SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
E-AUCTION GLOBAL TRADING INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how it
was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
E-AUCTION GLOBAL TRADING INC.
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 31, 2001
- --------------------------------------------------------------------------------
The Annual Meeting of Stockholders of e-Auction Global Trading Inc., a Delaware
corporation (the "Company"), will be held at The Toronto Board of Trade, Ketchum
Osgoode MacDonald Room, 3rd Floor, 77 Adelaide Street West Toronto, M5X 1C1 (the
"Annual Meeting") on May 31, 2001, at 10:30 AM, local time, for the following
purposes:
1. To elect 6 members of the Board of Directors to serve until
the next annual meeting and until their successors have been
elected and qualified.
2. To ratify the appointment of PricewaterhouseCoopers LLC as the
Company's independent accountants for the fiscal year ending
December 31, 2001.
3. To consider and vote upon a proposal to amend the Company's
Articles of Incorporation to change the name of the Company.
4. To consider and vote upon a proposal to amend the Company's
1999 Stock Option Plan to increase the number of shares
available for issuance from 6,000,000 to 9,000,000 shares.
5. To consider and vote upon a proposal to adopt the Company's
2001 Stock Option Plan.
6. To transact such other business as may properly come before
the Annual Meeting or any and all postponements or
adjournments thereof.
Only stockholders of record at the close of business on April 24, 2001,
shall be entitled to notice of and to vote at the Annual Meeting or any and all
postponements or adjournments thereof. A complete list of holders of common
stock entitled to vote at the Annual Meeting, arranged in alphabetical order and
showing the address of each stockholder and the number of shares registered in
the name of each stockholder, will be available at the Annual Meeting and will
be available for examination by any stockholder for any purpose germane to the
Annual Meeting during ordinary business hours for a period of ten days prior to
the Annual Meeting at the offices of e-Auction Global Trading Inc., 220 King
Street West, Suite 200, Toronto, Ontario M5H 1K4.
By order of the Board of Directors
/s/
----------------------------
April [___,] 2001
Toronto, Ontario
- --------------------------------------------------------------------------------
IMPORTANT
TO ASSURE PROPER REPRESENTATION AT THE ANNUAL MEETING, ALL STOCKHOLDERS ARE
REQUESTED TO FILL IN AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN
THE ACCOMPANYING ENVELOPE.
- --------------------------------------------------------------------------------
E-AUCTION GLOBAL TRADING INC.
220 KING STREET WEST, SUITE 200
TORONTO, ONTARIO M5H 1K4
------------------
PROXY STATEMENT
------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 31, 2001
This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of e-Auction Global Trading Inc., a Nevada corporation (the
"Company"), of proxies for use at the Annual Meeting of Stockholders (the
"Annual Meeting") to be held at The Toronto Board of Trade, Ketchum Osgoode
MacDonald Room, 3rd Floor, 77 Adelaide Street West Toronto, M5X 1C1, on May 31,
2001, at 10:30 AM, local time, or any and all postponements or adjournments
thereof, for the purposes set forth in the accompanying Notice of Annual
Meeting.
This Proxy Statement, Notice of Annual Meeting and accompanying proxy card
are first being mailed to stockholders on or about April 27, 2001.
A copy of the Company's Annual Report for the fiscal year ended
December 31, 2000 ("fiscal 2000"), is being sent to each stockholder of record
as of April 24, 2001, together with this Proxy Statement.
VOTING SECURITIES
Stockholders of record at the close of business on April 24, 2001, will
be entitled to notice of, and to vote the shares of Common Stock of the Company,
$.001 par value ("Common Stock"), held by them on such date at, the Annual
Meeting or any and all postponements or adjournments thereof. The Common Stock
is the Company's only class of outstanding voting securities. Each share of
Common Stock entitles the holder thereof to one vote. On April 24, 2001, there
were [_______] shares of Common Stock outstanding and entitled to vote at the
Annual Meeting.
If the accompanying proxy card is properly signed and returned to the
Company and not revoked, it will be voted in accordance with the instructions
contained therein. Unless contrary instructions are given, the persons
designated as proxy holders in the accompanying proxy card will vote for:
o the Board of Directors' nominees for director
o the ratification of the appointment of PricewaterhouseCoopers LLC as
the Company's independent accountants for the fiscal year ending
December 31, 2001 ( "fiscal 2001 ")
o an amendment of the Company's Articles of Incorporation to change
the Company's name
o an amendment to the Company's 1999 Stock Option Plan to increase the
number of shares issuable under such plan from 6,000,000 to
9,000,000 shares
o the adoption of the Company's 2001 Stock Option Plan
o in the discretion of the Board of Directors, as to all other matters
as may properly come before the Annual Meeting.
Each such proxy granted may be revoked by the stockholder giving such
proxy at any time before it is exercised by filing with the Secretary of the
Company, at the address set forth above, a revoking
3
instrument or a duly executed proxy bearing a later date. The powers of the
proxy holders will be suspended if the person who executed a proxy attends the
Annual Meeting in person and so requests. Attendance at the Annual Meeting will
not in itself constitute revocation of a proxy.
The presence at the Annual Meeting, in person or by proxy, of the
holders of a majority of the aggregate shares of Common Stock outstanding at the
close of business on April 24, 2001 will constitute a quorum.
The directors will be elected by a plurality of the votes cast at a
duly held meeting at which a quorum is present. All other matters at the meeting
will be decided by the affirmative vote of a majority of the shares represented
and voting at a duly held meeting at which a quorum is present (which shares
voting affirmatively also constitute at least a majority of the required
quorum).
Proxies submitted which contain abstentions or broker non-votes will be
deemed present at the Meeting in determining the presence of a quorum. Shares
that are voted to abstain will be considered cast with respect to that matter
and will, in effect, be deemed negative votes on each proposal. However,
abstentions and broker non-votes will have no effect on the outcome of the
election of directors, which election is by a plurality of the votes. Shares
subject to broker non-votes with respect to any matter will not be considered
cast with respect to that matter.
4
PROPOSAL 1
ELECTION OF DIRECTORS
---------------------
A Board of six (6) directors is to be elected at the Annual Meeting.
The Board of Directors proposes the election of the following six (6) nominees
to serve until the next Annual Meeting and until their successors are duly
elected and qualified:
Philip A. Lapp
Phillip G. MacDonnell
Daniel A. McKenzie
Mark F. Milazzo
Ken Reid
Bart Sonck
All of the nominees are present members of the Board of Directors. The
Board has no reason to believe that any of the foregoing nominees will not serve
if elected, but if any of them should become unavailable to serve as a director
or be withdrawn from nomination, and if the Board of Directors shall designate a
substitute nominee, the persons named as proxy holders will vote for the
substitute.
If elected, all nominees are expected to serve until the 2001 Annual
Meeting of Stockholders and until their successors are duly elected and
qualified.
YEAR FIRST
ELECTED OR
NAME AGE APPOINTED POSITION
- ---- --- --------- --------
Daniel McKenzie 46 2000 President, Chief Executive Officer and
Chairman of the Board of Directors
Philip A. Lapp 72 2000 Director
Philip G. MacDonnell 59 2000 Director
Mark F. Milazzo 44 2000 Director
Ken Reid 56 2000 Director
Bart Sonck 36 2000 Director
BUSINESS EXPERIENCE OF NOMINEES FOR ELECTION AS DIRECTORS
Philip A. Lapp, Director
Philip Lapp has been a director of the Company since January 25, 2000.
From 1969 to 1998 Dr. Lapp was President of Philip A. Lapp Limited, a consulting
firm. Dr. Lapp previously served in the capacity of Senior Vice President and
Director of SPAR Aerospace Limited, where he was responsible for all engineering
and technical programs from 1967 until 1969. While also at SPAR Aerospace, Dr.
Lapp established and developed entry into the medical and technological markets.
From 1955 to 1966, Dr. Lapp served as both Director of Technical Operations and
as Chief Engineer of de Havilland Aircraft of Canada. Dr. Lapp currently holds
numerous directorships, including on the boards of CDM Information Inc.,
InfoWest Services Inc., Kenneth Molson Foundation (Chairman), EMR Microwave
Technology Corporation, PCI Enterprises Inc., Mind the Store Inc. (Chairman) and
VisuaLabs Inc. He is also a Honorary Governor at York University. His
professional affiliations include: Canadian Council of Professional Engineers
(President 1987-1988); Fellow of the Royal Society of Canada; Fellow of the
Canadian Academy of Engineering (President 1988); Member of the Association of
Professional Engineers of Ontario (President 1982-1983); Senior Member of the
Institute of Electrical and Electronics Engineers; Fellow of Canadian
Aeronautics and Space Institute (President 1967-1968); Member of Canadian Remote
Sensing Society; and Senior Member of American Aeronautics and Astronautics.
Daniel A. McKenzie, Director
Since January 2000, Dan McKenzie has served as the President, Chief
Executive Officer and Chairman of the Board of Directors of the Company. From
1990 until 1998, Mr. McKenzie served as President and Chief Executive Officer of
EveryWare Development Inc., a software company providing cross-platform
development tools for creating dynamic Web-based applications he founded in
1990. When EveryWare became a publicly traded company in 1995, Mr. McKenzie also
served in the capacity of Chairman of the Board. In November 1998, EveryWare was
acquired by Pervasive Software Inc. All told, Mr.
5
McKenzie's brings 19 years of high tech management experience, including 15
years served in an owner/manager capacity, as well as experience in growing and
merging early stage technology companies. Mr. McKenzie is a Director of Aucxis
Ltd., an affiliated company listed on the Australian Stock Exchange.
Phillip MacDonnell, Director
Phil MacDonnell has been a director of the Company since January 25, 2000. Mr.
MacDonnell also serves as a Vice President and a director of Hawk Capital
Corporation and Hawk Partners Ltd., which companies provide financial services
to Canadian companies. He has held such positions since 1998 and 1997,
respectively. He also has served as: (i) President and director of P.G.
MacDonnell Services Ltd. since 1997; (ii) director of Constitution Insurance
Company since 1987; (iii) director of Syntex Systems Ltd., a publicly traded
Company on the American Stock Exchange, since 1997; (iv) director of World Wide
Warranty (CDNX); and (v) director of Palco Communications, a private company
since 1999. In 1969, Mr. MacDonnell became a founding partner in Loewen
Ondaattje McCutheon & Co. Ltd., an international institutional stock Brokerage
Company publicly traded on the Toronto Stock Exchange (TSE). Mr. MacDonnell has
sat on the Board of the Vancouver Stock Exchange and was a director of Grand
Field Pacific Ltd. (a publicly traded hotel Company on the TSE 1996-1998) and
EveryWare Development Inc. (a publicly traded software Company on the American
Stock Exchange 1997-1998). Mr. MacDonnell obtained an Honors Business
Administration Degree in 1960 while at the University of Western Ontario, and he
later obtained a Chartered Accountants Degree from the Institute of Chartered
Accountants in 1964.
Mark F. Milazzo, Director
Mark Milazzo has been a director of the Company since March 6, 2000.
Mr. Milazzo also currently serves in the capacity of Director, Wireless Market
Development, Service Provider Line of Business, at Cisco Systems Inc. in San
Jose, California, which company he joined in 1992. From 1998 to 1999, he was the
Director, Service Provider Global Alliances, for Cisco Systems Inc., responsible
for building Cisco's Global Alliances with key service providers. Mr. Milazzo
served as a Region Manager from 1995 to 1998 at Cisco Systems Inc. and, from
1994 to 1995, as an Account Manager to an assigned territory which included the
BCE group, Nortel, Bell Canada and Bell Mobility. Prior to 1994, Mr. Milazzo
worked at Cisco Systems Canada as Channel Manager, where he was responsible for
developing the public carriers channel of business in Canada. He was also
responsible for strategy development and Cisco's global sales channel support in
Cisco's Mobile Wireless area. From 1987 until 1992, Mr. Milazzo was the General
Manager for Computer Logics Ltd., where he managed a software development firm
developing PC to mainframe gateway software to corporate clients worldwide. Mr.
Milazzo holds a Bachelor of Science (B.Sc.) and a Master of Science (M.Sc.) in
Microbiology & Immunology from the University of Western Ontario in London,
Ontario.
Ken Reid, Director
Ken Reid has been a director of the Company since June 23, 2000. Mr.
Reid has also served since 1997 in the role of President & CEO of Ontario Flower
Growers Inc., one of North America's largest suppliers of cut flowers and plant
products to the wholesale and retail market place. Additionally, Mr. Reid is the
General Manager (1994 to present) of Ontario Flower Growers Co-Operative
Limited, the largest concentration of growers in Canada.
6
Bart Sonck, Director
Bart Sonck has been a director of the Company since June 16, 2000. Mr. Sonck has
also served in the following positions at ABN AMRO and its affiliated companies
since 1994: (i) Senior Account Manager Corporate Banking for ABN AMRO Bank N.V.
(Belgian Branch) Antwerp Office, where he was responsible for customer relations
management and business development (1994 to 1998); (ii) Regional Manager
Corporate Banking for ABN AMRO Bank N.V. (Belgian Branch) Brussels Office, where
he was responsible for management of team of senior account managers, for
Customer Relations Management & Business Development (1998 to 1999); and (iii)
Managing Director of ABN AMRO Capital Investments, where he is responsible for
the development of the Private Equity and Venture Capital operations of ABN AMRO
in Belgium (2000 to present). Mr. Sonck has been involved in the banking
community for over ten years, having held positions with JP Morgan, Bank Brussel
Lambert and, most recently, with ABN AMRO. Mr. Sonck holds a Master in Arts from
Vrije Universiteit Brussel and a Master of Business Administration, Vrije
Universiteit Brussel Solvay Business School. Mr. Sonck has also lectured at
Hogere Taal- & Handelsleergangen in the areas of Quality Management in the
Banking Industry, Trade & Export Finance, Interest and Currency Risk Hedging and
Credit Negotiation for Relationship Managers.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
EACH OF THE NOMINEES TO SERVE AS DIRECTORS UNTIL THE NEXT ANNUAL
MEETING AND UNTIL THEIR SUCCESSORS HAVE BEEN ELECTED AND
QUALIFIED.
COMMITTEES
The Company has an Audit Committee consisting of Phillip MacDonnell,
Ken Reid and Bart Sonck, each of whom is an independent Director of the Company.
