act;
(d) Quarterly Report on Form 10-QSB for the fiscal quarter ended
April 30, 1998, filed on June 12, 1998, pursuant to Section 13 of
the Exchange Act; and
(e) Proxy statement on Schedule 14A dated December 12, 1997, filed
pursuant to Section 14 of the Exchange Act.
(f) Description of the Registrant's Common Stock, par value $.01 per
share, contained in Exhibit 3(a) to its Quarterly Report on Form
10-QSB for the fiscal quarter ended January 31, 1998.
All documents filed by the Registrant pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), after the date of this Registration Statement (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 in this Registration Statement and to be a part
hereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to Sections 721 through 725 of the New York Business
Corporation Law (the "NYBCL"), which provide for indemnification of directors
and officers of New York corporations under certain circumstances.
Section 722 of the NYBCL provides that a corporation may indemnify
directors and officers as well as other employees and individuals against
judgments, fines, amounts paid in settlement and reasonable expenses, including
attorneys' fees, in connection with actions or proceedings, whether civil or
criminal (other than an action by or in the right of the corporation, a
"derivation action"), if they acted in good faith and in a manner they
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<PAGE> 3
reasonably believed to be in the best interests of the corporation; and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
their conduct was unlawful; and, in the case of service for any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise at the request of the corporation, reasonably believed to be in, or
not opposed to, the best interest of the corporation. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to amounts paid in settlement and reasonable expenses (including
attorneys' fees) incurred in connection with the defense or settlement of such
actions, and the statute does not apply in respect of a threatened action, or a
pending action that is settled or otherwise disposed of, unless prior court
approval of indemnification has been obtained. Section 721 of the NYBCL provides
that Article 7 of the NYBCL is not exclusive of other indemnification that may
be granted by a corporation's certificate of incorporation, disinterested
director vote, shareholder vote, agreement or otherwise.
The Registrant's Restated Certificate of Incorporation requires the
Registrant to indemnify its officers and directors to the fullest extent
permitted under the NYBCL. Furthermore, the Registrant's By-laws provides that
the Registrant, to the fullest extent permitted and in the manner required by
the laws of the State of New York, may indemnify any officer or director (and
the heirs and legal representatives of such person) made, or threatened to be
made, a party in an action or proceeding (including, without limitation, one by
or in the right of the Registrant to procure a judgment in its favor), whether
civil or criminal, including an action by or in the right of any other
corporation of any type or kind, domestic or foreign, or any partnership, joint
venture, trust, employee benefit plan or other enterprise, which any director
or officer of the Registrant served in any capacity at the request of the
Registrant, by reason of the fact that such director or officer, or such
director's or officer's testator or intestate, was a director or officer of the
Registrant or served such other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise in any capacity.
Section 402(b) of the NYBCL provides that a corporation's certificate of
incorporation may include a provision that eliminates or limits the personal
liability of the corporation's directors to the corporation or its shareholders
for damages for any breach of a director's duty, provided that such provision
does not eliminate or limit (1) the liability of any director if a judgment or
other final adjudication adverse to the director establishes that the director's
acts of omissions were in bad faith or involved intentional misconduct or a
knowing violation of law or that the director personally gained a financial
profit or other advantage to which the director was not legally entitled or that
the director's acts violated Section 719 of the NYBCL, or (2) the liability of
any director for any act or omission prior to the adoption of a provision
authorized by Section 402(b) of the NYBCL.
The Registrant's Restated Certificate of Incorporation provides
that a member of the Registrant's Board of Directors shall not be personally
liable to the Registrant or its shareholders for damages for any breach of duty
in his capacity as such; provided, however, that the foregoing provision in the
Restated Certificate of Incorporation shall not be construed to eliminate (i)
the liability of any director if a judgment or other adjudication adverse to
such director establishes that such director's acts or omissions were in bad
faith or involved intentional misconduct or a knowing violation of law, or that
such director personally gained in fact a financial profit or other advantage to
which he or she was not legally entitled, or that such director's acts violated
Section 719 of the NYBCL (concerning liability of directors in certain
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<PAGE> 4
cases), or (ii) the liability of any director for any act or omission prior to
the adoption of the foregoing provisions. The Restated Certificate of
Incorporation further provides that if the NYBCL is amended after adoption of
the foregoing provisions contained in the Registrant's Restated Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of any director of the
Registrant shall be eliminated or limited to the fullest extent permitted by the
NYBCL, as so amended. The Registrant's Restated Certificate of Incorporation
provides that any repeal or modification of the foregoing provisions contained
in the Registrant's Restated Certificate of Incorporation by the shareholders of
the Registrant shall not adversely affect any right or protection of a director
of the Registrant existing at the time of such repeal or modification.
