SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended November 30, 1995 Commission File No. 1-13830
TELESOFT CORP.
(Exact name of Registrant as specified in its charter)
Arizona 86-0431009
(State of Incorporation) (IRS Employer Identification No.)
3216 North Third Street
Phoenix, Arizona 85012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (602) 265-6311
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of each exchange on which registered
Common Stock, No Par Value Pacific Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act : None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Check if there is no disclosure of delinquent filings in this Form and no
disclosure will be contained in the definitive Proxy Statement incorporated by
reference in Part III of this Form 10-KSB. X
Issuer's revenues for its fiscal year: $19,576,905
As of June 14, 1996, the number of shares of Common Stock outstanding
was 3,787,500 and the aggregate market value of the Common Stock (based
on the closing price on that date) held by non-affiliates of the Registrant was
approximately $8,943,750.
Documents Incorporated By Reference
Exhibit Index Page 10
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT.
The following sets forth certain information with respect
to directors and executive officers of the Company with the year
in which each director's term expires in parentheses.
Position With
Name Age Company and
Tenure
Joseph W. Zerbib 60 President and Director since 1982. (1996)
Thierry E. Zerbib 34 Vice President Software/ Systems, Secretary and
Director since 1982. (1996)
Brian H. Loeb 34 Vice President- Marketing/Sales and Operations
and Director since 1992. (1996)
Michael F. Zerbib 29 Vice President - Finance, Treasurer and Director
since 1990. (1996)
Cecile Silverman 71 Director since 1995. (1996)
Kalvan Swanky 32 Director since 1995. (1996)
Directors hold office until the next annual meeting of
shareholders and until their successors are elected and qualified
or until their prior resignation. The terms of the executive officers
are continuous, subject to the authority of the Company's Board
of Directors.
Joseph W. Zerbib was born in Algeria and has lived in the
Middle East, Europe and the United States. From 1982 to the
present, Mr. Zerbib has been the President of the Company. He
concentrates on strategic planning and financial, accounting and
human resources management. From 1975 to 1982 Mr. Zerbib
managed a large supermarket chain in Israel. From 1960 to 1975
Mr. Zerbib owned and managed a full service drug store and
blood analysis laboratory in Paris, France. Mr. Zerbib is the
treasurer, principal shareholder and a director of International
FiberCom, Inc. ("IFC"), a publicly held company traded on the
Nasdaq Small-Cap Market. Mr. Zerbib estimates that the time
required for his management duties at IFC are not substantial and
will not adversely impact on the management time required for
the Company.
Thierry E. Zerbib has been with the Company since 1982.
His responsibilities include day-to-day supervision of
software/hardware customer service, system configuration,
system implementation, research and development, and quality
control. He holds dual degrees in computer science and math
from the University of Tel Aviv, Israel.
Brian H. Loeb has been with the Company since 1982. His
responsibilities include day to day supervision of sales,
marketing, customer service, and service bureau implementation.
Michael F. Zerbib has been with the Company since 1990
with main emphasis on service bureau sales and financial
reporting. He holds a Bachelor of Science degree in finance and a
Master degree in taxation and financial accounting from Arizona
State University. Mr. Zerbib also holds a certification from the
Arizona State Board of Accountancy.
Cecile Silverman is a certified public accountant employed
by the firm of Schwartz, Cohen & Co. She was a
partner/shareholder of such firm from 1975 to 1989 and is now
employed with the firm on a part-time basis. Ms. Silverman
specializes in tax planning for corporations and individuals, as
well as representing clients before various governmental
agencies. She graduated from Syracuse University with a degree
in public accounting.
Kalvan Swanky has been employed for the past ten years
by Storage Technology Corporation, which develops,
manufacturers and distributes computer memory devices. Mr.
Swanky has held a number of positions with Storage Technology,
most recently as Direct Sales Manager for Arizona and Nevada.
He received a Bachelor of Science degree from the University of
Colorado.
Joseph W. Zerbib is the father of Thierry E. Zerbib and
Michael F. Zerbib and the father-in-law of Brian H. Loeb.
Accordingly, Thierry E. Zerbib and Michael F. Zerbib are brothers
and Brian H. Loeb is the brother-in-law of Thierry and Michael
Zerbib.
Business of the Board of Directors
During the fiscal year ended November 30, 1995, the
Company's board of directors held one meeting. All directors
attended this meeting, except Mr. Swanky.
Compensation and Audit Committees
The Board of Directors appointed Cecile Silverman and
Kalvan Swanky to the Compensation and Audit Committees of
the Board of Directors in June 1995 and continue to serve in such
capacity. Such persons are not officers or employees of the
Company and thus are Independent Directors. Such individuals
will not have any contractual or other relationships with the
Company during the present fiscal year, except as directors and
except that Ms. Silverman's accounting firm provides tax
advisory services to the Company.
Audit Committee. The functions of the Audit Committee
are to receive reports with respect to loss contingencies, the public
disclosure or financial statement notation of which may be legally
required; annually review and examine those matters that relate
to a financial and performance audit of the Company's employee
plans; recommend to the Company's board of directors the
selection, retention and termination of the Company's
independent accountants; review the professional services,
proposed fees and independence of such accountants; and
provide for the periodic review and examination of management
performance in selected aspects of corporate responsibility. The
Audit Committee held one meeting during the fiscal year ended
November 30, 1995. See "Compensation Committee Interlocks
and Insider Participation" in the following section.
Compensation Committee. The functions of the
Compensation Committee are to review annually the
performance of the chairman and president and of the other
principal officers whose compensation is subject to the review
and recommendation by the Committee to the Company's board
of directors. Additionally, the Compensation Committee is to
review compensation of outside directors for service on the
Company's board of directors and for service on committees of
the Company's board of directors, and to review the level and
extent of applicable benefits provided by the Company with
respect to automobiles, travel, insurance, health and medical
coverage, stock options and other stock plans and benefits. The
Compensation Committee did not meet during the fiscal year
ended November 30, 1995. See "Compensation Committee
Interlocks and Insider Participation" in the following section.
The Compensation Committee has adopted a policy that
the Company should be competitive in total compensation and
include as a part of total compensation opportunities for equity
ownership and utilize incentives that offer competitive
compensation. Pursuant to these policies, the Compensation
Committee has instructed the Company's agents to obtain more
specific information regarding the Company's competitors and
the industry generally, with respect to compensation and options.
It is anticipated that the Compensation Committee will review
these materials and make recommendations in fiscal 1996 to the
Board of Directors regarding executive compensation.
Compensation Committee Interlocks and Insider Participation
Cecile Silverman and Kalvan Swanky serve as members of
the Compensation Committee. They were appointed in June 1995
and continue to serve in such capacity. These persons are
disinterested directors for purposes of administering the 1995
Incentive Stock Option Plan under SEC Rule 16(b)(3) and will
administer the 1996 Incentive Stock Option Plan proposed for adoption
at the 1996 Annual Meeting of Shareholders.