The Audit Committee's functions are to serve as an independent and objective
monitor of the Company's financial reporting process and internal control
system, to review and appraise the audit efforts of the Company's independent
auditors, and to provide an open avenue of communication among the independent
auditors, financial and senior management and the Board of Directors. The Audit
Committee was formed on June 30, 2000 and had one (1) meeting during the fiscal
year ending December 31, 2000.
The Company has a Compensation Committee consisting of Phil Lapp and
Mark Milazzo. The Compensation Committees' functions are to review all matters
relating to the compensation of executive officers of the Company. The
Compensation Committee had one (1) meeting during the fiscal year ending
December 31, 2000.
The Company does not have a Nominating Committee.
COMPENSATION OF DIRECTORS
Currently, upon being appointed to the Board of Directors, each
director of the Company receives options to purchase up to 50,000 shares of the
Company's common stock under the 1999 Stock Option Plan. In addition, the
Company compensates each of its directors Cdn $5,000 per annum and Cdn $500 for
each meeting held for which such director attends.
MEETING OF THE BOARD OF DIRECTORS
The Board of Directors held 2 meetings during the fiscal year ended
December 31, 2000. During such fiscal year, none of the directors attended fewer
than 75% of the aggregate of (i) the total meetings of the Board of Directors
and (ii) the total number of meetings held by all committees of the Board on
which such director served.
7
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding beneficial
ownership of the shares of the Company's common stock as of the date of April
24, 2001 by (i) each person who is known by the management to own beneficially
more than five percent (5%) of the Company's issued and outstanding shares of
common stock, (ii) the Company's Chief Executive Officer and each of the
Company's other most highly compensated executive officers whose compensation on
an annualized basis (salary and bonus) for services rendered in all capacities
to the Company during the year ended December 31, 2000 exceeded US $100,000
(collectively, the "Named Executive Officers"), and (iii) each of the Company's
directors.
PERCENTAGE OF
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER OF SHARES (1) CLASS
- ----------------------------------------------------------------------- --------------------- --------------
J. Andrews, in Trust for the Shareholders of Sanga International Inc.(2) 16,500,000 24.9%
c/o Pachulski, Stong, Ziehl, Yang & Jones P.C.
10100 Santa Monica Blvd., Suite 1100, Los Angeles, CA 90067
ABN AMRO Capital Investments (Belgie) N.V. 4,072,639 6.1%
Regentlaan 53, 1000 Brussels, Belgium
Luc Schelfhout 3,636,364 (3) 5.5%
Bornte 204/A, Stekene, Belgium 9190
QFG Holdings Limited, Inc. (4) 4,455,883 6.7%
P.O. Box 659, Roadtown, Tortola, BVI
Daniel McKenzie 1,661,987 (5) *
c/o 220 King Street West, Suite 200, Toronto, Ontario M5H 1K4
David Hackett 1,236,987 (6) *
c/o 220 King Street West, Suite 200, Toronto, Ontario M5H 1K4
Philip Lapp 50,000 (7) *
c/o 220 King Street West, Suite 200, Toronto, Ontario M5H 1K4
Mark Milazzo 50,000 (7) *
c/o 220 King Street West, Suite 200, Toronto, Ontario M5H 1K4
Phillip MacDonnell 50,000 (7) *
c/o 220 King Street West, Suite 200, Toronto, Ontario M5H 1K4
Ken Reid 50,000 (7) *
c/o 220 King Street West, Suite 200, Toronto, Ontario M5H 1K4
Bart Sonck 50,000 (7) *
c/o 220 King Street West, Suite 200, Toronto, Ontario M5H 1K4
All executive officers and directors as a group (11 persons) 6,868,626 (4)(5)(6)(7) 9.96%
- -------------
1. The number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rule,
beneficial ownership includes any share as to which 33 the individual or
8
entity has voting power or investment power. Unless otherwise indicated,
each person or entity has sole voting and investment power with respect to
shares shown as beneficially owned. A person is deemed to be the beneficial
owner of securities that can be acquired by such person within 60 days,
whether pursuant to the exercise of options, conversion of securities or
otherwise.
2. The shares are beneficially owned by Sanga International Inc. which is
currently undergoing a restructuring pursuant to Chapter 11 of United
States Bankruptcy laws. Sanga does not have any controlling shareholder.
The sole officer of Sanga is John Andrews and its directors are John
Andrews, Mitch Stein and Masood Jabor.
3. Includes 1,818,182 shares held by Mr. Schelfhout's spouse, Hilde de Laet.
4. QFG is controlled by the Ballantine Family Trust, and David Ballantine is
the sole director of QFG.
5. Includes 161,987 shares held by a holding company and 1,500,00 shares
issuable upon exercise of stock options, re-priced at $0.35 per share on
December 30, 2000.
6. Includes 136,987 common shares held by a holding company for Mr. Hackett's
wife and children and 1,000,000 shares issuable upon exercise of stock
options, re-priced at $0.35 per share on December 30, 2000.
7. Consists of options enabling the holder to purchase up to 50,000 shares,
re-priced at an exercise price of $0.35 per share on December 30, 2000.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who beneficially own
more than 10% of the Company's common stock ("Reporting Person"), to file with
the Securities and Exchange Commission, on a timely basis, the initiation of
their status as a Reporting Person and any changes with respect to their
beneficial ownership of the Company's common stock. Based solely on the
Company's review of the copies of such forms by it, the Company believes that
during fiscal 2000 all such filings were made.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth certain information for the two (2)
years ended December 31, 2000 and December 31, 1999 regarding the compensation
of the Company's Named Executive Officers.
9
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- -----------------------------------------------------------------------------------------------------------------------
Long-term compensation
------------------------ --------- ------------
Annual compensation Awards Payouts
---------------------------------- ------------------------ --------- ------------
Other Restricted Securities
annual stock underlying LTIP All other
Salary Bonus compensation awards options/ payouts compensation
Name and Principal Position Year (Cnd$) (Cnd$) (Cnd$) (Cnd$) SARs (#) (Cnd$) (Cnd$)
- ----------------------------- ------ ---------- --------- ------------- ---------- ------------- --------- ------------
Fred Tham, CEO and 1999 - - - - - - -
President(1)
- ----------------------------- ------ ---------- --------- ------------- ---------- ------------- --------- ------------
Shane Maine, CEO and 2000 - - - - - -
President (2) 1999 - 1,000,000(3)
- ----------------------------- ------ ---------- --------- ------------- ---------- ------------- --------- ------------
Dan McKenzie, President, 2000 $150,000 - - - 1,500,000(4) - -
CEO and Chairman (5)
- ----------------------------- ------ ---------- --------- ------------- ---------- ------------- --------- ------------
David Hackett, Chief 2000 $100,000 - - - - -
Financial Officer 1999 $58,333 1,000,000(6)
- ----------------------------- ------ ---------- --------- ------------- ---------- ------------- --------- ------------
- -------------------
(1) Fred Tham resigned as Chief Executive Officer and President on February 26,
1999.
(2) Shane Maine resigned as acting Chief Executive Officer and director
on January 17, 2000.
(3) Options to purchase 1,000,000 shares of the Company's common stock canceled
December 29, 2000, at which time no options had been exercised.
(4) Options to purchase 1,500,000 shares of the Company's common stock canceled
December 29, 2000, after which time on December 30, 2000 new options to
purchase 1,500,000 shares of the Company's common stock were granted at a
exercise price of $0.35 per share.
(5) Dan McKenzie was named Chief Executive Officer on January 17, 2000.
(6) Options to purchase 1,000,000 shares of the Company's common stock canceled
December 29, 2000, after which time on December 30, 2000 new options to
purchase 1,000,000 shares of the Company's common stock were granted at an
exercise price of $0.35 per share.
No retirement, pension, annuity benefits have been adopted by the Company
for the benefit of the Company's employees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 30, 2000, Dan McKenzie entered into an employment agreement
to serve as President and Chief Executive Officer of the Company, effective
January 2000, in addition to serving on the Board of Directors of the Company.
Mr. McKenzie's employment agreement provides for a base fee of Cdn $200,000 per
year, payable in equal semi-monthly payments, plus a bonus of Cdn $50,000
subject to meeting certain benchmarks outlined in the agreement. He will also be
provided with insurance benefits and other perquisites, including car allowance,
professional fees, along with four weeks vacation per annum, and the
reimbursement of normal and reasonable business expenses. Under the agreement,
Mr. McKenzie is also granted options to purchase up to an aggregate of 1,500,000
shares of the Company's common stock. These options vest upon date of grant and
are exercisable at approximately US $0.35 per share. If the Company terminates
Mr. McKenzie without just cause he will receive a severance amount equal to the
greater of (i) the past 12 months compensation and (ii) $200,000, plus bonuses
earned over the 12 months preceding his termination. The employment agreement
also provides for a one (1) year non-competition clause and a one (1) year
non-solicitation clause.
10
On December 30, 2000, David Hackett entered into a restated and amended
employment agreement with respect to his capacity as Chief Financial Officer of
the Company, effective May 1, 1999. Mr. Hackett's employment agreement provides
for a base fee of Cdn $165,000 per year, payable in equal semi-monthly payments,
plus a bonus of Cdn $35,000 subject to meeting certain benchmarks outlined in
the agreement. He will also be provided with insurance benefits and other
perquisites, including car allowance and professional fees, along with four
weeks vacation per annum, and the reimbursement of normal and reasonable
business expenses. Under the agreement, Mr. Hackett is granted options to
purchase up to an aggregate of 1,000,000 shares of the Company's common stock.
These options vest upon date of grant and are exercisable at approximately US
$0.35 per share. If the Company terminates Mr. Hackett without just cause he
will receive a severance amount equal to the greater of (i) the past 12 months
compensation and (ii) $165,000, plus bonuses earned over the 12 months preceding
his termination. The employment agreement also provides for a one (1) year
non-competition clause and a one (1) year non-solicitation clause.
The majority of the Company's operations during the 1999 fiscal year
were funded by Ventures North Investment Partners Inc ("Ventures North"). The
amounts advanced were non-interest bearing, with no fixed terms of repayment.
The entire balance owing, in the approximate sum of $860,793, was paid in full
in January 2000. A significant percentage of the ownership interest of Ventures
North is owned by stockholders of the Company. In addition, Ventures North owns
2,000,000 of the issued and outstanding shares of the Company's common stock.
Under an agreement dated March 1, 1999 with Millennium Advisors Inc.
("Millennium"), the Company agreed to pay to Millennium a management fee of
$20,000 per month for advice and services with respect to mergers and
acquisitions, corporate structuring, administration and financing. The Company
also entered into a contract for service whereby Millennium would be paid 25% of
any funds it raised by the sale of the Company's equity or issuance of debt by
the Company in excess of the amount required to complete the acquisition of
Schelfhout Computer Systemen N.V. No amounts were paid under this agreement
prior to agreement's termination in March 2000. Michael Gilley, a former
director and officer of the Company, is President of Millennium.
On August 12, 1999, the Company received a loan of $1,000,000 from
Millennium, which loan was to be repaid within 30 days. In consideration for the
loan, Millennium received 197,219 shares of the Company's common stock, with a
deemed value of $1,000,000 as a financing fee. The number of shares of the
Company's common stock issued was based on the weighted average closing price
over the five (5) trading days prior to the date the loan was granted. The
shares were issued in January, 2000.
On August 29, 1999 Michael Gilley received stock options to purchase up
to 250,000 shares of the Company's common stock which options were to vest over
3 years at an exercise price of $5.00 per share. At the time these options were
granted, Mr. Gilley was a director of the Company. These options were canceled
as part of the Company's settlement with Millennium where Mr. Gilley was
President.
On January 10, 2000, acting through the Company's subsidiary e-Auction
Belgium N.V. (now Aucxis N.V. (Belgium)), the Company purchased all of the
shares of Schelfhout Computer Systemen N.V. for a purchase price of US $10
million. The purchase price was satisfied by (i) the payment of US $4 million in
cash (US $1 million was paid in August 1999 and the US $3 million balance was
paid on completing the acquisition in January 2000) and (ii) the issuance of
3,636,364 shares of the Company's common stock, at a price per
11
share of $1.65, having an aggregate value of US $6 Million. Of the shares
issued, 1,818,182 shares of the Company's common stock were issued to Luc
Schelfhout, a current officer of the Company, and 1,818,182 shares of the
Company's common stock were issued to Mr. Schelfhout's spouse, Hilde de Laet.
The $1.65 per share price was a negotiated price among Luc Schelfhout, Hilde de
Laet and the Company. The price was based, in part, on the weighted average 40
day trading price of the Company's stock from the period of October 18, 1999 to
December 13, 1999. Management believes that the terms and conditions of the
foregoing transactions were no less favorable to the Company than terms
attainable from unaffiliated third parties. Management believes that the terms
and conditions of the foregoing transactions were no less favorable to the
Company than terms attainable from unaffiliated third parties.
As of March 20, 2000, the Company and Millennium agreed to terminate
the March 1, 1999 consulting agreement. As part of such settlement, the Company
agreed to pay, and did pay, Millennium $120,000 as full and final settlement
under the agreement.
On March 22, 2000, the Company formed a new subsidiary, SDL Invest,
N.V., to be owned 99% by the Company and 1% by Luc Schelfhout, a current officer
of the Company, and his spouse, Hilde de Laet. As part of this transaction, Mr.
Schelfhout and his spouse were granted an option to purchase the Company's
ownership interest in SDL Invest, N.V. at a nominal price, based upon the book
value of the Company's contribution to capital.
On August 24, 2000, Messrs. McKenzie and Hackett, a director and
officer of the Company, respectively, and Mr. Maine, a former director and Chief
Executive Officer of the Company, received options to purchase up to an
aggregated of 1,500,000, 1,000,000 and 1,000,000 shares of the Company's common
stock, respectively. The options vested on the date of grant and were
exercisable at an exercise price of $0.80 per share. The Company subsequently
canceled all of these options as of December 29, 2000. On December 30, 2000,
Messrs. McKenzie and Hackett, received new options to purchase up to an
aggregate of 1,500,000 and 1,000,000 shares of the Company's common stock,
respectively, at the repriced exercise price of $0.35 per share, pursuant to
their respective employment contracts dated January 1, 2001 with the Company.