Article V of the Registrant's By-laws provides each person who was or is
made a party to or is threatened to be made a party to or is otherwise involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he or his
testator or intestate (i) is or was a director or officer of the Registrant or
(ii) is or was a director or officer of the Registrant who serves or served, in
any capacity, any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise at the request of the Registrant (hereinafter
an "indemnitee"), shall be indemnified and held harmless by the Registrant
against all expense, liability and loss, including without limitation ERISA
excise taxes or penalties, judgments, fines, penalties, amounts paid in
settlement (provided the Board of Directors of the Registrant shall have given
its prior consent to such settlement, which consent shall not be unreasonably
withheld by it) and reasonable expenses, including attorneys' fees, suffered or
incurred by such indemnitee in connection therewith, and such indemnification
shall continue as to an indemnitee who has ceased to be a director or officer
and shall inure to the benefit of the indemnitee's heirs and fiduciaries;
provided, however, that no indemnification may be made to or on behalf of any
director or officer if his acts were committed in bad faith or were the result
of active and deliberate dishonesty and were material to the cause of action so
adjudicated or otherwise disposed of, or if he personally gained in fact a
financial profit or other advantage to which he was not legally entitled.
Notwithstanding the foregoing, the Registrant shall indemnify any such
indemnitee in connection with a proceeding (or part thereof) initiated by such
indemnitee only if such proceeding (or part thereof) was authorized by the Board
of Directors and is consistent with the Registrant's By-laws.
General Effect
- --------------
The general effect of the aforementioned provisions of the NYBCL and the
Registrant's Restated Certificate of Incorporation and By-laws is to eliminate
the rights of the Registrant and its shareholders (through shareholders'
derivative suits on behalf of the Registrant) to recover monetary damages in the
event of a breach of fiduciary duty as a director (including breach of duty in
the case of negligent or grossly negligent behavior) except in the situations as
described above. The aforementioned provisions will not affect the availability
of injunctive relief against directors of the Registrant (although such relief
may not always be available as a practical matter), nor will it limit directors'
liability for violations of the federal securities laws.
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<PAGE> 5
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
Exhibits filed as part of this Registration Statement are listed
on the Index to Exhibits.
ITEM 9. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes (subject to the proviso
contained in Item 512(a) of Regulation S-K):
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(iii) 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, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof;
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered 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 of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange 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 of 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.
- 4 -
<PAGE> 6
INDEX TO EXHIBITS
EXHIBIT 4 - INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS,
INCLUDING INDENTURES
4.1 Restated Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3(a) of the Registrant's Form 10-QSB for
the fiscal quarter ended January 31, 1998, filed with the Commission on March
17, 1998).
4.2 By-laws of the Registrant (incorporated by reference to
Exhibit 3(b) of the Registrant's Form 10-QSB for the fiscal quarter ended
January 31, 1998, filed with the Commission on March 17, 1998).
EXHIBIT 5 - OPINION RE: LEGALITY
* 5.1 Opinion of Harter, Secrest & Emery LLP
EXHIBIT 15 - LETTER ON UNAUDITED INTERIM FINANCIAL INFORMATION
Not applicable.
EXHIBIT 23 - CONSENTS OF EXPERTS AND COUNSEL
* 23.1 Consent of Mengel, Metzger, Barr & Co. LLP
* 23.2 Consent of Harter, Secrest & Emery LLP (included in Exhibit 5.1)
EXHIBIT 24 - POWER OF ATTORNEY
Not applicable.
EXHIBIT 99 - ADDITIONAL EXHIBITS
* 99.1 Sel-Drum International, Inc. 1995 Employee and Non-Employee
Director Stock Option Plan
- --------
* Exhibit filed with this Registration Statement.
- 5 -
<PAGE> 7
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 this City of Burlington, Ontario, Canada, on this 25th day of
June, 1998.
