UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997
Commission File Number 1-13424
Data Systems Network Corporation
Michigan 38-2649874
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
34705 W. 12 Mile Rd., Suite 300 48331
Farmington Hills, Michigan
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(248) 489-8700
Indicate by check mark whether the registrant(1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12,13
or 15(d) of the Securities Exchange Act of 1934 subsequent
to the distribution of securities under a plan confirmed by
a court.
YES [X] NO[ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practical
date:
Common Stock, $.01 Par Value - 4,597,331 shares as of
July 31, 1997
PART I. - FINANCIAL INFORMATION
ITEM I. - FINANCIAL STATEMENTS.
DATA SYSTEMS NETWORK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
---------- ----------- ---------- ---------
REVENUES:
Net sales $16,433,077 $5,554,100 $30,234,570 $9,800,449
Service revenue 5,230,874 744,474 9,292,935 1,511,989
----------- ----------- ----------- ---------
Total revenues 21,663,951 6,298,574 39,527,505 11,312,438
COST OF REVENUES:
Cost of sales 12,784,118 4,945,583 23,144,711 8,674,407
Cost of service 3,963,714 327,886 6,846,152 561,686
----------- ----------- ----------- ---------
Total cost of
revenues 16,747,832 5,273,469 29,990,863 9,236,093
GROSS PROFIT 4,916,119 1,025,105 9,536,642 2,076,345
OPERATING EXPENSES:
Selling expenses 2,220,531 561,593 4,673,003 1,034,741
General and administrative
expenses 1,229,308 449,448 2,440,264 853,805
---------- ---------- ---------- ---------
Total operating expenses 3,449,839 1,011,041 7,113,267 1,888,546
INCOME FROM OPERATIONS 1,466,280 14,064 2,423,375 187,799
INTEREST INCOME(EXPENSE):
Interest expense (429,406) (102,427) (710,980) (194,805)
Interest income 80,051 50,716 112,333 135,916
Other income 54,691 94,648 61,646 94,648
----------- --------- ---------- ---------
Total interest
expense, net (294,664) 42,937 (537,001) 35,759
INCOME BEFORE INCOME TAXES
AND MINORITY INTEREST 1,171,616 57,001 1,886,374 223,558
MINORITY INTEREST IN
SUBSIDIARY 11,880 (41,147)
------------- ---------- ------------ --------
INCOME BEFORE INCOME TAXES 1,171,616 68,881 1,886,374 182,411
INCOME TAXES (468,646) - (754,546)
------------- ----------- ---------- --------
NET INCOME $ 702,969 $ 68,881 $1,131,828 $182,411
============= =========== ========== =========
DATA SYSTEMS NETWORK CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months Ended June 30,
-------------------------------------------
1997 1997 1996 1996
--------- -------- -------- --------
Fully Fully
Primary Diluted Primary Diluted
--------- -------- -------- ---------
EARNINGS PER COMMON SHARE $0.16 $0.15 $0.03 $0.02
========== ======== ========= =========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 4,346,074 4,702,465 2,589,903 2,889,903
========== ========= ========= =========
For the Six Months Ended June 30,
---------------------------------------------
1997 1997 1996 1996
--------- -------- -------- -------
Fully Fully
Primary Diluted Primary Diluted
--------- -------- --------- --------
EARNINGS PER COMMON SHARE $0.29 $0.27 $0.07 $0.06
========= ======== ========= ========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 3,906,096 4,262,737 2,589,903 2,889,903
========= ========= ========= =========
See Accompanying Notes to the Condensed Consolidated Financial Statements.
DATA SYSTEMS NETWORK CORPORATION
CONDENSED CONDOLIDATED BALANCE SHEETS
June 30, Decenber 31,
1997 1996
------------- -------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalent $ 7,023,149 $ 1,522,434
Accounts receivable (net of allowance of
$292,994 and $67,609 at June 1997 and
December 31, 1996, respectively) 20,043,785 12,102,794
Notes receivable 616,787 564,059
Inventories 3,724,800 2,563,201
Other current assets 1,216,923 646,112
------------ ------------
Total current assets 32,625,444 17,398,600
SERVICE PARTS,net 1,349,439 1,471,284
PROPERTY AND EQUIPMENT, net 1,715,976 1,811,923
GOODWILL,net (Note 3) 4,166,415 4,291,312
OTHER ASSETS 384,549 549,056
--------- ---------
TOTAL ASSETS $40,241,823 $25,522,175
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank line of credit (Note 2) $14,474,501 $ 9,225,311
Accounts payable 7,942,742 7,594,346
Accrued liabilities 1,617,465 813,831
Deferred maintenance revenues 1,116,642 1,256,566
----------- -----------
Total current liabilities 25,151,350 18,889,954
LONG-TERM DEBT 75,000 75,000
STOCKHOLDERS' EQUITY
Preferred stock, authorized 1,000,000, none
outstanding
Common stock ($.01 par value; authorized
10,000,000 shares;issued and outstanding
4,596,206 and 3,255,000 shares at June 30, 1997
and December 31, 1996, respectively) 45,962 32,550
Additional paid-in capital 16,450,374 9,139,153
Accumulated deficit (1,480,863) (2,614,482)
------------ -----------
Total stockholders' equity 15,015,473 6,557,221
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $40,241,823 $25,522,175
=========== ===========
See Accompanying Notes to the Condensed Consolidated Financial Statements.
DATA SYSTEMS NETWORK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended June 30,
1997 1996
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,131,828 $ 182,411
Adjustments to reconcile net income
to net cash provided by operating
activities:
Minority interest in subsidiary 41,147
Depreciation and amortization 296,402 189,188
Provision for doubtful receivables 225,385 30,545
Provision for inventory obsolescence 208,463 16,881
Changes in asets and liabilities that
provided(used)cash, net of effects
of acquisition:
Accounts receivable (8,166,376) 605,683
Notes receivable (52,728) (461,384)
Inventories (1,233,270) 5,169
Other current assets (570,811) (47,514)
Service parts (51,840) 148,946
Other assets 164,507 (3,460)
Accounts payable 348,396 (802,650)
Accrued liabilities 803,634 (223,652)
Deferred maintenance revenues (139,924) (23,483)
---------- ----------
Net cash used in operating
activities (7,036,355) (342,133)
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and
equipment, net (36,873) (516,391)
Purchase of UNS common stock (7,000)
Exercise of warrants and conversion
into common stock, net 7,324,633
--------- ---------
Net cash provided by (used in)
investing activities 7,287,760 (523,391)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under bank line
of credit 5,249,290 94,257
Payment of principal on longterm debt (115,401)
Increase in long-term debt 181,605
---------- ----------
Net cash provided by financing
activities 5,249,290 160,461
--------- ----------
NET INCREASE(DECREASE) IN CASH
AND CASH EQUIVALENTS 5,500,715 (705,063)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,522,434 3,171,544
---------- ----------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $7,023,149 $2,466,481
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS:
Cash paid during the period for:
Interest 710,980 194,805
========== ==========
Income taxes NONE NONE
========== ==========
See Accompanying Notes to the Condensed Consolidated Financial Statements.