Management believes that the terms and conditions of the foregoing
transactions were no less favorable to the Company than terms attainable from
unaffilated third parties.
STOCK OPTIONS
The following table sets forth the particulars of individual grants of
options to purchase shares of the Company's common stock made to each of the
Named Executive Officers who were granted options during the Financial year
ended December 31, 2000:
INCENTIVE STOCK OPTIONS GRANTED TO NAMED EXECUTIVE OFFICERS
DURING THE FINANCIAL YEAR ENDED DECEMBER 31, 2000
The following table sets forth the particulars of individual grants of
options to purchase shares of the Company's common stock made to each of the
Named Executive Officers who were granted options during the Financial year
ended December 31, 2000:
% OF TOTAL
SECURITIES OPTIONS GRANTED MARKET VALUE OF SECURITIES
UNDER OPTION TO EMPLOYEES IN UNDERLYDING OPTIONS ON THE
NAME GRANTED FISCAL YEAR EXERCISE PRICE DATE OF THE GRANT EXPIRATION DATE
- ---------------- ------------ --------------- -------------- ----------------- ---------------
Dan McKenzie 1,500,000 21% $0.85 $0.84 December 1, 2009(1)
David Hackett 1,000,000 21% $0.85 $0.84 December 1, 2009(1)
Shane Maine 1,000,000 21% $0.85 $0.84 December 1, 2009(1)
Dan McKenzie 1,500,000 23% $0.80 $0.59 August 24, 2009 (2)
David Hackett 1,000,000 16% $0.80 $0.59 August 24, 2009 (2)
Shane Maine 1,000,000 16% $0.80 $0.59 August 24, 2009 (3)
Dan McKenzie 1,500,000 19% $0.35 $0.42 December 30, 2010
David Hackett 1,000,000 12% $0.35 $0.42 December 30, 2010
- ------------------
(1) These options were canceled on August 24, 2000, at which time new options
to purchase the same number of shares of the Company's common stock were
granted, at a repriced exercise price of $0.80 per share.
(2) These options were canceled on December 29, 2000, after which time new
options to purchase the same number of shares of the Company's common stock
were granted on December 30, 2000, at a repriced exercise price of $0.35
per share.
(3) These options were canceled on December 29, 2000.
12
PROPOSAL II.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
--------------------------------------
The Board of Directors of the Company, upon a recommendation given by
the Audit Committee, has appointed PricewaterhouseCoopers LLP as the Company's
independent accountants for fiscal 2001.
Representatives of PricewaterhouseCoopers LLP will not be present at
the Annual Meeting [to respond to appropriate questions and to make such
statements as they may desire].
On October 10, 2000, the client-auditor relationship between the
Company and Dale Matheson Carr-Hilton ("DMCH") ceased and the Company engaged
PricewaterhouseCoopers LLP, as the Company's independent auditors for the fiscal
year ending December 31, 2000. The decision to engage PricewaterhouseCoopers LLP
was approved by the board of directors, upon the recommendation of the board of
directors. DMCH's reports on the consolidated financial statements of the
Company for fiscal year 1999 did not contain any adverse opinion or a disclaimer
of opinion, and was not qualified or modified as to uncertainty, audit scope or
accounting principles. During fiscal year 1999 and the subsequent interim period
preceding the resignation of DMCH, there were no disagreements with DMCH
regarding any matters of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of DMCH, would have caused DMCH to make reference to the
subject matter of the disagreements in connection with its report. The Company
requested that DMCH furnish us with a letter addressed to the Securities and
Exchange Commission stating whether it agrees with the above statements.
Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for fiscal 2001 will require the affirmative
vote of at least a majority of the votes of the shares of Common Stock
represented in person or by proxy and entitled to vote at the Annual Meeting.
AUDIT FEES
The aggregate fees billed for services rendered for the audit of
Company's annual financial statements for fiscal 2000 were US$206,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
No aggregate fees were billed for services rendered by accountants
which directly or indirectly related to the operating, or supervising the
operation of, the Company's information system or managing the Company's local
area network.
ALL OTHER FEES
There were no fees billed for services rendered by the principal
accountants, other than those services covered in the previous two categories.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR FISCAL 2001.
13
PROPOSAL III.
PROPOSAL TO AMEND THE COMPANY'S ARTICLES OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
---------------------------------
At the Annual Meeting, you will be asked to vote upon an amendment (the
"Name Change Amendment") to Article 1 of the Company's Articles of Incorporation
to change the name of the Company from "e-Auction Global Trading Inc." to
"Aucxis Corp." The terms of the Name Change Amendment are set forth in Appendix
A to this Proxy Statement.
As amended, Article I of the Company's Articles of Incorporation would
read in its entirety as follows: "Article I -- Name. The name of the Corporation
shall be "Aucxis Corp."
The name change is intended to parallel the trade names given to the
Company's operating subsidiaries located throughout the world. Changing the
Company's name does not alter any of the rights of stockholders. The affirmative
vote of a majority of the votes represented and voted at the Annual Meeting
(assuming a quorum is present) is required to approve the Name Change Amendment.
Any shares not voted at the Annual Meeting (whether by broker non-votes or
otherwise, except abstentions) will have no impact on the vote. Shares as to
which holders abstain from voting will be treated as votes against the Name
Change Amendment.
In the event the Name Change Amendment is approved by stockholders, the
Company will thereafter file a Certificate of Amendment to its Articles of
Incorporation with the Secretary of State of the State of Nevada, amending
Article I thereof, which will become effective at the close of business on the
date such filing is accepted by the Secretary of State of the State of Nevada.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE
FOR THE RATIFICATION OF THE AMENDMENT TO THE COMPANY'S
ARTICLES OF INCORPORATION.
14
PROPOSAL IV.
PROPOSAL TO INCREASE NUMBER OF SHARES ISSUED UNDER THE
COMPANY'S 1999 STOCK OPTION PLAN
--------------------------------
At the Annual Meeting, you will be asked to ratify the Amended and
Restated 1999 Stock Option Plan (the "1999 Amended Plan") adopted by the Board
of Directors of the Company on March 13, 2000. The 1999 Amended Plan, as amended
by the Board of Directors, increases the maximum number of shares of common
stock of the Company for which options may be granted to employees of the
Company under the 1999 Stock Option Plan from 6,000,000 to 9,000,000. This
amendment was necessitated by the need to grant to the Company's employees stock
options exercisable for shares of common stock in excess of that number of
shares authorized under the 1999 Stock Option Plan adopted by the Board and the
stockholders on March 22, 1999. At March 13, 2000, when the amendment was
adopted by the Board of Directors, options to purchase up to an aggregate of
5,650,000 shares of the Company's common stock had been granted by the Company,
leaving less than 440,000 shares available for issuance under the 1999 Stock
Option Plan. At the Company's fiscal year ended December 31, 2000, options
exercisable for up to an aggregate of 3,518,383 shares of the Company's common
stock had been granted under the 1999 Stock Option Plan.
Despite the amendment adopted by the Board of Directors, the option
grants permitted by such amendment cannot be exercised with respect to such
additional shares until the 1999 Amended Plan is approved by the Company's
stockholders. Accordingly, the Board of Directors unanimously recommends that
stockholders ratify the adoption of the Amended 1999 Plan.
The following summary of the 1999 Amended Plan does not purport to be
complete, and is subject to and qualified in its entirety by reference to the
full text of the 1999 Amended Plan, set forth as Appendix B attached hereto and
made a part hereof.
SUMMARY OF THE AMENDED 1999 PLAN
Under the Amended 1999 Plan, any person, including, employees,
directors, consultants of the Company or any parent or subsidiary of the Company
(provided such consultants render bona fide services not in connection with the
offer and sale of securities in a capital-raising transaction), is eligible to
be granted Non-Qualified Stock Options (as defined below). Incentive Stock
Options (as defined below) will be granted, but only with respect to employees
(including officers and directors who are also employees) of the Company or of a
parent or subsidiary of the Company and only with respect to the first 6,000,000
options granted. Pending stockdholder approval of the Amended 1999 Plan, the
additional 3,000,000 options that will be eligible for granting under the
Amended 1999 Plan shall only in the form of Non-Qualified Stock Options.
The Amended 1999 Plan is currently administered by the Board acting as
the Committee, two or more members of which are "Non-Employee Directors" (as
defined in Rule 16b-3 of the Securities Exchange Act of 1934) or "outside
directors" (as defined in Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). The Board of Directors or the Committee, as the case
may be, will determine, among other things, the persons to whom options will be
granted, the type of options to be granted, the number of shares subject to each
option and the share price. The Board of Directors, or Committee, as the case
may be, will also determine the term of each option, the restrictions or
limitations thereon, and the manner in which each such option may be exercised.
Unless sooner terminated, the Amended 1999 Plan will expire the earlier of ten
years from the date of stockholder approval of the 1999 Amended Plan and the
exercise of all outstanding options granted under the Amended 1999 Plan.
CHARACTERISTICS OF STOCK OPTIONS
The Amended 1999 Plan provides for the grant of "incentive stock
options," as defined in Section 422 of the Code ("Incentive Stock Options"),
with respect to the initial 6,000,000 options granted under the Amended 1999
Plan, and for options not qualifying as Incentive Stock Options ("Non-Qualified
Stock Options") with respect to all 9,000,000 options eligible for granting
under the Amended 1999 Plan. The
15
Board of Directors or the Committee, as the case may be, shall determine those
persons to whom stock options may be granted.
Options granted under the Amended 1999 Plan, and any interest therein,
will not be transferable or assignable by the optionee, and may not be made
subject to execution, attachment or similar process, otherwise than by will or
by the laws of descent and distribution. All options granted under the Amended
1999 Plan, will, unless a shorter term is established by the Board of Directors
or the Committee, expire if not exercised within ten years of the grant (five
years in the case of Incentive Stock Options granted to an eligible employee
owning stock possessing more than 10% of the total combined voting power of all
classes of stock of the Company or a parent or subsidiary of the Company
immediately before the grant ("10% Stockholder")), and under certain
circumstances set forth in the Amended 1999 Plan, may be exercised within three
(3) months following termination of employment or, in the event of death of the
optionee, twelve within (12) months. Options may be granted to optionees in such
amounts and at such prices as may be determined, from time to time, by the Board
of Directors or the Committee. The exercise price of an Option will be
determined by the Committee when the Option is granted and may not be less than
the fair market value of the shares on the date of grant; provided that (i) the
exercise price of an Incentive Stock Option will not be less than 100% of the
fair market value of the shares on the date of grant and (ii) the exercise price
of any Option granted to a 10% stockholder will not be less than 110% of the
fair market value of the shares on the date of grant.
The Company may not, in the aggregate, grant Incentive Stock Options
that are first exercisable by any optionee during any calendar year (under the
1999 Amended Plan or under any other incentive stock option plan of the Company
or any Parent or Subsidiary of the Company) to the extent the aggregate fair
market value of shares (determined as of the date of grant) exceeds US $100,000.
Any stock options granted shall become exercisable in such amounts, at
such intervals and upon such terms and conditions as the Board of Directors or
the Committee, as applicable, shall provide. Stock options granted under the
Amended 1999 Plan are exercisable immediately (subject to repurchase pursuant to
Section 10 of the Amended 1999 Plan) or may be exercisable within the times or
upon the events determined by the Committee as set forth in the Stock Option
Agreement governing such Option; provided, however, that no Option will be
exercisable after the expiration of ten (10) years from the date the Option is
granted; and provided further that no Incentive Stock Option granted to a 10%
Stockholder will be exercisable after the expiration of five (5) years from the
date the Incentive Stock Option is granted. The Committee also may provide for
Options to become exercisable at one time or from time to time, periodically or
otherwise, in such number of Shares or percentage of Shares as the Committee
determines. The Amended 1999 Plan shall remain in effect until all stock options
are exercised or terminated. Notwithstanding the foregoing, no options may be
granted after March 22, 2009.
CERTAIN U.S. TAX CONSEQUENCES OF THE AMENDED 1999 PLAN
The following is a general summary of certain material United States
Federal income tax consequences of the grant and exercise of the options under
the Amended 1999 Plan and the sale of any underlying security. This description
is based on current law which is subject to change, possibly with retroactive
effect. This discussion does not purport to address all tax considerations
relating to the grant and exercise of the options or resulting from the
application of special rules to a particular optionee (including an optionee
subject to the reporting and short-swing profit provisions under Section 16 of
the Securities Exchange Act of 1934, as amended), and state, local, foreign and
other tax consequences inherent in the ownership and exercise of stock options
and the ownership and disposition of the underlying securities. This description
only pertains to U.S. Federal income tax consequences and does not attempt to
address the tax consequences surrounding an optionee who is a resident of a
country other than the United States. All optionees should nonetheless consult
with their own tax advisors with respect
16
to the tax consequences inherent in the ownership and exercise of stock options
and the ownership and disposition of any underlying security.
Incentive Stock Options Exercised With Cash
No taxable income will be recognized by an optionee upon the
grant or exercise of an Incentive Stock Option. The optionee's tax basis in the
shares acquired upon the exercise of an Incentive Stock Option with cash will be
equal to the exercise price paid by the optionee for such shares.
If the shares received upon exercise of an Incentive Stock
Option are disposed of more than one year after the date of transfer of such
shares to the optionee and more than two years from the date of grant of the
option, the optionee will recognize long-term capital gain or loss on such
disposition equal to the difference between the selling price and the optionee's
basis in the shares, and the Company will not be entitled to a deduction.
Long-term capital gain is generally subject to more favorable tax treatment than
short-term capital gain or ordinary income.
If the shares received upon the exercise of an Incentive Stock
Option are disposed of prior to the end of the
two-years-from-grant/one-year-after-transfer holding period (a "disqualifying
disposition"), the excess (if any) of the fair market value of the shares on the
date of transfer of such shares to the optionee over the exercise price (but not
in excess of the gain realized on the sale of the shares) will be taxed as
ordinary income in the year of such disposition, and the Company generally will
be entitled to a deduction in the year of disposition equal to such amount. Any
additional gain or any loss recognized by the optionee on such disposition will
be short-term or long-term capital gain or loss, as the case may be, depending
upon the period for which the shares were held.