SEL-DRUM INTERNATIONAL, INC.
By: /s/ Raymond C. Sparks
----------------------------------
Raymond C. Sparks
President and Chief Executive Officer
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.
<TABLE>
<CAPTION>
TITLE DATE
<S> <C>
/s/ Raymond C. Sparks President and Chief Executive June 19, 1998
- --------------------------------------------- Officer (Principal Executive
Raymond C. Sparks Officer)
/s/ John C. Hall Vice President - Finance June 19, 1998
- --------------------------------------------- (Principal Financial Officer
John C. Hall and Principal Accounting
Officer)
/s/ Brian F. Turnbull Chairman of the Board of June 22, 1998
- --------------------------------------------- Directors
Brian F. Turnbull
/s/ Robert M. Orr Director June 19, 1998
- ---------------------------------------------
Robert M. Orr
/s/ Robert E. Asseltine Director June 25, 1998
- ---------------------------------------------
Robert E. Asseltine
</TABLE>
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<PAGE> 1
EXHIBIT 5.1
OPINION OF HARTER, SECREST & EMERY LLP
<PAGE> 2
[Letterhead of Harter, Secrest & Emery LLP]
June 26, 1998
Sel-Drum International, Inc.
501 Amherst Street
Buffalo, New York 14207-2913
Re: Sel-Drum International, Inc.
Registration Statement on Form S-8
Gentlemen:
You have requested our opinion in connection with your Registration
Statement on Form S-8, filed under the Securities Act of 1933, as amended (the
"Registration Statement"), with the Securities and Exchange Commission in
respect of the proposed issuance by Sel-Drum International, Inc. (the
"Company") of up to 500,000 shares of Common Stock, par value $.01 per share
("Common Stock"), of the Company pursuant to the Company's 1995 Employee and
Non-Employee Director Stock Option Plan.
We have examined the following corporate records and proceedings of the
Company in connection with the preparation of this opinion: its Certificate of
Incorporation as amended and restated to date; its By-laws as currently in force
and effect; its minute books, containing minutes and records of other
proceedings of its stockholders and its Board of Directors from January 1, 1996,
to the date hereof; the Registration Statement and the related exhibits thereto;
applicable provisions of laws of the State of New York; and such other documents
and matters as we have deemed necessary.
In rendering this opinion, we have made such examination of laws as we
have deemed relevant for the purposes hereof. As to various questions of fact
material to this opinion, we have relied upon representations and/or
certificates of officers of the Company, certificates and documents issued by
public officials and authorities, and information received from searches of
public records.
Based upon and in reliance on the foregoing, we are of the opinion that:
1. The Company is validly existing under the laws of the State of New
York as of June 17, 1998.
2. The Company has the authority to issue an aggregate of 500,000 shares
of Common Stock upon the effectiveness of the Registration Statement.
3. The shares of Common Stock to be sold by the Company upon the
effectiveness of the Registration Statement will, when sold and paid for as
described in the Registration Statement, be validly authorized, legally issued
and outstanding, and fully paid and non-assessable.
<PAGE> 3
Sel-Drum International, Inc.
June 26, 1998
Page 2
We hereby consent to being named in the Registration Statement as
attorneys who will, for the Company, pass upon the validity of the issuance of
shares of Common Stock offered thereby, and we hereby consent to the filing of
this opinion as an Exhibit to the Registration Statement.
Very truly yours,
/s/ Harter, Secrest & Emery LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF MENGEL, METZGER, BARR & CO. LLP
<PAGE> 2
[Letterhead of Mengel, Metzger, Barr & Co. LLP]
INDEPENDENT AUDITORS' CONSENT
Board of Directors
Sel-Drum International, Inc.
We consent to the incorporation by reference in this Registration Statement of
Sel-Drum International, Inc. on Form S-8 of our report dated September 19, 1997
appearing in the Annual Report on Form 10-KSB of Sel-Drum International, Inc.
for the year ended July 31, 1997.
/s/ Mengel, Metzger, Barr & Co. LLP
Rochester, New York
June 19, 1998
<PAGE> 1
EXHIBIT 99.1
SEL-DRUM INTERNATIONAL, INC. STOCK OPTION PLAN
<PAGE> 2
SEL-DRUM INTERNATIONAL, INC.