Director Compensation
Directors receive no compensation for their services as
members of the Board of Directors. The Company may
reimburse the independent directors for their reasonable out-of-
pocket expenses in connection with their attendance at meetings.
The Company may issue stock options or pay other
compensation to Ms. Silverman and Mr. Swanky in the future.
ITEM 11. EXECUTIVE COMPENSATION.
Summary Compensation Table
The following table sets forth the total compensation
received by the chief executive officer and each additional
executive officer whose compensation exceeded $100,000, paid to
the named individuals and group for services rendered in all
capacities to the Company and its subsidiaries for the fiscal years
ended November 30, 1995 and 1994.
<TABLE>
<CAPTION>
Long Term Compensation <F1>
Annual Compensation Awards Payouts
------------------- ------------------ --------
Other All
Annual Restricted Other
Name and Compen- Stock Options LTIP Compen-
Principal Position Year Salary Bonus sation Awards SARS<F3> Payouts sation
- ------------------ ---- ------- ----- ------ --------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joseph W. Zerbib 1995 $120,000 0 0 0 41,000 0 0
President 1994 $144,000 $115,000
Thierry E. Zerbib 1995 $120,000 0 0 0 41,000 0 0
Vice President - 1994 $144,000 $398,500
Software/Systems
and Secretary
Michael F. Zerbib 1995 $120,000 0 0 0 41,000 0 0
Vice President - 1994 $144,000 $398,500
Finance and Treasurer
Brian H. Loeb 1995 $120,000 0 0 0 41,000 0 0
Vice President - 1994 $144,000 $398,500
Marketing, Sales and
Operations
<FN>
<F1>
See "Stock Options and Restricted Stock Plans" below for
additional information on options which were granted to these
four officers.
<F2>
The Company entered into one-year employment agreements
with Joseph W. Zerbib, Thierry E. Zerbib, Brian H. Loeb and
Michael F. Zerbib which provide for an annual salary of $96,000
each, effective July 1, 1995. The Compensation Committee,
composed of Independent Directors, will determine future
executive compensation. The Company's policy is to maximize
the net income of the Company by providing performance
incentives to management based on the performance of the
Company.
<F3>
Does not include options granted to purchase 64,000 shares of
Common Stock divided equally among such individuals under
the 1996 Incentive Stock Option Plan, effective only upon approval of the
1996 Incentive Stock Option Plan by the shareholders at the 1996 Annual
Meeting of Shareholders. See "Option Grants in 1995 Fiscal Year".
</FN>
</TABLE>
Option Grants in 1995 Fiscal Year
The following executive officers were granted stock
options by the Company in fiscal 1995 in recognition of their past
contributions to the Company. In each case, the option price was
in excess of the fair market value of the Common Stock on the
date of grant.
<TABLE>
<CAPTION>
Percentage of Total
No. of Shares for which
Shares Underlying Options Granted Expiration
Name Options Granted to Employees Exercise Price Date <F1>
- --------------- --------------- ------------ ------------ ---------
<S> <C> <C> <C> <C>
Joseph W. Zerbib 41,000 15.5 $6.60 9/27/00
Thierry E. Zerbib 41,000 15.5 6.60 9/27/00
Brian H. Loeb 41,000 15.5 6.60 9/27/00
Michael F. Zerbib 41,000 15.5 6.60 9/27/00
<FN>
<F1>
Options became exercisable September 28, 1995.
<F2>
Does not include options granted to purchase 64,000 shares of
Common Stock divided equally among such individuals under
the 1996 Incentive Stock Option Plan, effective only upon approval of the
1996 Incentive Stock Option Plan by the shareholders at the 1996 Annual Meeting
of Shareholders. See "Option Grants in 1995 Fiscal Year" and "Approval of
Adoption of 1996 Incentive Stock Option Plan and 1996 Restricted Stock Plan."
</FN>
</TABLE>
Option Exercises in 1995 Fiscal Year
There were no exercises of outstanding stock options in
fiscal 1995.
Stock Option and Restricted Stock Plans
1995 Incentive Stock Option Plan. The Board of Directors
adopted the 1995 Incentive Stock Option Plan ("Plan") on
February 1, 1995. Under the Plan, 264,000 shares are reserved for
issuance and all of such shares are now subject to options granted
under the Plan. The Plan authorizes the Company to grant to key
employees of the Company (i) incentive stock options to purchase
shares of Common Stock and (ii) non-qualified stock options to
purchase shares of Common Stock. Such Plan was approved by
the stockholders at a Special Meeting of Stockholders which was
held on February 1, 1995.
The objectives of the Plan are to provide incentives to key
employees to achieve financial results aimed at increasing
stockholder value and attracting talented individuals to the
Company. The Compensation Committee to be formed by the
Board of Directors and comprised of disinterested Directors will
have the discretion to make awards of stock options. Although
the Plan does not specify what portion of the shares may be
awarded in the form of incentive stock options or non-statutory
options, at the time of adoption it was anticipated that a
substantially greater number of incentive stock options would be
awarded under the Plan. The incentive stock options are
qualified stock options under the Internal Revenue Code.
Further, the Plan is a stock option plan meeting the requirements
of Rule 16b-3 promulgated under the Exchange Act. Persons
eligible to participate in the Plan will be those employees of the
Company whose performance, in the judgment of the
Compensation Committee, can have significant effect on the
success of the Company.
The Plan is administered by the Compensation
Committee, which has the authority to interpret its provisions, to
establish and amend rules for its administration, to determine the
types and amounts of awards to be made pursuant to the Plan,
subject to the Plan's limitations, and to approve recommendations
made by management of the Company as to who should receive
awards.
Incentive stock options may be granted under the Plan for
terms of up to ten years and at an exercise price at least equal to
100% of the fair market value of the Common Stock as of the date
of grant, and 85% of the fair market value in the case of non-
statutory options, except that incentive options granted to any
person who owns stock possessing more than 10% of the
combined voting power of all classes of the Company's stock or of
any parent or subsidiary corporation must have an exercise price
at least equal to 110% of the fair market value of the Company's
Common Stock on the date of grant. The aggregate fair market
value, determined as of the time an incentive stock option is
granted, of the Common Stock with respect to which incentive
stock options are exercisable by an employee for the first time
during any calendar year shall not exceed $100,000. There is no
aggregate dollar limitation on the amount of non-statutory stock
options which may be exercisable for the first time by an
employee during any calendar year. Payment of the exercise
price is to be in cash, although the Compensation Committee
may, in its discretion, allow payment in the form of shares of the
Company's Common Stock under certain circumstances. Any
option granted under the Plan will expire at the time fixed by the
Committee, which will not be more than ten years after the date it
is granted. Any employee receiving a grant must remain
continuously employed by the Company for a period of twelve
months after the date of the grant, as a condition to the exercise of
the option. The Compensation Committee may also specify when
all or part of an option becomes exercisable, but in the absence of
such specification, the option will ordinarily be exercisable in
whole or part at any time during its term. In addition, optionees
who are directors or executive officers of the Company may not
exercise any portion of an option within six months of the date of
grant. Subject to the foregoing, the Compensation Committee
may accelerate the exercisability of any option in its discretion.
