SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
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Rule 14a-6(e)(2))
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[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
FECHTOR, DETWILER, MITCHELL & CO.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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[LETTERHEAD OF FECHTOR, DETWILER, MITCHELL & CO.]
________________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held May 22, 2000
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of
Fechtor, Detwiler, Mitchell & Co. will be held at the time and place set forth
below.
At the meeting, you will consider and vote on the following matters:
1. Approval of the Fechtor, Detwiler, Mitchell & Co. 2000 Omnibus Equity
Incentive Plan.
2. Election of two directors to serve for three years or until their successor
shall be elected.
3. Ratification of the selection of Deloitte & Touche LLP as our independent
public accountants.
4. Any other business properly brought before the meeting.
Stockholders of record at the close of business on March 31, 2000 are
entitled to notice of and to vote at the meeting. If you cannot attend and wish
to vote by proxy, you are urged to mark, sign, and date the enclosed proxy and
return it in the enclosed envelope.
The date, time and place of the meeting are: May 22, 2000, at 10:00 am
Pacific Daylight Savings Time
The Inn at Rancho Santa Fe, 5951
Linea Del Cielo
Rancho Santa Fe, California 92067
/s/ James K. Mitchell
James K. Mitchell
Chairman and President
This Proxy Statement, dated April 5, 2000, was first mailed to stockholders
on or about April 10, 2000.
[LETTERHEAD OF FECHTOR, DETWILER, MITCHELL & CO.]
Proxy Statement For
Annual Meeting of Stockholders
To Be Held on May 22, 2000
GENERAL
The enclosed Proxy is solicited by the Board of Directors on behalf of
Fechtor, Detwiler, Mitchell & Co., a Delaware corporation (the "Company"), for
use at the Annual Meeting of Stockholders (the "Annual Meeting") to be held on
May 22, 2000 at 10:00 a.m., Pacific Daylight Savings Time, or at any
adjournment(s) or postponement(s) thereof, for the purposes set forth herein and
in the accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting
will be held at The Inn at Rancho Santa Fe, 5951 Linea Del Cielo, Rancho Santa
Fe, California 92067.
Our company's principal executive offices are located at 225 Franklin
Street, 20th Floor, Boston, MA 02110, and the telephone number is (617) 451-
0100. These proxy solicitation materials were first mailed on or about April 10,
2000 to all stockholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING VOTING, SOLICITATION AND PROXIES
Record Date and Shares Outstanding
Stockholders of record at the close of business on March 31, 2000 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. On
the Record Date, our company had approximately 12,916,451 issued and 12,781,251
outstanding, shares of common stock, $0.01 par value (the "Common Stock"), and
no shares of preferred stock issued or outstanding.
Solicitation
The cost of this proxy solicitation will be paid by our company. Our
company will reimburse brokerage firms and other persons representing beneficial
owners of shares for their expenses in forwarding soliciting materials to such
beneficial owners. Proxies may be solicited by certain of our company's
directors, officers, and regular employees, without additional compensation,
personally or by telephone or telegram.
Revocability of Proxies
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to our company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the Annual Meeting and voting in person. Attending the Annual Meeting
in and of itself will not constitute a revocation of a proxy.
Deadlines for Receipt of Stockholder Nominations, Proposals and Proposals for
Inclusion in the Proxy Statement for the 2001 Annual Meeting
Section 2.5 of our company's Bylaws provides that nominations may be made
by the Board of Directors or by any stockholder entitled to vote in the election
of directors generally, provided that all stockholders intending to nominate
director candidates for election must deliver written notice thereof to the
Secretary of our company, which notice must be received not less than sixty nor
more than ninety days prior to the meeting or, if less than seventy days' notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, within ten days after the date on which notice of such meeting is
first given to stockholders. Such notice must set forth certain information
concerning the nominating stockholder
1
and his or her nominee(s), including their names and addresses, such other
information as would be required to be in the proxy statement soliciting proxies
for the election of the nominees of such stockholder and the consent of each
nominee to serve as a director of our company if so elected. The chairman of the
Annual Meeting will refuse to acknowledge the nomination of any person not made
in compliance with the foregoing procedure.
Our Bylaws also require that stockholders give advance notice and follow
certain other procedures with regard to business they wish to bring before an
annual meeting of stockholders. Section 2.6 of our company's Bylaws provides
that all stockholders intending to bring business before the meeting deliver
written notice thereof to the Secretary of our company in the same manner and
within the same periods as required for stockholder nominees for the Board of
Directors, as described in the preceding paragraph. Such notice shall set forth
certain information concerning such stockholder and the proposed business,
including any material interest of the stockholder in such business. The
chairman of the Annual Meeting will refuse to permit business to be brought
before the Annual Meeting if notice is not given in compliance with the
foregoing procedure.
Our company intends to hold its next Annual Meeting of Stockholders on or
about May 22, 2001. Stockholders seeking to include a proposal in the Proxy
Statement for our company's 2001 Annual Meeting must ensure that such proposal
is received at the executive offices of our company on or before March 22, 2001.
Inclusion of any such proposal is subject to certain other requirements.
Board Meetings and Committees
The business affairs of our company are managed by or under the direction
of the Board of Directors, although it is not involved in day-to-day operations.
During the year ended December 31, 1999, the Board of Directors met five times.
The Board of Directors of our company has standing Audit and Compensation
Committees.
Audit Committee. The Audit Committee recommends to the Board of Directors
the appointment of the firm selected to be independent public accountants for
our company and monitors and evaluates the performance of such firm; reviews and
approves the scope of the annual audit and evaluates with the independent public
accountants our company's annual audit and annual consolidated financial
statements; reviews our company's financial reporting policies and practices;
reviews with management the status of internal audit and control procedures,
adequacies of financial staff and other matters and makes such recommendations
to the Board of Directors as may be appropriate; evaluates matters having a
potential financial impact on our company which may be brought to its attention
by management, the independent public accountants or the Board of Directors; and
reviews all public financial reporting documents of our company. The current
members of the Audit Committee are Messrs. Jenkins, Baran and Beek. Mr. Jenkins
is the Chairman. The Audit Committee held one meeting during fiscal 1999.
Compensation Committee. The Compensation Committee reviews and makes
recommendations to the full Board of Directors with respect to the specific
compensation to be paid or provided to executive officers and also recommends
incentive stock options under our company's 1993 Executive and Employee Stock
Option Plans. The current members of the Compensation Committee are Messrs.
Sharp, Beek and Jenkins. Mr. Sharp is the Chairman. The Compensation Committee
held one meeting during fiscal 1999.
During the fiscal year ended December 31, 1999, each of the Directors of
our company attended at least 80% of the aggregate of (1) the total number of
meetings of the Board of Directors and (2) the total number of meetings of the
committee(s) of the Board on which he served during the period he served in such
capacities.
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BOARD OF DIRECTORS AND OFFICERS OF FECHTOR, DETWILER, MITCHELL & CO.
