<PAGE> 1
As filed with the Securities and Exchange Commission on August 2, 1996,
Registration No. _______
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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KAYE KOTTS ASSOCIATES INC.
(Exact name of registrant as specified in its charter)
DELAWARE 95-4248310
(State or of incorporation (I.R.S. Employer Identification No.)
or organization)
KAYE KOTTS ASSOCIATES INC.
15490 VENTURA BOULEVARD
SHERMAN OAKS, CALIFORNIA 91403
(Address of principal executive offices, zip code)
Kaye Kotts Associates Inc. 1995 Stock Incentive Plan
Kaye Kotts Associates Inc. Directors Stock Option Plan
(Full title of Plan)
David Kaye
15490 Ventura Boulevard
Sherman Oaks, California 91403
(818) 382-6300
(Name, address and telephone number, including area code, for agent for
service.)
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Copies to:
Ronald Warner, Esq.
Thelen, Marrin, Johnson & Bridges
333 South Grand Avenue
Suite 3400
Los Angeles, California 90071
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CALCULATION OF REGISTRATION FEE
<TABLE>
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PROPOSED PROPOSED
TITLE OF MAXIMUM MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED(2) PER SHARE(3) OFFERING PRICE(3) REGISTRATION FEE(3)
<S> <C> <C> <C> <C>
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Common Stock, par
value $.01 per 716,000 $4.00 $2,864,000 $987.59
share(1)
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</TABLE>
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(1) Common Stock underlying stock options available for grant
under the Kaye Kotts Associates Inc. 1995 Stock Incentive Plan
and the Kaye Kotts Associates Inc. Directors Stock Option Plan
(the "Options").
(2) Pursuant to Rule 416 promulgated under the Securities Act of
1933, as amended (the "Act"), an additional indeterminable
number of shares of Common Stock is being registered to cover
any adjustments in the number of shares of Common Stock
pursuant to the anti-dilution provisions of the Options, if
any.
(3) Estimated solely for the purpose of calculating the
registration fee, and based on the average of the high and low
prices of the Common Stock on the NASDAQ Small Cap on July 30,
1996 in accordance with Rules 457(c) and 457(h) promulgated
under the Act.
PART I INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
ITEM 1. PLAN INFORMATION
Information required by Part I (Item 1) is omitted in accordance with
the Note to Part I of Form S-8.
ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
The written statement required by Part I (Item 2) is included in
documents sent or given to participants in Kaye Kotts Associates Inc. 1995
Stock Incentive Plan and Kaye Kotts Associates Inc. Directors Stock Incentive
Plan pursuant to Rule 428(b)(1).
PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3: INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents, which are filed with the Securities and
Exchange Commission (the "Commission"), are incorporated into this Registration
Statement by reference:
(a) Registrant's Prospectus, dated February 22, 1996, included as part
of Registrant's Registration Statement on Form SB-2 (Registration No. 33-97470)
and filed pursuant to Rule 424(b) of the Act on February 26, 1996.
(b) Registrant's Special Financial Report for the year ended December
31, 1995, dated May 13, 1996, filed pursuant to Rule 15d-2 of the Act.
(c) Registrant's Quarterly Report on Form 10-QSB for the period ended
March 31, 1996.
(d) Registrant hereby incorporates by reference the information under
the caption "Item 1 Description of Registrant's Securities to be Registered"
contained in Registrant's Form 8-A, dated
<PAGE> 3
April 11, 1996, filed pursuant to Section 13(a) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") on April 17, 1996.
(e) All documents subsequently filed by Registrant pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, 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 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
The Delaware Corporation Law and the Company's Certificate of
Incorporation authorize indemnification of a director, officer, employee or
agent of the Company against expenses incurred by him in connection with any
action, suit or proceeding to which he is named a party by reason of his having
acted or served in such capacity, except for liabilities arising from his own
misconduct or negligence in the performance of his duties. In addition, even a
director, officer, employee or agent of the Company who was found liable for
misconduct or negligence in the performance of his duties may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification.
ITEM 7: EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8: EXHIBITS
The following is a complete list of exhibits filed as a part of, or
incorporated by reference in, this Registration Statement.
EXHIBIT NO. DOCUMENT
4.1 Certificate of Incorporation of Registrant,
as amended (1)
4.2 By-Laws of Registrant (1)
4.3 Kaye Kotts Associates Inc. 1995 Stock
Incentive Plan, as amended (2)
<PAGE> 4
4.4 Kaye Kotts Associates Inc. Director's Stock
Option Plan, as amended (2)
4.5 Specimen Certificate for Shares of Common
Stock (1)
5 Opinion of Thelen, Marrin, Johnson & Bridges (2)
23 Consent of Thelen, Marrin, Johnson & Bridges
(included in Exhibit 5)(2)
24 Power of Attorney (included on signatures
page of this registration statement)
___________________
(1) Incorporated by reference to Exhibits 3.1, 3.2 and 4.4
respectively, to Registrant's Registration Statement on From
SB-2 (Reg No. 33-97470).
(2) Filed herewith
ITEM 9: UNDERTAKINGS
The Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this registration
statement to:
(a) Include any additional or changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of
the securities offered, and the offering of securities at that
time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the
offering.
Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Company
pursuant to any Certificate provision, by-law provision statute, or otherwise,
the Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company will, unless in the opinion of its counsel the matter
has been settled by controlling procedure, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
<PAGE> 5
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 City of Sherman Oaks, State of California, on July 31,
1996.
KAYE KOTTS ASSOCIATES, INC.
By /s/ David Kaye
------------------------------------------
David Kaye, Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below appoint David Kaye
his or her agent and attorney-in-fact, with full power of substitution to
execute for him or her and in his or her name, in any and all capacities, all
amendments (including post-effective amendments) to this Registration Statement
on Form S-8 to which this Power Of Attorney is attached.
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 date indicated.
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Signature Title Date
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<S> <C> <C>
Chairman of the Board of
Directors, Chief Executive
/s/ David Kaye . Officer, President, Treasurer July 31, 1996
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David Kaye
Vice President - Sales
_______________________________ Director July __, 1996
Michael M. Kesner
Secretary
/s/ Susan E. Phillips . Director July 31, 1996
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Susan E. Phillips
_______________________________ Director July __, 1996
Robert M. Rubin
/s/ Lawrence Cohen . Director July 31, 1996
- --------------------------------------------
Lawrence Cohen
/s/ Arnold Levitt . Chief Financial Officer July 31, 1996
- --------------------------------------------
Arnold Levitt
</TABLE>
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Exhibit Page
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4.3 Kaye Kotts Associates Inc. 1995 Stock Incentive
Plan, as amended
4.4 Kaye Kotts Associates Inc. Director's Stock Option
Plan, as amended
5 Opinion of Thelen, Marrin, Johnson & Bridges
<PAGE> 1
KAYE KOTTS ASSOCIATES INC.
1995 STOCK INCENTIVE PLAN
1. PURPOSE.
(a) The purpose of this 1995 Stock Incentive Plan (the
"Plan") is to further the growth and development of Kaye Kotts Associates,
Inc., a Delaware corporation (the "Company"), by encouraging employees,
consultants and advisors to obtain a proprietary interest in the Company by
owning its stock. The Company intends that the Plan will provide such persons
with an added incentive to continue in the employ and service of the Company
and its subsidiaries and will stimulate their efforts in promoting the growth,
efficiency and profitability of the Company. The Company also intends that the
Plan will afford the Company and its subsidiaries a means of attracting to its
service persons of outstanding quality.