Options granted under the Plan are not assignable.
Options may be exercised only while the optionee is employed by
the Company or within twelve months after termination by
reason of death, within twelve months after the date of disability,
or within ten days after termination for any other reason.
The Company may assist optionees in paying the exercise
price of options granted under the Plan by either the extension of
a loan by the Company for payment by the optionee of the
exercise price in installments, or a guarantee by the Company of a
loan obtained by the optionee from a third party. The terms of
any loan, installment payments or guarantees, including the
interest rate and terms of repayment and collateral requirements,
if any, shall be determined by the Board of Directors in its sole
discretion.
The Company issued options under the Plan to purchase
100,000 shares of Common Stock to certain key employees and
options to purchase 164,000 shares to its four executive officers,
Joseph W. Zerbib, Thierry E. Zerbib, Michael F. Zerbib and Brian
H. Loeb in June 1995. Such options are exercisable commencing
September 28, 1995 through September 27, 2000. The exercise
price of the options granted to key employees is $6.00 per share.
The exercise price of the options granted to the executive officers,
is $6.60 per share. See "Principal Shareholders" and "Certain
Relationships and Related Transactions."
1995 Restricted Stock Plan. The Board of Directors adopted
the 1995 Restricted Stock Plan ("Restricted Stock Plan") on
February 1, 1995. Such Plan was approved by the stockholders at
a Special Meeting of Stockholders which was held on February 1,
1995. Under the Restricted Stock Plan, shares of Common Stock
of the Company are reserved, in such amounts as determined by
the Board of Directors, for issuance as part of the total shares
reserved under the Plan described above. The Restricted Stock
Plan authorizes the grant of shares of Common Stock to key
employees, consultants, researchers and to members of the
Advisory Board. The Restricted Stock Plan is administered by the
Board of Directors or a committee of the Board, which determines
the persons to whom shares of Common Stock will be granted
and the terms of such share grants.
No shares have been granted under the Restricted Stock
Plan. The Company anticipates that shares will be granted under
the Restricted Stock Plan by the Compensation Committee from
time to time in the future depending upon the performance of the
Company and availability of unreserved shares under the Plan
and Restricted Stock Plan.
1996 Incentive Stock Option Plan. The Board of Directors adopted the 1996
Incentive Stock Option Plan ("1996 ISO Plan") on April 15, 1996. Under the
1996 ISO Plan 264,000 shares are reserved for issuance under terms and
conditions substantially similar to the 1995 Incentive Stock Option Plan
described above. The 1996 ISO Plan is subject to stockholder approval at the
next annual meeting of stockholders.
1996 Restricted Stock Option Plan. The Board of Directors adopted the 1996
Restricted Stock Option Plan ("1996 Restricted Stock Plan") on APril 15, 1996.
Under the 1996 Restricted Stock Plan, shares of common stock are reserved in
such amounts as the Board of Directors determine is necessary for the
requirements of teh 1996 Resricted Stock Plan. The terms and conditions of the
1996 Restricted Stock Plan are substantially similar to those of the 1995
Restricted Stock Option Plan described above.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
The following table sets forth information, as of June 14,
1996, with respect to the number of shares of Common Stock of
the Company beneficially owned by individual directors, by all
directors and officers of the Company as a group, and by persons
known by the Company to own more than 5% of the Company's
Common Stock. The Company has no other class of stock
outstanding.
<TABLE>
Name of Beneficial Number of Percent of Common
Owner and Address Shares <F1><F2><F3> Stock Owned<F1><F2>
- ------------------------- ------------------- -------------------
<S> <C> <C>
Thierry E. Zerbib 618,500 16.2
3216 North Third Street
Phoenix, Arizona 85012
Brian H. Loeb and 618,500 16.2
Irene Loeb
3216 North Third Street
Phoenix, Arizona 85012
Michael F. Zerbib 613,500 16.0
3216 North Third Street
Phoenix, Arizona 85012
Joseph W. Zerbib 334,250 8.7
3216 North Third Street
Phoenix, Arizona 85012
Nicolas Zerbib 293,750 7.7
3216 North Third Street
Phoenix, Arizona 85012
Cecile Silverman 1,000 <F4>
3216 North Third Street
Phoenix, Arizona 85012
Kalvan Swanky 1,000 <F4>
4725 North 33rd Street
Phoenix, Arizona 85018
All directors and 2,480,500 64.8
officers as a group
(six persons)
<FN>
<F1>
Includes 41,000 shares of Common Stock which are issuable
upon exercise of stock options the Company granted to each of
the following: Joseph W. Zerbib, Thierry E. Zerbib, Michael F.
Zerbib and Brian H. Loeb. The options were exercisable
commencing September 28, 1995 through September 27, 2000 to
purchase shares of Common Stock at a price of $6.60 per share.
See "Option Grants in 1995 Fiscal Year" and "Stock Option and
Restricted Stock Plans."
<F2>
Does not include options granted to purchase 64,000 shares of
Common Stock divided equally among such individuals under
the Plan, effective only upon approval of the Plan by the
shareholders at the 1996 Annual Meeting of Shareholders. See
"Option Grants in 1995 Fiscal Year".
<F3>
Includes 1,000 shares of Common Stock which are issuable
upon exercise of stock options which the Company granted each
to Cecile Silverman and Kalvan Swanky in April 1996. The
options are exercisable at a price of $4.75 per share through April
15, 2001 and were not issued pursuant to any stock option plan of
the Company.
<F4>
Less than 1%
</FN>
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Certain Transactions
The Company leases 13,500 square feet of office space
from Joseph W. Zerbib, an officer, director and principal
shareholder of the Company. The Company's obligations under
the terms of the lease agreement were approximately $84,336 for
fiscal 1995. The Company has leased this office in fiscal 1996 on a
month-to-month basis at a rate of $7,028 per month. The
Company believes that the foregoing lease rate is no less
favorable than it could obtain from an unaffiliated third party for
comparable space.
The Board of Directors has adopted a policy that provides
that all transactions between the Company and its executive
officers, directors, employees and affiliates are subject to the
approval of a majority of disinterested directors of the Board of
Directors and will be on terms that are no less favorable to the
Company than those that could be negotiated with unaffiliated
parties.
The Company retired approximately $280,000 of debt
which the Company owed to First Interstate Bank of Arizona out
of a portion of the proceeds of its June 1995 initial public offering.
Joseph W. Zerbib, Thierry E. Zerbib, Michael F. Zerbib and Brian
H. Loeb had personally guaranteed payment of this obligation
and therefore received a benefit to such extent upon the
Company's payment of the loan.