Non-Qualified Stock Options Exercised With Cash
No taxable income will be recognized by an optionee upon the
grant of a Non-Qualified Stock Option. Upon the exercise of a Non-Qualified
Stock Option, the excess of the fair market value of the shares received at the
time of exercise over the exercise price therefor will be taxed as ordinary
income, and the Company will generally be entitled to a corresponding deduction.
The optionee's tax basis in the shares acquired upon the exercise of such
Non-Qualified Stock Option will be equal to the exercise price paid by the
optionee for such shares plus the amount of ordinary income so recognized.
Any gain or loss recognized by the optionee on a subsequent
disposition of shares purchased pursuant to a Non-Qualified Stock Option will be
short-term or long-term capital gain or loss, depending upon the period during
which such shares were held, in an amount equal to the difference between the
selling price and the optionee's tax basis in the shares.
Exercises of Options Using Previously Acquired Shares
If previously acquired shares are surrendered in full or
partial payment of the exercise price of an option (whether an Incentive Stock
Option or a Non-Qualified Stock Option), gain or loss generally will not be
recognized by the optionee upon the exercise of such option to the extent the
optionee receives shares which on the date of exercise have a fair market value
equal to the fair market value of the shares surrendered in exchange therefor
("Replacement Shares"). If the option exercised is an Incentive Stock Option or
if the shares used were acquired pursuant to the exercise of an Incentive Stock
Option, the Replacement Shares are treated as having been acquired pursuant to
the exercise of an Incentive Stock Option.
17
However, if an Incentive Stock Option is exercised with shares
which were previously acquired pursuant to the exercise of an Incentive Stock
Option but which were not held for the required
two-years-from-grant/one-year-after-transfer holding period, there is a
disqualifying disposition of such previously acquired shares. In such case, the
optionee would recognize ordinary income on such disqualifying disposition equal
to the difference between the fair market value of such shares on the date of
exercise of the prior Incentive Stock Option and the amount paid for such shares
(but not in excess of the gain realized). Special rules apply in determining
which shares are considered to have been disposed of and in allocating the basis
among the shares. No capital gain is recognized.
The optionee will have an aggregate basis in the Replacement
Shares equal to the basis of the shares surrendered, increased by any ordinary
income required to be recognized on the disposition of the previously acquired
shares. The optionee's holding period for the Replacement Shares generally
includes the period during which the surrendered shares were held.
Any shares received by the optionee on such exercise in
addition to the Replacement Shares will be treated in the same manner as a cash
exercise of an option for no consideration.
Alternative Minimum Tax
In addition to the federal income tax consequences described
above, an optionee who exercises an Incentive Stock Option may be subject to the
alternative minimum tax, which is payable only to the extent it exceeds the
optionee's regular tax liability. For this purpose, upon the exercise of an
Incentive Stock Option, the excess of the fair market value of the shares over
the exercise price is an adjustment which increases the optionee's alternative
minimum taxable income. In addition, the optionee's basis in such shares is
increased by such amount for purposes of computing the gain or loss on
disposition of the shares for alternative minimum tax purposes. If the optionee
is required to pay an alternative minimum tax, the amount of such tax which is
attributable to deferral preferences (including the Incentive Stock Option
adjustment) is allowable as a tax credit against the optionee's regular tax
liability (net of other non-refundable credits) in subsequent years. To the
extent the credit is not used, it is carried forward. A holder of an Incentive
Stock Option should consult with the optionee's tax advisors concerning the
applicability and effect of the alternative minimum tax.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE ADOPTION OF THE AMENDMENT TO THE AMENDED 1999 PLAN TO
INCREASE THE NUMBER OF SHARES ISSUABLE UNDER SUCH AMENDED 1999
PLAN.
18
PROPOSAL V.
PROPOSAL TO ADOPT THE COMPANY'S 2001 STOCK OPTION PLAN
------------------------------------------------------
On March 26, 2001 The Board of Directors adopted the Company's 2001
Stock Option Plan (the "2001 Plan"), subject to approval by the stockholders at
the Annual Meeting.
The 2001 Plan is meant to update the Company's existing stock option
plan (in the form of the 1999 Amended Plan) to reflect the current legal and tax
requirements and is intended to work in tandem with the 1999 Amended Plan so
that the aggregate number of shares available for exercise under the Company's
program of stock options does not exceed, at any one time, an aggregate of
10,000,000 shares, or roughly 15% of the issued and outstanding stock of the
Company as of the date of adoption of the 2001 Plan. The Board of Directors
believes that it is in the best interest of the Company and its stockholders to
continue to provide to officers, directors, key employees, consultants and other
independent contractors who perform services for the Company the opportunity to
participate in the value and/or appreciation in value of the Company's Common
Stock through the granting of stock options. The Board of Directors believes
that the 2001 Plan is consistent with such objective. The 2001 Plan is intended
to (i) provide the Company with significant means to attract and retain talented
personnel, (ii) result in saving cash, which otherwise would be required to
retain current key employees, and adequately attract and reward key personnel,
and (iii) ultimately will prove beneficial to the Company's ability to be
competitive. In view of the substantial growth of the Company and the need to
continue to expand, the Board of Directors recommends that the Plan should be
approved.
The following summary of the 2001 Plan does not purport to be complete,
and is subject to and qualified in its entirety by reference to the full text of
the 2001 Plan, set forth as Appendix C attached hereto and made a part hereof.
SUMMARY OF THE 2001 STOCK OPTION PLAN
The 2001 Plan shall operate in tandem with the Amended 1999 Plan and
shall provide for the granting of options to purchase up to 10,000,000 shares of
Common Stock, subject to the amount of options granted and still outstanding
under the Amended 1999 Plan as well as such other adjustment as described more
particularly in the 2001 Plan. Specifically, in no event shall the aggregate
number of shares of the Company's common stock available for granting under the
2001 Plan and the Amended 1999 Plan exceed 10,000,000, in the aggregate. Any
person, including, employees, directors, consultants of the Company or any
parent or subsidiary of the Company (provided such consultants render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction) are eligible to be granted Non-Qualified Stock
Options (as defined below) under the 2001 Plan. Pending stockholder approval of
the 2001 Plan, Incentive Stock Options (as defined below) may be granted only to
employees (including officers and directors who are also employees) of the
Company or of a parent or subsidiary of the Company.
The 2001 Plan will be administered by the Committee or the Board acting
as the Committee, consisting of two or more members of the Board of Directors,
appointed by the Board of Directors, who must be "Non-Employee Directors" (as
defined in Rule 16b-3 of the Securities Exchange Act of 1934) and an "outside
director" (as defined in Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). The Board of Directors or the Committee, as the case may
be, will determine, among other things, the persons to whom options will be
granted, the type of options to be granted, the number of shares subject to each
option and the share price. The Board of Directors, or Committee, as the case
may be, will also determine the term of each option, the restrictions or
limitations thereon, and the manner in which each such option may be exercised.
Unless sooner terminated, the 2001 Plan will expire ten (10) years from the date
of stockholder approval of the 2001 Plan.
19
CHARACTERISTICS OF STOCK OPTIONS
The 2001 Plan provides for the grant of "incentive stock options" as
defined in Section 422 of the Code ("Incentive Stock Options"), and for options
not qualifying as Incentive Stock Options ("Non-Qualified Stock Options"). The
Board of Directors or the Committee, as the case may be, shall determine those
persons to whom stock options may be granted.
Options granted under this 2001 Plan, and any interest therein, will
not be transferable or assignable by the optionee, and may not be made subject
to execution, attachment or similar process, otherwise than by will or by the
laws of descent and distribution. All options granted under the 2001 Plan, will,
unless a shorter term is established by the Board of Directors or the Committee,
expire if not exercised within ten years of the grant (five years in the case of
Incentive Stock Options granted to an eligible employee owning stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company or a parent or subsidiary of the Company immediately before the grant
("10% Stockholder")), and under certain circumstances set forth in the 2001
Plan, may be exercised within 3 months following termination of employment.
Options may be granted to optionees in such amounts and at such prices as may be
determined, from time to time, by the Board of Directors or the Committee. The
exercise price of an Option will be determined by the Committee when the Option
is granted and may not be less than the fair market value of the shares on the
date of grant; provided that (i) the exercise price of an Incentive Stock Option
will not be less than 100% of the fair market value of the shares on the date of
grant and (ii) the exercise price of any Option granted to a 10% stockholder
will not be less than 110% of the fair market value of the shares on the date of
grant.
The Company may not, in the aggregate, grant Incentive Stock Options
that are first exercisable by any optionee during any calendar year (under this
2001 Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) to the extent the aggregate fair market
value of shares (determined as of the date of grant) exceeds US $100,000.
Any stock options granted shall become exercisable in such amounts, at
such intervals and upon such terms and conditions as the Board of Directors or
the Committee, as applicable, shall provide. Stock options granted under the
2001 Plan are exercisable immediately (subject to repurchase pursuant to Section
10 of the 2001 Plan) or may be exercisable within the times or upon the events
determined by the Committee as set forth in the Stock Option Agreement governing
such Option; provided, however, that no Option will be exercisable after the
expiration of ten (10) years from the date the Option is granted; and provided
further that no Incentive Stock Option granted to a 10% Stockholder will be
exercisable after the expiration of five (5) years from the date the Incentive
Stock Option is granted. The Committee also may provide for options to become
exercisable at one time or from time to time, periodically or otherwise, in such
number of Shares or percentage of Shares as the Committee determines. The Plan
shall remain in effect until all stock options are exercised or terminated.
Notwithstanding the foregoing, no options may be granted after March ___, 2010.
CERTAIN U.S. TAX CONSEQUENCES OF THE 2001 PLAN
The following is a general summary of certain material United States
Federal income tax consequences of the grant and exercise of the options under
the 2001 Plan and the sale of any underlying security. This description is based
on current law which is subject to change, possibly with retroactive effect.
This discussion does not purport to address all tax considerations relating to
the grant and exercise of the options or resulting from the application of
special rules to a particular optionee (including an optionee subject to the
reporting and short-swing profit provisions under Section 16 of the Securities
Exchange Act of 1934, as amended), and state, local, foreign and other tax
consequences inherent in the ownership and exercise of stock options and the
ownership and disposition of the underlying securities.
20
This description only pertains to U.S. Federal income tax consequences and does
not attempt to address the tax consequences surrounding an optionee in a country
other than the United States. All optionees should nonetheless consult with
their own tax advisors with respect to the tax consequences inherent in the
ownership and exercise of stock options and the ownership and disposition of any
underlying security.
Incentive Stock Options Exercised With Cash
No taxable income will be recognized by an optionee upon the
grant or exercise of an Incentive Stock Option. The optionee's tax basis in the
shares acquired upon the exercise of an Incentive Stock Option with cash will be
equal to the exercise price paid by the optionee for such shares.
If the shares received upon exercise of an Incentive Stock
Option are disposed of more than one year after the date of transfer of such
shares to the optionee and more than two years from the date of grant of the
option, the optionee will recognize long-term capital gain or loss on such
disposition equal to the difference between the selling price and the optionee's
basis in the shares, and the Company will not be entitled to a deduction.
Long-term capital gain is generally subject to more favorable tax treatment than
short-term capital gain or ordinary income.
If the shares received upon the exercise of an Incentive Stock
Option are disposed of prior to the end of the
two-years-from-grant/one-year-after-transfer holding period (a "disqualifying
disposition"), the excess (if any) of the fair market value of the shares on the
date of transfer of such shares to the optionee over the exercise price (but not
in excess of the gain realized on the sale of the shares) will be taxed as
ordinary income in the year of such disposition, and the Company generally will
be entitled to a deduction in the year of disposition equal to such amount. Any
additional gain or any loss recognized by the optionee on such disposition will
be short-term or long-term capital gain or loss, as the case may be, depending
upon the period for which the shares were held.
Non-Qualified Stock Options Exercised With Cash
No taxable income will be recognized by an optionee upon the
grant of a Non-Qualified Stock Option. Upon the exercise of a Non-Qualified
Stock Option, the excess of the fair market value of the shares received at the
time of exercise over the exercise price therefor will be taxed as ordinary
income, and the Company will generally be entitled to a corresponding deduction.
The optionee's tax basis in the shares acquired upon the exercise of such
Non-Qualified Stock Option will be equal to the exercise price paid by the
optionee for such shares plus the amount of ordinary income so recognized.
Any gain or loss recognized by the optionee on a subsequent
disposition of shares purchased pursuant to a Non-Qualified Stock Option will be
short-term or long-term capital gain or loss, depending upon the period during
which such shares were held, in an amount equal to the difference between the
selling price and the optionee's tax basis in the shares.
Exercises of Options Using Previously Acquired Shares
If previously acquired shares are surrendered in full or
partial payment of the exercise price of an option (whether an Incentive Stock
Option or a Non-Qualified Stock Option), gain or loss generally will not be
recognized by the optionee upon the exercise of such option to the extent the
optionee receives shares which on the date of exercise have a fair market value
equal to the fair market value of the shares surrendered in exchange therefor
("Replacement Shares"). If the option exercised is an Incentive Stock Option or
if the shares used were acquired pursuant to the exercise of an Incentive Stock
Option, the Replacement Shares are treated as having been acquired pursuant to
the exercise of an Incentive Stock Option.
21
However, if an Incentive Stock Option is exercised with shares
which were previously acquired pursuant to the exercise of an Incentive Stock
Option but which were not held for the required
two-years-from-grant/one-year-after-transfer holding period, there is a
disqualifying disposition of such previously acquired shares. In such case, the
optionee would recognize ordinary income on such disqualifying disposition equal
to the difference between the fair market value of such shares on the date of
exercise of the prior Incentive Stock Option and the amount paid for such shares
(but not in excess of the gain realized). Special rules apply in determining
which shares are considered to have been disposed of and in allocating the basis
among the shares. No capital gain is recognized.
The optionee will have an aggregate basis in the Replacement
Shares equal to the basis of the shares surrendered, increased by any ordinary
income required to be recognized on the disposition of the previously acquired
shares. The optionee's holding period for the Replacement Shares generally
includes the period during which the surrendered shares were held.
Any shares received by the optionee on such exercise in
addition to the Replacement Shares will be treated in the same manner as a cash
exercise of an option for no consideration.