1995 EMPLOYEE AND NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
1. PURPOSES OF THE PLAN.
The Sel-Drum International, Inc. 1995 Employee and Non-Employee
Director Stock Option Plan (the "Plan"), effective November 24, 1995, is
designed to attract and retain key employees, directors or advisors of Sel-Drum
International, Inc., a New York corporation (the "Company"), and to encourage
them to contribute to the success of the Company by providing the opportunity
for stock ownership. The Company may grant under the Plan both Incentive Stock
Options and Nonstatutory Stock Options.
2. DEFINITIONS.
The capitalized words and phrases used in this Plan have the
following meaning unless the context clearly indicates otherwise:
a. "ACT" means the Securities Exchange Act of 1934, as amended.
b. "CODE" means the Internal Revenue Code of 1986, as amended.
c. "FAIR MARKET VALUE" means if at any time the shares of such
class are not listed on any securities exchange or quoted in the Nasdaq National
Market System or the Nasdaq System or the over-the-counter market, the Fair
Market Value of the shares of such class shall be determined by the Stock Option
Committee in its good faith judgment. If at any time the Company's Common Stock
shall be listed on any securities exchange, the Fair Market Value on a certain
date shall be the average of the closing prices of the sales of shares of such
class on all securities exchanges on which shares of such class may at the time
be listed or, if there have been no sales on any such exchange on any day, the
average of the highest bid and lowest asked prices on all such exchanges at the
end of such day or, if on any day the shares of such class are not so listed,
the average of the highest and lowest sale prices on such day reported by the
Nasdaq National Market System or, if there have been no sales on such system,
the average of the highest bid and lowest asked prices on such System at the end
of such day or, if on any day the shares of such class are not included on the
Nasdaq National Market System, the average of the representative bid and asked
prices quoted in the Nasdaq System as of 4:00 p.m. New York time or, if on any
day the shares of such class are not quoted in the Nasdaq System, the average of
the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the national Quotation Bureau,
Incorporated, or any similar successor organization, in each such class averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day.
d. "GRANT DATE" as used with respect to a particular Option means
the date on which the Option Agreement for such Option is executed on behalf of
the Company.
<PAGE> 3
e. "HOLDER" means the Optionee of an Option or other person
entitled to exercise the Option under the terms hereof.
f. "INCENTIVE STOCK OPTION" means an incentive stock option
within the meaning of Section 422 of the Code.
g. "NONSTATUTORY STOCK OPTION" means a stock option that does not
qualify for treatment as an Incentive Stock Option.
h. "OPTIONEE" means the individual to whom an Option is granted.
i. "OPTIONS" means both Incentive Stock Options and Nonstatutory
Stock Options, unless expressly provided to the contrary.
j. "OPTION AGREEMENT" means a written instrument evidencing an
Option granted under this Plan.
k. "OPTION PERIOD" means the period beginning on the Grant Date
and ending on the day prior to the tenth (10th) anniversary of the Grant Date or
such earlier ending date as may be set by the Stock Option Committee.
l. "OPTION PRICE" means the price for the purchase of shares of
Plan Stock under an Option Agreement.
m. "PLAN STOCK" shall mean the Company's Common Stock, $.01 par
value, or such other class of shares or securities as to which the provisions of
the Plan may be applicable pursuant to Section 8 of the Plan.
n. "STOCK OPTION COMMITTEE" means the Stock Option Committee
appointed by the Board of Directors of the Company to administer the Plan, which
shall consist of two or more non-employee directors of the Company.
o. "TEN PERCENT OWNER" means an individual who owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company or of its subsidiaries.
3. PLAN ADMINISTRATION.
The Stock Option Committee shall administer the Plan. Decisions
concerning the Plan shall be made solely by the Stock Option Committee.
Decisions of the Stock Option Committee concerning the interpretation and
construction of any provisions of the Plan or of any Option granted pursuant to
the Plan shall be final. The Company shall effect the grant of Options under the
Plan in accordance with the decisions of the Stock Option Committee, which may,
from time to time, adopt rules and regulations for carrying out the Plan.