The following table sets forth names and certain other information
concerning our company's Directors and executive officers, as of March 31, 2000:
Term of
Office as
Director
Name Age Position Will Expire
- -----------------------------------------------------------------------------------------------------------------------
James Mitchell 61 Chairman, President 2001
and Director
Richard Fechtor 69 Chief Executive Officer 2002
and Director
Edward Hughes 59 Chief Operating Officer 2000
and Director
Andrew Detwiler 40 Director 2002
Edward Baran 64 Director 2000
Barton Beek 76 Director 2002
Frank Jenkins 63 Director 2001
Robert Sharp 64 Director 2001
Stephen Martino 43 Chief Financial Officer
Stephen Frank 47 Chief Legal Officer and Secretary
Information with respect to the principal occupation during the past five
years of each nominee, each current Director and each executive officer is set
forth below. There are no family relationships among Directors or executive
officers of our company.
James Mitchell became a Director in October 1988 and became Chairman of our
company on January 1, 1993 and served as Chief Executive Officer between January
1, 1993 and August 30, 1999. He assumed the responsibilities of President of our
company on January 1, 1997. Mr. Mitchell is the founder of one of our operating
subsidiaries, James Mitchell & Co. In 1973, Mr. Mitchell was a founding officer
of Security First Group, a financial services firm that pioneered the concept of
marketing insurance and annuity products through stock brokerage firms. Before
joining that firm, Mr. Mitchell served as Vice President of Marketing for the
Variable Annuity Life Insurance Company of Houston, Texas. He attended Portland
State University and is a registered General Securities Principal with the NASD.
Richard Fechtor is the CEO and Director of one of our principal
subsidiaries, Fechtor, Detwiler & Co., Inc. ("Fechtor, Detwiler"). Mr. Fechtor
has also served as Treasurer of that company during the past 36 years. He is a
graduate of Boston University. Mr. Fechtor serves on the Boards of Directors of
Vascular Lab and Creative Bakeries. Mr. Fechtor is a registered NASD General
Securities Principal.
Edward Hughes is Vice President and Director of Operations of Fechtor,
Detwiler and has been with that company for 13 years. He holds a Bachelor of
Science degree in Business Administration and an Associates Degree in Finance
from Northeastern University. Mr. Hughes has served as a member and as Chairman
of the 13th District Committee of the NASD. He is a registered General
Securities and Financial Principal with the NASD.
Andrew Detwiler has been with Fechtor, Detwile for 16 years having served
as Director of Research and currently as Managing Director of Capital Markets
and became CEO of that company on April 1, 2000. He graduated from the
University of Vermont and also serves on the Board of Directors of Wade Golf
Centers, Inc. and Radican Systems, Inc. He is a registered General Securities
Principal with the NASD.
3
Edward Baran became a Director in August 1992. Mr. Baran, who has spent
more than thirty years in the insurance business, is currently Chairman and
Chief Executive Officer of BCS Financial Corporation, a financial services
holding company. Prior to joining BCS in November 1987, Mr. Baran was Vice
Chairman, President and Chief Executive Officer of Capitol Life Insurance
Company of Denver, Colorado. He is a graduate of Georgetown University and a
member of the Audit and Compensation Committees of the Board of Directors.
Barton Beek became a Director in January 1984. Mr. Beek is a securities
attorney specializing in mergers and acquisitions and a senior partner of
O'Melveny & Myers, a law firm that he joined in 1955, with offices worldwide.
Mr. Beek is a graduate of the California Institute of Technology, the Stanford
University Graduate School of Business and Loyola College of Law. Mr. Beek is a
director of Wynns International, Inc. He is a member of the Audit and
Compensation Committees of the Board of Directors.
Frank Jenkins is an Associate Professor of Finance at RPI Lally School of
Management in Hartford, Connecticut, and also provides ongoing financial,
marketing and business strategy consulting to several clients. He was formerly
the Chief Financial Officer, Vice President and managing partner of Harbridge
House, Inc. for 25 years until it was purchased by Coopers & Lybrand in 1993.
Mr. Jenkins retired as Managing Director of Coopers & Lybrand in 1998. He
graduated from North Carolina State University with a BSME and has a MBA from
Wharton School, University of Pennsylvania. He is currently on the Board of
Directors of Metro West Health, Inc., Metro West Community Healthcare
Foundation, Inc., Clark, Cutler & McDermott, Inc. and the Boston Classical
Orchestra. He is Chairman of the Audit Committee and a member of the
Compensation Committee of the Board of Directors.
Robert Sharp became a Director in May 1995. Mr. Sharp retired from his
position as President and Chief Executive Officer of Keyport Life Insurance
Company in February 1992 after having served in that position since 1979. Mr.
Sharp is the past chairman of the National Association for Variable Annuities
and a former director of the National Association of Life Companies. Mr. Sharp
is a graduate of the California State University at Sacramento and is a
registered Principal with the NASD. Mr. Sharp is also a director of Navallier
Variable Funds, a mutual fund. Mr. Sharp is a member of the Audit Committee and
Chairman of the Compensation Committee of the Board of Directors.
Stephen Martino became the Chief Financial Officer of our company in
October 1999. Prior to joining us, Mr. Martino was Senior Vice President of
Finance for Nvest, a New York Stock Exchange listed firm with approximately $125
billion in assets under management. Previously, he served in senior management
positions with First Data Corporation and KPMG Peat Marwick. He received a BS in
Business Administration, graduating magna cum laude, from Northeastern
University. He is a member of the American Institute of CPAs and the
Massachusetts Society of CPAs.
Stephen Frank has been the Chief Legal Officer and Chief Compliance Officer
of Fechtor, Detwiler & Co., Inc. since 1993. He has a BA in Psychology from C.W.
Post College and a JD from New York Law School. Mr. Frank has sat as both an
arbitrator and chairperson in NASD sponsored arbitrations and has been a member
of the NYSE and NASD Content Committee for national continuing education. He is
a registered General Securities Principal with the NASD.
4
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid during each of our company's last three fiscal years to our Chief Executive
Officer (the "named executive officer") (1):
Long-Term
Compensation
Awards
Securities
Annual Compensation Underlying All Other
------------------- Options/ Compensation
Name and Principal Position Year Salary ($) Bonus ($) SARs (#)(2) ($)(3)
- -------------------------------------------------------------------------------------------------------------------
Richard Fechtor, Chief Executive Officer 1999 (4) 73,558 -- -- 63,757
James Mitchell, Chairman and President 1999 225,000 37,500 125,000 9,529
1998 225,000 -- -- 9,740
1997 239,087 -- 100,000 7,811
________________________
(1) Although SEC regulations require information for the four highest paid
executive officers in the classification of the "named executive officers"
(in addition to the Chief Executive Officer), no other executive officer of
our company qualified for this specification under Regulation S-K, Item
402a(3) during 1999.