The Company has entered into one-year employment
agreements with Joseph W. Zerbib, Thierry E. Zerbib, Michael F.
Zerbib and Brian H. Loeb in their respective capacities. See
"Executive Compensation - Employment Agreements."
The Company issued options to purchase a total of 164,000 shares of Common
Stock to Joseph W. Zerbib, Thierry E. Zerbib, Michael F. Zerbib and Brian H.
Loeb in fiscal 1995 under the 1995 Incentive Stock Option Plan. Such options
were divided equally among the four individuals. In April 1996 the Company
also granted options under the Plan to purchase 64,000 shares of
Common Stock to the same four individuals in equal proportions,
such grants to be effective only upon approval of the Plan by the
shareholders at the 1996 Annual Meeting of Shareholders. The
options are exercisable at a price of $5.23 per share for a term of
five years after their effective date. Finally, in April 1996 the
Company granted options to Cecile Silverman and Kalvan
Swanky exercisable to purchase 1,000 shares of Common Stock at
a price of $4.75 per share through April 15, 2001. See "Option
Grants in 1995 Fiscal Year," "Stock Option and Restricted Stock
Plans," and "Item 12. Security Ownership of Certain Beneficial Owners and
Management."
Policy Regarding Transactions
Management believes that all of its existing transactions
with affiliates are on terms no less favorable than could have been
obtained from unaffiliated parties. The Board of Directors has
adopted a policy that all future material transactions and loans
between the Company and its executive officers, directors,
employees and affiliates will be subject to the approval of the
majority of independent and disinterested directors and that such
transactions and loans, and any forgiveness of loans, will be on
terms that are no less favorable to the Company than those that
are generally available from unaffiliated third parties.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K.
(a) Exhibits
The following Exhibits are filed herewith pursuant to Rule 601 of
Regulation S-K and paragraph (c) of this Item 14.
No. Description Reference
10.1 1996 Incentive Stock Option Plan *
10.2 1996 Restricted Stock Option Plan *
_____________________
* Filed herewith
(b) Current Reports on Form 8-K
The Company filed no reports on Form 8-K during the last quarter of
the fiscal year ended November 30, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TELESOFT CORP.
Dated: June 18, 1996 By /s/ Joseph W. Zerbib
Joseph W. Zerbib,
President and Principal
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature and Title Date
/s/ Joseph W. Zerbib June 18,
1996
Joseph W. Zerbib,
President, Principal Executive Officer and Director
/s/ Thierry E. Zerbib June 18, 1996
Thierry E. Zerbib, Vice President - Software/Systems,
Secretary and Director
/s/ Brian H. Loeb June 18, 1996
Brian H. Loeb, Vice President - Marketing,
Sales and Operations and Director
/s/ Michael F. Zerbib June 18, 1996
Michael F. Zerbib, Vice President - Finance,
Treasurer and Director
/s/ Cecile Silverman June 18, 1996
Cecile Silverman, Director
/s/ Kalvan Swankey June 18, 1996
Kalvan Swankey, Director
Exhibit 10.1
TELESOFT CORP.
1996 INCENTIVE STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1996
Incentive Stock Option Plan are to provide additional incentive to
Employees of the Company to achieve financial results aimed at
increasing stockholder value and to attract and retain the best
available personnel for positions of responsibility within the
Company through the grant of options to purchase shares of the
Company's Common Stock.
Options granted hereunder may be either Incentive
Stock or Non-Statutory Stock Options, at the discretion of the
Board. The type of options granted shall be reflected in the terms
of written Stock Option agreements.
2. Definitions. As used herein, the following
definitions shall apply:
(a) "Board" shall mean the Board of Directors
of the Company or, when appropriate, the Committee
administering the Plan, if one has been appointed.
(b) "Code" shall mean the Internal Revenue
Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
(c) "Common Stock" shall mean the common
stock of the Company described in the Company's Articles of
Incorporation, as amended.
(d) "Company" shall mean TELESOFT CORP.,
an Arizona corporation, and shall include any parent or
subsidiary corporation of the Company as defined in Sections
425(e) and (f), respectively, of the Code.
(e) "Committee" shall mean the Committee
appointed by the Board in accordance with paragraph (a) of
Section 4 of the Plan, if one is appointed.
(f) "Employee" shall mean any person,
including salaried officers and directors, employed by the
Company. The payment of a director's fee by the Company shall
not be sufficient to constitute "employment" by the Company.
(g) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(h) "Fair Market Value" shall mean, with respect
to the date a given Option is granted or exercised, the value of the
Common Stock determined by the Board in such manner as it
may deem equitable for Plan purposes but, in the case of an
Incentive Stock Option, no less than is required by applicable
laws or regulations; provided, however, that where there is a
public market for the Common Stock, the Fair Market Value per
Share shall be the mean of the bid and asked prices of the
Common Stock on the date of grant, as reported in the Wall Street
Journal, or, if not so reported, as otherwise reported in the
National Association of Securities Dealers Automated Quotation
System ("Nasdaq") or, in the event the Common Stock is listed on
the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market or the Nasdaq SmallCap Market, the
Fair Market Value per Share shall be the closing price on the
relevant Nasdaq market or exchange on the date of grant of the
Option, as reported in the Wall Street Journal.
(i) "Incentive Stock Option" shall mean an
Option which is intended to qualify as an incentive stock option
within the meaning of Section 422 of the Code.
(j)
(j) "Option" shall mean a stock option granted
under the Plan.
(k) "Optioned Stock" shall mean the Common
Stock subject to an Option.
(l) "Optionee" shall mean an Employee of the
Company who has been granted one or more Options.
(m) "Nonstatutory Stock Option" shall mean an
Option which is not an Incentive Stock Option.
(n) "Parent" shall mean a "parent corporation,"
whether now or hereafter existing, as defined in Section 425(e) of
the Code.
(o) "Plan" shall mean this 1996 Incentive Stock
Option Plan.
(p) "Share" shall mean a share of the Common
Stock, as adjusted in accordance with Section 11 of the Plan.
(q) "Stock Option Agreement" shall mean the
written agreement between the Company and the Optionee
relating to the grant of an Option.
(r) "Subsidiary" shall mean a "subsidiary
corporation," whether now or hereafter existing, as defined in
Section 425(f) of the Code.
(s) "Tax Date" shall mean the date an Optionee
is required to pay the Company an amount with respect to tax
withholding obligations in connection with the exercise of an
option.
3. Common Stock Subject to the Plan. Subject to the
provisions of Section 11 of the Plan, the maximum aggregate
number of shares which may be optioned and sold under the Plan
is Two Hundred Sixty Thousand (260,000) Shares of Common
Stock. The Shares may be authorized, but unissued, or
previously issued Shares acquired by the Company and held in
treasury.
If an Option should expire or become
unexercisable for any reason without having been exercised in
full, the unpurchased Shares covered by such Option shall, unless
the Plan shall have been terminated, be available for future grants
of Options.