Alternative Minimum Tax
In addition to the federal income tax consequences described
above, an optionee who exercises an Incentive Stock Option may be subject to the
alternative minimum tax, which is payable only to the extent it exceeds the
optionee's regular tax liability. For this purpose, upon the exercise of an
Incentive Stock Option, the excess of the fair market value of the shares over
the exercise price is an adjustment which increases the optionee's alternative
minimum taxable income. In addition, the optionee's basis in such shares is
increased by such amount for purposes of computing the gain or loss on
disposition of the shares for alternative minimum tax purposes. If the optionee
is required to pay an alternative minimum tax, the amount of such tax which is
attributable to deferral preferences (including the Incentive Stock Option
adjustment) is allowable as a tax credit against the optionee's regular tax
liability (net of other non-refundable credits) in subsequent years. To the
extent the credit is not used, it is carried forward. A holder of an Incentive
Stock Option should consult with the optionee's tax advisors concerning the
applicability and effect of the alternative minimum tax.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR
THE ADOPTION OF THE 2001 PLAN.
22
ALL OTHER MATTERS WHICH MAY COME BEFORE THE ANNUAL MEETING
As of the date of this Proxy Statement, the Company knows of no
business that will be presented for consideration at the Annual Meeting other
than that which has been referred to above. As to other business, if any, that
may come before the Annual Meeting, it is intended that proxies in the enclosed
form will be voted in accordance with the judgment of the proxy holder.
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any stockholder proposal intended to be included in the Company's proxy
statement and form of proxy for presentation at the 2002 Annual Meeting of
Stockholders (the "2002 Meeting") pursuant to Rule 14a-8 ("Rule 14a-8"), as
promulgated under the Exchange Act, must be received by the Company not later
than December 1, 2002. As to any proposals submitted for presentation at the
2002 Meeting outside the processes of Rule 14a-8, the proxies named in the form
of proxy for the 2002 Meeting will be entitled to exercise discretionary
authority on that proposal unless the Company receives notice of the matter on
or before January 15, 2002. However, even if such notice is timely received,
such proxies nevertheless may be entitled to exercise discretionary authority on
that matter to the extent permitted by Securities and Exchange Commission
regulations.
Any stockholder proposals, as well as any questions relating thereto,
should be directed to the Secretary of the Company at 220 King Street West,
Suite 200, Toronto, Ontario M5H 1K4.
ADDITIONAL INFORMATION
The cost of soliciting proxies in the enclosed form will be borne by
the Company. Officers and regular employees of the Company may, but without
compensation other than their regular compensation, solicit proxies by further
mailing, personal conversations, or by telephone or telegraph. The Company will,
upon request, reimburse brokerage firms and others for their reasonable expenses
in forwarding solicitation material to the beneficial owners of its Common
Stock.
By order of the Board of Directors
/s/
-------------------------------
April ____, 2001
23
APPENDIX A
----------
24
CERTIFICATE OF AMENDMENT OF THE ARTICLES OF INCORPORATION
OF
E-AUCTION GLOBAL TRADING INC.
Under Section 78.390 of the Nevada General Corporation Law
------------------
Pursuant to the unanimous written consent of the Board of
Directors of e-AUCTION GLOBAL TRADING INC., a Nevada corporation (the
"Corporation") and the vote of a majority of the shareholders of the Corporation
entitled to vote thereon, which Corporation's original Articles of Incorporation
were filed on July 8, 1998 with the Secretary of State of the State of Nevada,
and pursuant to the provisions of Section 78.390 of the Revised Statutes of the
State of Nevada, the undersigned do hereby certify as follows:
FIRST: The name of the corporation is e-Auction Global Trading
Inc.
SECOND: The Board of Directors of the Corporation duly adopted
the following resolution as of March __, 2001:
RESOLVED, that it is advisable in the
judgment of the Board of Directors that the Articles be, and
hereby are, amended by the deletion of Article FIRST thereof
and the insertion of the following new Article:
FIRST: "The name of the corporation is Aucxis Corp."
THIRD: The amendment of the Articles of Incorporation of the
corporation effected by this certificate of amendment is to amend Article One.
FOURTH: To accomplish the foregoing amendment, Article One of
the Articles of Incorporation of the corporation relating to the name of the
corporation is hereby deleted in its entirety and, in lieu thereof, amended as
follows:
"FIRST": "The name of the corporation is Aucxis Corp."
FIFTH: The foregoing amendment of the Articles of
Incorporation of the corporation was authorized by the consent in writing of all
the members of the Board of Directors of the corporation followed by the vote of
the holders of a majority of the outstanding shares of the corporation entitled
to vote on the said amendment of the Articles of Incorporation at the
Corporation's 2001 Annual Meeting of Shareholders.
Signed as of June __, 2001
-----------------------------
Daniel A. McKenzie, President
-----------------------------
, Assistant Secretary
25
ACKNOWLEDGMENT
State of________________________
County of______________________
On _____________________________, personally appeared before me, a
notary public, each of ______________________________________________________,
who acknowledged that they are the names of persons appearing and signing
document President and Assistant Secretary, respectively, of e-Auction Global
Trading, Inc. and that they executed the foregoing instrument in such capacities
by authority of the board of directors of said corporation.
---------------------------
Signature of Notary Public
(notary stamp or seal)
26
APPENDIX B
----------
27
E-AUCTION GLOBAL TRADING INC.
1999 STOCK OPTION PLAN
AS ADOPTED MARCH 1, 1999 AND AMENDED MARCH 13, 2000
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options. Capitalized terms not defined in
the text are defined in Section 21. This Plan is intended to be a written
compensatory benefit plan within the meaning of Rule 701 promulgated under the
Securities Act.
2. SHARES SUBJECT TO THE PLAN.
--------------------------
2.1 Number of Shares Available. Subject to Sections 2.2 and
16, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 9,000,000 Shares. Subject to Sections 2.2 and 16,
Shares will again be available for grant and issuance in connection with future
Options under this Plan that are subject to issuance upon exercise of an Option
but cease to be subject to such Option for any reason other than exercise of
such Option. At all times the Company will reserve and keep available a
sufficient number of Shares as will be required to satisfy the requirements of
all outstanding Options granted under this Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under this Plan and (b) the
Exercise Prices of and number of Shares subject to outstanding Options, will be
proportionately adjusted, subject to any required action by the Board or the
shareholders of the Company and compliance with applicable securities laws;
provided, however, that fractions of a Share will not be issued but will either
be paid in cash at Fair Market Value of such fraction of a Share or will be
rounded up to the nearest whole Share, as determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. Nonqualified Stock
Options (as defined in Section 5 below) may be granted to employees, officers,
directors and consultants of the Company or any Parent or Subsidiary of the
Company; provided such consultants render bona fide services not in connection
with the offer and sale of securities in a capital-raising transaction. A person
may be granted more than one Option under this Plan.
4. ADMINISTRATION.
--------------
4.1 Committee Authority. This Plan will be administered by the
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of this Plan, and to the direction of the Board, the
Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Stock Option
Agreement (as defined in Section 5 below) and any
other agreement or document executed pursuant to this
Plan;
(b) prescribe, amend and rescind rules and regulations
relating to this Plan;
28
(c) select persons to receive Options;
(d) determine the form and terms of Options;
(e) determine the number of Shares or other consideration
subject to Options;
(f) determine whether Options will be granted singly, in
combination with, in tandem with, in replacement of,
or as alternatives to, any other incentive or
compensation plan of the Company or any Parent or
Subsidiary of the Company;
(g) grant waivers of Plan or Option conditions;
(h) determine the vesting and exercisability of Options;
(i) correct any defect, supply any omission, or reconcile
any inconsistency in this Plan, any Option, any Stock
Option Agreement (as defined in Section 5 below) or
any Exercise Agreement (as defined in Section 5
below);
(j) determine whether an Option has been earned; and
(k) make all other determinations necessary or advisable
for the administration of this Plan.
4.2 Committee Discretion. Any determination made by the
Committee with respect to any Option will be made in its sole discretion at the
time of grant of the Option or, unless in contravention of any express term of
this Plan or Option, at any later time, and such determination will be final and
binding on the Company and on all persons having an interest in any Option under
this Plan. The Committee may delegate to one or more officers of the Company the
authority to grant an Option under this Plan to Participants who are not
Insiders of the Company.
5. OPTIONS. The Committee may grant Options to eligible persons and
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOS") or Nonqualified Stock Options ("NQSOS"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Agreement which will expressly identify the Option as an
ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and contain
such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 Exercise Period. Options may be exercisable immediately
(subject to repurchase pursuant to Section 10 of this Plan) or may be
exercisable within the times or upon the events determined by the Committee as
set forth in the Stock Option Agreement governing such Option; provided,
however, that no Option will be exercisable after the expiration of ten (10)
years from the date the Option is granted; and provided further that no ISO
granted to a person who directly or by attribution owns more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of
29
any Parent or Subsidiary of the Company ("TEN PERCENT SHAREHOLDER") will be
exercisable after the expiration of five (5) years from the date the ISO is
granted. The Committee also may provide for Options to become exercisable at one
time or from time to time, periodically or otherwise, in such number of Shares
or percentage of Shares as the Committee determines. Subject to earlier
termination of the Option as provided herein, each Participant shall have the
right to exercise an Option granted hereunder at the rate of at least twenty
percent (20%) per year over five (5) years from the date such Option is granted.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less than
the Fair Market Value of the Shares on the date of grant; provided that (i) the
Exercise Price of an ISO will not be less than 100% of the Fair Market Value of
the Shares on the date of grant and (ii) the Exercise Price of any Option
granted to a Ten Percent Shareholder will not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 6 of this Plan.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"EXERCISE AGREEMENT") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price, and any applicable taxes, for the
number of Shares being purchased.
5.6 Termination. Subject to earlier termination pursuant to
Subsection 16.1 and notwithstanding the exercise periods set forth in the Stock
Option Agreement, exercise of an Option will always be subject to the following:
(a) If the Participant is Terminated for any reason
except death or Disability, then the Participant may
exercise such Participant's Options, only to the
extent that such Options would have been exercisable
upon the Termination Date, no later than three (3)
months after the Termination Date (or such shorter
time period, not less than thirty (30) days, as may
be specified in the Stock Option Agreement) or such
longer time period not exceeding five (5) years after
the Termination Date as may be determined by the
Committee, with any exercise beyond three (3) months
after the Termination Date deemed to be an NQSO, but
in any event, no later than the expiration date of
the Options.
(b) If the Participant is Terminated because of
Participant's death or Disability (or the Participant
dies within three (3) months after a Termination
other than because of Participant's death or
Disability), then Participant's Options may be
exercised, only to the extent that such Options would
have been exercisable by Participant on the
Termination Date and must be exercised by Participant
(or Participant's legal representative or authorized
assignee), no later than twelve (12) months after the
Termination Date (or such shorter time period, not
less than six (6) months, as may be specified in the
Stock Option Agreement) or such longer time period
not exceeding five (5) years after the Termination
Date as may be determined by the Committee, with any
exercise beyond (a) three (3) months after the
Termination Date when the Termination is for any
reason other than the Participant's death or
disability, within the meaning of Section 22(e)(3) of
the Code, or (b) twelve (12) months after the
Termination Date when the Termination is for
Participant's death or disability, within the meaning
of Section
30
22(e)(3) of the Code, deemed to be an NQSO, but in
any event no later than the expiration date of the
Options.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) will not exceed $100,000. If the Fair
Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, then the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year will be ISOs and the Options for the amount in
excess of $100,000 that become exercisable in that calendar year will be NQSOs.
In the event that the Code or the regulations promulgated thereunder are amended
after the Effective Date (as defined in Section 17 below) of this Plan to
provide for a different limit on the Fair Market Value of Shares permitted to be
subject to ISOs, then such different limit will be automatically incorporated
herein and will apply to any Options granted after the effective date of such
amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. The Committee may reduce the Exercise Price of
outstanding Options without the consent of Participants affected by a written
notice to them; provided, however, that the Exercise Price may not be reduced
below the minimum Exercise Price that would be permitted under Section 5.4 of
this Plan for Options granted on the date the action is taken to reduce the
Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision
in this Plan, no term of this Plan relating to ISOs will be interpreted, amended
or altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
5.11 The following restrictions shall also apply to this Plan:
(i) the aggregate number of Shares reserved for issuance
pursuant to Options granted to Insiders shall not
exceed 10% of the Outstanding Issue;
(ii) Insiders shall not be issued, within any one year
period, a number of Shares which exceeds 10% of the
Outstanding Issue;
(iii) no Participant together with such Participant's
Associates shall be issued, within any one year
period, a number of Shares which exceeds 15% of the
Outstanding Issue; and
(iv) the number of Shares reserved for issuance pursuant
to Options to any one Participant shall not exceed 5%
of the Outstanding Issue.
6. PAYMENT FOR SHARE PURCHASES.
---------------------------
31
6.1 Payment. Payment for Shares purchased pursuant to this
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been
owned by the Participant for more than six (6) months
and have been paid for within the meaning of SEC Rule
144 (and, if such shares were purchased from the
Company by use of a promissory note, such note has
been fully paid with respect to such shares); or (2)
were obtained by the Participant in the public
market;
(c) by waiver of compensation due or accrued to the
Participant for services rendered;
(d) provided that a public market for the Company's stock
exists:
(1) through a "same day sale" commitment from
the Participant and a broker-dealer that is
a member of the National Association of
Securities Dealers (an "NASD DEALER")
whereby the Participant irrevocably elects
to exercise the Option and to sell a portion
of the Shares so purchased to pay for the
Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such
Shares to forward the Exercise Price
directly to the Company; or
(2) through a "margin" commitment from the
Participant and an NASD Dealer whereby the
Participant irrevocably elects to exercise
the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin
account as security for a loan from the NASD
Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to
forward the Exercise Price directly to the
Company; or
(e) by any combination of the foregoing.
6.2 Loan Guarantees. The Committee may help the Participant
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
7. WITHHOLDING TAXES.
7.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Options granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Options are to be made in cash, such payment will be net of
an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
7.2 Stock Withholding. When, under applicable tax laws, a
Participant incurs tax liability in connection with the exercise or vesting of
any Option that is subject to tax withholding and the Participant is obligated
to pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have
32
the Company withhold from the Shares to be issued that number of Shares having a
Fair Market Value equal to the minimum amount required to be withheld,
determined on the date that the amount of tax to be withheld is to be
determined. All elections by a Participant to have Shares withheld for this
purpose will be made in accordance with the requirements established by the
Committee and be in writing in a form acceptable to the Committee.