(2) Our company does not have any outstanding Stock Appreciation Rights
("SARs").
(3) Amounts reported for Mr. Mitchell in the "All Other Compensation" column
include $4,700, $4,911 and $2,982, respectively, for 1999, 1998 and 1997,
representing our company's contributions to its 401(k) Savings Plan on his
behalf and $4,829 for each of 1999, 1998 and 1997, representing life
insurance premiums advanced by our company pursuant to a split dollar
insurance agreement. Mr. Fechtor's total under All Other Compensation
includes $63,757 earned in regular commissions between September 1, 1999
and December 31, 1999 for sales of securities by Mr. Fechtor during this
period. Such commissions were at the rates customarily paid to retail
brokers and traders in the stock brokerage industry.
(4) Includes compensation from September 1, 1999 to December 31, 1999. Mr.
Fechtor was not employed by our company prior to September 1, 1999.
Option Grants
The following table provides information related to grants of options to
purchase Common Stock to the named executive officers during the 1999 fiscal
year:
Individual Grants
- -------------------------------------------------------------------------------------
Percent of Total Potential Realizable
Number of Options/SARs Value at Assumed
Securities Granted to All Annual Rate of
Underlying Employees Exercise Price Stock Price
Options/SARs During Fiscal or Base Price Expiration Appreciation for
Name Granted (1) Year (1) ($/sh) Date Option Term (2)
---- ----------- -------- ------ ---- ---------------
5% ($) 10%($)
-------- --------
James Mitchell 125,000 16.84% $0.969 12/13/04 $154,590 $195,073
___________________
(1) Our company does not have any outstanding SARs. The option for Mr. Mitchell
vests in annual installments of 41,667, 41,667 and 41,666 shares beginning
December 13, 2000.
5
(2) The 5% and 10% assumed rates of appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent our company's
estimate or projection of the future Common Stock price. The potential
realizable value was calculated using the closing price of the Common Stock
on December 13, 1999 of $0.969 per share. The exercise price was determined
by using the same closing price.
Option Exercises and Fiscal Year-End Option Values
The following table provides information related to options exercised by
the named executive officer during the 1999 fiscal year and the number and value
of options held at fiscal year-end.
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs at FY- In-the-Money Options/
Shares Acquired Value End (#)(1) SARs at FY-End ($)(1)(2)
Name On Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- --------------------------------------------------------------------------------------------------------------------
James Mitchell 0 0 100,000 125,000 $137,500 $121,125
_________________
(1) Our company does not have any outstanding SARs.
(2) The closing price for the Common Stock on December 31, 1999, as reported by
the NASDAQ National Market System, was $1.375. Mr. Mitchell's exercisable
options are at the price of $1.375. The remaining unexercisable options are
at the price of $0.969 per share.
Compensation of Directors
The members of the Board of Directors who are not full-time employees of
our company are entitled to receive reimbursement for out-of-pocket expenses
they incur in attending Board meetings and otherwise performing their duties and
receive fees of $1,000 for each meeting of the Board of Directors which they
attend. Members of committees additionally receive $500 per committee meeting
held on the same day as a Board of Directors' meeting, or $1,000 per committee
meeting if held on a different day. Non-employee Directors receive formula
grants of non-qualified stock options under our company's 1993 Executive Stock
Option Plan. Options to acquire 12,000 shares of common stock are to be granted
within six months after an individual takes office as a Director and options to
acquire an additional 12,000 shares are to be granted within six months after
every third anniversary of such Director's taking office. As reported in the
Form 10-K for the year ended December 31, 1997, on February 17, 1998, in
addition to their regular formula grants, the outside Directors of our company
were each granted stock options to purchase 25,000 shares of common stock at a
price of $1.125, which was equal to the closing price for the common stock on
June 30, 1998. If approved by our stockholders, Directors will be eligible for
automatic grants of 24,000 shares of common stock every third anniversary of
their initial election as a Director under the 2000 Omnibus Stock Equity Plan.
Officers of our company are not compensated for their services as Directors or
committee members.
Compensation Committee Interlocks and Insider Participation and Certain
Relationships and Related Transactions
Mr. Jenkins performed services as a consultant to Fechtor, Detwiler & Co.,
Inc. in connection with the merger that was completed on August 30, 1999 and
received compensation of 150,000 shares of Common Stock in our company.
Mr. Beek is of counsel to O'Melveny & Myers LLP, a law firm that advised
JMC Group Inc. in connection with the merger.
Subsequent to the merger neither Mr. Jenkins nor Mr. Beek or his law firm
have provided, or are expected to provide in the future, any services to our
company except as directors.
Compensation Committee Report on Executive Compensation
During 1999 executive compensation policy and practice were recommended to
the Board by a Compensation Committee (the "Committee"). Subsequent to the
merger on August 30, 1999 between JMC Group Inc. and Fechtor, Detwiler & Co.,
Inc., the Committee has been composed of Robert Sharp, Chairman, Frank Jenkins
and Barton Beek. Prior to the merger, the Committee of JMC Group Inc. was
composed of Robert Sharp, Edward Baran, Barton Beek and Charles
6
Black, a former Director of JMC Group, Inc. Prior to the merger, Fechtor,
Detwiler & Co., Inc. did not have a Compensation Committee. The Committee held
one meeting during 1999.
The Committee's compensation policy is to provide our company's senior
officers, including the executive officers named in this proxy statement, with
base salaries commensurate with the base salaries of executives in our industry,
augmented by (i) performance-based bonuses and (ii) stock incentives, primarily
stock options. The objectives of the Committee's policies are to attract and
retain outstanding executives by providing compensation opportunities comparable
to those offered by other companies in our industry, and to motivate and reward
these executives with bonuses and stock awards which link their total
compensation to the enhancement of shareholder values.
Richard Fechtor was President of Fechtor, Detwiler & Co. prior to the
merger and became CEO of Fechtor, Detwiler, Mitchell & Co. subsequent to the
merger. Prior to the merger his compensation consisted of commissions on
business initiated by him in the course of the firm's trading and brokerage
business. Such commissions were at the rates customarily paid to retail brokers
and traders in the stock brokerage industry.
Concurrent with the merger, and as one of the terms of the Merger
Agreement, Mr. Fechtor became CEO of Fechtor, Detwiler, Mitchell & Co. and
entered into an employment agreement with our company for a three-year term
providing for base salary of $225,000.
Prior to the merger, Mr. Mitchell was the only executive officer of JMC
Group Inc. whose compensation is reportable under the rules of the Securities
and Exchange Commission. His compensation for 1999 was $225,000, established
pursuant to a three-year employment contract entered into between our company
and Mr. Mitchell in 1998. Concurrent with the merger, Mr. Mitchell became
Chairman of our company and continues to receive compensation at the rate of
$225,000 per year pursuant to his employment contract.