4. Administration of the Plan.
(a) Procedure.
(i) The Plan shall be administered by
the Board in accordance with Rule 16b-3 under the Exchange Act
("Rule 16b-3"); provided, however, that the Board may appoint a
Committee to administer the Plan at any time or from time to
time, and, provided further, that if the Board is not "disinterested"
within the meaning of Rule 16b-3, the Plan shall be administered
by a Committee in accordance with Rule 16b-3.
(ii) Once appointed, the Committee
shall continue to serve until otherwise directed by the Board.
From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove
members (with or without cause), appoint new members in
substitution therefor, and fill vacancies however caused:
provided, however, that at no time may any person serve on the
Committee if that person's membership would cause the
Committee not to satisfy the "disinterested administration"
requirements of Rule 16b-3.
(b) Powers of the Board. Subject to the
provisions of the Plan, the Board shall have the authority, in its
discretion: (i) to grant Incentive Stock Options and Nonstatutory
Stock Options; (ii) to determine, upon review of relevant
information and in accordance with Section 2 of the Plan, the Fair
Market Value of the Common Stock; (iii) to determine the exercise
price per Share of Options to be granted, which exercise price
shall be determined in accordance with Section 8(a) of the Plan;
(iv) to determine the Employees to whom, and the time or times
at which, Options shall be granted and the number of Shares to be
represented by each Option; (v) to interpret the Plan; (vi) to
prescribe, amend and rescind rules and regulations relating to the
Plan; (vii) to determine the terms and provisions of each Option
granted (which need not be identical) and, with the consent of the
Optionee thereof, modify or amend each Option; (viii) to
accelerate or defer (with the consent of the Optionee) the exercise
date of any Option; (ix) to authorize any person to execute on
behalf of the Company any instrument required to effectuate the
grant of an Option previously granted by the Board; (x) to accept
or reject the election made by an Optionee pursuant to Section 17
of the Plan; and (xi) to make all other determinations deemed
necessary or advisable for the administration of the Plan.
(c) Effect of Board's Decision. All decisions,
determinations and interpretations of the Board shall be final and
binding on all Optionees and any other holders of any Options
granted under the Plan.
5. Eligibility.
(a) Consistent with the Plan's purposes,
Options may be granted only to Employees of the Company as
determined by the Board. An Employee who has been granted an
Option may, if he is otherwise eligible, be granted an additional
Option or Options. Incentive Stock Options may be granted only
to those Employees who meet the requirements applicable under
Section 422 of the Code.
(b) All Options granted to Employees of the
Company under the Plan will be subject to forfeiture until such
time as the Optionee has been continuously employed by the
Company for one year after the date of the grant of the Options,
and may not be exercised prior to such time. At such time as the
Optionee has been continuously employed by the Company for
one year, the foregoing restriction shall lapse and the Optionee
may exercise the Options at any time otherwise consistent with
the Plan.
(c) With respect to Incentive Stock Options, the
aggregate Fair Market Value (determined at the time the
Incentive Stock Option is granted) of the Common Stock with
respect to which Incentive Stock Options are exercisable for the
first time by the employee during any calendar year (under all
employee benefit plans of the Company) shall not exceed One
Hundred Thousand Dollars ($100,000).
6. Stockholder Approval and Effective Dates. The
Plan became effective upon approval by the Board. The grant of
any options under the Plan is effective only upon approval of the
Plan by the Shareholders. No Option may be granted under the
Plan after April 14, 2006; provided, however that the Plan and all
outstanding Options shall remain in effect until such Options
have expired or until such Options are canceled.
7. Term of Option. Unless otherwise provided in the
Stock Option Agreement, the term of each Option shall be ten (10)
years from the date of grant thereof. In no case shall the term of
any Option exceed ten (10) years from the date of grant thereof.
Notwithstanding the above, in the case of an Incentive Stock
Option granted to an Employee who, at the time the Incentive
Stock Option is granted, owns ten percent (10%) or more of the
Common Stock as such amount is calculated under Section
422(b)(6) of the Code ("Ten Percent Stockholder"), the term of the
Incentive Stock Option shall be five (5) years from the date of
grant thereof or such shorter time as may be provided in the
Stock Option Agreement.
8. Exercise Price and Payment.
(a) Exercise Price. The per Share exercise price
for the Shares to be issued pursuant to exercise of an Option shall
be determined by the Board, but in the case of an Incentive Stock
Option shall be no less than one hundred percent (100%) of the
Fair Market Value per share on the date of grant, and in the case
of a Nonstatutory Stock Option shall be no less than eighty-five
percent (85%) of the Fair Market Value per share on the date of
grant. Notwithstanding the foregoing, in the case of an Incentive
Stock Option granted to an Employee who, at the time of the
grant of such Incentive Stock Option, is a Ten Percent
Stockholder, the per Share exercise price shall be no less than one
hundred ten percent (110%) of the Fair Market Value per Share on
the date of grant.
(b) Payment. The price of an exercised Option
and the Employee's portion of any taxes attributable to the
delivery of Common Stock under the Plan, or portion thereof,
shall be paid:
(i) In United States dollars in cash or
by check, bank draft or money order payable to the order of the
Company; or
(ii) At the discretion of the Board,
through the delivery of shares of Common Stock with an
aggregate Fair Market Value equal to the option price and
withholding taxes, if any; or
(iii) At the election of the Optionee
pursuant to Section 17 and with the consent of the Board
pursuant to Section 4(b)(x), by the Company's retention of such
number of shares of Common Stock subject to the exercised
Option which have an aggregate Fair Market Value on the
exercise date equal to the Employee's portion of the Company's
aggregate federal, state, local and foreign tax withholding and
FICA and FUTA obligations with respect to income generated by
the exercise of the Option by Optionee;
(iv) By a combination of (i), (ii) and (iii)
above; or
(v) In the manner provided in
subsection (c) below.
The Board shall determine acceptable
methods for tendering Common Stock as payment upon exercise
of an Option and may impose such limitations and prohibitions
on the use of Common Stock to exercise an Option as it deems
appropriate.
(c) Financial Assistance to Optionees. The Board
may assist Optionees in paying the exercise price of Options
granted under this Plan in the following manner:
(i) The extension of a loan to the
Optionee by the Company; or
(ii) Payment by the Optionee of the
exercise price in installments; or
(iii) A guaranty by the Company of a
loan obtained by the Optionee from a third party.
The terms of any loans, installment
payments or guarantees, including the interest rate and terms of
repayment, and collateral requirements, if any, shall be
determined by the Board, in its sole discretion. Subject to
applicable margin requirements, any loans, installment payments
or guarantees authorized by the Board pursuant to the Plan may
be granted without security, but the maximum credit available
shall not exceed the exercise price for the Shares for which the
Option is to be exercised, plus any federal and state income tax
liability incurred in connection with the exercise of the Option.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder.