(b) It is further intended that part of the Plan qualify
as an incentive stock option plan, and that any option granted in accordance
with such portion of the Plan qualify as an incentive stock option ("ISO"), all
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"). The tax effects of any other stock option (a "Non-ISO")
granted hereunder should be determined under Section 83 of the Code. Unless
otherwise specified, the term "Options" shall refer to both ISO's and
Non-ISO's, and to any Reload Options (as described in Section 5(i) hereof)
granted in connection therewith.
2. ADMINISTRATION.
(a) The Plan shall be administered and interpreted by the
committee appointed by the Company's Board of Directors (the "Committee").
Subject to the provisions of the Plan, the Committee shall have the authority
and sole discretion to determine and designate, from time to time, those
persons eligible for a grant of options under the Plan, those persons to whom
Options are to be granted, the purchase price (if any) of the shares covered by
any Options granted, the time or times at which Options shall be granted, the
manner in and conditions under which Options are exercisable (including,
without limitation, any limitations or restrictions thereon). In making such
determinations, the Committee may take into account the nature of the services
rendered by the respective persons to whom Options may be granted, their
present and potential contributions to the Company's success and such other
factors as the Committee, in its sole discretion, shall deem relevant. Subject
to the express provisions of the Plan, the Committee also shall have authority
to interpret the Plan, to prescribe, amend and rescind rules and regulations
relating to it, to determine the terms and provisions of the instruments by
which Options shall be evidenced (which shall not be inconsistent with the
terms of the Plan), and to make all other determinations necessary or advisable
for the administration of the Plan, all of which determinations shall be final,
binding and conclusive.
(b) The Board of Directors, in accordance with the
applicable provisions of the Company's By-Laws, shall appoint the Committee
from among its members to serve at the pleasure of the Board. The Board from
time to time may remove members from, or add members to, the Committee and
shall fill all vacancies thereon. The Committee at all times shall be composed
of two or more directors; provided, the following requirements shall apply:
(i) During the period any director is serving on
the Committee and during the 1-year period immediately preceding the
commencement of such service, he or she shall
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<PAGE> 2
not be or have been granted or awarded any Option or other equity
securities of the Company under the Plan (or any other discretionary
stock plan of the Company or any Company affiliate as defined by Rule
144(a)(1) of the Securities Act of 1933). Notwithstanding the
foregoing, a member of the Committee may participate during such
period in (A) a formula plan, (B) an ongoing securities acquisition
program with broad-based employee participation, and/or (C) a program
to elect to receive all or part of his annual retainer in equity
securities of the Company, all as defined and limited by Rule 16b-3
issued under Section 16 of the Securities and Exchange Act of 1934, as
amended ("Rule 16b-3").
(ii) The requirements of this subsection (b) are
intended to comply with the "disinterested administration rule" of
Rule 16-3 or any successor rule or regulation, and shall be
interpreted and construed in a manner which assures compliance with
said Rule. To the extent Rule 16b-3 is modified to reduce or increase
the restrictions on who may serve on the Committee, the Plan shall be
deemed modified in a similar manner.
(c) The Committee may select one of its members as its
chairman and shall hold its meetings at such times and at such places as it
shall deem advisable. A majority of the Committee shall constitute a quorum,
and such majority shall determine its actions. The Committee shall keep
minutes of its proceedings and shall report the same to the Board of Directors
at the meeting next succeeding.
(d) In addition to such other rights of indemnification
as they have as directors or as members of the Committee, the members of the
Committee shall be indemnified by the Company against reasonable expenses
(including, without limitation, attorneys' fees) actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or
in connection with the Plan or any options granted hereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is
approved to the extent required by and in the manner provided by the By-Laws of
the Company relating to indemnification of directors) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding, except in
relation to matters as to which it shall be adjudged in such action, suit or
proceeding that such Committee member or members did not act in good faith and
in a manner he, she or they reasonably believed to be in or not opposed to the
best interest of the Company.
3. STOCK.
The stock subject to the Options and other provisions of the
Plan shall be authorized but unissued or reacquired shares of the $.01 par
value common stock of the Company (the "Common Stock"). Subject to
readjustment in accordance with the provisions of Section 6, the total number
of shares of the Common Stock for which Options may be granted to persons
participating in the Plan shall not exceed in the aggregate 666,000 shares of
Common Stock, and the number of shares with respect to which options may be
granted during any calendar year to any employee shall not exceed 100,000.
Notwithstanding the foregoing, shares of Common Stock allocable to the
unexercised portion of any expired or terminated option again may become
subject to Options under the Plan.
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<PAGE> 3
4. ELIGIBILITY TO RECEIVE OPTIONS; TYPE OF OPTIONS.
(a) The persons eligible to receive options hereunder
shall be key employees, directors, consultants and advisors of the Company and
its subsidiary corporations (within the meaning of Section 424(f) of the Code;
"Subsidiaries") ; provided, (i) ISO's may be granted only to employees
(including officers, whether or not they also are directors, but excluding
directors, consultants and advisors who are not otherwise employees of the
Company or its Subsidiaries); and (ii) no director, (A) who is not an employee
of the Company or its Subsidiaries or (B) who is then currently serving on the
Committee, shall be eligible to receive any options. The Committee from time
to time may select such persons (from that group specified above) to whom
options are to be offered and granted hereunder; such selected persons
hereinafter are referred to individually as "Key Person" and collectively as
"Key Persons", and any Key Persons to whom Options are offered and granted
hereunder hereinafter are referred to individually as "Optionee" and
collectively as "Optionees".
(b) The Committee may grant, at any time, new Options to
a Key Person who previously has received options, whether such options include
prior Options that still are outstanding, previously have been exercised in
whole or in part, have expired or are canceled in connection with the issuance
of new options. The purchase price of any new options may be established by
the Committee without regard to any existing option Price (as described below).
5. TERMS AND CONDITIONS OF OPTIONS.
Options may be granted to Optionees from time to time and at
such times as may be authorized by the Committee. Subject to the provisions
hereinafter set forth, each Option granted under the Plan shall be designated
either as an ISO or a Non-ISO. In its authorization of the granting of an
Option hereunder, the Committee shall specify the name of the Optionee, the
number of shares of stock subject to such Option and whether such Option is an
ISO or a Non-ISO. The Committee then shall prepare a written agreement,
executed and dated by the Company, evidencing such Option (the "Option
Agreement") and setting forth the terms and conditions of such option;
provided, an Option Agreement evidencing both an ISO and a Non-ISO shall
identify clearly the status and terms of each Option. The Committee shall
present such Option Agreement to the Optionee. Upon execution of such Option
Agreement by the Optionee, such option shall be deemed to have been granted
effective as of the date of grant specified in subsection (c) (i) hereof. The
failure of the Optionee to execute the Option Agreement within 30 days after
the date of the receipt of same shall render the Option Agreement and the
underlying option null and void ab initio. Option Agreements and the options
granted thereby shall comply with and be subject to the following terms and
conditions:
(a) Optionee and Number of Shares. Each Option Agreement
shall state the name of the optionee and the total number of shares of the
Common Stock to which it pertains.
(b) Employment/Service. Each Optionee shall agree to
remain in the employ or service, as applicable, of the Company or a Subsidiary
for such period and pursuant to such terms, as the Committee may require in the
Option Agreement; provided, such Agreement shall not impose upon the Company or
a Subsidiary any obligation to retain the Optionee in its employ or service, as
applicable, for any period.
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<PAGE> 4
(c) Option Price.
(i) The purchase price of the shares of Common
Stock underlying each Option (the "Option Price") shall be determined
by the Committee, which determination shall be final, binding and
conclusive; provided, in no event shall the option Price of any ISO be
less than 100 percent (110 percent in the case of ISO's of optionees
who own more than 10 percent of the voting power of all classes of
stock of the Company, a parent corporation (within the meaning of
Section 424(e) of the Code) of the Company (a "Parent"), or a
Subsidiary) of the fair market value of the Common Stock on the date
the option is granted. Upon execution of an option Agreement by both
the Company and optionee, the date as of which the Committee granted
the Option shall be considered the date on which such Option is
granted; provided, any option granted (pursuant to an executed Option
Agreement) to a prospective employee, director, consultant or advisor
of the Company or a Subsidiary prior to the commencement of his or her
employment or service shall be deemed to be granted on, and shall
become effective on, the first day of employment or service.