The Committee at its December 13, 1999 meeting considered the operating
results for 1999 (excluding merger-related costs) and awarded cash bonuses to
Messrs. Mitchell, Martino, Hughes and Frank, the President, Chief Financial
Officer, Chief Operating Officer and Chief Legal Officer of our company,
respectively.
The Committee considers from time to time the grant of options or other
stock-based compensation awards to senior executives of our company. The
Committee has not developed any specific formula for such awards. At its
December 13, 1999 meeting, the Committee reviewed the accomplishments of our
senior officers and key employees and recommended the grant of options to Mr.
Mitchell (125,000 shares), Mr. Hughes and Mr. Andrew Detwiler (100,000 shares
each) and 50,000 shares each to Brian Kritzer, Doug Jones and Peter Fenton, and
10,000 shares to Eliot Herman, each of whom (in the judgment of the Committee)
had made and would continue to make an important contribution to our success.
During 1999, a grant of 100,000 shares was also made to Mr. Martino. The
Committee noted that Mr. Richard Fechtor and Mr. Robert Detwiler had made, and
were expected to continue to make, very substantial contributions to the success
of our company, but in view of their large shareholdings, the Committee did not
recommend grants of options to them at that time.
This report shall not be deemed incorporated by reference by any general
statement incorporating this proxy statement by reference into any filing under
the Securities Acts, except to the extent that our company specifically
incorporates this information by reference, and shall not otherwise be deemed
"filed" under such Acts.
The Compensation Committee of the Board of
Directors of Fechtor, Detwiler, Mitchell & Co.
Robert Sharp, Chairman
Barton Beek
Frank Jenkins
7
Performance Graph
The following chart compares the yearly percentage change in the cumulative
total stockholder return on the common stock during the five fiscal years ended
December 31, 1999 with the cumulative total return on the S&P 500 Index and the
NASDAQ Financial Stocks Industry Index.
[PERFORMANCE CHART APPEARS HERE]
[Assumes $100 invested on December 31,
1994 in Fechtor, Detwiler, Mitchell & Co.,
S&P 500 Index and NASDAQ Financial
Stock Industry Index]
PERFORMANCE 1994 1995 1996 1997 1998 1999
- ----------- ---- ---- ---- ---- ---- ----
NASDAQ 100.00 145.68 187.03 286.11 278.93 274.02
S&P 500 100.00 134.11 161.29 211.30 267.65 342.59
FEDM 100.00 57.97 62.00 41.97 60.01 87.97
[GRAPH APPEARS HERE]
The foregoing information shall not be deemed incorporated by reference by
any general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent our company specifically incorporates this
information by reference, and shall not otherwise be deemed filed under such
Acts.
8
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Unless otherwise noted below, the following table presents certain
information with respect to the ownership of the common stock as of March 31,
2000 by each person known by our company to own beneficially more than 5% of the
common stock, by each person who is a Director or nominee for Director of our
company, by each named executive officer and by all executive officers and
Directors of our company as a group:
Shares of Common
Stock
Beneficially Owned
as of March 31, 2000 (1)
Name Number (2)(3) %
- ------------------------------------------------------------------------------------------------
Richard Fechtor (4) 2,612,000 19.51%
Fechtor, Detwiler, Mitchell & Co.
225 Franklin Street, 20th Floor
Boston, MA 02110
Robert Detwiler (4)(5) 2,405,000 17.97%
Fechtor, Detwiler, Mitchell & Co.
225 Franklin Street, 20th Floor
Boston, MA 02110
James Mitchell 821,352 6.14%
Fechtor, Detwiler, Mitchell & Co.
9710 Scranton Road, Suite 100
San Diego, CA 92121
Andrew Detwiler 432,636 3.23%
Robert Sharp 195,000 1.46%
Frank Jenkins 160,000 1.20%
Barton Beek 152,000 1.14%
Edward Hughes 148,703 1.11%
Edward Baran 41,000 *
All Executive Officers and Directors as a group (5 persons) 4,562,691 34.09%
Total outstanding shares (6) 13,385,451
* Less than 1%
- ------------------
(1) All ownership figures include options to purchase shares of common stock
exercisable within 60 days of March 31, 2000, as set forth below. Except as
otherwise noted below, each individual, directly or indirectly, has sole or
shared voting and investment power with respect to the shares listed.
(2) Includes 22,126, 703, 7,636 and 30,465 vested shares of common stock
contributed by our company to its 401(k) Savings Plan for Messrs. Mitchell,
Hughes, A. Detwiler and for all executive officers and Directors as a
group. Outside Directors do not have 401(k) Plan holdings with our company.
(3) Includes options to purchase 100,000, 200,000, 45,000, 33,000, 50,000,
41,000 and 469,000, shares of common stock for Messrs. Mitchell, A.
Detwiler, Sharp, Beek, Hughes, Baran and for all executive officers and
Directors as a group, respectively.
(4) Includes 200,000 shares of common stock for each of Messrs. Fechtor and R.
Detwiler which represent shares held in trust to reimburse our company for
any shares issued by our company upon exercise of stock options under the
1999 Special Stock Option Plan assumed by our company after the merger.
Reimbursed shares will be summarily canceled upon receipt by our Company.
(5) Includes 10,000 shares owned by Mr. Detwiler's wife to which he disclaims
beneficial ownership.
(6) Includes 469,000 shares issuable upon exercise of stock options.
9
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our company's
Directors and executive officers, and persons who own more than 10% of a
registered class of its equity securities, to file with the Securities and
Exchange Commission, NASDAQ and the Pacific Stock Exchange initial reports of
ownership and reports of changes in ownership of common stock and other equity
securities of our company. Executive officers, Directors and greater than 10%
stockholders are required by Securities and Exchange Commission regulations to
furnish our company with copies of all Section 16(a) reports they file.
Specific due dates for these reports have been established and we are
required to identify those persons who failed to timely file these reports. To
our knowledge, based solely on review of the copies of such reports furnished to
us and written representations that no other reports were required, during the
fiscal year ended December 31, 1998, all Section 16(a) filing requirements
applicable to its executive officers, Directors and greater than 10% beneficial
owners were complied with.
PROPOSED APPROVAL OF 2000 OMNIBUS EQUITY INCENTIVE PLAN
The Board of Directors recommends approval of the 2000 Omnibus Equity
Incentive Plan in the form attached as Annex A. The Omnibus Plan provides for
stock based incentive compensation provided to Directors, officers, employees
and consultants of our Company. The proposed plan will replace completely the
1993 Employee and Executive Stock Option Plans as of the date of approval by our
stockholders and no further grants of options will be made under the 1993 Plans
after the date of such approval.
Introduction
The Omnibus Plan was adopted by the Board of Directors effective February
28, 2000. The purpose of the Plan is to promote the long-term success of the
Company and the creation of stockholder value by (a) encouraging Employees,
Outside directors and Consultants to focus on critical long-range objectives,
(b) encouraging the attraction and retention of Employees, Outside Directors and
Consultants with exceptional qualifications and (c) linking employees, outside
directors and consultants directly to stockholder interests through increased
stock ownership. The Omnibus Plan seeks to achieve this purpose by providing for
Awards in the form of Restricted Shares, Stock Units, Options (which may
constitute incentive stock options (ISOs) or nonstatutory stock options (NSOs))
or stock appreciation rights (SARs).