Any Option granted hereunder shall be exercisable at such times
and under such conditions as determined by the Board, including
performance criteria with respect to the Company and/or the
Optionee, and as shall be permissible under the terms of the Plan.
Unless otherwise determined by the Board at the time of grant,
an Option may be exercised in whole or in part. An Option may
not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised
when written notice of such exercise has been given to the
Company in accordance with the terms of the Option by the
person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by
the Board, consist of any consideration and method of payment
allowable under Section 8(b) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the
stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise
of the Option. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall
result in a decrease in the number of Shares which thereafter may
be available, both for purposes of the Plan and for sale under the
Option, by the number of Shares for which the Option is
exercised.
(b) Termination of Status as an Employee. If an
Employee's employment by the Company is terminated for cause,
then any Option held by the Employee shall be immediately
canceled upon termination of employment and the Employee
shall have no further rights with respect to such Option. Unless
otherwise provided in the Stock Option Agreement (which may
reduce but not increase the time period described below), if an
Employee's employment by the Company is terminated for
reasons other than cause, and does not occur due to death or
disability, then the Employee may, with the consent of the Board,
but only within ten (10) days after the date he ceases to be an
Employee of the Company, exercise his Option to the extent that
he was entitled to exercise it at the date of such termination. To
the extent that he was not entitled to exercise the Option at the
date of such termination, or if he does not exercise such Option
(which he was entitled to exercise) within the time specified
herein, the Option shall terminate.
(c) Disability. Unless otherwise provided in the
Stock Option Agreement (which may reduce but not increase the
time period described below), notwithstanding the provisions of
Section 9(b) above, in the event an Employee is unable to continue
his employment with the Company as a result of his permanent
and total disability (as defined in Section 22(e)(3) of the Code), he
may, but only within twelve (12) months from the date of
termination, exercise his Option to the extent he was entitled to
exercise it at the date of such termination. To the extent that he
was not entitled to exercise the Option at the date of termination,
or if he does not exercise such Option (which he was entitled to
exercise) within the time specified herein, the Option shall
terminate.
(d) Death. Unless otherwise provided in the
Stock Option Agreement (which may reduce but not increase the
time period described below), if an Employee dies during the
term of the Option and is at the time of his death an Employee of
the Company who shall have been in continuous status as an
Employee since the date of grant of the Option, the Option may
be exercised at any time within twelve (12) months following the
date of death (or such other period of time as is determined by
the Board) by the Employee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but
only to the extent that an Employee was entitled to exercise the
Option on the date of death. To the extent the Employee was not
entitled to exercise the Option on the date of death, or if the
Employee's estate, or person who acquired the right to exercise
the Option by bequest or inheritance, does not exercise such
Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate.
10. Non-Transferability of Options. An Option may
not be sold, pledged, assigned, hypothecated, transferred or
disposed of in any manner other than by will or by the laws of
descent or distribution, or pursuant to a "qualified domestic
relations order" under the Code and ERISA, and may be
exercised, during the lifetime of the Optionee, only by the
Optionee.
11. Adjustments Upon Changes in Capitalization or
Merger. Subject to any required action by the stockholders of the
Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common
Stock which have been authorized for issuance under the Plan but
as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option,
as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for
any increase or decrease in the number of issued shares of
Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration
by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in
that respect shall be final, binding and conclusive. Except as
expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock
of any class, shall affect and no adjustment by reason thereof,
shall be made with respect to the number or price of shares of
Common Stock subject to an Option.
In the event of the proposed dissolution or
liquidation of the Company, the Option will terminate
immediately prior to the consummation of such proposed action,
unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that any
Option shall terminate as of a date fixed by the Board and give
each Optionee the right to exercise his Option as to all or any part
of the Optioned Stock, including Shares as to which the Option
would not otherwise be exercisable. In the event of a proposed
sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Board
determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the Optionee shall have the right
to exercise the option as to all of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable.
If the Board makes an Option fully exercisable in lieu of
assumption or substitution in the event of a merger of sale of
assets, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of sixty (60) days from the date of
such notice (but not later than the expiration of the term of the
Option under the Option Agreement), and the Option will
terminate upon the expiration of such period.
12. Time of Granting Options. The date of grant of an
Option shall, for all purposes, be the date on which the Board
makes the determination granting such Option. Notice of the
determination shall be given to each Employee to whom an
Option is so granted within a reasonable time after the date of
such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board
may amend or terminate the Plan from time to time in such
respects as the Board may deem advisable; provided, however,
that the following revisions or amendments shall require
approval of the Stockholders of the Company, to the extent
required by law, rule or regulation:
(i) Any material increase in the number
of Shares subject to the Plan, other than in connection with an
adjustment under Section 11 of the Plan;
(ii) Any material change in the
designation of the Employees eligible to be granted Options; or
(iii) Any material increase in the benefits
accruing to participants under the Plan.
(b) Effect of Amendment or Termination. Any
such amendment or termination of the Plan shall not affect
Options already granted and such Options shall remain in full
force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and
signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall
not be issued pursuant to the exercise of an Option unless the
exercise of such Option and the issuance and delivery of such
Shares pursuant thereto shall comply with all relevant provisions
of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations
promulgated thereunder, and the requirements of any stock
exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with
respect to such compliance.
As a condition to the exercise of an Option, the
Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion
of counsel for the company, such a representation is required by
any of the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from
any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have
been obtained.
In the case of an Incentive Stock Option, any
Optionee who disposes of Shares of Common Stock acquired
upon the exercise of an Option by sale or exchange (a) either
within two (2) years after the date of the grant of the Option
under which the Common Stock was acquired or (b) within one
(1) year after the acquisition of such Shares of Common Stock
shall notify the Company of such disposition and of the amount
realized upon such disposition.
15. Reservation of Shares. The Company will at all
times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan.
16. Option Agreement. Options shall be evidenced by
Stock Option Agreements in such form as the Board shall
approve.
17. Withholding Taxes. Subject to Section 4(b)(x) of
the Plan and prior to the Tax Date, the Optionee may make an
irrevocable election to have the Company withhold from those
Shares that would otherwise be received upon the exercise of any
Option, a number of Shares having a Fair Market Value equal to
the minimum amount necessary to satisfy the Company's federal,
state, local and foreign tax withholding obligations and FICA and
FUTA obligations with respect to the exercise of such Option by
the Optionee.
An Optionee who is also an officer of the Company
must make the above described election:
(a) at least six months after the date of grant of
the Option (except in the event of death or disability); and
(b) either:
(i) six months prior to the Tax Date, or
(ii) prior to the Tax Date and during the
period beginning on the third business day following the date the
Company releases its quarterly or annual statement of sales and
earnings and ending on the twelfth business day following such
date.
18. Miscellaneous Provisions.
(a) Plan Expense. Any expense of
administering this Plan shall be borne by the Company.