Notwithstanding the foregoing, for purposes of calculating the holding
period described in Sections 5(h) and (l), the effective date of the
grant of any Option granted prior to the approval of the Plan by the
stockholders of the Company in accordance with Section 9 of the Plan
shall be the date of such approval.
(ii) If the Common Stock subject to the Plan is
registered on a national securities exchange (as such term is defined
by the Securities Exchange Act of 1934) or is regularly traded in the
over-the-counter market on the date of determination, the fair market
value per share shall be the closing price of a share of the Common
Stock on said national securities exchange or over-the-counter market
on the date of grant of the Option. If shares are publicly traded on
a national securities exchange or the over-the-counter market but no
shares of the Stock are traded on that date (or if records of such
sales are unavailable or burdensome to obtain) but there were shares
traded on dates within a reasonable period both before and after such
date, the fair market value shall be the average of the closing prices
of the Common Stock on the nearest date before and the nearest date
after the date of determination. If the Common Stock is traded both
on a national securities exchange, and in the over-the-counter market,
the closing price shall be determined by the closing price on the
national securities exchange, unless transactions on such exchange and
in the over-the-counter market are jointly reported on a consolidated
reporting system in which case the closing price shall be determined
by reference to such consolidated reporting system. If the Common
Stock is not listed for trading on a national securities exchange and
is not regularly traded in the over-the-counter market, then the
Committee shall determine the fair market value of the Common Stock
from all relevant available facts which may include opinions of
independent experts as to value and may take into account any recent
sales and purchases of such Common Stock to the extent they are
representative.
(d) Term and Options. The terms of options granted under
the Plan shall commence on the date of grant and shall expire on such date as
the Committee may determine for each Option; provided, in no event shall any
Option be exercisable after 10 years (5 years in the case of ISO's granted to
Optionees who own more than 10 percent of the voting power of all classes of
the Company's Common Stock or the stock of a Parent or Subsidiary) from the
date the option is granted. Any Reload Option granted pursuant to Section 5(i)
hereof shall expire as of the date of expiration of the original option with
respect to which such Reload Option is granted. No option
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<PAGE> 5
shall be granted hereunder after 10 years from the earlier of the date the Plan
is approved by the stockholders or is adopted by the Board of Directors.
(e) ISO's Converted to Non-ISO's. In the event any part
or all of an ISO granted under the Plan at any time fails to satisfy all of the
requirements of an incentive stock option, then such ISO shall be split into an
ISO and Non-ISO so that the portion of the option, if any, that still qualifies
as an incentive stock option shall remain an ISO, and the portion that does not
qualify as an incentive stock option shall become a Non-ISO. Such split of an
ISO into an ISO portion and a Non-ISO portion shall be evidenced by one or more
Option Agreements, as long as each option is identified clearly as to its status
as an ISO or Non-ISO.
(f) Terms of Exercise. Subject to the terms of this
Section and Section 4, the Committee may specify the terms pursuant to which
each option may be exercised. Each Option shall become exercisable in such
installments (which need not be equal and which may or may not correspond to a
vesting schedule specified by the Committee) and at such times as designated by
the Committee; provided, notwithstanding anything herein to the contrary, no
option, or portion thereof, may be exercised until the expiration of the
holding period described in subsection (1) hereof. The exercise of an option
may be for less than the full number of shares of Common Stock subject to such
option, but, unless the option Agreement permits a smaller percentage, such
exercise shall not be made for less than the greater of 10-percent of the
number of shares of Common Stock initially subject to such Option or 200
shares. Subject to the other restrictions on exercise set forth herein, the
unexercised portion of an option may be exercised at a later date by the
Optionee; provided, the 10-percent/200 share requirement set forth above shall
not apply to any exercise of an option if all remaining shares of Common Stock
subject to such option are exercised.
(g) Method of Exercise. All Options granted hereunder
shall be exercised by written notice directed to the Secretary of the Company
at its principal place of business or to such other person as the Committee may
direct. Each notice of exercise shall identify the option which the Optionee
is exercising (in whole or in part) and shall be accompanied by payment of the
Option Price for the number of shares specified in such notice and by any
documents required by Section 7(a). The Company shall make delivery of such
shares within a reasonable period of time; provided, if any law or regulation
requires the Company to take any action (including, but not limited to, the
filing of a registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), and causing such registration statement to become effective)
with respect to the shares specified in such notice before the issuance
thereof, then the date of delivery of such shares shall be extended for the
period necessary to take such action.
(h) Medium and Time of Payment.
(i) The Option Price shall be payable upon the
exercise of the Option in an amount equal to the number of shares then
being purchased times the per share Option Price. Payment, at the
election of the Optionee [or his or her successors as provided in
Section 5(j) (iii)], shall be (A) in cash; (B) by delivery to the
Company of a certificate or certificates for shares of the Common
Stock duly endorsed for transfer to the Company with signature
guaranteed by a member firm of a national stock exchange or by a
national or state bank (or guaranteed or notarized in such other
manner as the Committee may require); or (C) by a combination of (A)
and (B).
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<PAGE> 6
(ii) If all or part of the Option Price is paid by
delivery of shares of the Common Stock, the following conditions shall
apply:
(A) Such shares be valued on the basis
of the fair market value of the Common Stock on the date of
exercise. Fair market value shall be determined in the manner
provided in Section 5(c)(ii) (dealing with determining Option
Price);
(B) On the date of such payment, the
Optionee must have held such shares for at least 6 months from
(I) the date of acquisition, in the case of shares acquired
other than through an exercise or award of options, or (II)
the date of grant or award (as described in Section 5(c)(i)
hereof) of the underlying Options, if such shares were
acquired in connection with the exercise or award of options
(or similar rights); and
(C) The value of such Common Stock shall
be less than or equal to the total Option Price payment. If
the optionee delivers Common Stock with a value that is less
than the total Option Price, then such Optionee shall pay the
balance of the total option Price in cash.
(iii) In addition to the payment of the purchase
price of the shares then being purchased, an Optionee also shall pay
in cash (or have withheld from his or her normal pay) an amount equal
to the amount, if any, which the Company at the time of exercise is
required to withhold under the income tax laws of the state of the
optionee's residence.
(i) Reload Options. At the time of granting any ISO or
Non-ISO hereunder, the Committee shall designate in its discretion, whether
such ISO or Non-ISO shall be accompanied by a "Reload Option." A "Reload
Option" shall be an Option that is granted (i) to an Optionee who pays for
exercise of all or part of such ISO or Non-ISO with shares of the Common Stock
pursuant to Section 5(h) hereof, (ii) for the same number of shares as is
exchanged in payment for the exercise of such ISO or Non-ISO; (iii) as of the
date of such payment, and (iv) subject to all of the same terms and conditions
as such ISO or Non-ISO; provided, the Option Price for shares subject to the
Reload Option shall be determined pursuant to Section 5(c) hereof on the basis
of the fair market value of such shares on the date the Reload Option is
granted. In addition, the committee, in its discretion, may grant one or more
successive Reload Options to an Optionee who pays for exercise of a Reload
option with shares of the Common Stock. In no event shall the term of any
Reload Option extend beyond the original term of the ISO or Non-ISO with
respect to which such Reload Option was granted.
(j) Effect of Termination of Employment/Service or Death.