OF PERIOD
DATA SYSTEMS NETWORK CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1997
Note 1. Basis of Presentation
The accompanying unaudited, condensed consolidated financial
statements of Data Systems Network Corporation ("Company")
have been prepared in accordance with generally accepted
accounting principles for interim financial information and
should be read in conjunction with the Company's audited
consolidated financial statements and notes contained in the
Company's Form 10-K for the year ended December 31, 1996.
The condensed consolidated financial statements include all
adjustments, consisting of normal recurring adjustments,
necessary for a fair presentation of results of operations
for the periods presented. The results of such interim
periods are not necessarily indicative of the results of
operations for the full year. The accompanying consolidated
financial statements include the financial statements of
Data Systems Network Corporation and its 70%-owned
subsidiary, Unified Network Services, Inc. ("UNS"). All
significant intercompany balances and transactions have been
eliminated in consolidation.
Note 2. Bank Line
The Company has a bank line of credit bearing interest equal
to the bank's prime rate (effective rate of 8.5% at June 30,
1997). Borrowing limits are determined based on a collateral
formula which includes 85% of qualified trade receivables
and 25% of eligible inventory and spare parts up to
$2,250,000. The term of the current agreement extends to
November 30 1997, is renewable annually and can be
terminated at any time by the borrower or lender. As of June
30, 1997, approximately $1 million was available under this
line, with a total loan outstanding of approximately $14.5
million.
The bank line of credit agreement contains certain covenants
requiring the Company's receivables to be genuine and free
of all other encumbrances and requiring the Company's
inventory to be kept at designated locations and free from
all other encumbrances.
Note 3. Goodwill
During the first quarter of 1996, the Company purchased 70%
(7,000 shares) of the common stock of UNS for $7,000 and during
the third quarter of 1996, the Company purchased the assets and
operations of The Network Services Group of SofTech, Inc.
("SofTech") and assumed certain liabilities from SofTech. Each
acquisition has been accounted for as a purchase and each
purchase price was allocated to the net assets acquired based
upon their estimated fair market value. The excess of the
purchase price over the estimated fair market value of the net
assets acquired is being accounted for as goodwill and is being
amortized over 20 years using a straight-line method.
Note 4. Credit Line
The Company is party to a secured finance agreement with IBM
Credit Corporation. As of June 30, 1997, the agreement extended
a maximum of $2,000,000 in secured funds to be used exclusively
for the acquisition of inventory for resale, limited to those
products manufactured by Apple, Compaq, Hewlett Packard, IBM and
Lexmark. Use of this credit line is at the Company's option. To
secure payment of all debt incurred under this agreement, IBM
Credit Corporation was granted a first security interest in the
Company's financed inventory equal to the amount of the
outstanding debt. This agreement allows for thirty (30) day
interest free financing of eligible inventory and a variable
discount from the invoice price for eligible product purchases
paid for within fifteen days from the date of invoice. This
agreement can be terminated at any time by the Company or the
lender. The terms and conditions of this financing agreement can
be changed at the discretion of IBM Credit Corporation. The
amount outstanding at June 30, 1997 is approximately $1,171,000
and has been included in accounts payable.
Note 5. Redemption of Warrants
In February 1997, the Company called all of its then outstanding
Redeemable Common Stock Purchase Warrants ("Warrants") for
redemption as of March 10, 1997 pursuant to the Warrant
Agreement, dated October 28, 1994, setting forth the terms of the
Warrants. Approximately 99% of the Warrants were exercised on or
prior to the date of redemption at a price of $6.25 per Warrant,
resulting in net proceeds of approximately $7,300,000. In
connection with the receipt of consent to the redemption, the
Company agreed to file a registration statement with the
Securities and Exchange Commission with respect to 60,000 units,
consisting of two common shares and two warrants to purchase an
additional two common shares ("Units") which may be purchased
upon exercise of a warrant issued to the underwriters'
representatives in the Company's initial public offering. The
registration of the units and the 240,000 common shares
underlying the Units was completed in July 1997.
During the first quarter of 1997, the Company's bank lender also
exercised 85,000 warrants for nominal consideration held in
connection with the Company's prior reorganization. Such shares
had been included in paid in capital and in the calculation of
earnings per share and therefore, the par value of $850 has been
reclassified to common stock.
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The following analysis of financial condition and results of
operations of the Company should be read in conjunction with
the Company's financial statements and notes thereto
included under Item 1. Financial Statements.
RESULTS OF OPERATIONS
REVENUES. Total revenues increased 244% to $21.6 million
for the three months ended June 30, 1997 from $6.3 million
for the same period in 1996. For the six months ended June
30, 1997, total revenues increased 249% to $39.5 million
from $11.3 million for the same period in 1996. These
increases were attributable primarily to the acquisition of
the Network Systems Group of SofTech, Inc. ("NSG") in
September 1996 and the Company's expansion into the eastern
region of the United States in the fourth quarter of 1996.
A significant portion of the increase was attributable to
the substantial contract with the State of Michigan assigned
to the Company as part of the NSG acquisition. Although a
portion of the contract has been extended to April 1998, the
remainder expires in August 1997. The Company's sales
management team has been meeting with representatives of the
State of Michigan on a continued basis to improve the terms
of the current contract and to work towards securing an
extension of the remainder of the contract or the award of a
new contract. As with all of the Company's service
contracts, there can be no assurance that the remainder of
the State of Michigan contract will be extended or that, if
rebid, the Company will be awarded a new contract on terms
and conditions which are at least as favorable to the
Company as the current contract. The Company also
experienced significant growth in the eastern region of the
United States and believes that the anticipated revenue
growth from this region will offset any potential loss of
revenue if the State of Michigan contract is not fully
renewed.