Subject to the express provisions of the Plan, the Stock Option Committee shall
have the authority, in its discretion and without limitation: to determine the
individuals to receive Options,
<PAGE> 4
whether an Option is intended to be an Incentive Stock Option or a Nonstatutory
Stock Option, the times when such individuals shall receive such Options, the
number of shares of Plan Stock to be subject to each Option, the term of each
Option, the date when each Option shall become exercisable, whether an Option
shall be exercisable in whole or in part in installments, the number of shares
to be subject to each installment, the date each installment shall become
exercisable, the term of each installment and the Option Price of each Option;
to accelerate the date of exercise of any Option or installment thereof; and to
make all other determinations necessary or advisable for administering the Plan.
4. SHARES SUBJECT TO THE PLAN.
Subject to adjustments authorized by Section 15 hereof, no more
than 500,000 shares of Plan Stock (the "Reserved Shares") may be issued pursuant
to the Plan, which shares may, in the discretion of the Stock Option Committee,
consist either in whole or in part of authorized but unissued shares or shares
held in the treasury of the Company. The number of Reserved Shares available to
the Plan shall be reduced upon the grant of an Option by the number of shares
that may be purchased pursuant to such Option and shall be increased by the
number of shares not purchased under Options which have expired or have been
terminated or cancelled.
5. INCENTIVE STOCK OPTION ANNUAL LIMITATION.
The aggregate fair market value (determined as of the Grant Date)
of the shares with respect to which Incentive Stock Options are exercisable for
the first time by any individual during any calendar year (under the Plan and
all other incentive stock option plans of the Company) shall not exceed
$100,000.
6. ELIGIBILITY AND LIMITATIONS.
a. ELIGIBILITY. Participants in the Plan shall be selected by the
Stock Option Committee from among the employees, directors and advisors of the
Company. Directors or advisors who are not otherwise officers or employees of
the Company shall not be eligible to receive Incentive Stock Options under the
Plan, but shall be entitled to receive Nonstatutory Stock Options.
b. PARENT AND SUBSIDIARY. All references in this Plan to
employees, directors or advisors of the Company shall include employees,
directors or advisors of any parent or subsidiary of the Company, as those terms
are defined in Section 424 of the Code.
c. LIMITATION ON TEN PERCENT OWNERS. In the case of an Incentive
Stock Option granted to a Ten Percent Owner: (i) the Option Period shall be no
more than five (5) years, and (ii) the Option Price shall be no less than 110
percent (110%) of the Fair Market Value of the shares of Plan Stock subject to
the Incentive Stock Option determined as of the Grant Date.
<PAGE> 5
d. NO RIGHT OF EMPLOYMENT. Nothing in the Plan or in any Option
granted shall confer any right on an employee to continue in the employ of the
Company or shall interfere in any way with the right of the Company to terminate
such employee's employment at any time.
7. OPTION REQUIREMENTS.
a. WRITTEN OPTION. An Option shall be evidenced by an Option
Agreement specifying the number of shares of Plan Stock that may be purchased by
its exercise and whether it is an Incentive Stock Option or a Nonstatutory Stock
Option, and shall contain such terms and conditions consistent with the Plan as
the Stock Option Committee shall determine.
b. OPTION EXERCISABILITY. Each Option shall be exercisable only
during the Option Period and shall be exercisable at such times as may be
determined by the Stock Option Committee. Further, when an Option is granted to
any Optionee who is subject to the provisions of Section 16 of the Act on the
Grant Date, or who become subject to the provisions of such Section as a result
of the Option granted to him/her, such Option shall not be exercisable for at
least six (6) months after the grant thereof, except in the case of death or
disability.
c. DURATION OF OPTION. The Stock Option Committee shall determine
the Option Period consistent with the provisions of Section 7(b) hereof. The
Stock Option Committee and a Optionee may at any time by mutual agreement
terminate any Option granted to such Optionee under the Plan.
d. INCENTIVE STOCK OPTION PRICE. Subject to Section 7(b) hereof,
the Option Price of each share subject to an Incentive Stock Option shall be an
amount not less than the Fair Market Value of such share (determined as of the
Grant Date), determined by the Stock Option Committee in its sole discretion and
set forth in the Option Agreement.