Except as provided in parts (i), (ii) and (iii) of this subsection, no ISO
shall be exercisable unless the Optionee thereof shall have been an employee of
the Company and/or a Subsidiary from the date of the granting of the Option
until the date of exercise, and no Non-ISO shall be exercisable unless the
Optionee thereof shall have been an employee, director, consultant or advisor
(as applicable) of the Company and/or a Subsidiary from the date of the
granting of the Option until the date of exercise; provided, the Committee, in
its sole discretion, may waive the application of this Section 5(j) with
respect to any Non-ISO's granted hereunder and, instead, may provide a
different expiration date or dates in a Non-ISO Option Agreement.
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<PAGE> 7
(i) In the event an optionee ceases to be an
employee (or, in the case of an option granted to a consultant or
advisor, ceases to be a consultant or advisor) of the Company and its
Subsidiaries for any reason other than death or disability, any Option
or unexercised portion thereof granted to him or her shall terminate
on and shall not be exercisable after the earliest to occur of (a) the
expiration date of the option, (b) 3 months after termination of
employment (or service, as applicable), or (c) the Company gives
notice to such optionee of termination of employment if employment (or
service, as applicable) is terminated by the Company because of an act
or acts by an optionee involving fraud, dishonesty, theft,
embezzlement or the like (an Optionee's resignation in anticipation of
termination of employment (or service, as applicable) by the Company
because of an act or acts of the type listed in this sentence
("cause") shall constitute a notice of termination by the Company);
provided, the Committee may provide in the option Agreement that such
Option or any unexercised portion thereof shall terminate sooner.
Prior to the earlier of the dates specified in the first sentence of
this Section (5)(j)(i), the option shall be exercisable only in
accordance with its terms and only for the number of shares
exercisable on the date of termination of employment (or service, as
applicable). The question of whether an authorized leave of absence or
absence for military or government service or for any other reason
shall constitute a termination of employment (or service, as
applicable) for purposes of the Plan shall be determined by the
Committee, which determination shall be final and conclusive.
(ii) Upon the termination of an Optionee's
employment (or service, as applicable) due to disability, as
determined by the Committee in its sole discretion, any option or
unexercised portion thereof granted to him or her which is otherwise
exercisable shall terminate on and shall not be exercisable after the
earlier to occur of (a) the expiration date of such Option, or (b) 1
year after the date on which such optionee ceases to be an employee
(or, in the case of an option granted to a consultant or advisor,
ceases to be a consultant or advisor) of the Company and its
Subsidiaries; provided, the Committee may provide in the Option
Agreement that such option or any unexercised portion thereof shall
terminate sooner. Prior to the earlier of such date, such Option
shall be exercisable only in accordance with its terms and only for
the number of shares exercisable on the date such Optionee's
employment (or service, as applicable) ceases due to disability.
(iii) In the event of the death of the Optionee
(A) while he or she is an employee (and, in the case of a Non- ISO, a
director, consultant and advisor) of the Company or a Subsidiary, (B)
within 3 months after the date on which such Optionee's employment (or
service, as applicable) terminated (for a reason other than cause) as
provided in Section (5)(j)(i), or (C) within 1 year after the date on
which such Optionee's employment (or service, as applicable)
terminated due to his or her disability as provided in Section
5(j)(ii), any Option or unexercised portion thereof granted to him or
her may be exercised by his or her personal representatives, heirs or
legatees at any time prior to the expiration of 1 year from the date
of death of such Optionee, but in no event later than the date of
expiration of the option period; provided, the Committee may provide
in the Option Agreement that such Option or any unexercised portion
thereof shall terminate sooner. Such exercise shall be effected
pursuant to the terms of this Section 5 as if such personal
representatives, heirs or legatees are the named Optionee.
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<PAGE> 8
(k) Restrictions on Transfer and Exercise of options. No
option shall be assignable or transferable by the optionee except by will or by
the laws of descent and distribution; and, during the lifetime of an Optionee,
the Option shall be exercisable only by him or her.
(1) Holding Period. No Option granted hereunder may be
exercised within the 6-month period immediately following the date of grant (as
described in Section 5(c)(i) hereof).
(m) Rights as a Stockholder. An Optionee shall have no
rights as a stockholder with respect to shares covered by his or her Option
until date of the issuance of the shares to him or her and only after the
Option Price of such shares is fully paid. Unless specified in Section 6, no
adjustment will be made for dividends or other rights for which the record date
is prior to the date of such issuance.
(n) Miscellaneous Provisions. The Option Agreements
authorized under the Plan shall contain such other provisions, including,
without limitation, restrictions upon the exercise of the option as the
Committee shall deem advisable. In the event of any conflict between the
provisions of an Option Agreement and the Plan, the Plan shall control.
(o) No Obligation to Exercise Option. The granting of an
Option shall impose no obligation upon the Optionee to exercise such Option.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
(a) In the event that the outstanding shares of the
Common Stock of the Company are hereafter increased or decreased or changed
into or exchanged for a different number or kind of shares or other securities
of the Company by reason of a recapitalization, reclassification, stock split,
combination of shares or dividend payable in shares of the Common Stock, the
following rules shall apply:
(i) The Committee shall make an appropriate
adjustment in the number and kind of shares available for the granting
of options under the Plan.
(ii) The Committee also shall make an appropriate
adjustment in the number and kind of shares (A) as to which
outstanding Options, or portions thereof then unexercised, shall be
exercisable; any such adjustment in any outstanding options shall be
made without change in the total price applicable to the unexercised
portion of such Option and With a corresponding adjustment in the
Option Price per share. No fractional shares shall be issued or
optioned in making the foregoing adjustments, and the number of shares
available under the Plan or the number of shares subject to any
outstanding Options shall be the next lower number of shares, rounding
all fractions downward.
(iii) Any adjustment to or assumption of ISO's
under this subsection (a) shall be made in accordance with Code
Section 424(a) and the regulations promulgated thereunder so as to
preserve the status of such ISO's as incentive stock options under
Code Section 422.
(iv) If any rights or warrants to subscribe for
additional shares are given pro rata to holders of outstanding shares
of the class or classes of stock then set aside f or the Plan, each
Optionee shall be entitled to the same rights or warrants on the same
basis as
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<PAGE> 9
holders of the outstanding shares with respect to such portion of his
or her Option as is exercised on or prior to the record date for
determining stockholders entitled to receive or exercise such rights
or warrants.
(b) Subject to any required action by the stockholders,
if the Company shall be a party to any reorganization involving merger,
consolidation, acquisition of the stock or acquisition of the assets of the
Company, the Committee, in its discretion, may declare that:
(i) any or all outstanding options granted
hereunder shall become immediately nonforfeitable and exercisable (to
the extent permitted under federal or state securities laws);
(ii) any Option granted but not yet exercised
shall pertain to and apply, with appropriate adjustment as determined
by the Committee, to the securities of the resulting corporation to
which a holder of the number of shares of the Common Stock subject to
such Options would have been entitled; and/or
(iii) any or all options granted hereunder are to
become immediately nonforfeitable and exercisable (to the extent
permitted under federal or state securities laws) and are to be
terminated after giving at least 30 days' notice to the Key Persons to
whom such options have been granted.
(c) If the Board adopts a plan of dissolution and
liquidation that is approved by the stockholders of the Company, the Committee
shall give each Optionee notice of such event at least 10 days prior to its
effective date, and the rights of all Optionees shall become immediately
nonforfeitable and exercisable (to the extent permitted under federal or state
securities laws).
(d) Any issuance by the Company of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number or
price of shares of the Common Stock subject to any option, except as
specifically provided otherwise in this section 6. The grant of Options
pursuant to the Plan shall not affect in any way the right or power of the,
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure or to merge, consolidate or dissolve, or to
liquidate, sell or transfer all or any part of its business or assets. All
adjustments the Committee makes under this Section 6 shall be conclusive.