Net sales increased to $16.4 million and $30.2 million for
the three and six months ended June 30, 1997, respectively,
from $5.6 million and $9.8 million during the same periods
in 1996, due primarily to the acquisition of NSG and the
eastern region expansion. Returns and allowances decreased
to 1% as a percentage of net sales for the three and six
months ended June 30, 1997 from 3.7% during the same periods
in 1996 due to the increase in the Company's presales
support resources used to more accurately assess the
customer's equipment needs.
Service revenues increased $4.5 million to 24.2% of total
revenues in the three months ended June 30, 1997 from 11.8%
in the corresponding period of 1996. For the six months
ended June 30, 1997, service revenues increased $7.8 million
to 23.5% of total revenues, compared to 13.4% for the
corresponding period of 1996. A significant percentage of
the service revenue increases resulted primarily from an
increase in maintenance revenues from the State of Michigan
contract and secondarily from training, installation and
project service revenues generated from the eastern region.
COST OF REVENUES. The cost of revenues decreased to 77.3%
and 75.9% of total revenues for the three and six months
ended June 30, 1997, respectively, from 83.7% and 81.6% for
the same periods in 1996.
The cost of service revenue increased to 75.8% and 73.7% of
service revenues for the three and six months ended June 30,
1997, respectively, from 73.7% and 37.2% for the same
periods in 1996. These increases were due primarily to the
Company's investment in additional technical personnel which
increased both pre- and post- sale field support headcount
to prepare for the anticipated growth in service offerings.
The increase in the cost of service revenue for the six
months ended June 30, 1997 was also due to the utilization
during the period of third party subcontractors to support
installations in areas where the Company does not have a
physical presence.
The cost of sales decreased to 77.8% and 76.6% of net sales
for the three and six months ended June 30, 1997,
respectively, compared to 89.0% and 88.5% for the same
periods in 1996. The Company attributes these decreases
primarily to the success of its efforts to shift sales
toward higher margin advanced technology products.
OPERATING EXPENSES. Selling, general and administrative
expense decreased to 15.9% of total revenue for the three
months ended June 30, 1997 compared to 16.0% of total
revenue for the same period in 1996. The Company is
beginning to benefit from economies of scale which have
enabled it to increase its revenue base at a faster rate
than its personnel costs have increased.
Selling, general and administrative expense increased to
17.9% of total revenue for the six months ended June 30,
1997 compared to 16.7% for the same period in 1996. The
increase was primarily due to increases in customer service,
accounting and distribution personnel and the expansion of
internal network and communication systems in anticipation
of the increase in revenues and business volume.
OTHER (EXPENSE) INCOME. Interest expense for the three and
six months ended June 30, 1997 increased $327,000 and
$516,000, respectively, compared to the same periods in
1996. The increases reflect the Company's need to borrow to
support its increased business activity and to support
increased levels of receivables and inventory. These
increased levels are expected to decline in future quarters
as the Company is better able to manage the business
processes related to the significant increase in business
activity. Interest income increased by $29,000 for the
three months ended June 30, 1997 compared to the prior year
period as a result of an increase in the Company's cash
reserves due to the exercise of outstanding warrants to
purchase common stock in February 1997 which generated net
proceeds of approximately $7.3 million. Interest income for
the six months ended June 30, 1997 decreased by $24,000
compared to the prior year period as a result of the
temporary decrease in cash reserves resulting from the
September 1996 NSG acquisition.
FINANCIAL CONDITION
The Company finances its business primarily through funds
generated internally through operations, trade credit, and
advances under its line of credit with NBD Bank N.A. (the
"Bank"). The line of credit is secured by substantially all
of the Company's assets, bears interest at the Bank's prime
rate (effective rate of 8.5% at June 30, 1997) and is due on
demand of the Bank. Borrowing under the line of credit is
limited by a formula determined from time to time by the
Bank and currently is calculated as the sum of 85% of
qualified receivables less than 90 days old and 25% of
eligible inventory and spare parts up to $2,250,000. The
formula permitted total borrowings of up to $15.5 million as
of June 30, 1997, of which $14.5 million was outstanding at
that time. The Company believes that the borrowing formula,
which increases borrowing availability as the Company's
sales growth generates new accounts receivable, will support
the continued internal growth of the Company. The term of
the current agreement extends to November 30, 1997, is
renewable annually and can be terminated at any time by the
borrower or lender.
The secured financing agreement with IBM Credit Corporation
continues to offer thirty day interest free financing up to
$2.0 million on certain products purchased by the Company
for resale. As of June 30, 1997, IBM Credit Corporation
purchase transactions accounted for $1.2 million of the
total accounts payable balance.
In February 1997, the Company called all of its then outstanding
Warrants for redemption as of March 10, 1997 pursuant to the
Warrant Agreement, dated October 28, 1994. Approximately
1,256,000 shares were issued due to the resulting exercise of
Warrants, generating in net proceeds of approximately $7.3
million (see Note 5).
For the six months ended June 30, 1997, the Company increased
cash and cash equivalents by approximately $5.5 million primarily
due to the results of the call for redemption of the outstanding
Warrants. Cash used by operations increased to $7.2 million
during the six months ended June 30, 1997, compared to $342,000
during the six months ended June 30, 1996, primarily as a result
of an increase in accounts receivable due to the longer payment
cycles associated with government and institutional customers,
and secondarily to inventory held for project sales. Working
capital as of June 30, 1997 was $7.5 million compared to a
working capital deficiency of $1.5 million at December 31, 1996,
primarily due to the results of the call for redemption of the
Warrants.
The Company believes that the combination of present cash
balances, future operating cash flows, and credit facilities
will be adequate to fund the Company's currently anticipated
internal growth and current short and long term cash flow
requirements.
The foregoing discussion and analysis contain a number of
forward looking statements within the meaning of the
Securities Exchange Act of 1934 and are subject to a number
of risks and uncertainties. These include general business
conditions, continuing favorable economic conditions, the
failure of the Company's customers to fulfill contractual
commitments, the ability of the Company to recruit and
retain qualified personnel, the ability of the Company to
develop and sustain new customers in geographic areas in
which the Company has recently begun to operate, the ability
of the Company to successfully complete the integration of
its new offices and divisions into its operations, the
ability of management to implement new systems to manage the
Company's growth effectively and efficiently, the relative
uncertainties in the market direction of emerging
technologies, the willingness of the Bank to continue to
lend under the credit facility, the potential loss of key
personnel within the new regions, the Company's ability to
retain the State of Michigan contract and a lack of market
acceptance of the Company's products and services in the new
regions.