e. TRANSFER OF OPTION. An Option shall not be transferable other
than by will or the laws of descent and distribution. During the Optionee's
lifetime, an Option shall be exercisable only by the Optionee or by his guardian
or legal representative. The Stock Option Committee shall permit the transfer of
the Option, on Optionee's death, to the Optionee's estate and shall permit the
exercise of the Options, during the Optionee's lifetime, by Optionee's guardian
or legal representative.
f. TERMINATION OF EMPLOYMENT. If the Optionee ceases to be
employed by either the Company or by a subsidiary for any reason other than
death or disability, any Option that is not exercisable on the date employment
ceases shall expire immediately. The Option Period for any Option that is
exercisable on such date shall terminate on the date that is three (3) months
after such date, or on the otherwise applicable termination date set forth in
the Option Agreement, whichever is sooner. For purposes of this subsection, an
employment relationship will be treated as continuing during the period when a
Optionee is on military duty, sick leave or other bona fide leave of absence if
the period of such leave
<PAGE> 6
does not exceed ninety (90) days, or, if longer, so long as a statute or
contract guarantees the Optionee's right to re-employment with the Company. When
the period of leave exceeds ninety (90) days and the individual's right to
re-employment is not guaranteed either by statute or by contract, the employment
relationship will be deemed to have terminated on the ninety-first (91st) day of
such leave.
g. DEATH. In the case of death of the Optionee while he is an
employee of the Company, any Option that is not exercisable on the date of death
shall expire immediately. The Option Period for any Option that is exercisable
on the date of death shall terminate on the date that is twelve (12) months
after the date of death, or on the otherwise applicable termination date set
forth in the Option Agreement, whichever is sooner. In the event that a Optionee
shall die within three (3) months after the termination of his employment and
prior to the complete exercise of Options granted to him under the Plan, any
such remaining Options may be exercised in whole or in part within twelve (12)
months after the date of the Optionee's death but only: (i) by the Optionee's
estate or by or on behalf of such person or persons to whom the Optionee's
rights pass under his Will or the laws of descent and distribution, (ii) to the
extent that the Optionee was entitled to exercise the Option at the date his
employment ceased, and (iii) prior to the expiration of the term of the Option.
h. DISABILITY. In the case of termination of employment of the
Optionee due to total and permanent disability (within the meaning of Section
22(e)(3) of the Code, as in effect on the date of adoption of this Plan), any
Option that is not exercisable on the date of such termination shall expire
immediately. The Option Period for any Option that is exercisable on the date of
such termination shall terminate on the date that is twelve (12) months after
the date of such termination, or on the otherwise applicable termination date
set forth in the Option Agreement, whichever is sooner.
i. NOTICE AND MANNER OF EXERCISE. A person electing to exercise
an Option, whether in whole or in part, shall give written notice, in such form
as the Stock Option Committee may require, of such election to the Secretary of
the Company and shall tender to the Company, along with such notice, the full
purchase price for the shares of Plan Stock for which the election is made.
Payment of the purchase price may be in cash, a certified check or a bank check
payable to the order of the Company. Alternatively, a Optionee may pay for the
shares, in whole or in part, by the delivery of shares of the Company already
owned by him which will be accepted in exchange at their value on the date of
exercise. Certificates representing the shares purchased by the Optionee shall
be issued as soon as practicable after the Optionee has complied with the
provisions hereof.
j. COMPANY'S RIGHT TO REDEEM OPTIONS. Every vested Option granted
under this Plan shall be redeemable by the Company at any time. The purchase
price for any Option redeemed by the Company shall be the Fair Market Value of
the stock underlying such Option, less the exercise price of such Option. The
purchase price, less any amount of federal or state taxes attributable to the
redemption that the Company deems it necessary or advisable to pay or withhold,
shall be paid in cash or promissory notes.