7. EMPLOYEE'S AGREEMENT AND SECURITIES REGISTRATION.
(a) If, in the opinion of counsel for the Company, such
action is necessary or desirable, no Options shall be granted to any Key
Person, unless, at the time of grant, such Key Person (i) represents and
warrants that he or she will acquire the stock for investment only and not for
purposes of resale or distribution, and (ii) makes such further representations
and warranties as are deemed necessary or desirable by counsel to the Company
with regard to holding and resale of the stock. If at the time of the exercise
of any Option, it is necessary or desirable, in the opinion of counsel for the
Company, in order to comply with any applicable laws or regulations relating to
the sale of securities, that the Key Person represent and warrant that he or
she is purchasing or acquiring the Common Stock for investment and not with any
present intention to resell or distribute the same or make other and further
representations and warranties with regard to the holding and resale of such
shares, the Key Person shall, upon the request of the Committee, execute and
deliver to the
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<PAGE> 10
Company an agreement or affidavit to such effect. Should the Committee have
reasonable cause to believe that such Key Person did not execute such agreement
in good faith, the Company shall not be bound by the exercise of the Option.
All certificates issued pursuant to the Plan shall be marked with the following
restrictive legend or similar legend, if such marking, in the opinion of
counsel to the Company, is necessary or desirable:
The shares evidenced by this certificate have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), or under the securities
laws of any state (the "State Securities Acts") and have been issued or sold in
reliance upon Section 4(2) of the 1933 Act and the securities laws of Delaware.
These shares are held by an "affiliate" of the Company (as such term is defined
in Rule 144 promulgated by the Securities and Exchange Commission under the
1933 Act) Accordingly, these shares may not be sold, hypothecated, pledged or
otherwise transferred, except (i) pursuant to an effective registration
statement under the 1933 Act and any applicable State Securities Acts with
respect to such shares, (ii) in accordance with said Rule 144, or (iii) upon
the issuance to the Company of a favorable opinion of counsel or the submission
to the Company of such other evidence as may be satisfactory to the Company
that such proposed sale, assignment encumbrance or other transfer will not be
in violation of the 1933 Act or any applicable State Securities Acts or any
rules or regulations thereunder. Any attempted transfer of the certificate
representing these shares which is in violation of the preceding restrictions
will not be recognized by the Company, nor will any transferee of such shares
be recognized as the owner thereof by the Company.
If the Common Stock to be acquired upon the exercise of an option is registered
with the Securities and Exchange Commission as of the date of granting an
Option, or if such Common Stock is registered as of the date of exercise, then
the Committee, in its discretion, may dispense with the above investment
affidavits and the Common Stock may be issued without the first paragraph of
the restrictive legend set forth above. If the Common Stock is held by a Key
Person who is not an affiliate, as that term is defined in Rule 144 of the 1933
Act, or who ceases to be an affiliate, the Committee, in its discretion, may
dispense with or authorize the removal of the second paragraph of the
restrictive legend set forth above.
(b) In the event that the Company in its sole discretion
shall deem it necessary or advisable to register, under the 1933 Act or any
state securities acts, any shares with respect to which options have been
granted hereunder, then the Company shall take such action at its own expense
before delivery of the certificates representing such shares to a Key Person.
In the event the shares of Common Stock of the Company shall be listed on any
national securities exchange or on the over-the-counter market at the time of
the exercise of an option or issuance of Restricted Stock, the Company shall
make prompt application for the listing of the shares of Common Stock to be
issued on such stock exchange of such shares, at the sole expense of the
Company.
8. EFFECTIVE DATE; AMENDMENT AND TERMINATION OF THE
PLAN.
(a) The Plan shall be effective as of July 1, 1995, and
no options shall be granted hereunder prior to said date; provided, adoption of
the Plan shall be approved by the stockholders of the Company at the earlier of
(i) the annual meeting of the stockholders of the Company or the execution of a
written consent of a majority of the Company's stockholders which immediately
follows the date of the first grant or award of options hereunder, or (ii) 12
months after the adoption
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<PAGE> 11
of the Plan by the Board. Stockholder approval shall be made by a majority of
the votes cast at a duly held meeting at which a quorum representing a majority
of all outstanding voting stock is, either in person or by proxy, present and
voting on the Plan. Failure to obtain such approval shall render the Plan and
any Options granted hereunder null and void ab initio.
(b) In the event the Board shall determine that a portion
of the Plan does not qualify as an "Incentive Stock option Plan" pursuant to
Code Section 422 or that the Plan is not in the best interest of the Company or
its stockholders for any reason, the Board shall have the power to add to,
amend or repeal any of the provisions of the Plan, to suspend the operation of
the entire Plan or any of its provisions for any period or periods or to
terminate the Plan in whole or in part. In the event of any such action, the
Committee shall prepare written procedures which, when approved by the Board,
shall govern the administration of the Plan resulting from such addition,
amendment, repeal, suspension or termination. Notwithstanding the above
provisions, no such addition, amendment, repeal, suspension or termination
shall adversely affect, in any way, the rights of the Key Persons who have
outstanding options without the consent of such Key Persons, nor may any such
change in the Plan be made without the prior approval of the stockholders of
the Company if (i) such change would cause the applicable portions of the Plan
to fail to qualify as an "Incentive Stock Option Plan" pursuant to Code Section
422, or (ii) such stockholder approval is required under Code Section 422, Rule
16b-3, or any other applicable law or regulation. Stockholder approval shall
be made by a majority of the votes cast at a duly held meeting at which a
quorum representing a majority of all outstanding voting stock is, either in
person or by proxy, present and voting at the meeting.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of the
Common Stock subject to the Options granted hereunder will be used for general
corporate purposes.
10. NOTICES.
All notices or other communications by a Key Person to the
Committee pursuant to or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Committee at the
location, or by the person, designated by the Committee for the receipt
thereof.
11. TERM OF PLAN.
Subject to the terms of Section 8(b), the Plan shall terminate
upon the later of (i) the complete exercise or lapse of the last outstanding
Option, or (ii) the last date upon which Options may be granted hereunder.
ADOPTED BY THE BOARD OF DIRECTORS ON _____________________.
APPROVED BY STOCKHOLDERS ON _____________________.
FIRST AMENDMENT ADOPTED BY THE BOARD OF DIRECTORS ON _____________________.
SECOND AMENDMENT ADOPTED BY THE BOARD OF DIRECTORS ON _____________________.
SECOND AMENDMENT APPROVED BY STOCKHOLDERS ON _____________________.
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<PAGE> 1
KAYE KOTTS ASSOCIATES INC.
DIRECTORS STOCK OPTION PLAN
1. PURPOSE.
The purpose of the Kaye Kotts Associates Inc. Directors Stock
Option Plan (the "Plan") is to further the growth and development of Kaye Kotts
Associates Inc., a Delaware corporation (the "Company"), by encouraging
directors who are not otherwise employees of the Company to obtain a
proprietary interest in the Company by owning its stock. The Company intends
that the Plan will provide such persons with an added incentive to continue to
serve as directors of the Company and will stimulate their efforts in promoting
the growth, efficiency and profitability of the Company. The Company also
intends that the Plan will afford the Company a means of attracting to service
on its Board persons of outstanding quality. Unless otherwise specified, the
term "Options" shall refer to non-qualified stock options.
2. ADMINISTRATION.
(a) General Administration. The Plan shall be
administered and interpreted by the committee appointed by the Company's Board
of Directors (the "Committee"). Subject to the express provisions of the Plan,
the Committee also shall have authority to interpret the Plan, to prescribe,
amend and rescind rules and regulations relating to it, to determine the terms
and provisions of the instruments by which Options shall be evidenced (which
shall not be inconsistent with the terms of the Plan), and to make all other
determinations necessary or advisable for the administration of the Plan, all
of which determinations shall be final, binding and conclusive.