8. PRIVILEGES OF STOCK OWNERSHIP.
8.1 Voting and Dividends. No Participant will have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that the
Participant will have no right to retain such stock dividends or stock
distributions with respect to Unvested Shares that are repurchased pursuant to
Section 10.
8.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Options outstanding, or as otherwise required or permitted under
Section 260.140.46 of Title 10 of the California Code of Regulations.
Notwithstanding the foregoing, the Company will not be required to provide such
financial statements to Participants whose services in connection with the
Company assure them access to equivalent information.
9. TRANSFERABILITY. Options granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Participant an Option will be exercisable only by the Participant, and any
elections with respect to an Option, may be made only by the Participant.
10. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Stock Option
Agreement (a) a right of first refusal to purchase all Shares that a Participant
(or a subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by Section 25102(o) of the California Corporations Code,
and/or (b) a right to repurchase Unvested Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after
Participant's Termination Date for cash and/or cancellation of purchase money
indebtedness, at the Participant's Exercise Price, provided, that such right of
repurchase lapses at the rate of at least twenty percent (20%) per year over
five (5) years from the date of grant of the Option. If such right of repurchase
is assigned, the assignee must pay the Company upon assignment of the right
(unless the assignee is a one hundred percent (100%) owned subsidiary of the
Company or is the parent of the Company owning one hundred percent (100%) of the
Company) cash equal to the difference between the Exercise Price and the Fair
Market Value of the Shares, if the Exercise Price is less than the Fair Market
Value of the Shares.
11. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or other
Securities Commissions or any stock exchange or automated quotation system upon
which the Shares may be listed or quoted.
12. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together
33
with stock powers or other instruments of transfer approved by the Committee,
appropriately endorsed in blank, with the Company or an agent designated by the
Company to hold in escrow until such restrictions have lapsed or terminated, and
the Committee may cause a legend or legends referencing such restrictions to be
placed on the certificates. Any Participant who is permitted to execute a
promissory note as partial or full consideration for the purchase of Shares
under this Plan will be required to pledge and deposit with the Company all or
part of the Shares so purchased as collateral to secure the payment of
Participant's obligation to the Company under the promissory note; provided,
however, that the Committee may require or accept other or additional forms of
collateral to secure the payment of such obligation and, in any event, the
Company will have full recourse against the Participant under the promissory
note notwithstanding any pledge of the Participant's Shares or other collateral.
In connection with any pledge of the Shares, Participant will be required to
execute and deliver a written pledge agreement in such form as the Committee
will from time to time approve. The Shares purchased with the promissory note
may be released from the pledge on a pro rata basis as the promissory note is
paid.
13. EXCHANGE AND BUYOUT OF OPTIONS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Options in exchange for the surrender and
cancellation of any or all outstanding Options. The Committee may at any time
buy from a Participant an Option previously granted with payment in cash, Shares
(including restricted stock) or other consideration, based on such terms and
conditions as the Committee and the Participant may agree.
14. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is
intended to comply with Section 25102(o) of the California Corporations Code.
Any provision of the Plan which is inconsistent with Section 25102(o) shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o). An Option will not be
effective unless such Option is in compliance with all applicable federal, state
and provincial securities laws, rules and regulations of any governmental body
or commission, and the requirements of any stock exchange or automated quotation
system upon which the Shares may then be listed or quoted, as they are in effect
on the date of grant of the Option and also on the date of exercise or other
issuance. Notwithstanding any other provision in this Plan, the Company will
have no obligation to issue or deliver certificates for Shares under this Plan
prior to (a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable, and/or (b) compliance with any exemption,
completion of any registration or other qualification of such Shares under any
state, federal or provincial law or ruling of any governmental body that the
Company determines to be necessary or advisable. The Company will be under no
obligation to register the Shares with the SEC or to effect compliance with the
exemption, registration, qualification or listing requirements of any state or
provincial securities laws, stock exchange or automated quotation system, and
the Company will have no liability for any inability or failure to do so.
15. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
16. CORPORATE TRANSACTIONS.
----------------------
16.1 Assumption or Replacement of Options by Successor. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation with a wholly-owned subsidiary, a reincorporation of
the Company in a different jurisdiction, or other transaction in which there is
no substantial change in the shareholders of the Company or their relative stock
holdings and the Options
34
granted under this Plan are assumed, converted or replaced by the successor
corporation, which assumption will be binding on all Participants), (c) a merger
in which the Company is the surviving corporation but after which shareholders
of the Company immediately prior to such merger (other than any shareholder
which merges, or which owns or controls another corporation which merges, with
the Company in such merger) cease to own their shares or other equity interests
in the Company, or (d) the sale of substantially all of the assets of the
Company, any or all outstanding Options may be assumed, converted or replaced by
the successor corporation (if any), which assumption, conversion or replacement
will be binding on all Participants. In the alternative, the successor
corporation may substitute equivalent Options or provide substantially similar
consideration to Participants as was provided to shareholders (after taking into
account the existing provisions of the Options). The successor corporation may
also issue, in place of outstanding Shares of the Company held by the
Participant, substantially similar shares or other property subject to
repurchase restrictions and other provisions no less favorable to the
Participant than those which applied to such outstanding Shares immediately
prior to such transaction described in this Subsection 16.1. The Committee has
the discretion to include in any Participant's Stock Option Agreement a
provision stating that, pursuant to a transaction described in this Subsection
16.1, then notwithstanding any other provision in this Plan to the contrary, the
vesting of such Options will accelerate and the Options will become exercisable
in full prior to the consummation of such event at such times and on such
conditions as the Committee determines, and if such Options are not exercised
prior to the consummation of the corporate transaction, they shall terminate in
accordance with the provisions of this Plan.
16.2 Other Treatment of Options. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 16, in
the event of the occurrence of any transaction described in Section 16.1, any
outstanding Options will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation or sale of assets.
16.3 Assumption of Options by the Company. The Company, from
time to time, also may substitute or assume outstanding options granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (a) granting an Option under this Plan in substitution
of such other company's option, or (b) assuming such option as if it had been
granted under this Plan if the terms of such assumed option could be applied to
an Option granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed option would have been
eligible to be granted an Option under this Plan if the other company had
applied the rules of this Plan to such grant. In the event the Company assumes
an option granted by another company, the terms and conditions of such option
will remain unchanged (except that the exercise price and the number and nature
of shares issuable upon exercise of any such option will be adjusted
appropriately pursuant to Section 424(a) of the Code). In the event the Company
elects to grant a new Option rather than assuming an existing option, such new
Option may be granted with a similarly adjusted Exercise Price.
17. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective
on the date that it is adopted by the Board (the "EFFECTIVE DATE"). This Plan
will be approved by the shareholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve (12)
months before or after the Effective Date. Upon the Effective Date, the Board
may grant Options pursuant to this Plan; provided, however, that no Option may
be exercised prior to shareholder approval of this Plan.
18. TERM OF PLAN. Unless earlier terminated as provided herein, this
Plan will terminate ten (10) years from the Effective Date or, if earlier, the
date of shareholder approval.
19. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend this Plan in any respect, including without limitation
amendment of any form of Stock Option Agreement or instrument to be executed
pursuant to this Plan; provided, however, that the Board
35
will not, without the approval of the shareholders of the Company, amend this
Plan in any manner that requires such shareholder approval pursuant to the Code
or the regulations promulgated thereunder as such provisions apply to ISO plans
or pursuant to the requirements of any stock exchange or automated quotation
system upon which the Shares are listed.
20. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
the Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under this Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
21. DEFINITIONS. As used in this Plan, the following terms will have
the following meanings:
"ASSOCIATE" has the meaning ascribed thereto in the Securities
Act (Ontario) as amended from time to time.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to
administer this Plan, or if no committee is appointed, the Board.
"COMPANY" means e-Auction Global Trading Inc. or any successor
corporation.
"DISABILITY" means a disability, whether temporary or
permanent, partial or total, as determined by the Committee.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXERCISE PRICE" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a
share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the NASDAQ
National Market, its closing price on the NASDAQ
National Market or if such Common Stock is then
listed on the Toronto Stock Exchange, its closing
price on the Toronto Stock Exchange on the date of
determination as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, its closing
price on the date of determination on the principal
national securities exchange on which the Common
Stock is listed or admitted to trading as reported in
The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not
quoted on the NASDAQ National Market nor listed or
admitted to trading on a national securities
exchange, the average of the closing bid and asked
prices on the date of determination as reported by
The Wall Street Journal (or, if not so reported, as
36
otherwise reported by any newspaper or other source
as the Board may determine); or
(d) if none of the foregoing is applicable, by the
Committee in good faith.
"INSIDER" means an officer or director of the Company or any
other person whose transactions in the Company's Common Stock are subject to
Section 16 of the Exchange Act, or is an insider of the Company as defined by
the Securities Act (Ontario) as amended from time to time.
"OUTSTANDING ISSUE" means the number of shares of capital
stock of the Company that are outstanding immediately prior to any issuance of
Options under this Plan or any issuance of Shares, as the case may be, excluding
Shares issued pursuant to the Plan during the preceding one year period.
"OPTION" means an award of an option to purchase Shares
pursuant to Section 5.
"PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"PARTICIPANT" means a person who receives an Option under this
Plan.
"PLAN" means this e-Auction Global Trading Inc. 1999 Stock
Option Plan, as amended from time to time.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved
for issuance under this Plan, as adjusted pursuant to Sections 2 and 16, and any
successor security.
"SUBSIDIARY" means any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director or consultant to the Company
or a Parent or Subsidiary of the Company. An employee will not be deemed to have
ceased to provide services in the case of (i) sick leave, (ii) military leave,
or (iii) any other leave of absence approved by the Committee, provided that
such leave is for a period of not more than 90 days unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to formal policy adopted from time to time by the
Company and issued and promulgated to employees in writing. In the case of any
employee on an approved leave of absence, the Committee may make such provisions
respecting suspension of vesting of the Option while on leave from the employ of
the Company or a Subsidiary as it may deem appropriate, except that in no event
may an Option be exercised after the expiration of the term set forth in the
Stock Option Agreement. The Committee will have sole discretion to determine
whether a Participant has ceased to provide services and the effective date on
which the Participant ceased to provide services (the "TERMINATION DATE").
37
"UNVESTED SHARES" means "Unvested Shares" as defined in
Section 2.2 of the Stock Option Agreement.
"VESTED SHARES" means "Vested Shares" as defined in Section
2.2 of the Stock Option Agreement.
38
APPENDIX C
----------
39
2001 STOCK OPTION PLAN
OF
E-AUCTION GLOBAL TRADING INC.
Section 1. Purposes of this Plan. This stock option plan (as the same
may be supplemented, modified, amended or restated from time to time in the
manner provided herein, this "Plan") is intended to provide an incentive to
employees (including directors and officers who are employees), and to
consultants and directors who are not employees, of E-Auction Global Trading
Inc., a Nevada corporation (the "Company"), or any of its Subsidiaries (as such
term is defined in Section 19 hereof), and to offer an additional inducement in
obtaining the services of such individuals. This Plan provides for the grant of
"incentive stock options" ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Tax Code"), and nonqualified
stock options which do not qualify as ISOs ("NQSOs"). The Company makes no
representation or warranty, express or implied, as to the qualification of any
option as an "incentive stock option" under the Tax Code. Each reference to a
consultant in the Plan shall be deemed to include each of the consultant's
employees in the case of a consultant that is not a natural person.
Section 2. Stock Subject to this Plan.
(a) Subject to the provisions of Section 12, the aggregate number of
shares of the Company's Common Stock, par value $.001 per share ("Common
Stock"), for which options may be granted under this Plan shall not exceed the
number of shares of Common Stock covered by the Unissued Reserve (as defined
below) and the Voided Options (as defined below) plus 1,000,000 shares; provided
that in no event shall the aggregate number of shares of Common Stock available
under the Plan and the 1999 Plan (as hereinafter defined) exceed 10,000,000.
Such shares of Common Stock may, in the discretion of the Board of Directors of
the Company (the "Board of Directors"), consist either in whole or in part of
authorized but unissued shares of Common Stock or shares of Common Stock held in
the treasury of the Company. Subject to the provisions of Section 13 hereof, any
shares of Common Stock subject to an option which for any reason expires, is
canceled or is terminated unexercised or which ceases for any reason to be
exercisable shall again become available for the granting of options under this
Plan. The Company shall at all times during the term of this Plan reserve and
keep available such number of shares of Common Stock as will be sufficient to
satisfy the requirements of this Plan.
(b) "Unissued Reserve" shall mean the number of shares of Common Stock
as of the date of the adoption hereof for which options were authorized but not
issued and outstanding under the Company's Amended and Restated 1999 Stock
Option Plan (the "1999 Plan"). "Voided Options" shall mean any and all options
in respect of shares of Common Stock previously granted pursuant to 1999 Plan
that become void, expire, are canceled, terminate unexercised or cease for any
reason whatsoever to become exercisable.
Section 3. Administration of this Plan.
(a) This Plan will be administered by the Board of Directors, or by a
committee (the "Committee") consisting of two or more directors appointed by the
Board of Directors. Those administering this Plan shall be referred to herein as
the "Administrators." Notwithstanding the foregoing, if the Company is or
becomes a corporation issuing any class of common equity securities required to
be registered under Section 12 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), to the extent necessary to preserve any deduction
under Section 162(m) of the Tax Code or to comply with Rule 16b-3 promulgated
under the Exchange Act, as amended, or any successor rule ("Rule 16b-3"), any
Committee appointed by the Board of Directors to administer this Plan shall be
comprised of two or more directors each of whom shall be (i) a "non-employee
director" within the meaning of Rule 16b-3, and (ii) an "outside director"
within the meaning of Treasury Regulation Section 1.162-27(e)(3). The delegation
of powers to the Committee shall be consistent with all applicable law
40
(including, without limitation, applicable state law and Rule 16b-3). Unless
otherwise provided in the By-Laws of the Company, by resolution of the Board of
Directors or applicable law, a majority of the members of the Board or the
Committee shall constitute a quorum, and the acts of a majority of the members
present at any meeting at which a quorum is present, and any acts approved in
writing by all members without a meeting, shall be the acts of the Board or the
Committee.