Summary of Basic Features
A general description of the basic features of the Omnibus Plan is outlined
below. This summary is qualified in its entirety by the terms of the Omnibus
Plan, a copy of which is attached hereto and incorporated herein as Annex A.
Stock Subject to the Plan. The Omnibus Plan sets the maximum number of
shares that may be subject to grants at any one time as 1,500,000 shares of
authorized but unissued shares or treasury shares. The Omnibus Plan provides for
an automatic increase each year by the lesser of 150,000 shares or ten percent
(10%) of the outstanding shares on January 1st each year beginning in 2001. In
the event of any reorganization, merger, recapitalization, stock dividend, stock
split or similar change in the corporate structure or shares of our company,
appropriate adjustments will be made to the number and kind of shares reserved
under the Omnibus Plan and under outstanding stock options and to the exercise
price of outstanding stock options.
Eligibility. Directors, officers, employees, and independent contractors,
advisors and consultants providing services to our company, are eligible for the
grant of Restricted Shares, Stock Units, NSOs or SARs. Further, only actual
employees of our company are eligible for ISOs.
Administration. The Omnibus Plan shall be administered by the Board of
Directors or the Committee, which shall consist of two or more Outside Directors
(although Committee functions may be delegated to officers to the extent the
Awards relate to persons who are not subject to the reporting requirements of
Section 16 of the Exchange Act). If no Committee has been appointed, the entire
Board of Directors shall constitute the Committee. The Committee shall select
one of its members as Chairman and shall appoint a Secretary, who need not be a
member of the Committee. The Committee shall hold meetings at such times and
places as it may determine and minutes of such meetings shall be recorded. Acts
by a majority of the members of the Committee in a meeting at which a quorum is
present and acts approved in writing by a majority of the members of the
Committee shall be valid acts of the Committee. Subject to the provisions of the
Omnibus Plan, the Committee shall have full authority and discretion to take any
and all allowable actions under the Omnibus Plan.
10
Committee for Non-Officer Grants. The Board of Directors may also appoint a
secondary committee of the Board of Directors. Such secondary committee may
administer the Omnibus Plan with respect to Employees and Consultants who are
not considered officers or directors of our company under Section 16 of the
Exchange Act, may grant Awards under the Omnibus Plan to such Employees and
Consultants and may determine all features and conditions of such Awards. Any
reference in the Omnibus Plan to the Committee shall include such secondary
committee.
Option Grants. ISOs must be granted with an exercise price equal to at
least the fair market value of the Common Stock on the date the stock options
are granted, except that ISOs granted to persons owning stock possessing more
than 10% of the total combined voting power of all classes of stock of our
company or any subsidiary may not be granted at less than 110% of the fair
market value of the Common Stock on the date of grant. NSOs may be granted at an
exercise price equal to no less than 85% of the fair market value of the Common
Stock on the date the stock options are granted. The Committee shall determine
the exercisability of the Option as required by applicable law, but Options
shall not vest in less than 20% per year from the date of grant. Regardless of
the exercisability of the Option, the Option shall expire no more than ten years
from the date of grant for Options and five years from the date of grant for
Options to owners of 10% or more of our company. The Committee in its discretion
may accelerate any exercisability of any Option in case of death, disability,
retirement or termination as well as extend, modify, renew or exchange
outstanding Options.
Stock Appreciation Rights. SAR grants will be determined by the Committee
and will be at a price specified in a Stock Appreciation Agreement or may vary
by a predetermined formula in accordance with the SAR Agreement. The Committee
will also determine the exercisability and term of the SAR and may, in its
discretion, accelerate any exercisability of any SAR in case of death,
disability, retirement or termination as well as extend, modify, renew or
exchange outstanding SARs.
Stock Units. Stock Unit grants will be determined by the Committee as well
as all vesting conditions. The holder of the Stock Units will have no voting or
dividend rights. The Committee may determine whether Stock Units be settled in
the form of cash or shares of Common Stock at the time of settlement of the
Stock Units. The Committee in its discretion may accelerate any exercisability
of any Stock Unit in case of death, disability, retirement or termination as
well as extend, modify, renew or exchange outstanding Stock Unit awards.
Restricted Shares. Restricted Share awards will be determined by the
Committee and will be considered compensation valued at price per share
determined by the Committee but may not be less than 85% (100% for 10% owners)
of the fair market value of the Common Stock at the time of the award. The
Committee will also determine the vesting and term of the Restricted Shares but
may not vest in less than 20% increments during the first five years. The
Committee in its discretion may accelerate any vesting of any Restricted Share
in case of death, disability, retirement or termination.
Manner of Exercise and Purchase. Options may be exercised by delivery of a
Notice of Exercise and Common Stock Purchase Agreement in a form as provided
with the optionee's Stock Option Agreement, along with payment in full of the
total Option exercise price for the shares to be purchased, subject to
alternative methods of payment approved by the Committee in its sole discretion.
Stock Units and Restricted Share awards shall be issued in accordance with the
Stock Unit Agreement or Restricted Stock Agreement and any vesting requirements
therein. SARs may be exercised in accordance with the terms of any underlying
SAR Agreement.
Termination of Options. Upon the termination of an optionee's employment or
other service with our company, the optionee will have three months to exercise
options vested as of the date of termination; provided that if the termination
is due to the optionee's death, the estate of the optionee will have six months
to exercise. If the termination is due to disability of the optionee, which is
expected to last for longer than twelve months, then the optionee shall have the
right to exercise any vested options for six months after date of termination.
The Committee, in its discretion, may extend such termination of option.
Plan Amendment and Termination. The Omnibus Plan may be amended from time
to time by the Board of Directors without approval by the stockholders of our
company unless required by applicable laws, regulations or rules. The Omnibus
Plan will automatically expire on February 28, 2010, or on any earlier date by
action of the Board of Directors. No grants of Options, Stock Units, SARs or
Restricted Shares may be made after the Omnibus Plan is terminated and only
those Options, Stock Units, SARs or Restricted Shares which are granted or
awarded prior to the termination of the plan will be honored after the
termination date of the Omnibus Plan.