(b) Appointment. The Board of Directors, in accordance
with the applicable provisions of the Company's By-Laws, shall appoint the
Committee from among its members to serve at the pleasure of the Board. The
Board from time to time may remove members from, or add members to, the
Committee and shall fill all vacancies thereon. The Committee shall be
composed of two or more directors.
(c) Organization. The Committee may select one of its
members as its chairman and shall hold its meetings at such times and at such
places as it shall deem advisable. A majority of the Committee shall
constitute a quorum, and such majority shall determine its actions. The
Committee shall keep minutes of its proceedings and shall report the same to
the Board of Directors at the meeting next succeeding.
(d) Indemnification. In addition to such other rights of
indemnification as they have as directors or as members of the Committee, the
members of the Committee, to the extent permitted by applicable law, shall be
indemnified by the Company against reasonable expenses (including, without
limitation, attorneys' fees) actually and necessarily incurred in connection
with the defense of any action, suit or proceeding, or in connection with any
appeal, to which they or any of them may be a party by reason of any action
taken or failure to act under or in connection with the Plan or any Options
granted hereunder, and against all amounts paid by them in settlement thereof
(provided such settlement is approved to the extent required by and in the
manner provided by applicable law and/or the By-Laws of the Company relating to
indemnification of directors) or paid by them in satisfaction of a judgment in
any such action, suit or proceeding, except in relation to matters as to which
it shall be adjudged in such action, suit or proceeding that such Committee
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<PAGE> 2
member or members did not act in good faith and in a manner he, she or they
reasonably believed to be in or not opposed to the best interest of the
Company.
3. STOCK.
The stock subject to the Options and other provisions of the
Plan shall be authorized but unissued or reacquired shares of the $.01 par
value common stock of the Company (the "Common Stock"). Subject to
readjustment in accordance with the provisions of Section 6, the total number
of shares of the Common Stock for which Options may be granted to persons
participating in the Plan shall not exceed in the aggregate 50,000 shares.
Notwithstanding the foregoing, shares of Common Stock allocable to the
unexercised portion of any expired or terminated Option again may become
subject to Options under the Plan.
4. ELIGIBILITY TO RECEIVE OPTIONS.
The persons eligible to receive Options hereunder shall be
directors who are not otherwise employees of the Company or its affiliates.
The individuals eligible to receive Options hereunder shall be referred to
individually as "Optionee" and collectively as "Optionees".
5. TERMS AND CONDITIONS OF OPTIONS.
The Committee shall prepare a written agreement, executed and
dated by the Company, evidencing the Option granted to an Optionee (the "Option
Agreement") and setting forth the terms and conditions of such Option. The
Committee shall present such Option Agreement to the Optionee and upon
execution of such Option Agreement by the Optionee, such Option shall be deemed
to have been granted effective as of the date the Option is granted as
specified in subsection (a) hereof. The failure of the Optionee to execute the
Option Agreement within 30 days after the date of the receipt of same shall
render the Option Agreement and the underlying Option null and void ab initio.
Option Agreements and the Options granted thereby shall comply with and be
subject to the following terms and conditions:
(a) Optionee and Number of Shares.
(i) Each individual, who becomes a director
eligible to participate in the Plan (as described in Section 4) after
July 1, 1996 (the "Effective Date"), shall receive an Option to
purchase 3,000 shares of the Common Stock of the Company as of the
date such individual is elected a non-employee director of the
Company.
(ii) Effective as of each July 1 (beginning, for
each Optionee, as of the later of July 1, 1996 or the July 1
immediately following the date such individual commenced serving as a
non-employee director of the Company), each Optionee shall receive an
Option to purchase an additional 1,500 shares of Common Stock of the
Company.
(iii) In addition to the Options granted pursuant
to the terms of subsections (a)(i) and (ii) hereof, each director who
is eligible to participate in the Plan (as described in Section 4) on
the Effective Date shall receive, on that date, an Option to purchase
a total of 1,500 shares of the Common Stock of the Company; and each
director who is eligible to participate in the Plan (as described in
Section 4) on each successive July 1 during the term of the Plan shall
receive on each of such July 1, an Option to purchase 1,500 shares of
the
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<PAGE> 3
Common Stock of the Company. The Option granted pursuant to the terms
of this subsection shall be referred to herein as "Retainer Options".
(iv) Notwithstanding anything herein to the
contrary, no Optionee may be granted an Option or Options under the
Plan to the extent that the number of shares of Common Stock subject
to such Option or Options, when added to the total number of shares of
Common Stock granted pursuant to other Options, would exceed the
number of shares of Common Stock available under Section 3.
(v) Each Option Agreement shall state the name of
the Optionee and the total number of shares of the Common Stock to
which it pertains.
(b) Vesting.
(i) Options, other than Retainer Options, shall
first become exercisable (that is, vested) on the date 6 months
following the date of grant.
(ii) Notwithstanding anything herein to the
contrary, the Optionee shall be 100 percent vested in each of his
Retainer Options upon the date such Retainer Option is granted.
(iii) The Option Agreement and the Optionee's right
as to vested Options shall not impose upon the Company any obligation
to retain the Optionee as a director for any period.
(c) Option Price.
(i) The purchase price of the shares of Common
Stock underlying each Option (the "Option Price") granted pursuant to
subsections (i), (ii) and (iii) of section 5 (a) shall be the fair
market value of the Common Stock on the date the Option is granted.
The Option Price for Retainer Options granted pursuant to Section
5(a)(iii) shall be 120 percent of the fair market value of the Common
Stock on the date the Retainer Option is granted.
(ii) If the Common Stock subject to the Plan is
registered on a national securities exchange (as such term is defined
by the Securities Exchange Act of 1934 (the "1934 Act")) or is
regularly traded in the over-the-counter market on the date of
determination, the fair market value per share shall be the closing
price of a share of the Common Stock on said national securities
exchange or over-the-counter market on the date of grant of the
Option. If shares are publicly traded on a national securities
exchange or the over-the-counter market but no shares of the Stock are
traded on that date (or if records of such sales are unavailable or
burdensome to obtain) but there were shares traded on dates within a
reasonable period both before and after such date, the fair market
value shall be the average of the closing prices of the Common Stock
on the nearest date before and the nearest date after the date of
determination. If the Common Stock is traded both on a national
securities exchange, and in the over-the-counter market, the closing
price shall be determined by the closing price on the national
securities exchange, unless transactions on such exchange and in the
over-the-counter market are jointly reported on a consolidated
reporting system in which case the closing price shall be determined
by reference to such consolidated reporting
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<PAGE> 4
system. If the Common Stock has not been registered under the 1934
Act, the Committee shall determine the fair market value of the Common
Stock from all relevant available facts which may include opinions of
independent experts as to value and may take into account any recent
sales and purchases of such Common Stock to the extent they are
representative. If the Common Stock is not listed for trading on a
national securities exchange and is not regularly traded in the
over-the-counter market, then an independent appraiser shall determine
the fair market value of the Common Stock from all relevant available
facts, including any recent sales and purchases of such Common Stock
to the extent they are representative.
(d) Terms of Options. Terms of Options granted under the
Plan shall commence on the date the Option is granted and shall expire 10 years
from the date the Option is granted. No Option shall be granted hereunder
after 10 years from the earlier of the date the Plan is approved by the
stockholders or is adopted by the Board of Directors.