<PAGE> 7
k. ADDITIONAL REQUIREMENTS. Each grant of an Option under the
Plan, and each issuance of shares of Plan Stock upon exercise of an Option,
shall be conditioned upon the Company's prior receipt of a duly executed letter
of investment intent, in form and content satisfactory to counsel for the
Company, of the Optionee (or the Holder of the Option) that such Option and such
shares are being acquired by such person solely for investment and not with a
view to, or for sale in connection with, any distribution thereof, not with any
present intention of selling, transferring or disposing of the same. Any shares
of Plan Stock acquired by the Optionee or the Holder of an Option upon exercise
of the Option may not thereafter be offered for sale, sold or otherwise
transferred unless (i) a Registration Statement with respect thereto shall be
effective under the Securities Act of 1933, as amended (the "'33 Act"), and the
Company shall have been furnished with proof satisfactory to it that such
Optionee or Holder has complied with applicable state securities laws, or (ii)
the Company shall have received an opinion of counsel in form and substance
satisfactory to counsel for the Company that the proposed offer for sale, sale
or transfer is exempt from the registration requirements of the '33 Act and may
otherwise be transferred in compliance with the '33 Act and in compliance with
any other applicable law, including all applicable state securities laws; and
the Company may withhold transfer, registration and delivery of such securities
until one of the foregoing conditions shall have been met.
8. ANTI-DILUTION PROVISIONS.
The aggregate number and kind of shares of Plan Stock available
for Options under the Plan, the number and kind of shares subject to any
outstanding Option and the Option Price of each outstanding Option, shall be
proportionately adjusted by the Stock Option Committee for any increase,
decrease or change in the total outstanding shares of the Company resulting from
a stock dividend, recapitalization, reclassification, merger, consolidation,
split-up, combination, exchange of shares or similar transaction (but not by
reason of the issuance or purchase of shares by the Company in consideration for
money, services or property).
9. TAXES; COMPLIANCE WITH LAW; APPROVAL OF REGULATORY BODIES; STOCK
LEGENDS.
The Company, if necessary or desirable, may pay or withhold the
amount of any tax attributable to any shares of Plan Stock deliverable under
this Plan, and the Company may defer making delivery until it is indemnified to
its satisfaction for that tax. Options are exercisable, and shares can be
delivered under this Plan, only in compliance with all applicable federal and
state laws and regulations, including without limitation state and federal
securities laws, and the rules of all stock exchanges on which the Company's
stock is listed at any time. Any certificate issued to evidence Options or to
evidence shares issued under the Plan shall bear such legends and statements as
the Stock Option Committee deems advisable to assure compliance with all federal
and state laws and regulations. Options may not be exercised and shares may not
be issued under this Plan until the Company has obtained the consent or approval
of every regulatory body, federal or state, having jurisdiction over such
matters as the Stock Option Committee deems advisable. Each person or estate
that acquired the right to exercise an Option by bequest or inheritance may be
<PAGE> 8
required by the Stock Option Committee to furnish reasonable evidence of
ownership of the Option as a condition to the exercise of the Option. In
addition, the Stock Option Committee may require such consents and releases of
taxing authorities as the Stock Option Committee deems advisable.
10. RIGHTS OF SHAREHOLDERS.
A Optionee or a Holder shall have no rights as a shareholder with
respect to the Plan Stock purchased by him pursuant to the exercise of an Option
until the date of the issuance to him of a certificate of stock representing
such shares. No adjustment shall be made for dividends or for distributions of
any other kind with respect to Plan Stock for which the record date is prior to
the date of the issuance to the Optionee or Holder of a certificate for the
shares. Furthermore, the existence of the Options shall not affect the right or
power of the Company or its shareholders to make adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business; issue bonds, debentures, preferred or prior preference stocks
affecting the Plan Stock of the Company or the rights thereof; dissolve the
Company, or sell or transfer any part of its assets or business, or do any other
corporate act, whether of a similar character or otherwise.
11. RESERVATION OF SHARES.
The Company shall be under no obligation to reserve shares of
capital stock to fill Options. The grant of Options to employees hereunder shall
not be construed to constitute the establishment of a trust of such shares and
no particular shares shall be identified as optioned and reserved for employees
hereunder. The Company shall be deemed to have complied with the terms of the
Plan if, at the time of issuance and delivery pursuant to the exercise of an
Option, it has a sufficient number of shares authorized and unissued or in its
treasury which may then be appropriated and issued for purposes of the Plan,
irrespective of the date when such shares were authorized.
12. LIABILITY OF COMPANY.
The Company or any subsidiary which is in existence or hereafter
comes into existence, shall not be liable to a Optionee or a Holder as to:
a. NON-ISSUANCE OF SHARES. The non-issuance or sale of shares of
Plan Stock as to which the Company has been unable to obtain from any regulatory
body having jurisdiction the authority deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any shares hereunder.
b. TAX CONSEQUENCES. Any tax consequences expected but not
realized by any Optionee or Holder due to the exercise of any Option granted
hereunder.