Effect of Stock Issuance. The issuance of shares of Common Stock under the
Omnibus Plan will dilute the voting power of current stockholders of our
company. A maximum of 1,500,000 shares will be reserved for issuance at any one
time. The Omnibus Plan provides for an automatic increase each year by the
lesser of 150,000 shares or ten percent (10%) of
11
the outstanding shares on January 1st each year beginning in 2001. In the
event of any reorganization, merger, recapitalization, stock dividend, stock
split or similar change in the corporate structure or shares of our company,
appropriate adjustments will be made to the number and kind of shares reserved
under the Omnibus Plan and under outstanding stock options and to the exercise
price of outstanding stock options. As of March 31, 2000, our company had
12,916,451 shares issued and 12,781,251 shares outstanding. Our company plans to
register under the Securities Act of 1933 the shares issuable upon exercise of
Options or SARs granted or Stock Unit awards made under the Omnibus Plan, at the
time of issuance, thereby making such shares immediately eligible for resale in
the public market without restriction by non-affiliates of our company. However,
affiliates of our company may generally only publicly resell shares of common
stock, including shares issued in a registered transaction, under Rule 144,
which limits the volume of such sales, requires that they be made in certain
types of market transactions, requires that our company be current in its
reports under the securities laws and requires that a specified notice of sale
be filed. Restricted Shares will not be registered under the Securities Act of
1933 until such time as they become "unrestricted" in accordance with any
underlying Restricted Share Agreement.
Formula Grants to Non-Employee Directors. Options shall be granted to non-
employee directors of our company as follows:
(1) Options to acquire 24,000 shares of stock shall be granted to each
director of the Company upon taking office as a member of the Board of
Directors of the Company;
(2) Additional options to acquire 24,000 shares of Common Stock shall be
granted to each director of our company every third anniversary of
such director's taking such office;
(3) The exercise price for these options shall be the fair market value of
the Common Stock on the date of grant, unless a higher price is
required by applicable securities or tax laws;
(4) This formula may be not modified more than once every six months,
except as may be necessary or advisable to comport with the
requirements of any applicable law or regulation; and
(5) The formula in the Omnibus Plan is intended to incorporate and thereby
supercede any other formula-based granting of options to non-employee
directors of our company and, accordingly, (a) supplants the similar
formula-based grant provisions of our company's 1993 Plans, and (b)
non-employee directors of our company shall be given credit for
periods of service as a director for which options have not yet been
awarded.
Benefits if Omnibus Plan had Been in Effect in 1999. If the Omnibus Plan
had been in effect during 1999, no stock option benefits would have been
received from the Omnibus Plan by our company's employees or directors, because
sufficient shares remained authorized for issuance under the 1993 Plans for all
Options granted during 1999.
Federal Income Tax Consequences
The following description of federal income tax consequences is based on
current statutes, regulations and interpretations. There may however be, pending
legislative proposals, which would affect the taxation of capital gains. The
description does not include state or local income tax consequences. In
addition, the description is not intended to address specific tax consequences
applicable to an individual optionee who receives an Option or an individual who
receives an SAR.
Initial Grant of Options and Stock Appreciation Rights. The grant of an
option, whether a nonqualified stock option ("NSO") or an incentive stock option
("ISO"), and the grant of a Stock Appreciation Right ("SAR") are not taxable
events for the optionee or recipient of an SAR. Accordingly, our company obtains
no deduction from the grant of an NSO, ISO or SAR.
Nonqualified Stock Options. Upon the exercise of an NSO, the amount by
which the fair market value of the shares on the date of exercise exceeds the
exercise price will be treated as ordinary income (i.e., compensation) to the
optionee. Our company will be entitled to a deduction in the same amount,
provided it makes all required withholdings. In general, the optionee's tax
basis in the shares acquired by exercising an NSO is equal to the fair market
value of such shares on the date of exercise. Upon a subsequent sale of any such
shares in a taxable transaction, the optionee will realize capital gain or loss
(long-term or short-term, depending on whether the shares were held for the
required holding period before the sale) in an amount equal to the difference
between his or her basis in the shares and the sale price. Our company is not
entitled to any compensation expense deduction on the optionee's sale of shares
under these circumstances.
12
Incentive Stock Options. There will not be any federal income tax
consequences to the optionee who holds an ISO or to our company as a result of
the exercise of an ISO under the Omnibus Plan, provided that the optionee is
still employed by our company at the time of exercise (or terminated employment
no longer than three months before the exercise date). Additional exceptions to
this exercise timing requirement apply upon the death or disability of an
optionee. Notwithstanding the foregoing, an amount equal to the excess of the
fair market value of the shares acquired upon exercise of the ISO, determined on
the date of exercise, over the amount that the optionee paid for the shares will
be includable in the optionee's alternative minimum taxable income for purposes
of the alternative minimum tax. Special rules will apply if previously acquired
shares of Common Stock are permitted to be tendered in payment of an ISO
exercise price.
An optionee who holds an ISO must hold the shares acquired upon exercise of
the ISO for: (i) two years from the date that the ISO is granted to him or her,
and (ii) one year from the date that he or she exercises the ISO. A sale of the
shares received upon the exercise of the ISO which meets the foregoing holding
requirements will result in long-term capital gains or losses in the amount of
the difference between the amount realized on the sale and the exercise price
for such shares. Our company is not entitled to any compensation expense
deduction under these circumstances.
If the optionee does not satisfy both of the foregoing holding requirements
(a "disqualifying disposition"), then the optionee will be required to report as
ordinary compensation income, in the year the optionee disposes of the shares,
the amount which equals the lesser of (i) the excess of the fair market value of
the shares on the date of the optionee's exercise of the ISO over the exercise
price, or (ii) the excess of the amount realized on the disposition of such
shares over the exercise price. In these circumstances, our company will be
entitled to a compensation expense deduction in an amount equal to the ordinary
income includable in the taxable income of the optionee. This compensation
income may be subject to withholding and employment-related taxes, and our
company may be required to satisfy applicable withholding requirements in order
to receive the deduction. The remainder of the gain or loss recognized on the
disposition, if any, will be treated as a long-term or short-term capital gain
or loss, depending on the length of time that the optionee held the shares
subject to the option. Our company is not entitled to any compensation expense
deduction with respect to any of the optionee's capital gain or loss.
Stock Appreciation Rights. An SAR will result in ordinary compensation
income for the person exercising the SAR equal to the amount of appreciation
payable at the time of exercise. Our company is entitled to a deduction that
corresponds with that amount included in the ordinary compensation income of the
SAR recipient at the time that such SAR recipient exercises his or her SARs. In
addition, so long as an SAR recipient exercises his or her SARs with money or
employer stock, the exercise will trigger no recognized gain or loss to our
company.
Stock Unit Awards. A Stock Unit Award (the "Award") will result in ordinary
compensation income for the person receiving the Award when the recipient of the
Award receives a cash payment in the amount of the Award. The cash payment will
generally equal the excess of the fair market value of the stock on the maturity
date of the Award over the fair market value of the stock on the Award's grant
date. Our company is entitled to a deduction that corresponds with the amount
included in the ordinary compensation income of the Award recipient in the same
taxable year as such Award recipient receives cash payment.