(e) Terms of Exercise. The exercise of an Option may be
for less than the full number of shares of Common Stock subject to such Option,
but such exercise shall not be made for less than the greater of 10 percent or
100 shares of the number of shares of Common Stock initially subject to such
Option. Subject to the other restrictions on exercise set forth herein, the
unexercised portion of an Option may be exercised at a later date by the
Optionee; provided, the 10 percent/100-share requirement set forth above shall
not apply to any exercise of an Option if all remaining shares of Common Stock
subject to such Option are exercised.
(f) Method of Exercise. All Options granted hereunder
shall be exercised by written notice directed to the Secretary of the Company
at its principal place of business or to such other person as the Committee may
direct. Each notice of exercise shall be accompanied by payment of the Option
Price for the number of shares specified in such notice and by any documents
required by Section 7(a). The Company shall make delivery of such shares
within a reasonable period of time; provided, if any law or regulation requires
the Company to take any action (including, but not limited to, the filing of a
registration statement under the Securities Act of 1933, as amended (the "1933
Act"), and causing such registration statement to become effective) with
respect to the shares specified in such notice before the issuance thereof,
then the date of delivery of such shares shall be extended for the period
necessary to take such action.
(g) Medium and Time of Payment.
(i) The Option Price shall be payable upon the
exercise of the Option in an amount equal to the number of shares then
being purchased times the per share Option Price. Payment, at the
election of the Optionee [or his or her successors as provided in
Section 5(h)(iii)], shall be (A) in cash; (B) by delivery to the
Company of a certificate or certificates for shares of the Common
Stock duly endorsed for transfer to the Company with signature
guaranteed by a member firm of a national stock exchange or by a
national or state bank (or guaranteed or notarized in such other
manner as the Committee may require); or (C) by a combination of (A)
and (B). Notwithstanding the foregoing, if the Common Stock has been
registered under the 1934 Act, an Optionee must have held any shares
of Common Stock used to pay the Option Price for at least 6 months
from (X) the date of acquisition, in the case of shares acquired other
than through a stock option or other stock award plan, or (Y) the date
of grant or award in the case of shares acquired through such a plan.
In the
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<PAGE> 5
event of any payment by delivery of shares of the Common Stock, such
shares shall be valued on the basis of the fair market value of the
Common Stock on the date of exercise. Fair market value shall be
determined in the manner provided in Section 5(c) (ii) (dealing with
determining Option Price), and an Optionee shall bear any costs of
appraisal necessitated by the Optionee's decision to use shares of
Common Stock to pay the exercise price. If the Optionee makes payment
by delivery of shares of Common Stock, the value of such Common Stock
shall be less than or equal to the total Option Price payment. If the
Optionee delivers Common Stock with a value that is less than the
total Option Price, then such Optionee shall pay the balance of the
total Option Price in cash.
(ii) In addition to the payment of the purchase
price of the shares then being purchased, an Optionee also shall pay
in cash (or have withheld from his or her normal pay) an amount equal
to the amount, if any, which the company at the time of exercise is
required to withhold under the income tax withholding provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), and of the
income tax laws of the state of the Optionee's residence.
(h) Effect of Termination of Service or Death. Except as
provided in parts (i), (ii) and (iii) of this subsection, no Option shall be
exercisable unless the Optionee thereof shall have been a director of the
Company from the date the Option was granted until the date of exercise.
(i) In the event an Optionee ceases to be a
director of the Company for any reason other than death or disability,
any Option or unexercised portion thereof granted to him or her which
is otherwise exercisable shall terminate on and shall not be
exercisable after the earlier to occur of (a) the expiration date of
the Option, or (b) 3 months after the date the director ceases to be a
director of the Company. Prior to the earlier of the dates specified
in the first sentence of this subsection (5)(h)(i), the Option shall
be exercisable only in accordance with its terms.
(ii) In the event that an Optionee ceases to be a
director of the Company due to disability, as determined by the
Committee in its sole discretion, any Option or unexercised portion
thereof granted to him or her which is otherwise exercisable shall
terminate on and shall not be exercisable after the earlier to occur
of (a) the expiration date of the Option, or (b) the expiration of 1
year from the date such Optionee ceases to be a director of the
Company due to disability.
(iii) In the event of the death of the Optionee
while he or she is a director of the Company, or within 3 months (1
year in the case of termination due to disability) after the date on
which such Optionee ceases to be a director, any Option or unexercised
portion thereof granted to him or her which is otherwise exercisable
may be exercised by his or her personal representatives, heirs or
legatees at any time prior to the expiration of 1 year from the date
of death of such Optionee. Such exercise shall be effected pursuant
to the terms of this Section 5 as if such personal representatives,
heirs or legatees are the named Optionee.
(i) Restrictions on Transfer and Exercise of Options. No
Option shall be assignable or transferable by the Optionee except by will or by
the laws of descent and distribution; and, during the lifetime of an Optionee,
the Option shall be exercisable only by him or her.
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<PAGE> 6
(j) Rights as a Stockholder. An Optionee shall have no
rights as a stockholder with respect to shares covered by his or her Option
until the date of issuance of the shares to him or her and only after the
Option Price of such shares is fully paid. Unless specified in Section 6, no
adjustment will be made for dividends or other rights for which the record date
is prior to the date of such issuance.
(k) Miscellaneous Provisions. In the event of any
conflict between the provisions of an Option Agreement and the Plan, the Plan
shall control.
(l) No Obligation to Exercise Option. The granting of an
Option shall impose no obligation upon the Optionee to exercise such Option.
6. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
(a) Recapitalization. In the event that the outstanding
shares of the Common Stock of the Company are hereafter increased or decreased
or changed into or exchanged for a different number or kind of shares or other
securities of the Company by reason of a recapitalization, reclassification,
stock split, combination of shares or dividend payable in shares of the Common
Stock, the following rules shall apply:
(i) The Committee shall make an appropriate
adjustment in the number and kind of shares available for the granting
of Options under the Plan.
(ii) The Committee also shall make an appropriate
adjustment in the number and kind of shares as to which outstanding
Options, or portions thereof then unexercised, shall be exercisable,
to the end that the Optionee's proportionate interest shall be
maintained as before the occurrence of such event; any such adjustment
in any outstanding Options shall be made without change in the total
price applicable to the unexercised portion of such Option and with a
corresponding adjustment in the Option Price per share. No fractional
shares shall be issued or optioned in making the foregoing
adjustments, and the number of shares available under the Plan or the
number of shares subject to any outstanding Options shall be the next
lower number of shares, rounding all fractions downward.
(iii) If any rights or warrants to subscribe for
additional shares are given pro rata to holders of outstanding shares
of the class or classes of stock then set aside for the Plan, each
Optionee shall be entitled to the same rights or warrants on the same
basis as holders of the outstanding shares with respect to such
portion of his or her Option as is exercised on or prior to the record
date for determining stockholders entitled to receive or exercise such
rights or warrants.
(b) Reorganization. Subject to any required action by
the stockholders, if the Company shall be a party to any reorganization
involving merger, consolidation, acquisition of the stock or acquisition of the
assets of the Company, and if the agreement memorializing such reorganization
so provides, any Option granted but not yet exercised shall pertain to and
apply, with appropriate adjustment as determined by the Committee, to the
securities of the resulting corporation to which a holder of the number of
shares of the Common Stock subject to such Options would have been entitled.
If such agreement does not so provide, then any or all Options granted
hereunder shall
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<PAGE> 7
terminate after giving at least 30 days' prior written notice to the Optionees
to whom such Options have been granted.
(c) Dissolution and Liquidation. If the Board adopts a
plan of dissolution and liquidation that is approved by the stockholders of the
Company, the Committee shall give each Optionee written notice of such event at
least 10 days prior to its effective date.