Item 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.
Not applicable.
PART II - OTHER INFORMATION
Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on May
29, 1997, at which time the shareholders considered and
voted on the election of four directors and on a proposal to
approve amendment to the Company's 1994 Stock Option Plan.
1. Each of the nominees for director at the meeting was an
incumbent and all nominees were elected. The following table
sets forth the number of shares voted for and withheld with
respect to each nominee.
Nominee Votes For Votes Withheld
Walter Aspatore 3,441,117 9,270
Richard Burkhart 3,441,117 9,270
Jerry Dusa 3,079,867 370,520
Michael Grieves 3,441,117 9,270
2. The adoption of an amendment to the 1994 Stock Option
Plan was approved. The results of the voting were as
follows:
For Against Abstain Broker Non-Votes
--------- ------- ------- ----------------
1,876,431 57,885 24,775 1,581,209
Item 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits
10.3(c) Data Systems Network Corporation 1994 Stock Option Plan (as amended
and restated April 1997)
10.3(d) Form of Nonqualified Stock Option Agreement under
the Data Systems Network Corporation
1994 Stock Option Plan, As Amended (April 1997 Version).
11. Computation of Earnings Per Share
DATA SYSTEMS NETWORK CORPORATION
COMPUTATION OF EARNINGS PER SHARE
SIX MONTHS ENDED JUNE 30, 1997
-----------------------------------------------------------
PRIMARY FULLY DILUTED
----------- -------------
NUMBER OF SHARES
Weighted average shares issued 4,206,906 4,262,737
Less shares held in escrow (300,000)
--------- ----------
Weighted average shares outstanding 3,906,906 4,262,737
========= ==========
EARNINGS
Net Income $1,131,828 $1,131,828
========== ==========
EARNINGS PER SHARE
Net Income $0.29 $0.27
========== ==========
27. Financial Data Schedule
(b.) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act
of 1934, the registrant has duly cause this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Data Systems Network Corporation
August 13, 1997 /S/ Philip M. Goy
Date Philip M.Goy
Vice President and Chief Financial Officer
(principal financial officer)
August 13, 1997 /S/ Michael W. Grieves
Date Michael W. Grieves
President and Chief Executive Officer
(duly authorized officer)
EXHIBIT 10.3(c)
DATA SYSTEMS NETWORK CORPORATION
1994 STOCK OPTION PLAN
(as amended and restated April 1997)
1. Purpose. The purpose of the Plan is to
promote the best interests of the Company and its
shareholders by giving Participants a greater personal
interest in the success of the Company in order to create
additional incentive for Participants to make greater
efforts on behalf of the Company.
2. Administration. (a) The Plan shall be
administered by the Committee. The selection of
Participants in the Plan and decisions concerning the
timing, pricing and amount of any grant of options under the
Plan shall be made by the Committee. Except as provided in
Sections 10 and 13 of the Plan, the Committee shall
interpret the Plan, prescribe, amend, and rescind rules and
regulations relating to the Plan, and make all other
determinations necessary or advisable for its
administration. The decision of the Committee on any
question concerning the interpretation of the Plan or any
option granted under the Plan shall be final and binding
upon all Participants. Notwithstanding any other provisions
of the Plan, the Committee may impose such conditions on an
option as may be required to satisfy the requirements of
Rule 16b-3.
(b) The Committee may delegate to one or more
officers or managers of the Company or a committee of such
officers or managers, the authority, subject to such terms
and limitations as the Committee shall determine, to grant
options to, or to cancel, modify, waive rights with respect
to, alter, discontinue or terminate options held by, and
otherwise act in lieu of the Committee with respect to,
Participants who are not officers or directors of the
Company for purposes of Section 16 of the Exchange Act.
3. Participants. Participants in the Plan shall
be such key Employees as the Committee may select from time
to time and with respect to Director Options, the
Nonemployee Directors. The Committee may grant options to
an individual upon the condition that the individual become
an Employee, provided that the option shall be deemed to be
granted only on the date the individual becomes an Employee.
4. Stock. The stock subject to options under the
Plan shall be the Common Stock and may be either authorized
and unissued shares or treasury shares held by the Company.
The total amount of Common Stock on which options may be
granted under the Plan shall not exceed 600,000 shares,
subject to adjustment in accordance with Section 11. Shares
subject to any unexercised portion of a terminated,
cancelled or expired option granted under the Plan, and
shares of Common Stock tendered or withheld pursuant to
Sections 6 and 7 (to the extent permitted under Rule 16b-3),
shall be available for subsequent grants under the Plan.
5. Award of Options. (a) Subject to the
limitations set forth in the Plan, the Committee from time
to time may grant options to such Participants and for such
number of shares of Common Stock and upon such other terms
(including, without limitation, the exercise price and the
times at which the option may be exercised) as it shall
designate; provided that during any two-year period, no
salaried Employee shall receive options to purchase more
than 100,000 shares of Common Stock (as adjusted from time
to time upon the occurrence of a corporate transaction or
event described in the first sentence of Section 11). The
Committee may designate any option granted as either an
Incentive Stock Option or a Nonqualified Stock Option, or
the Committee may designate a portion of an option as an
Incentive Stock Option or a Nonqualified Stock Option. A
Participant may hold more than one option under the Plan and
any other stock option plan of the Company.
(b) Any option intended to constitute an Incentive
Stock Option shall comply with the following requirements in
addition to the other requirements of the Plan: (i) the
exercise price per share for each Incentive Stock Option
granted under the Plan shall be equal to the Fair Market
Value per share of Common Stock on the Grant Date; provided
that no Incentive Stock Option shall be granted to any
Participant who owns (within the meaning of Section 424(d)
of the Code) stock of the Company, or any Parent or
Subsidiary, possessing more than 10% of the total combined
voting power of all classes of stock of such Company, Parent
or Subsidiary unless, at the Grant Date of an option to such
Participant, the exercise price per share for the option is
at least 110% of the Fair Market Value on the Grant Date and
the option, by its terms, is not exercisable more than five
years after the Grant Date; (ii) the aggregate Fair Market
Value of the underlying Common Stock on the Grant Date as to
which Incentive Stock Options under the Plan (or a plan of a
Subsidiary) may first be exercised by a Participant in any
calendar year shall not exceed $100,000 (to the extent that
an option intended to constitute an Incentive Stock Option
shall exceed the $100,000 limitation, the portion of the
option that exceeds such limitation shall be deemed to
constitute a Nonqualified Stock Option); and (iii) an
Incentive Stock Option shall not be exercisable after the
tenth anniversary of the Grant Date or such lesser period as
the Committee may specify from time to time.