Restricted Shares. An award of Restricted Shares will result in ordinary
compensation income for the recipient of such Restricted Shares (the
"Recipient") when the Restricted Shares become unrestricted; i.e., the stock
----
becomes transferable or is no longer subject to a substantial risk of
forfeiture. The amount of ordinary compensation income equals the excess of the
fair market value of the stock at the vesting date(s) over any amount that the
Recipient paid for such Restricted Shares. However, the Recipient may make an
"83(b) Election" whereby such Recipient would accelerate his or her taxable
event to the year in which the 83(b) Election is made. Accordingly, the
Recipient would be taxed on the full value of the shares at the time of the
award of Restricted Shares less any amount paid for such Restricted Shares. Our
company is entitled to a tax deduction in an amount that corresponds with the
amount included in the Recipient's ordinary compensation income during the same
tax year; however, for our company to obtain this deduction, our company must
properly and timely report the Recipient's income and satisfy the requisite
withholding requirements. Depending on the amount of time the Recipient holds
the shares, he or she will incur a short-term or long-term capital gain or loss
at the time he or she sells such shares. Our company is not entitled to any
deduction upon such a sale.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE OMNIBUS
EQUITY INCENTIVE PLAN.
13
ELECTION OF DIRECTORS
Nominee
Two of our company's total of eight directors are to be elected at the
Annual Meeting. The Board of Directors of our company has authorized the
nomination at the Annual Meeting of the persons named below as candidates.
Unless otherwise directed, the Proxy Holders will vote the proxies received by
them for the nominees named below. In the event that any nominee is unable or
declines to serve as a Director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the existing Board of
Directors to fill the vacancy. It is not expected the nominee will be unable or
will decline to serve as a Director.
Information with respect to the nominee to the Board of Directors is set
forth above in "Directors and Executive Officers." The names of the nominees
are as follows:
Edward Baran
Edward Hughes
Any Directors elected at this Annual Meeting will serve a three-year term,
until the annual meeting of stockholders in 2003, or until his successor is duly
elected.
Required Vote
The affirmative vote of a plurality of the shares of common stock present
in person or represented by proxy and entitled to vote is required for the
election of the Director nominee.
APPROVAL OF INDEPENDENT AUDITORS
The Board of Directors is recommending the ratification of its selection of
Deloitte & Touche LLP as our company's independent auditors to audit the
financial statements of our company for the 1999 fiscal year. Deloitte & Touche
LLP has audited the consolidated financial statements of our company and its
subsidiaries for fiscal 1999 and is expected to audit the consolidated financial
statements for fiscal 2000. Deloitte & Touche LLP has advised our company that
neither it nor any of its partners or associates has any direct or indirect
financial interest in or any connection with our company other than as
accountants and auditors. Representatives of Deloitte & Touche LLP are welcome
to attend the Annual Meeting, to make a statement, if they desire to do so, and
to respond to appropriate questions. However, they are not presently expected to
attend.
OTHER MATTERS
The Board of Directors knows of no other business that will be presented at
the Annual Meeting. If any other business is properly brought before the Annual
Meeting, it is intended that proxies in the enclosed form will be voted in
respect thereof in accordance with the judgments of the persons voting the
proxies. It is important that your shares be represented at the meeting,
regardless of the number of shares that you hold. WHETHER OR NOT YOU INTEND TO
BE PRESENT AT THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE, SIGN, AND RETURN
YOUR PROXY PROMPTLY.
By Order of the Board of Directors of
Fechtor, Detwiler, Mitchell & Co.
/s/ James K. Mitchell
James K. Mitchell
Chairman and President
Dated: April 5, 2000
ANNEXES
Annex A: 2000 Omnibus Equity Incentive Plan
14
ANNEX A
FECHTOR, DETWILER, MITCHELL & CO.
2000 OMNIBUS EQUITY INCENTIVE PLAN
(Effective February 28, 2000)
TABLE OF CONTENTS
-----------------
Page
----
SECTION 1. ESTABLISHMENT AND PURPOSE...................................... 1
SECTION 2. DEFINITIONS.................................................... 1
(A) "Affiliate"...................................................... 1
---------
(B) "Award".......................................................... 1
-----
(C) "Board of Directors"............................................. 1
------------------
(D) "Change in Control".............................................. 1
-----------------
(E) "Code"........................................................... 2
----
(F) "Committee"...................................................... 2
---------
(G) "Company"........................................................ 2
-------
(H) "Consultant"..................................................... 2
----------
(I) "Employee"....................................................... 2
--------
(J) "Exchange Act"................................................... 2
------------
(K) "Exercise Price"................................................. 2
--------------
(L) "Fair Market Value".............................................. 2
-----------------
(M) "ISO"............................................................ 3
---
(N) "Nonstatutory Option"............................................ 3
-------------------
(O) "Offeree"........................................................ 3
-------
(P) "Option"......................................................... 3
------
(Q) "Optionee"....................................................... 3
--------
(R) "Outside Director"............................................... 3
----------------
(S) "Parent"......................................................... 3
------
(T) "Participant".................................................... 3
-----------
(U) "Plan"........................................................... 3
----
(V) "Purchase Price"................................................. 3
--------------
(W) "Restricted Share"............................................... 3
----------------
(X) "Restricted Share Agreement ".................................... 3
--------------------------
(Y) "SAR"............................................................ 3
---
(Z) "SAR Agreement".................................................. 4
-------------
(AA) "Service"........................................................ 4
-------
(BB) "Share"......................................................... 4
-----
(CC) "Stock"......................................................... 4
-----
(DD) "Stock Option Agreement"......................................... 4
----------------------
(EE) "Stock Purchase Agreement"....................................... 4
------------------------
(FF) "Stock Unit"..................................................... 4
----------
(GG) "Stock Unit Agreement"........................................... 4
--------------------
(HH) "Subsidiary"..................................................... 4
----------
(II) "Total and Permanent Disability"................................. 4
------------------------------
SECTION 3. ADMINISTRATION................................................. 4
(A) Committee........................................................ 4
---------
(B) Committee Responsibilities....................................... 4
--------------------------
(C) Committee for Non-Officer Grants................................. 6
--------------------------------
(D) Financial Reports................................................ 6
-----------------
SECTION 4. ELIGIBILITY.................................................... 6
(A) General Rule..................................................... 6
------------
(B) Limitation On Grants............................................. 6
--------------------
(C) Ten-Percent Stockholders......................................... 6
------------------------
(D) Attribution Rules................................................ 7
-----------------
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(E) Outstanding Stock................................................ 7
-----------------
SECTION 5. STOCK SUBJECT TO PLAN.......................................... 7
(A) Basic Limitation................................................. 7
----------------
(B) Annual Increase in Shares........................................ 7
-------------------------
(C) Additional Shares................................................ 7
-----------------
(D) Dividend Equivalents............................................. 7
--------------------
SECTION 6. RESTRICTED SHARES.............................................. 8
(A) Restricted Stock Agreement....................................... 8
--------------------------
(B) Payment for Awards............................................... 8
------------------
(C) Vesting.......................................................... 8
-------
(D) Voting and Dividend Rights....................................... 8