(b) Subject to the express provisions of this Plan, the Administrators
shall have the authority, in their sole discretion, to determine (among other
things): (i) the persons who shall be granted options; (ii) the times when they
shall receive options; (iii) whether an option granted to an employee shall be
an ISO or a NQSO; the type (i.e., voting or non-voting) and number of shares of
Common Stock to be subject to each option; (iv) the term of each option,
including any provisions for early termination; (v) the date each option shall
become exercisable; including any provisions for early vesting; (vi) whether an
option shall be exercisable in whole or in installments, and, if in
installments, the number of shares of Common Stock to be subject to each
installment; whether the installments shall be cumulative; the date each
installment shall become exercisable and the term of each installment; (vii)
whether to accelerate the date of exercise of any option or installment; (viii)
whether shares of Common Stock may be issued upon the exercise of an option as
partly paid, and, if so, the dates when future installments of the exercise
price shall become due and the amounts of such installments; (ix) the exercise
price of each option; the form of payment of the exercise price; (x) the fair
market value of a share of Common Stock; (xi) whether and under what conditions
to restrict the pledge, sale or other disposition of any option granted under
this Plan, the shares of Common Stock acquired upon the exercise of an option
and, if so, whether and under what conditions to waive any such restriction,
whether individually, by class or otherwise; (xii) whether and under what
conditions to subject the exercise of all or any portion of an option to the
fulfillment of certain restrictions or contingencies as specified in the
contract referred to in Section 11 hereof (the "Contract"), including (without
limitation) restrictions or contingencies relating to (A) entering into a
covenant not to compete with the Company, its Parent (if any) (as such term is
defined in Section 19 hereof) and any Subsidiaries, (B) financial objectives for
the Company, any of its Subsidiaries, a division, a product line or other
category and/or (C) the period of continued employment or consulting of the
optionee with the Company or any of its Subsidiaries, and to determine whether
such restrictions or contingencies have been met; (xiii) the amount, if any,
necessary to satisfy the obligation of the Company, any of its Subsidiaries or
any Parent to withhold taxes or other amounts; (xiv) whether an optionee has a
Disability (as such term is defined in Section 19); (xv) to cancel or modify an
option either with the consent of the optionee or as provided in the Contract;
provided, however, that the modified provision is permitted to be included in an
option granted under this Plan on the date of the modification; provided,
further, that in the case of a modification (within the meaning of Section
424(h) of the Tax Code) of an ISO, such option as modified would be permitted to
be granted on the date of such modification under the terms of this Plan; (xvi)
to construe the respective Contracts and this Plan; (xvii) to prescribe, amend
and rescind policies, rules and regulations relating to this Plan; (xviii) to
approve any provision of this Plan or any option granted under this Plan, or any
amendment to either, that under Rule 16b-3 or Section 162(m) of the Tax Code
requires the approval of the Board of Directors, a committee of non-employee
directors or the stockholders, in order (1) to be exempt under Section 16(b) of
the Exchange Act (unless otherwise specifically provided herein) or (2) to
preserve any deduction under Section 162(m) of the Tax Code; and (xix) to make
all other determinations necessary or advisable for administering this Plan.
(c) Any controversy or claim arising out of or relating to this Plan,
any option granted under this Plan or any Contract shall be determined
unilaterally by the Administrators in their sole and absolute discretion. The
determinations of the Administrators on matters referred to in this Section 3
shall be conclusive and binding on all parties.
(d) No Administrator or former Administrator shall be liable for any
action or determination made in good faith with respect to this Plan or any
option granted hereunder.
41
Section 4. Eligibility. The Administrators may from time to time,
consistent with the purposes of this Plan, grant options to such employees
(including officers and directors who are employees) of, or consultants to, the
Company or any of its Subsidiaries, and to such directors of the Company who, at
the time of grant, are not common law employees of the Company or of any of its
Subsidiaries, as the Administrators may determine in their sole discretion. Such
options granted shall cover such number of shares of Common Stock as the
Administrators may determine in their sole discretion; provided, however, that
if on the date of grant of an option, any class of common stock of the Company
(including without limitation the Common Stock) is required to be registered
under Section 12 of the Exchange Act, the maximum number of shares subject to
options that may be granted to any employee during any calendar year under this
Plan shall be 1,500,000 shares; and provided, further, that the aggregate market
value (determined at the time the option is granted) of the shares of Common
Stock for which any eligible employee may be granted ISOs under this Plan or any
other plan of the Company, or of a Parent or a Subsidiary of the Company, that
are exercisable for the first time by such optionee during any calendar year
shall not exceed $100,000. The $100,000 ISO limitation amount shall be applied
by taking ISOs into account in the order in which they were granted. Any option
(or portion thereof) granted in excess of such ISO limitation amount shall be
treated as a NQSO to the extent of such excess.
Section 5. Exercise Price.
(a) The exercise price of the shares of Common Stock under each option
shall be determined by the Administrators in their sole discretion; provided,
however, that (i) except as provided below, the exercise price of an option
shall not be less than the fair market value of the Common Stock subject to such
option on the date of grant; (ii) if, at the time an ISO is granted, the
optionee owns (or is deemed to own under Section 424(d) of the Tax Code) stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company, of any of its Subsidiaries or of a Parent, the
exercise price of such ISO shall not be less than one hundred ten percent (110%)
of the fair market value of the Common Stock subject to such ISO on the date of
grant; and (iii) the Administrators must first obtain the approval of the Board
to grant a NQSO with an exercise price which is less than the fair market value
of the shares on the date of the granting of the NQSO; provided, however, that
with respect to any NQSO granted to a "covered employee" (as such term is
defined in Section 162(m) of the Tax Code), the exercise price of the shares of
Common Stock underlying such NQSO shall not be less than the fair market value
of such shares on the date of granting of such NQSO.
(b) The fair market value of a share of Common Stock on any day shall
be: (i) if the principal market for the Common Stock is a national securities
exchange, the closing sales price per share of the Common Stock on such day as
reported by such exchange or on a consolidated tape reflecting transactions on
such exchange; (ii) if the principal market for the Common Stock is not a
national securities exchange and the Common Stock is quoted on the Nasdaq Stock
Market ("Nasdaq"), and (A) if actual sales price information is available with
respect to the Common Stock, the closing sales price per share of the Common
Stock on such day on Nasdaq, or (B) if such information is not available, the
closing bid and asked prices per share for the Common Stock on such day on
Nasdaq; or (iii) if the principal market for the Common Stock is not a national
securities exchange and the Common Stock is not quoted on Nasdaq, the closing
bid and asked prices per share for the Common Stock on such day as reported on
the OTC Bulletin Board Service or by National Quotation Bureau, Incorporated or
a comparable service; provided, however, that if clauses (i), (ii) and (iii) of
this subsection are all inapplicable because the Company's Common Stock is not
publicly traded, or if no trades have been made or no quotes are available for
such day, the fair market value of a share of Common Stock shall be determined
by the Administrators by any method consistent with any applicable regulations
adopted by the Treasury Department relating to stock options.
Section 6. Term. Each option granted pursuant to this Plan shall be for
such term as is established by the Administrators, in their sole discretion, at
or before the time such option is granted;
42
provided, however, that the term of each option granted pursuant to this Plan
shall be for a period not exceeding ten (10) years from the date of grant
thereof, and provided further, that if, at the time an ISO (but not an NQSO) is
granted, the optionee owns (or is deemed to own under Section 424(d) of the Tax
Code) stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company, of any of its Subsidiaries or of a
Parent, the term of the ISO shall be for a period not exceeding five (5) years
from the date of grant. Options shall be subject to earlier termination as
hereinafter provided.
Section 7. Exercise.
(a) An option (or any installment thereof), to the extent then
exercisable, shall be exercised by giving written notice to the Company at its
principal office (i) specifying the option being exercised and the number of
shares of Common Stock as to which such option is being exercised, and (ii)
accompanied by payment in full of the aggregate exercise price therefor (or the
amount due on exercise if the applicable Contract permits installment payments)
(A) in cash and/or by certified check, (B) with the authorization of the
Administrators, with previously acquired shares of Common Stock having an
aggregate fair market value (determined in accordance with Section 5), on the
date of exercise, equal to the aggregate exercise price of all options being
exercised, (C) with a concurrent sale of option shares to the extent permitted
by subsection (b) of this Section, or (D) some combination thereof; provided,
however, that in no case may shares be tendered if such tender would require the
Company to incur a charge against its earnings for financial accounting
purposes. The Company shall not be required to issue any shares of Common Stock
pursuant to the exercise of any option until all required payments with respect
thereto, including payments for any required withholding amounts, have been
made.
(b) The Administrators may, in their sole discretion, permit payment of
the exercise price of an option by delivery by the optionee of a properly
executed notice, together with a copy of the optionee's irrevocable instructions
to a broker acceptable to the Administrators to sell all or a portion of the
option shares and deliver promptly to the Company the amount of sale or loan
proceeds sufficient to pay such exercise price. In connection therewith, the
Company may enter into agreements for coordinated procedures with one or more
brokerage firms.
(c) An optionee shall not have the rights of a stockholder with respect
to such shares of Common Stock to be received upon the exercise of an option
until the date of issuance of a stock certificate to the optionee for such
shares or, in the case of uncertificated shares, until the date an entry is made
on the books of the Company's transfer agent representing such shares; provided,
however, that until such stock certificate is issued or until such book entry is
made, any optionee using previously acquired shares of Common Stock in payment
of an option exercise price shall continue to have the rights of a stockholder
with respect to such previously acquired shares.
(d) In no case may a fraction of a share of Common Stock be purchased
or issued under this Plan.
Section 8. Termination of Relationship.
(a) Except as may otherwise be expressly provided in the applicable
Contract or optionee's written employment or consulting or termination contract,
any optionee whose employment or consulting relationship with the Company, its
Parent, any of its Subsidiaries has terminated for any reason (other than the
optionee's death or Disability) may exercise any option granted to the optionee
as an employee or consultant, to the extent exercisable on the date of such
termination, at any time within three (3) months after the date of termination,
but not thereafter and in no event after the date the option would otherwise
have expired; provided, however, that if such relationship is terminated for
Cause (as defined in Section 19) or by reason of the voluntary termination of
such relationship by, or the resignation of, the employee, such option shall
terminate immediately.
43
(b) For the purposes of this Plan, an employment or consulting
relationship shall be deemed to exist between an individual and the Company if,
at the time of the determination, the individual was an employee of the Company,
its Parent, any of its Subsidiaries. As a result, an individual on military
leave, sick leave or other bona fide leave of absence shall continue to be
considered an employee or consultant for purposes of this Plan during such leave
if the period of the leave does not exceed ninety (90) days, or, if longer, so
long as the individual's right to re-employment with the Company, any of its
Subsidiaries or Parent, as the case may be, is guaranteed either by statute or
by contract or the Company, its Parent, or any of its Subsidiaries, as the case
may be, has consented in writing to longer absence. If the period of leave
exceeds ninety (90) days and the individual's right to re-employment is not
guaranteed by statute, contract or consent, the employment or consulting
relationship shall be deemed to have terminated on the 91st day of such leave.
(c) Except as may otherwise be expressly provided in the applicable
Contract, an optionee whose directorship with the Company has terminated for any
reason (other than the optionee's death or Disability) may exercise the options
granted to the optionee as a director who was not an employee of or consultant
to the Company, Parent or any of its Subsidiaries, to the extent exercisable on
the date of such termination, at any time within three (3) months after the date
of termination, but not thereafter and in no event after the date the option
would otherwise have expired; provided, however, that if the optionee's
directorship is terminated for Cause, such option shall terminate immediately.
(d) Nothing in this Plan or in any option granted under this Plan shall
confer on any person any right to continue in the employ of or as a director of
or consultant to the Company, its Parent or any of its Subsidiaries, or as a
director of the Company, or interfere in any way with any right of the Company,
its Parent or any of its Subsidiaries to terminate such relationship at any time
for any reason whatsoever without liability to the Company, its Parent or any of
its Subsidiaries.
Section 9. Death or Disability of an Optionee.
(a) Except as may otherwise be expressly provided in the applicable
Contract or optionee's written employment or consulting or termination contract,
if an optionee dies (i) while he is employed by, or a consultant to, the
Company, its Parent or any of its Subsidiaries, (ii) within three (3) months
after the termination of the optionee's employment or consulting relationship
with the Company, its Parent and its Subsidiaries (unless such termination was
for Cause or without the consent of the Company) or (iii) within one (1) year
following the termination of such employment or consulting relationship by
reason of the optionee's Disability, the options granted to the optionee as an
employee of, or consultant to, the Company, Parent or any of its Subsidiaries,
will become fully vested and may be exercised, by the optionee's Legal
Representative (as such term is defined in Section 19), at any time within one
(1) year after death, but not thereafter and in no event after the date the
option would otherwise have expired. Except as may otherwise be expressly
provided in the applicable Contract or optionee's written employment or
consulting or termination contract, any optionee whose employment or consulting
relationship with the Company, its Parent and its Subsidiaries has terminated by
reason of the optionee's Disability may exercise such options, to the extent
exercisable upon the effective date of such termination, at any time within one
(1) year after such date, but not thereafter and in no event after the date the
option would otherwise have expired.
(b) Except as may otherwise be expressly provided in the applicable
Contract, if an optionee dies (i) while the optionee is a director of the
Company, (ii) within three (3) months after the termination of the optionee's
directorship with the Company (unless such termination was for Cause or without
the consent of the Company) or (iii) within one (1) year after the termination
of the optionee's directorship by reason of the optionee's Disability, the
options granted to the optionee as a director who was not an employee of or
consultant to the Company or any of its Subsidiaries, may be exercised, to the
extent exercisable on the date of the optionee's death, by the optionee's Legal
Representative at any time within one (1) year after death, but not thereafter
and in no event after the date the option would otherwise
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have expired. Except as may otherwise be expressly provided in the applicable
Contract, an optionee whose directorship with the Company has terminated by
reason of Disability, may exercise such options, to the extent exercisable on
the effective date of such termination, at any time within one (1) year after
such date, but not thereafter and in no event after the date the option would
otherwise have expired.