(d) Limits on Adjustments. Any issuance by the Company
of stock of any class, or securities convertible into shares of stock of any
class, shall not affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of the Common Stock subject to any
Option, except as specifically provided otherwise in this Section 6. The grant
of Options pursuant to the Plan shall not affect in any way the right or power
of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge, consolidate or
dissolve, or to liquidate, sell or transfer all or any part of its business or
assets. All adjustments the Committee makes under this Section 6 shall be
conclusive.
7. EMPLOYEES AGREEMENT AND SECURITIES REGISTRATION.
(a) Agreement. If such action is necessary or desirable,
no Options shall be granted to any Optionee, unless, at the time of grant, such
Optionee (i) represents and warrants that he or she will acquire the stock for
investment only and not for purposes of resale or distribution, and (ii) makes
such further representations and warranties as are deemed necessary or
desirable by counsel to the Company with regard to holding and resale of the
stock. If, at the time of the exercise of any Option paid in whole or in part
in shares of Common Stock, it is necessary or desirable, in the opinion of
counsel for the Company, in order to comply with any applicable laws or
regulations relating to the sale of securities, that the Optionee represent and
warrant that he or she is purchasing or acquiring the Common Stock for
investment and not with any present intention to resell or distribute the same
or make other and further representations and warranties with regard to the
holding and resale of such shares, the Optionee shall, upon the request of the
Committee, execute and deliver to the Company an agreement to such effect.
Should the Committee have reasonable cause to believe that such Optionee did
not execute such agreement in good faith, the Company shall not be bound by the
exercise of the Option. All certificates issued pursuant to the Plan shall be
marked with the following restrictive legend or similar legend, if such
marking, in the opinion of counsel to the Company, is necessary or desirable:
The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"1933 Act"), or under the securities laws or regulations of
any state (the "State Securities Acts"). The shares have been
issued or sold in reliance upon Section 4(2) of the 1933 Act
and the securities laws of Delaware.
These shares are held by an "affiliate" of the Company (as
such term is defined in Rule 144 promulgated by the Securities
and Exchange Commission under the 1933 Act). Accordingly,
these shares may not be sold, hypothecated, pledged or
otherwise transferred, except (i) pursuant to an effective
registration statement under the 1933 Act and any applicable
State Securities Acts with respect to such
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<PAGE> 8
shares, (ii) in accordance with said Rule 144, or (iii) upon
the issuance to the Company of a favorable opinion of counsel
or the submission to the Company of such other evidence as may
be satisfactory to the Company that such proposed sale,
assignment, encumbrance or other transfer will not be in
violation of the 1933 Act or any applicable State Securities
Acts or any rules or regulations thereunder. Any attempted
transfer of the certificate representing these shares which is
in violation of the preceding restrictions will not be
recognized by the Company, nor will any transferee of such
shares be recognized as the owner thereof by the Company.
If the Common Stock to be acquired upon the exercise of an Option is registered
under the 1934 Act as of the date of granting an Option, or if such Common
Stock is registered as of the date of exercise, then the Committee, in its
discretion, may dispense with the above investment affidavits and the Common
Stock may be issued without the first paragraph of the restrictive legend set
forth above. If the Common Stock is held by an Optionee who is not an
affiliate, as that term is defined in Rule 144 of the 1933 Act, or who ceases
to be an affiliate, the Committee, in its discretion, may dispense with or
authorize the removal of the second paragraph of the restrictive legend set
forth above.
(b) Registration. In the event that the Company in its
sole discretion shall deem it necessary or advisable to register, under the
1933 Act or any state securities acts, any shares with respect to which Options
have been granted hereunder, then the Company shall take such action at its own
expense before delivery of the certificates representing such shares to an
Optionee. In the event the shares of Common Stock of the Company shall be
listed on any national stock exchange at the time of the exercise of any
Option, the Company shall make prompt application for the listing of the shares
of Common Stock to be issued on such stock exchange of such shares, at the sole
expense of the Company.
8. EFFECTIVE DATE; AMENDMENT AND TERMINATION OF THE
PLAN.
(a) Effective Date. The Plan shall be effective July 1,
1996, and no Options shall be granted hereunder prior to said date; provided,
adoption of the Plan shall be approved by the stockholders of the Company not
later than the annual meeting of the stockholders of the Company which
immediately follows the date of the first grant of an Option hereunder.
Stockholder approval shall be made by a majority of the votes cast at a duly
held meeting at which a quorum representing a majority of all outstanding
voting stock is, either in person or by proxy, present and voting on the Plan
or by the written consent of the majority of stockholders of the Corporation.
Failure to obtain such approval shall render the Plan and any Options granted
hereunder null and void ab initio.
(b) Amendment and Termination. In the event the Board
shall determine that the Plan is not in the best interest of the Company or its
stockholders for any reason, the Board shall have the power to add to, amend or
repeal any of the provisions of the Plan, to suspend the operation of the
entire Plan or any of its provisions for any period or periods or to terminate
the Plan in whole or in part; provided, the Plan shall not be amended more than
once every 6 months other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act, or the rules thereunder. In
the event of any such action, the Committee shall prepare
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<PAGE> 9
written procedures that, when approved by the Board, shall govern the
administration of the Plan resulting from such addition, amendment, repeal,
suspension or termination. Notwithstanding the above provisions, no such
addition, amendment, repeal, suspension or termination shall affect, in any
way, the rights of the Optionees who have outstanding Options without the
consent of such Optionees, nor may any such change in the Plan be made without
stockholder approval if such approval is required under Rule 16b-3 promulgated
under Section 16 of the 1934 Act or any other applicable law or regulation.
Stockholder approval shall be made by the majority of the votes cast at a duly
held meeting at which a quorum representing a majority of all outstanding
voting stock is, either in person or by proxy, present and voting at the
meeting.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of the
Common Stock subject to the Options granted hereunder will be used for general
corporate purposes.
10. NOTICES.
All notices or other communications by an Optionee to the
Committee pursuant to or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Committee at the
location, or by the person, designated by the Committee for the receipt
thereof.
11. TERM OF PLAN.
Subject to the terms of Section 8(b), the Plan shall terminate
upon the later of (i) the complete exercise or lapse of the last outstanding
Option, or (ii) the last date upon which Options may be granted hereunder.
ADOPTED BY THE BOARD OF DIRECTORS ON _____________________.
APPROVED BY STOCKHOLDERS ON _____________________.
FIRST AMENDMENT ADOPTED BY THE BOARD OF DIRECTORS ON _____________________.
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<PAGE> 1
[Thelen, Marrin, Johnson & Bridges Letterhead]
1 August 1996
17173/1
Kaye Kotts Associates Inc.
15490 Ventura Boulevard
Sherman Oaks, California 91403
Gentlemen:
We have acted as counsel to Kaye Kotts Associates Inc. (the
"Company") in connection with the registration by the Company of the Company's
Common Stock underlying the Kaye Kotts Associates Inc. 1995 Stock Incentive Plan
(the "1995 Plan") and the Kaye Kotts Associates Inc. Directors Stock Option Plan
(the "Directors Plan"). The 1995 Plan provides for the grant of options to
purchase up to 666,000 shares of the Company's Common Stock. The Directors Plan
provides for the grant of options to purchase up to 50,000 shares of the
Company's Common Stock. In this opinion, all of such shares of Common Stock are
referred to collectively as the "Shares." Such Shares of the Company are being
registered under the Securities Act of 1933, as amended, in a registration
statement on Form S-8 to be filed with the Securities and Exchange Commission on
August 2, 1996 (the "Registration Statement"). We are familiar with the
proceedings, corporate and other, relating to the authorization and issuance of
the Shares.
Based on the foregoing, and such other examination of law and
fact as we have deemed necessary, we are of the opinion that, when issued as
described in the Registration Statement, the Shares offered by the Company will
be legally issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Thelen, Marrin, Johnson & Bridges