<PAGE> 9
13. CHOICE OF LAW.
The validity, interpretation and administration of the Plan and
of any rules, regulations, determinations or decisions made thereunder, and the
rights of any and all persons having or claiming to have any interest therein or
thereunder, shall be determined exclusively in accordance with the laws of the
State of New York. Without limiting the generality of the foregoing, the period
within which any action in connection with the Plan must be commenced shall be
governed by the laws of the State of New York without regard to the place where
the act or omission complained of took place, the residence of any party to such
action or the place where the action may be brought.
14. AMENDMENT AND TERMINATION OF PLAN.
a. The Board of Directors of the Company may alter, amend, or
terminate this Plan from time to time without approval of the shareholders,
provided, however, that without the approval of the shareholders no amendment
will be effective that:
(i) materially increases the benefits accruing to
participants under the Plan;
(ii) materially increases (other than by operation
of the provisions of Section 8 hereof) the number of shares which may be issued
under the Plan;
(iii) materially modifies the eligibility
requirements for participation in the Plan;
(iv) amends the requirements of subparagraphs (i)
through (iii) of this Section.
Any amendment, whether with or without the approval of the shareholders, that
alters the terms or provisions of an Option granted before the amendment (unless
the alteration is expressly permitted under this Plan or under the terms of the
Option Agreement) will be effective only with the consent of the Optionee or of
the Holder entitled to exercise the Option.
b. Upon the dissolution of the Company, the Plan shall terminate,
and all Options previously granted shall lapse on the date of such termination.
15. ADJUSTMENTS UPON CHANGES IN SHARES.
a. If any change is made in the shares subject to the Plan, or
subject to any Option granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or otherwise), the Plan and outstanding
Options will be appropriately adjusted in the class(es)
<PAGE> 10
and maximum number of shares subject to the Plan and the class(es) and number of
shares and price per share of stock subject to outstanding Options.
b. In the event of (i) a merger or consolidation in which the
Company is not the surviving corporation; (ii) a reverse merger in which the
Company is the surviving corporation but the shares of the Company's common
stock outstanding immediately preceding the merger are converted by virtue of
the merger into other property, whether in the form of securities, cash or
otherwise; or (iii) any other capital reorganization in which more than fifty
percent (50%) of the shares of the Company entitled to vote are exchanged, then
at the sole discretion of the Board and to the extent permitted by applicable
law, any surviving corporation may, in its absolute discretion, assume or
continue any Options outstanding under the Plan, or substitute similar options.
In the event any surviving corporation refuses to assume or continue such
Options, or to substitute similar options for those outstanding under the Plan,
then, with respect to Options held by persons then performing services as
employees of the Company, said Optionee, to the extent the Options are then
exercisable, may exercise said Options for a period of thirty (30) days after
notice is given by the Company and, furthermore the Board, in its sole
discretion, may accelerate the exercise dates set forth in any Option. This
right of exercise shall be conditioned upon the execution of a definitive
agreement or merger, consolidation or reorganization.
c. In the event of an offer by any person or entity to purchase
shares of stock of the Company holding fifty percent (50%) or more of the voting
power of the Company, any Optionee (as defined in this paragraph) shall have the
right upon commencement of such offer, to exercise Options held by such
Optionee, to the extent such Options are exercisable, provided that the Board in
its sole discretion, may accelerate the exercise dates set forth in any Option
held by such Optionee. Any such exercise or acceleration shall be subject to the
execution of a definitive stock purchase agreement.
16. DURATION OF THE PLAN.
The Plan shall terminate upon dissolution of the Company or upon
an amendment to terminate the Plan as provided in Section 14 hereof. If not
previously terminated, the Plan shall terminate on November 23, 2005.
Termination of the Plan other than upon dissolution of the Company shall not
affect the rights of any Optionee or other Holder of an Option except to the
extent specifically provided in the Option Agreement.
17. EFFECTIVE DATE OF THE PLAN.
The Plan is effective as of November 24, 1995.
18. APPLICATION OF PROCEEDS.
The proceeds of the sale of shares of Plan Stock by the Company
under the Plan will constitute general funds of the Company and may be used for
any purpose.