(c) A Nonqualified Stock Option shall not be
exercisable after the tenth anniversary of the Grant Date,
or such lesser period as the Committee shall determine. The
exercise price per share of a Nonqualified Stock Option
shall not be less than 85% of the Fair Market Value of the
Common Stock on the Grant Date.
(d) No person shall have any rights under any grant
made pursuant to the Plan unless and until the Company and
the recipient of the grant have executed and delivered an
agreement expressly granting benefits to such person
pursuant to the Plan and containing the provisions required
under the Plan to be set forth in the Agreement. The terms
of the Plan shall govern in the event any provision of any
Agreement conflicts with any term in this Plan as
constituted on the Grant Date.
6. Payment for Shares. The purchase price for
shares of Common Stock to be acquired upon exercise of an
option granted hereunder shall be paid in full, at the time
of exercise, in any of the following ways: (a) in cash, (b)
by certified check, bank draft or money order, (c) by
tendering to the Company shares of Common Stock then owned
by the Participant, duly endorsed for transfer or with duly
executed stock power attached, which shares shall be valued
at their Fair Market Value as of the date of such exercise
and payment or (d) by delivery to the Company of a properly
executed exercise notice, acceptable to the Company,
together with irrevocable instructions to the Participant's
broker to deliver to the Company a sufficient amount of cash
to pay the exercise price and any applicable income and
employment withholding taxes, in accordance with a written
agreement between the Company and the brokerage firm
("Cashless Exercise") if, at the time of exercise, the
Company has entered into such an agreement.
7. Withholding Taxes. The Company shall have the
right to withhold from a Participant's compensation or
require a participant to remit sufficient funds to satisfy
applicable withholding for income and employment taxes upon
the exercise of an option. A Participant may make a
written election to tender previously-acquired shares of
Common Stock or have shares of Common Stock withheld from
the exercise, provided that the tendered or withheld shares
have an aggregate Fair Market Value on the date of exercise
of the option equal to the applicable withholding taxes or
the Cashless Exercise procedure described in Section 6 may
be utilized to satisfy the withholding requirements related
to the exercise of an option.
8. Non-Assignability. No option shall be
transferable by a Participant except by will or the laws of
descent and distribution or, in the case of a Nonqualified
Stock Option, pursuant to a qualified domestic relations
order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder.
During the lifetime of a Participant, an option shall be
exercised only by the optionee. No transfer of an option
shall be effective to bind the Company unless the Company
shall have been furnished with written notice thereof and
such evidence as the Company may deem necessary to establish
the validity of the transfer and the acceptance by the
transferee of the terms and conditions of the option.
9. Termination of Employment. The time or times
at which an option shall terminate prior to its Expiration
Date shall be determined by the Committee in its discretion
and set forth in the Agreement relating to such Option.
Unless the Agreement otherwise specifies, the following
shall apply:
(a) If a Participant's Employment is
terminated for any reason prior to the date that an option
or a portion thereof first becomes exercisable, such option
or portion thereof shall terminate and all rights thereunder
shall cease.
(b) To the extent an option is exercisable
and unexercised on the date a Participant's Employment is
terminated:
(i) for any reason other than death,
Disability or Retirement, the option shall terminate on the
earlier of (A) the Expiration Date, and (B) the first
anniversary of such Participant's termination of Employment;
(ii) because the Participant has died or
become subject to a Disability, the option shall terminate
on the first anniversary of the date of such Participant's
termination of Employment;
(iii) due to Retirement, the option shall
terminate on the earlier of (A) the Expiration Date and (B)
the second anniversary of such Participant's termination of
Employment;
(c) During the period after the Participant's
termination of Employment until the termination of the
option, the Participant, or the person or persons to whom
the option shall have been transferred by will or by the
laws of descent and distribution, may exercise the option
only to the extent that such option was exercisable on the
date of the Participant's termination of Employment.
(d) The Committee may, at any time,
accelerate the right of a Participant to exercise an option
or extend the exercise period of such an option; provided,
that no option exercise period may be extended beyond the
option's Expiration Date.
(e) The transfer of a Participant from one
corporation to another among the Company, any Parent and any
Subsidiary, or a leave of absence with the written consent
of the Company, shall not constitute a termination of
Employment for purposes of the Plan.
10. Director Options. Each Nonemployee Director
shall be granted a "Director Option" on the date of the
annual meeting of shareholders in each year during the term
of the Plan beginning in 1995. A "Director Option" shall be
a Nonqualified Stock Option to purchase 1,000 shares
(subject to adjustment as provided in Section 11) of Common
Stock at an exercise price equal to the Fair Market Value
per share on the Grant Date. A Director Option shall become
exercisable on the first anniversary of the Grant Date and
shall be exercisable for a term ending on the tenth
anniversary of Grant Date; provided, however, (i) if the
term of office of the holder ceases for any reason before
such Director Option becomes exercisable, such Director
Option shall terminate and all rights thereunder shall
cease; and (ii) to the extent a Director Option is
exercisable and unexercised on the date the holder's term of
office ceases for any reason, such Director Option shall
terminate on the earlier of the Expiration Date of such
Director Option or the first anniversary of the date the
holder's term of office ceased. Each Director Option shall
be evidenced by an Agreement that shall specify the exercise
price, the Grant Date, the term, the number of shares to
which the Director Option relates and such other terms as
the Committee shall determine. Notwithstanding any
provision in the Plan to the contrary, Sections 5 and 9 of
the Plan shall not apply to Director Options.