(b) Use of Exercise Proceeds. The payment
received from Optionees from the exercise of Options shall be
used for the general corporate purposes of the Company.
(c) Construction of Plan. The place of
administration of the Plan shall be in the State of Arizona, and the
validity, construction, interpretation, administration and effect of
the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined in accordance with the laws of the State
of Arizona without regard to conflict of law principles and, where
applicable, in accordance with the Code.
(d) Taxes. The Company shall be entitled if
necessary or desirable to pay or withhold the amount of any tax
attributable to the delivery of Common Stock under the Plan from
other amounts payable to the Employee after giving the person
entitled to receive such Common Stock notice as far in advance as
practical, and the Company may defer making delivery of such
Common Stock if any such tax may be pending unless and until
indemnified to its satisfaction.
(e) Indemnification. In addition to such other
rights of indemnification as they may have as members of the
Board, the members of the Board shall be indemnified by the
Company against all costs and expenses reasonably incurred by
them in connection with any action, suit or proceeding to which
they or any of them may be party by reason of any action taken or
failure to act under or in connection with the Plan or any Option,
and against all amounts paid by them in settlement thereof
(provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction
of a judgment in any such action, suit or proceeding, except a
judgment based upon a finding of bad faith; provided that upon
the institution of any such action, suit or proceeding a Board
member shall, in writing, give the Company notice thereof and an
opportunity, at its own expense, to handle and defend the same
before such Board member undertakes to handle and defend it on
her or his own behalf.
(f) Gender. For purposes of this Plan, words
used in the masculine gender shall include the feminine and
neuter, and the singular shall include the plural and vice versa, as
appropriate.
(g) No Employment Agreement. The Plan shall
not confer upon any Optionee any right with respect to
continuation of employment with the Company, nor shall it
interfere in any way with his right or the Company's right to
terminate his employment at any time.
(h)
Exhibit 10.2
TELESOFT CORP.
1996 RESTRICTED STOCK PLAN
1. Purposes of the Plan. The purposes of this 1996
Restricted Stock Plan are to provide additional incentive to
employees and others who provide services to the Company to
achieve financial results aimed at increasing stockholder value
and to attract and retain the best available personnel for positions
of responsibility within the Company through the grant of
restricted shares of the Company's Common Stock.
2. Definitions. As used herein, the following
definitions shall apply:
(a) "Award" shall mean a grant of one or more
shares of Restricted Stock.
(b) "Board" shall mean the Board of Directors
of the Company or, when appropriate, the Committee
administering the Plan, if one has been appointed.
(c) "Code" shall mean the Internal Revenue
Code of 1986, as amended, and the rules and regulations
promulgated thereunder.
(d) "Common Stock" shall mean the common
stock of the Company described in the Company's Articles of
Incorporation, as amended.
(e) "Company" shall mean TELESOFT CORP.,
an Arizona corporation, and shall include any parent or
subsidiary corporation of the Company as defined in Sections
425(e) and (f), respectively, of the Code.
(f) "Committee" shall mean the Committee
appointed by the Board in accordance with paragraph (a) of
Section 4 of the Plan, if one is appointed.
(g) "Employee" shall mean any person,
including salaried officers and directors, employed by the
Company.
(h) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
(i) "Fair Market Value" shall mean, with respect
to the date a given Award is granted, the value of the Common
Stock determined by the Board in such manner as it may deem
equitable for Plan purposes; provided, however, that where there is
a public market for the Common Stock, the Fair Market Value per
Share shall be the mean of the bid and asked prices of the
Common Stock on the date of grant, as reported in the Wall Street
Journal, or, if not so reported, as otherwise reported in the
National Association of Securities Dealers Automated Quotation
System ("Nasdaq"), or, in the event the Common Stock is listed on
the New York Stock Exchange, the American Stock Exchange, the
Nasdaq National Market or the Nasdaq SmallCap Market, the
Fair Market Value per Share shall be the closing price on the
relevant Nasdaq market or exchange on the date of grant of the
Award, as reported in the Wall Street Journal.
(j) "Grantee" shall mean an employee or other
individual who provides services to the Company who has been
granted one or more shares of Restricted Stock.
(k) "Parent" shall mean a "parent corporation,"
whether now or hereafter existing, as defined in Section 425(e) of
the Code.
(l) "Plan" shall mean this 1996 Restricted Stock
Plan.
(m) "Restricted Stock" shall mean Common
Stock, issued and outstanding, restricted as to transfer and subject
to a substantial risk of forfeiture.
(n) Share" shall mean a share of the Common
Stock, as adjusted in accordance with Section 8 of the Plan.
(o) "Stock Purchase Agreement" shall mean the
written agreement between the Company and the Grantee
relating to the grant of an Award.
(p) "Subsidiary" shall mean a "subsidiary
corporation," whether now or hereafter existing, as defined in
Section 425(f) of the Code.
(q) "Tax Date" shall mean the date a Grantee is
required to pay the Company an amount with respect to tax
withholding obligations in connection with an Award.
3. Common Stock Subject to the Plan. Subject to the
provisions of Section 8 of the Plan, the maximum aggregate
number of shares of Common Stock which may be granted under
the Plan may be determined by the Board of Directors, for
issuance as part of the total Shares reserved under the 1996
Incentive Stock Option Plan. The Shares may be authorized, but
unissued, or previously issued Shares acquired by the Company
and held in treasury. If Restricted Stock is forfeited, the forfeited
Shares shall, unless the Plan shall have been terminated, be
available for future grants under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) The Plan shall be administered by
the Board in accordance with Rule 16b-3 under the Exchange Act
("Rule 16b-3"); provided, however, that the Board may appoint a
Committee to administer the Plan at any time or from time to
time, and, provided further, that if the Board is not "disinterested"
within the meaning of Rule 16b-3, the Plan shall be administered
by a Committee in accordance with Rule 16b-3.
(ii) Once appointed, the Committee
shall continue to serve until otherwise directed by the Board.
From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove
members (with or without cause), appoint new members in
substitution therefor, and fill vacancies however caused:
provided, however, that at no time may any person serve on the
Committee if that person's membership would cause the
Committee not to satisfy the "disinterested administration"
requirements of Rule 16b-3.
(b) Powers of the Board. Subject to the
provisions of the Plan, the Board shall have the authority, in its
discretion: (i) to grant Restricted Stock; (ii) to determine, upon
review of relevant information and in accordance with Section 2
of the Plan, the Fair Market Value of the Common Stock; (iii) to
determine the Employees and other individuals who provide
services to the Company to whom, and the time or times at
which, Restricted Stock shall be granted and the number of Shares
to be represented by each Award; (iv) to interpret the Plan; (v) to
prescribe, amend and rescind rules and regulations relating to the
Plan; (vi) to determine the terms and provisions of each Award
granted (which need not be identical) and, with the consent of the
Grantee thereof, modify or amend each Award; (vii) to accelerate
or defer (with the consent of the Grantee) the date of any Award;
(viii) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an
Award previously granted by the Board; (ix) to accept or reject
the election made by a Grantee pursuant to Section 14 of the Plan;
and (x) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) Effect of Board's Decision. All decisions,
determinations and interpretations of the Board shall be final and
binding on all Grantees and any other holders of any Restricted
Stock granted under the Plan.