Section 10. Compliance with Securities Laws.
(a) It is a condition to the exercise of any option that either (i) a
Registration Statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the shares of Common Stock to be issued upon
such exercise shall be effective and current at the time of exercise, or (ii)
there is an exemption from registration under the Securities Act for the
issuance of the shares of Common Stock upon such exercise. Nothing herein shall
be construed as requiring the Company to register shares subject to any option
under the Securities Act or to keep any Registration Statement effective or
current.
(b) The Administrators may require, in their sole discretion, as a
condition to the grant or exercise of an option, that the optionee execute and
deliver to the Company such optionee's representations and warranties, in form,
substance and scope satisfactory to the Administrators, as the Administrators
may determine to be necessary or convenient to facilitate the perfection of an
exemption from the registration requirements of the Securities Act, applicable
state securities laws or other legal requirements, including (without
limitation) that (i) the shares of Common Stock to be issued upon exercise of
the option are being acquired by the optionee for the optionee's own account,
for investment only and not with a view to the resale or distribution thereof,
and (ii) any subsequent resale or distribution of shares of Common Stock by such
optionee will be made only pursuant to (A) a Registration Statement under the
Securities Act which is effective and current with respect to the shares of
Common Stock being sold, or (B) a specific exemption from the registration
requirements of the Securities Act, but in claiming such exemption, the
optionee, prior to any offer of sale or sale of such shares of Common Stock,
shall provide the Company with a favorable written opinion of counsel
satisfactory to the Company, in form, substance and scope satisfactory to the
Company, as to the applicability of such Securities Act exemption to the
proposed sale or distribution.
(c) In addition, if at any time the Administrators shall determine that
the listing or qualification of the shares of Common Stock subject to such
option on any securities exchange, Nasdaq or under any applicable law, or that
the consent or approval of any governmental agency or regulatory body, is
necessary or desirable as a condition to, or in connection with, the granting of
an option or the issuance of shares of Common Stock thereunder, such option may
not be granted or exercised in whole or in part, as the case may be, unless such
listing, qualification, consent or approval shall have been effected or obtained
by the Administrators free of any conditions not acceptable to the
Administrators.
Section 11. Stock Option Contracts. Each option shall be evidenced by
an appropriate Contract duly executed by the Company and the optionee. Such
Contract shall contain such terms, provisions and conditions not inconsistent
herewith as may be determined by the Administrators in their sole discretion.
The terms of each option and Contract need not be identical.
Section 12. Adjustments upon Changes in Common Stock.
(a) In the event of (i) a dissolution or liquidation of the Company,
(ii) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the stockholders of
the Company or their relative stock holdings and the options granted under this
Plan are assumed, converted or replaced by the successor corporation, which
assumption will be binding on all optionees), (iii) a merger in which the
Company is the surviving corporation but after which stockholders of the Company
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immediately prior to such merger (other than any stockholder which merges, or
which owns or controls another corporation which merges, with the Company in
such merger) cease to own their shares or other equity interests in the Company,
or (iv) the sale of substantially all of the assets of the Company, any or all
outstanding options may be assumed, converted or replaced by the successor
corporation (if any), which assumption, conversion or replacement will be
binding on all optionees. In the alternative, the successor corporation may
substitute equivalent options or provide substantially similar consideration to
optionees as was provided to stockholders (after taking into account the
existing provisions of the options). The successor corporation may also issue,
in place of outstanding Shares of the Company held by the optionee,
substantially similar shares or other property subject to repurchase
restrictions and other provisions no less favorable to the optionee than those
which applied to such outstanding Shares immediately prior to such transaction
described in this subsection (a). The Administrators have the discretion to
include in any optionee's Contract a provision stating that, pursuant to a
transaction described in this subsection (a), then notwithstanding any other
provision in this Plan to the contrary, the vesting of such options will
accelerate and the options will become exercisable in full prior to the
consummation of such event at such times and on such conditions as the
Administrators determine, and if such options are not exercised prior to the
consummation of the corporate transaction, they shall terminate in accordance
with the provisions of this Plan.
(b) Subject to any greater rights granted to optionees under the
foregoing provisions of this Section 12, in the event of the occurrence of any
transaction described in paragarph (a), any outstanding options will be treated
as provided in the applicable agreement or plan of merger, consolidation,
dissolution, liquidation or sale of assets.
(c) The Company, from time to time, also may substitute or assume
outstanding options granted by another company, whether in connection with an
acquisition of such other company or otherwise, by either (i) granting an option
under this Plan in substitution of such other company's option, or (ii) assuming
such option as if it had been granted under this Plan if the terms of such
assumed option could be applied to an option granted under this Plan. Such
substitution or assumption will be permissible if the holder of the substituted
or assumed option would have been eligible to be granted an option under this
Plan if the other company had applied the rules of this Plan to such grant. In
the event the Company assumes an option granted by another company, the terms
and conditions of such option will remain unchanged (except that the exercise
price and the number and nature of shares issuable upon exercise of any such
option will be adjusted appropriately pursuant to Section 424(a) of the Code).
In the event the Company elects to grant a new option rather than assuming an
existing option, such new option may be granted with a similarly adjusted
exercise price.
Section 13. Amendments and Termination of this Plan. This Plan was
adopted by the Board of Directors on March 26, 2001. No option may be granted
under this Plan after March 26, 2011. The Board of Directors, without further
approval of the Company's stockholders, may at any time suspend or terminate
this Plan, in whole or in part, or amend it from time to time in such respects
as it may deem advisable, including (without limitation) in order that ISOs
granted hereunder meet the requirements for "incentive stock options" under the
Tax Code, or to comply with the provisions of Rule 16b-3 of the Exchange Act or
Section 162(m) of the Tax Code or any change in applicable laws or regulations,
ruling or interpretation of any governmental agency or regulatory body;
provided, however, that no amendment shall be effective, without the requisite
prior or subsequent stockholder approval, that would (a) except as contemplated
in Section 12, increase the maximum number of shares of Common Stock for which
options may be granted under this Plan or change the maximum number of shares
for which options may be granted to employees in any calendar year, (b) change
the eligibility requirements for individuals entitled to receive options
hereunder, or (c) make any change for which applicable law or any governmental
agency or regulatory body requires stockholder approval. No termination,
suspension or amendment of this Plan shall adversely affect the rights of an
optionee under any option granted under this Plan without such optionee's
consent. The power of the Administrators to construe and administer any option
granted
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under this Plan prior to the termination or suspension of this Plan shall
continue after such termination or during such suspension.
Section 14. Non-Transferability.
(a) Except as otherwise provided below or in the applicable Contract,
no option granted under this Plan shall be transferable other than by will or
the laws of descent and distribution, and options may be exercised, during the
lifetime of the optionee, only by the optionee or the optionee's Legal
Representatives. Except to the extent provided below or in the applicable
Contract, options may not be assigned, transferred, pledged, hypothecated or
disposed of in any way (whether by operation of law or otherwise) and shall not
be subject to execution, attachment or similar process, and any such attempted
assignment, transfer, pledge, hypothecation or disposition shall be null and
void ab initio and of no force or effect, unless and to the extent the Board, in
the case of NQSOs, has given its express written consent to any pledge or
hypothecation to (and subsequent disposition by) a financial institution, which
NQSOs shall continue to be subject to the terms and provisions of this Plan and
the applicable Contract and may be subject to such additional limits, conditions
and provisions as the Board may require in its sole and absolute discretion as a
condition of such consent.
(b) Following any permitted transfer, any such options shall continue
to be subject to the same terms and conditions as were applicable immediately
prior to transfer, provided that for purposes of Sections 7 and 10 reference to
"optionee" shall be deemed to refer to the transferee. The provisions in Section
8 hereof respecting the effect of termination of employment and Section 9
respecting the effect of death or Disability shall continue to be applied with
respect to the original optionee, following which the options shall be
exercisable by the transferee only to the extent, and for the periods specified
in the Contract. Any permitted transferee shall be required prior to any
transfer of an option or shares of Common Stock acquired pursuant to the
exercise of an option to execute a written undertaking to be bound by the
provisions of this Plan and the applicable Contract.
Section 15. Withholding Taxes. The Company, or its Subsidiary or
Parent, as applicable, may withhold (a) cash or (b) with the consent of the
Administrators (in the Contract or otherwise), shares of Common Stock to be
issued upon exercise of an option or a combination of cash and shares, having an
aggregate fair market value (determined in accordance with Section 5) equal to
the amount which the Administrators determine is necessary to satisfy the
obligation of the Company, a Subsidiary or Parent to withhold Federal, state and
local income taxes or other amounts incurred by reason of the grant, vesting,
exercise or disposition of an option or the disposition of the underlying shares
of Common Stock. Alternatively, the Company may require the optionee to pay to
the Company such amount, in cash, promptly upon demand.
Section 16. Legends; Payment of Expenses.
(a) The Company may endorse such legend or legends upon the
certificates for shares of Common Stock issued upon exercise of an option under
this Plan and may issue such "stop transfer" instructions to its transfer agent
in respect of such shares as it determines, in its sole discretion, to be
necessary or appropriate to (i) prevent a violation of, or to perfect an
exemption from, the registration requirements of the Securities Act, applicable
state securities laws or other legal requirements, (ii) implement the provisions
of this Plan or any agreement between the Company and the optionee with respect
to such shares of Common Stock, or (iii) permit the Company to determine the
occurrence of a "disqualifying disposition," as described in Section 421(b) of
the Tax Code, of the shares of Common Stock transferred upon the exercise of an
ISO granted under this Plan.
(b) The Company shall pay all issuance taxes with respect to the
issuance of shares of Common Stock upon the exercise of an option granted under
this Plan, as well as all fees and expenses incurred by the Company in
connection with such issuance.
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Section 17. Use of Proceeds. Except to the extent required by law, the
Company's Certificate of Incorporation, or the Company's By-laws, the cash
proceeds to be received upon the exercise of an option under this Plan shall be
added to the general funds of the Company and used for such corporate purposes
as the Board of Directors may determine, in its sole discretion.
Section 18. Substitutions and Assumptions of Options of Certain
Constituent Corporations. Anything in this Plan to the contrary notwithstanding,
the Board of Directors may, without further approval by the stockholders,
substitute new options for prior options of a Constituent Corporation (as such
term is defined in Section 19) or assume the prior options of such Constituent
Corporation.
Section 19. Definitions.
(a) "Business Day" shall mean any day other than (i) any Saturday or
Sunday or (ii) New Year's Day, Martin Luther King's Birthday, Presidents' Day,
Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans' Day,
Thanksgiving, and Christmas.
(b) "Cause," in connection with the termination of an optionee, shall
mean (i) "cause", as such term (or any similar term, such as "with cause") is
defined in any employment, consulting or other applicable agreement for services
or termination agreement between the Company and such optionee, or (ii) in the
absence of such an agreement, "cause" as such term is defined in the Contract
executed by the Company and such optionee pursuant to Section 11, or (iii) in
the absence of both of the foregoing, (A) indictment of such optionee for any
illegal conduct, (B) failure of such optionee to perform adequately any of the
optionee's duties and responsibilities in any capacity held with the Company,
any of its Subsidiaries or any Parent (other than any such failure resulting
solely from such optionee's physical or mental incapacity), (C) the commission
of any act or failure to act by such optionee that involves moral turpitude,
dishonesty, theft, destruction of property, fraud, embezzlement or unethical
business conduct, or that is otherwise injurious to the Company, any of its
Subsidiaries or any Parent or any other affiliate of the Company (or its or
their respective employees), whether financially or otherwise, (D) any violation
by such optionee of any Company rule or policy, or (E) any violation by such
optionee of the requirements of such Contract, any other contract or agreement
between the Company and such optionee or this Plan (as in effect from time to
time); in each case, with respect to clauses (A) through (E), as determined by
the Board of Directors in their sole and absolute discretion.
(c) "Constituent Corporation" shall mean any corporation which engages
with the Company, its Parent or any Subsidiary in a transaction to which Section
424(a) of the Tax Code applies (or would apply if the option assumed or
substituted were an ISO), or any Parent or any Subsidiary of such corporation.
(d) "Disability" shall mean a permanent and total disability within the
meaning of Section 22(e)(3) of the Tax Code.
(e) "Legal Representative" shall mean the executor, administrator or
other person who at the time is entitled by law to exercise the rights of a
deceased or incapacitated optionee with respect to an option granted under this
Plan.
(f) "Parent" shall mean a "parent corporation" within the meaning of
Section 424(e) of the Tax Code.
(g) "Subsidiary" shall mean a "subsidiary corporation" within the
meaning of Section 424(f) of the Tax Code.
Section 20. Governing Law. This Plan, such options as may be granted
hereunder, the Contracts and all related matters shall be governed by, and
construed in accordance with, the laws of the State of Nevada (other than those
that would defer to the substantive laws of another jurisdiction).
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Section 21. Construction. Neither this Plan nor any Contract shall be
construed or interpreted with any presumption against the Company by reason of
the Company causing this Plan or Contract to be drafted. Whenever from the
context it appears appropriate, any term stated in either the singular or plural
shall include the plural and singular, respectively, and any term stated in the
masculine, feminine or neuter gender shall include the other forms as well.
Captions and headings have been provided for convenience and shall not affect
the meaning or interpretation of this Plan or any Contract.
Section 22. Partial Invalidity. The invalidity, illegality or
unenforceability of any provision in this Plan, any option or Contract shall not
affect the validity, legality or enforceability of any other provision, all of
which shall be valid, legal and enforceable to the fullest extent permitted by
applicable law.
Section 23. Stockholder Approval. This Plan shall be subject to
approval by (a) the holders of a majority of the votes present in person or by
proxy entitled to vote hereon at a duly held meeting of the Company's
stockholders at which a quorum is present or (b) the Company's stockholders
acting in accordance with the provisions of Section 78.320 of the Nevada General
Corporation Law. No options granted hereunder may be exercised prior to such
approval, provided, however, that the date of grant of any option shall be
determined as if this Plan had not been subject to such approval.
Notwithstanding the foregoing, if this Plan is not approved by a vote of the
stockholders of the Company on or before March 25, 2002, this Plan and any
options granted hereunder shall terminate.
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