11. Adjustments. In the event that the Committee
shall determine that any dividend or other distribution
(whether in the form of cash, Common Stock, other
securities, or other property), recapitalization, stock
split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase,
or exchange of Common Stock or other securities of the
Company, issuance of warrants or other rights to purchase
Common Stock or other securities of the Company, or other
similar corporate transaction or event affects the Common
Stock such that an adjustment is determined by the Committee
to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended
to be made available under the Plan, then the Committee
shall, in such manner as it may deem equitable, adjust any
or all of (a) the number and type of shares of Common Stock
which thereafter may be made the subject of options, (b) the
number and type of shares of Common Stock subject to
outstanding options, and (c) the exercise price with respect
to any option, or, if deemed appropriate, make provision for
a cash payment to the holder of an outstanding option;
provided, however, in each case, that with respect to
Incentive Stock Options no such adjustment shall be
authorized to the extent that such authority would cause the
Plan to violate Section 422 of the Code or any successor
provision thereto; and provided further, that any such
adjustment shall provide for the elimination of any
fractional share which might otherwise become subject to an
option. In the event of a Change of Control, all
outstanding options under the Plan immediately shall become
exercisable in full.
12. Rights Prior to Issuance of Shares. No
Participant shall have any rights as a shareholder with
respect to any shares covered by an option until the
issuance of a stock certificate to the Participant for such
shares. No adjustment shall be made for dividends or other
rights with respect to such shares for which the record date
is prior to the date such certificate is issued.
13. Termination and Amendment. (a) The Board may
terminate the Plan, or the granting of options under the
Plan, at any time. No Incentive Stock Option shall be
granted under the Plan after April 29, 2004. Termination of
the Plan shall not affect the rights of the holders of any
options previously granted.
(b) The Board may amend or modify the Plan at any
time and from time to time.
(c) No amendment, modification, or termination of
the Plan shall in any manner affect any option granted under
the Plan without the consent of the Participant holding the
option.
14. Approval of Plan. The Plan shall be subject
to the approval of the holders of at least a majority of the
shares of Common Stock of the Company present and entitled
to vote at a meeting of shareholders of the Company held
within 12 months after adoption of the Plan by the Board.
No option granted under the Plan may be exercised in whole
or in part until the Plan has been approved by the
shareholders as provided herein. If not approved by
shareholders within such 12-month period, the Plan and any
options granted hereunder shall become void and of no
effect.
15. Effect on Employment. Neither the adoption of
the Plan nor the granting of any option pursuant to it shall
be deemed to create any right in any individual to be
retained as an Employee.
16. Securities Laws. (a) Anything to the contrary
herein notwithstanding, the Company's obligation to sell and
deliver Common Stock pursuant to the exercise of an option
is subject to such compliance with federal and state laws,
rules and regulations applying to the authorization,
issuance or sale of securities as the Company deems
necessary or advisable. The Company shall not be required
to sell and deliver Common Stock unless and until it
receives satisfactory assurance (i) that the issuance or
transfer of such shares will not violate any of the
provisions of the Securities Act of 1933 or the Exchange
Act, or the rules and regulations promulgated thereunder or
those of the National Association of Securities Dealers,
Inc. or any stock exchange on which the Common Stock may be
listed, or the provisions of any state laws governing the
sale of securities, or (ii) that there has been compliance
with the provisions of such acts, rules, regulations and
laws.
(b) The Committee may impose such restrictions on
any shares of Common Stock acquired pursuant to the exercise
of an option under the Plan as it may deem advisable,
including, without limitation, restrictions (i) under
applicable federal securities laws, (ii) under the
requirements of the Nasdaq National Market or Small Cap
Market or any stock exchange or other recognized trading
market upon which such shares of Common Stock are then
listed or traded, and (iii) under any blue sky or state
securities laws applicable to such shares. No shares shall
be issued until counsel for the Company has determined that
the Company has complied with all requirements under
appropriate securities laws.
17. Certain Definitions.
"Agreement" means the written agreement setting
forth the terms of the Participant's option, including,
without limitation, its exercise price, the time or times it
may be exercised, its Expiration Date and the number or
shares of Common Stock subject to the option.
"Board" means the Board of Directors of the
Company.
"Change in Control" shall mean (i) consummation of
any merger or consolidation with respect to which the
Company or any Parent is a constituent corporation (other
than a transaction for the purpose of changing the Company's
corporate domicile), any liquidation or dissolution of the
Company or any sale of all or substantially all of the
Company's assets or (ii) a change in the identity of a
majority of the members of the Company's Board of Directors
within any twelve-month period, which change or changes are
not recommended by the incumbent directors immediately prior
to any such change or changes.
The "Code" is the Internal Revenue Code of 1986, as
amended from time to time.
The "Committee" is a committee of two or more
directors of the Company, each of whom shall be a "non-
employee director" as such term is defined in Rule 16b-3.
The "Common Stock" is the common stock of the
Company.
The "Company" is Data Systems Network Corporation,
a Michigan corporation.
"Director Option" shall have the same meaning as
defined in Section 10.
"Disabled" or "Disability" means total and
permanent disability as defined in Section 22(e) of the
Code.
"Employee" means an individual with a full-time
salaried "employment relationship" with the Company, or any
Parent or Subsidiary, as defined in Regulation 1.421-7(h)
promulgated under the Code, and shall include, without
limitation, employees who are directors of the Company, or
any Parent or Subsidiary.
"Employment" means the state of being an Employee.
"Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time.
"Expiration Date" means the date set forth in the
Agreement relating to an Option on which the right to
exercise shall expire absent a termination of the
Participant's employment, consulting arrangement or term on
the Board. Unless otherwise provided in the Agreement, the
Expiration Date for an Option shall be the tenth anniversary
of its Grant Date.
"Fair Market Value" means, for purposes of
determining the value of Common Stock on the Grant Date, (i)
the last sale price on the Nasdaq National Market or the
Nasdaq SmallCap Market as reported in The Wall Street
Journal for the Grant Date, or (ii) if the Common Stock is
not traded on the Nasdaq National Market or the Nasdaq
SmallCap Market on the Grant Date but is traded on a
national securities exchange on the Grant Date, the closing
price on the Grant Date (if traded on more than one such
exchange, the closing price for this purpose shall be the
average of the closing prices on each such exchange on the
Grant Date or (iii) if the Common Stock is not traded on the
Nasdaq National Market, the Nasdaq SmallCap Market or a
national securities exchange on the Grant Date but is traded
"over the counter", the average of the bid and asked prices
for the Grant Date; provided, however, that Fair Market
Value with respect to the initial option grants approved
prior to the closing of the Company's initial public
offering shall be deemed to be $4.75 per share. In the
event that there were no Common Stock transactions on such
date and no published bid and asked prices, the Fair Market
Value shall be determined as of the immediately preceding
date on which there were Common Stock transactions or
published bid and asked prices, as the case may be. "Fair
Market Value" for purposes of determining the value of
Common Stock on the date of exercise or the date Common
Stock is tendered or withheld for purposes of Sections 6 or
7 shall be determined in accordance with the procedure set
forth in the preceding sentence as of the last date
preceding the exercise, tender or withholding rather than
the Grant Date.