5. Eligibility. Consistent with the Plan's purposes,
Restricted Stock may be granted only to Employees and other
individuals who provide services to the Company as determined
by the Board. An Employee or other individual who provides
services to the Company who has been granted Restricted Stock
may, if he is otherwise eligible, be granted additional Restricted
Stock.
6. Stockholder Approval and Effective Dates. The
Plan became effective upon approval by the Board. No Award
may be granted under the Plan after April 14, 2006. The grant of
any Restricted Stock under the Plan is effective only upon
approval of the Plan by the Shareholders.
7. Restricted Stock.
(a) Awards. The Committee may award
Restricted Stock to any Employee or other individual who
provides services to the Company. Each certificate for Restricted
Stock shall be registered in the name of the Grantee and
deposited by him, together with a stock power endorsed in blank,
with the Company. Restricted Stock shall be awarded by a
signed written agreement containing such terms and conditions
as the Board may determine. At the time of an award there shall
be established a restriction period of such length as shall be
determined by the Board. Shares of Restricted Stock shall not be
sold, assigned, transferred, pledged or otherwise encumbered,
except as hereinafter provided, during the restriction period.
Except for such restrictions on transfer, the Grantee as owner of
such shares of Restricted Stock shall have all the rights of a holder
of Common Stock. At the expiration of the restriction period, the
Company shall redeliver to the Grantee (or his legal
representative or designated beneficiary) the Restricted Stock de-
posited pursuant to this paragraph 7.
(b) Termination. If a Grantee ceases to be an
Employee or to provide services to the Company with the consent
of the Board, or upon his death, retirement or total and
permanent disability, the restriction imposed under paragraph
7(a) shall lapse with respect to such number of shares of
Restricted Stock theretofore awarded to him as shall be
determined by the Board.
8. Adjustments Upon Changes in Capitalization or
Merger. Subject to any required action by the stockholders of the
Company, the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no
Award has yet been granted or which have been returned to the
Plan upon cancellation, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued shares
of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible
securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided
herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class,
shall affect and no adjustment by reason thereof, shall be made
with respect to the number or price of shares of Common Stock
subject to the Plan.
9. Time of Granting Restricted Stock. The date of
grant of Restricted Stock shall, for all purposes, be the date on
which the Board makes the determination granting such
Restricted Stock. Notice of the determination shall be given to
each Employee or other individual who provides services to the
Company to whom an Award is so granted within a reasonable
time after the date of such grant.
10. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board
may amend or terminate the Plan from time to time in such
respects as the Board may deem advisable; provided, however,
that the following revisions or amendments shall require
approval of the shareholders of the Company, to the extent
required by law, rule or regulation:
(i) Any material increase in the number
of Shares subject to the Plan, other than in connection with an
adjustment under Section 8 of the Plan;
(ii) Any material change in the
designation of the Employees or other individuals who provide
services to the Company eligible to be granted Restricted Stock; or
(iii) Any material increase in the benefits
accruing to participants under the Plan.
(b) Effect of Amendment or Termination. Any
such amendment or termination of the Plan shall not affect
Restricted Stock already granted and such Restricted Stock shall
remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise
between the Grantee and the Board, which agreement must be in
writing and signed by the Grantee and the Company.
11. Conditions Upon Issuance of Shares. Shares shall
not be issued pursuant to this Plan unless the issuance and
delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the Shares may then be listed,
and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the grant of Restricted Stock the
Company may require the Grantee to represent and warrant at
the time of any such grant that the Shares are being acquired only
for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required by any of the
aforementioned relevant provisions of law.
Inability of the Company to obtain authority from
any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the
Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have
been obtained.
12. Reservation of Shares. The Company will at all
times reserve and keep available such number of Shares as shall
be sufficient to satisfy the requirements of the Plan.
13. Purchase Agreement. Awards of Restricted Stock
shall be evidenced by Stock Purchase Agreements in such form as
the Board shall approve.
14. Withholding Taxes. Subject to Section 4(b)(ix) of
the Plan and prior to the Tax Date, the Grantee may make an
irrevocable election to have the Company withhold from those
Shares that would otherwise be received upon the grant, a
number of Shares having a Fair Market Value equal to the
minimum amount necessary to satisfy the Employee's portion of
the Company's federal, state, local and foreign tax withholding
obligations and FICA and FUTA obligations with respect to the
grant of Restricted Stock to the Grantee.
A Grantee who is also an officer of the Company
must make the above described election:
(a) at least six months after the date of grant of
the Restricted Stock (except in the event of death or disability);
and
(b) either:
(i) six months prior to the Tax Date, or
(ii) prior to the Tax Date and during the
period beginning on the third business day following the date the
Company releases its quarterly or annual statement of sales and
earnings and ending on the twelfth business day following such
date.
15. Miscellaneous Provisions.
(a) Plan Expense. Any expense of
administering this Plan shall be borne by the Company.
(b) Construction of Plan. The place of
administration of the Plan shall be in the State of Arizona, and the
validity, construction, interpretation, administration and effect of
the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined in accordance with the laws of the State
of Arizona without regard to conflict of law principles and, where
applicable, in accordance with the Code.
(c) Taxes. The Company shall be entitled if
necessary or desirable to pay or withhold the amount of any tax
attributable to the delivery of Common Stock under the Plan from
other amounts payable to the Grantee after giving the person
entitled to receive such Common Stock notice as far in advance as
practical, and the Company may defer making delivery of such
Common Stock if any such tax may be pending unless and until
indemnified to its satisfaction.
(d) Indemnification. In addition to such other
rights of indemnification as they may have as members of the
Board, the members of the Board shall be indemnified by the
Company against all costs and expenses reasonably incurred by
them in connection with any action, suit or proceeding to which
they or any of them may be party by reason of any action taken or
failure to act under or in connection with the Plan or any
Restricted Stock, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by
independent legal counsel selected by the Company) or paid by
them in satisfaction of a judgment in any such action, suit or
proceeding, except a judgment based upon a finding of bad faith;
provided that upon the institution of any such action, suit or
proceeding a Board member shall, in writing, give the Company
notice thereof and an opportunity, at its own expense, to handle
and defend the same before such Board member undertakes to
handle and defend it on her or his own behalf.
(e) Gender. For purposes of this Plan, words
used in the masculine gender shall include the feminine and
neuter, and the singular shall include the plural and vice versa, as
appropriate.
(f) No Employment Agreement. The Plan shall
not confer upon any Grantee any right with respect to
continuation of employment with the Company, nor shall it
interfere in any way with his right or the Company's right to
terminate his employment at any time.
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