"Grant Date" means the date on which the Committee
authorizes a particular option, or such later date as shall
be designated by the Committee.
An "Incentive Stock Option" is an option intended
to meet the requirements of Section 422 of the Code.
"Nonemployee Director" means a Director who is not
an Employee.
A "Nonqualified Stock Option" is an option granted
under the Plan other than an Incentive Stock Option.
"Option" means either an Incentive Stock Option or
a Nonqualified Stock Option to purchase Common Stock.
"Parent" means any "parent corporation" of the
Company as defined in Section 424(e) of the Code.
"Participant" shall have the meaning ascribed in
Section 3 of the Plan.
The "Plan" is the 1994 Stock Option Plan.
"Retirement" means normal retirement from
Employment at age 65 or older.
"Rule 16b-3" means Rule 16b-3 under the Exchange
Act, as in effect from time to time.
"Subsidiary" means any "subsidiary corporation" of
the Company as defined in Section 424(f) of the Code.
EXHIBIT 10.3(d)
NONQUALIFIED STOCK OPTION AGREEMENT
UNDER THE
DATA SYSTEMS NETWORK CORPORATION
1994 STOCK OPTION PLAN, AS AMENDED
(APRIL 1997 VERSION)
THIS AGREEMENT is entered into as of the Grant Date
set forth herein by and between DATA SYSTEMS NETWORK
CORPORATION ("Corporation") and the undersigned
("Optionee"), pursuant to the Corporation's 1994 Stock
Option Plan, as amended ("Plan"). The Corporation hereby
grants to the Optionee a Nonqualified Stock Option to
purchase the number of shares of Common Stock indicated on
the signature page, subject to the terms and conditions
contained in the Plan and as hereinafter provided (the
"Option"). Capitalized terms not defined in this Agreement
shall have the meanings respectively ascribed to them in the
Plan.
1. Option Price. The Option shall be exercisable
at the price per share indicated on the signature page.
2. Option Exercise.
(a) Vesting. The Option shall become
exercisable in installments as follows: one-half of the
Option shall become exercisable on the second anniversary of
the date hereof, one-quarter shall become exercisable on the
third anniversary of the date hereof and the remaining one-
quarter shall become exercisable on the fourth anniversary
of the date hereof. To the extent not exercised,
installments shall accumulate and the Optionee may exercise
them thereafter in whole or in part. In the event of a
Change of Control, the Option immediately shall become
exercisable in full. Any provision of this Agreement to the
contrary notwithstanding, the Option shall expire and no
longer be exercisable after the date which is the tenth
(10th) anniversary of the date of this Agreement (the
"Expiration Date"). The Option shall be forfeitable in
accordance with the terms of Section 2(d) hereof and shall
terminate in accordance with Section 3 hereof.
(b) Notice. The Option shall be exercisable by
delivery to the Secretary of the Corporation of a written
and duly executed notice in the form attached hereto.
(c) Payment Terms. Payment of the full
purchase price of any shares with respect to which the
Option is being exercised shall accompany the notice of
exercise of the Option. Payment shall be made (i) in cash
or by certified check, bank draft or money order; (ii) by
tendering to the Corporation shares of Common Stock then
owned by the Optionee, duly endorsed for transfer or with
duly executed stock power attached, which shares shall be
valued at their Fair Market Value as of the date of such
exercise and payment; or (iii) if, at the time of exercise,
the Corporation has entered into a written agreement with a
brokerage firm pursuant to which the brokerage firm agrees
to pay the option exercise price to the Corporation upon
receipt from the option holder of certain documentation and
instructions, by delivery to the Corporation of a properly
executed exercise notice, acceptable to the Corporation,
together with irrevocable instructions to the brokerage firm
to deliver to the Corporation a sufficient amount of cash to
pay the exercise price and any applicable income and
employment withholding taxes, in accordance with such
agreement ("Cashless Exercise").
(d) Forfeiture. The Option shall terminate
immediately and shall cease to be exercisable if the
Executive Compensation Committee of the Board of Directors
in its sole discretion determines that the Optionee has
committed any of the following acts: fraud, theft,
dishonesty, waste of corporate assets, negligence, a felony,
willful misconduct against the Corporation or any of its
employees, agents or affiliates, failure in any material
respect to perform the Optionee's duties and
responsibilities, termination of employment by Optionee if
Optionee obtains employment with a competitor within 60 days
of such termination, or encouragement of any other employee
of the Corporation to terminate employment with the
Corporation for the purpose of obtaining employment with a
competitor of the Corporation.
3. Termination of Employment.
(a) Termination Prior to Option Becoming
Exercisable. If, prior to the date that the Option shall
first become exercisable, the Optionee's Employment shall be
terminated, with or without cause, or by the act, death,
Disability, or Retirement of the Optionee, the Optionee's
right to exercise the Option shall terminate and all rights
hereunder shall cease.
(b) Termination Other Than Because of Death,
Disability or Retirement After Option Becomes Exercisable.
If, on or after the date that the Option shall first become
exercisable, the Optionee's Employment shall be terminated
for any reason other than death, Disability or Retirement,
the Optionee shall have the right, until the first
anniversary of the Optionee's termination of Employment, to
exercise the Option to the extent that it was exercisable
and is unexercised on the date of such termination of
Employment, subject to any other limitation on the exercise
of the Option in effect at the date of exercise. The Option
shall thereafter terminate and no longer be of any effect.
(c) Termination Because of Death or Disability
After Option Becomes Exerciseable. If, on or after the date
that the Option shall have become exercisable, the Optionee
shall die or become Disabled while an Employee or while the
Option remains exercisable, the Optionee or the executor or
administrator of the estate of the Optionee (as the case may
be), or the person or persons to whom the Option shall have
been transferred (if such transfer was made in compliance
with the Plan and Section 7 of this Agreement), shall have
the right, until the first anniversary of the date of the
Optionee's death or termination due to such Disability, to
exercise the Option to the extent that it was exercisable
and unexercised on the date of death or termination, subject
to any other limitation on exercise in effect at the date of
exercise. The Option shall thereafter terminate and no
longer be of any effect.
(d) Termination Because of Retirement After Option
Becomes Exercisable. If, on or after the date that the
Option shall have become exercisable, the Optionee's
Employment shall terminate due to the Optionee's Retirement,
the Optionee shall have the right until the second
anniversary of the Optionee's termination of Employment, to
exercise the Option to the extent that it was exercisable
and unexercised on the date of such termination of
Employment subject to any other limitation on exercise in
effect at the date of exercise. The Option shall thereafter
terminate and no longer be of any effect.
4. Optionee's Agreement. The Optionee agrees to
all the terms stated in this Agreement, as well as to the
terms of the Plan, a copy of which is attached and of which
the Optionee acknowledges receipt.
5. Withholding. The Optionee consents to
withholding from his compensation of all applicable payroll
and income taxes with respect to the Option. If the
Optionee is no longer employed by the Corporation at the
time any applicable taxes with respect to the Option are due
and must be remitted by the Corporation, the Optionee agrees
to pay applicable taxes to the Corporation, and the
Corporation may delay issuance of a certificate until proper
payment of such taxes has been made by the Optionee. The
Optionee may satisfy his obligations under this Section 5 by
(i) making an election, notice of which shall be in writing
and promptly delivered to the Committee, and tendering
previously-acquired shares of Common Stock, provided that
the shares have an aggregate Fair Market Value on the date
of exercise of the Option sufficient to satisfy in whole or
in part the applicable withholding taxes; or (ii) utilizing
the Cashless Exercise procedure described in Section 2(c).
6. Rights as Shareholder. The Optionee shall
have no rights as a shareholder of the Corporation with
respect to any of the shares covered by the Option until the
issuance of a stock certificate or certificates upon the
exercise of the Option, and then only with respect to the
shares represented by such certificate or certificates. No
adjustment shall be made for dividends or other rights with
respect to such shares for which the record date is prior to
the date such certificate or certificates are issued.
7. Non-Transferability of Option. The Option
shall not be transferred in any manner other than by will,
the laws of descent or distribution or pursuant to a
qualified domestic relations order as defined by the Code or
Title I of the Employee Retirement Income Security Act, or
the rules thereunder. During the lifetime of the Optionee,
the Option shall be exercised only by the Optionee. No
transfer of the Option shall be effective to bind the
Corporation unless the Corporation shall have been furnished
with written notice thereof and such evidence as the
Corporation may deem necessary to establish the validity of
the transfer and the acceptance by the transferee of the
terms and conditions of the Option.
8. Compliance with Securities, Tax and Other
Laws. The Option may not be exercised if the issuance of
shares upon such exercise would constitute a violation of
any applicable Federal or state securities law or any other
law or valid regulation. As a condition to exercise of the
Option, the Corporation may require the Optionee, or any
person acquiring the right to exercise the Option, to make
any representation or warranty that the Corporation deems to
be necessary under any applicable securities, tax, or other
law or regulation.
9. Adjustments. In the event that the Committee
shall determine that any dividend or other distribution
(whether in the form of cash, Common Stock, other
securities, or other property), recapitalization, stock
split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase,
or exchange of Common Stock or other securities of the
Corporation, issuance of warrants or other rights to
purchase Common Stock or other securities of the
Corporation, or other similar corporate transaction or event
affects the Common Stock such than an adjustment is
determined by the Committee to be appropriate in order to
prevent dilution or enlargement of the benefits or potential
benefits intended to be made available by the grant of the
Option, the Committee is permitted to adjust the terms of
the Option as provided in the Plan.
10. No Right to Employment. The granting of the
Option does not confer upon the Optionee any right to be
retained as an Employee.
11. Amendment and Termination of Option. Except
as otherwise provided in this Agreement, the Corporation may
not, without the consent of the Optionee, alter or impair
any Option granted under the Plan. The Option shall be
considered terminated in whole or in part, to the extent
that, in accordance with the provisions of the Plan, it can
no longer be exercised for shares originally subject to the
Option.
12. Notices. Every notice relating to this
Agreement shall be in writing and if given by mail shall be
given by registered or certified mail with return receipt
requested. All notices to the Corporation or the Committee
shall be sent or delivered to the Secretary of the
Corporation at the Corporation's headquarters. All notices
by the Corporation to the Optionee shall be delivered to the
Optionee personally or addressed to the Optionee at the
Optionee's last residence address as then contained in the
records of the Corporation or such other address as the
Optionee may designate. Either party by notice to the other
may designate a different address to which notices shall be
addressed. Any notice given by the Corporation to the
Optionee at the Optionee's last designated address shall be
effective to bind any other person who shall acquire rights
hereunder.
IN WITNESS WHEREOF, the Corporation, by its duly
authorized officer, and the Optionee have executed this
Agreement effective as of the Grant Date set forth below.
DATA SYSTEMS NETWORK CORPORATION
By:
Its:
OPTIONEE
(signature)
DETAILS OF THIS AWARD
Name of Optionee
Grant Date
Number of Shares
Exercise Price
NOTICE OF EXERCISE OF NONQUALIFIED STOCK OPTION
GRANTED UNDER THE DATA SYSTEMS NETWORK CORPORATION
1994 STOCK OPTION PLAN
Secretary
Data Systems Network Corporation
34705 West Twelve Mile Road
Suite 300
Farmington Hills, Michigan 48331
An Option was granted to me on ,
19 to purchase shares of Data Systems Network
Corporation Common Stock at a price of $ per share
(the "Option").
I hereby elect to exercise the Option with respect
to shares. Payment of the exercise price is being
made as follows:
Cash delivered with this notice.
Certified check, bank draft or money order
delivered with this notice.
I am tendering shares of Common Stock which I
currently own.
Subject to Section 2(c) of the agreement
relating to the Option, I am making a
"cashless exercise" and have given the
designated broker the irrevocable instructions
required by the agreement between the broker
and Data Systems Network Corporation.
The stock certificate for the shares acquired upon
exercise should be issued to:
(name)
(address)
(Social Security No.)
Dated: ,
(signature)
(print name)
EXHIBIT 27