--------------------------
SECTION 7. TERMS AND CONDITIONS OF OPTIONS................................ 8
(A) Stock Option Agreement........................................... 8
----------------------
(B) Number of Shares................................................. 9
----------------
(C) Exercise Price................................................... 9
--------------
(D) Exercisability and Term.......................................... 9
-----------------------
(E) Nontransferability............................................... 9
------------------
(F) Exercise of Options Upon Termination of Service.................. 9
-----------------------------------------------
(G) Effect of Change in Control...................................... 10
---------------------------
(H) Leaves of Absence................................................ 10
-----------------
(I) No Rights as a Stockholder....................................... 10
--------------------------
(J) Modification, Extension and Renewal of Options................... 10
-----------------------------------------------
(K) Restrictions on Transfer of Shares............................... 10
----------------------------------
(L) Buyout Provisions................................................ 11
-----------------
SECTION 8. PAYMENT FOR SHARES............................................. 11
(A) General Rule..................................................... 11
------------
(B) Surrender of Stock............................................... 11
------------------
(C) Services Rendered................................................ 11
-----------------
(D) Exercise/Sale.................................................... 11
-------------
(E) Exercise/Pledge.................................................. 11
---------------
(F) Promissory Note.................................................. 11
---------------
(G) Combination of Forms of Payment.................................. 11
-------------------------------
(H) Other Forms of Payment........................................... 12
----------------------
SECTION 9. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.......................... 12
(A) Initial Grants................................................... 12
--------------
(B) Other Grants..................................................... 12
------------
(C) Exercise Price................................................... 12
--------------
(D) Term............................................................. 12
----
(E) Modification..................................................... 12
------------
(F) Accelerated Exercisability....................................... 12
--------------------------
(G) Affiliates of Outside Directors.................................. 12
-------------------------------
(H) Supersedes Other Grants.......................................... 13
-----------------------
SECTION 10. STOCK APPRECIATION RIGHTS..................................... 13
(A) SAR Agreement.................................................... 13
-------------
(B) Number of Shares................................................. 13
----------------
(C) Exercise Price................................................... 13
--------------
(D) Exercisability and Term.......................................... 13
-----------------------
(E) Effect of Change in Control...................................... 13
---------------------------
(F) Exercise of SARs................................................. 13
----------------
(G) Modification or Assumption of SARs............................... 14
----------------------------------
-ii-
SECTION 11. STOCK UNITS................................................... 14
(A) Stock Unit Agreement............................................. 14
--------------------
(B) Payment for Awards............................................... 14
------------------
(C) Vesting Conditions............................................... 14
------------------
(D) Voting and Dividend Rights....................................... 14
--------------------------
(E) Form and Time of Settlement of Stock Units....................... 14
------------------------------------------
(F) Death of Recipient............................................... 15
------------------
(G) Creditors' Rights................................................ 15
-----------------
SECTION 12. PROTECTION AGAINST DILUTION................................... 15
(A) Adjustments...................................................... 15
-----------
(B) Dissolution or Liquidation....................................... 15
--------------------------
(C) Reorganizations.................................................. 16
---------------
(D) Reservation of Rights............................................ 16
---------------------
(E) Notice of Adjustment............................................. 16
--------------------
SECTION 13. DEFERRAL OF AWARDS............................................ 16
SECTION 14. AWARDS UNDER OTHER PLANS...................................... 17
SECTION 15. LEGAL AND REGULATORY REQUIREMENTS............................. 17
SECTION 16. WITHHOLDING TAXES............................................. 17
(A) General.......................................................... 17
-------
(B) Share Withholding................................................ 17
-----------------
SECTION 17. LIMITATION ON PARACHUTE PAYMENTS.............................. 18
(A) Scope of Limitation.............................................. 18
-------------------
(B) Basic Rule....................................................... 18
----------
(C) Reduction of Payments............................................ 18
---------------------
(D) Overpayments and Underpayments................................... 18
------------------------------
(E) Related Corporations............................................. 19
--------------------
SECTION 18. NO EMPLOYMENT RIGHTS.......................................... 19
SECTION 19. DURATION AND AMENDMENTS....................................... 19
(A) Term of the Plan................................................. 19
----------------
(B) Right to Amend or Terminate the Plan............................. 19
------------------------------------
(C) Effect of Amendment or Termination............................... 19
----------------------------------
SECTION 20. NOTICE........................................................ 19
SECTION 21. EXECUTION..................................................... 20
iii
FECHTOR, DETWILER, MITCHELL & CO.
----------------------------------
2000 Omnibus Equity Incentive Plan
----------------------------------
(Effective February 28, 2000)
SECTION 1. ESTABLISHMENT AND PURPOSE
-------------------------
The Plan was adopted by the Board of Directors effective February 28, 2000.
The purpose of the Plan is to promote the long-term success of the Company and
the creation of stockholder value by (a) encouraging Employees, Outside
Directors and Consultants to focus on critical long-range objectives, (b)
encouraging the attraction and retention of Employees, Outside Directors and
Consultants with exceptional qualifications and (c) linking Employees, Outside
Directors and Consultants directly to stockholder interests through increased
stock ownership. The Plan seeks to achieve this purpose by providing for Awards
in the form of Restricted Shares, Stock Units, Options (which may constitute
incentive stock options or nonstatutory stock options) or stock appreciation
rights.
SECTION 2. DEFINITIONS.
-----------
(a) "Affiliate" shall mean any entity other than a Subsidiary, if the
---------
Company and/or one or more Subsidiaries own not less than fifty percent (50%) of
such entity.
(b) "Award" shall mean any award of an Option, a SAR, a Restricted Share
-----
or a Stock Unit under the Plan.
(c) "Board of Directors" shall mean the Board of Directors of the Company,
------------------
as constituted from time to time.
(d) "Change in Control" shall mean the occurrence of either of the
-----------------
following events:
(i) A change in the composition of the Board of Directors, as a
result of which fewer than one-half of the incumbent directors are
directors who either:
(A) Had been directors of the Company twenty-four (24) months
prior to such change; or
(B) Were elected, or nominated for election, to the Board of
Directors with the affirmative votes of at least a majority of the
directors who had been directors of the Company twenty-four (24)
months prior to such change and who were still in office at the time
of the election or nomination; or
(ii) Any "person" (as such term is used in sections 13(d) and 14(d) of
the Exchange Act) who, by the acquisition or aggregation of securities, is
or becomes the beneficial owner, directly or indirectly, of securities of
the Company representing forty percent (40%) or more of the combined voting
power of the Company's then outstanding securities ordinarily (and apart
from rights accruing under special circumstances) having
-1-
the right to vote at elections of directors (the "Base Capital Stock");
except that any change in the relative beneficial ownership of the
Company's securities by any person resulting solely from a reduction in the
aggregate number of outstanding shares of Base Capital Stock, and any
decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company. For purposes of this Subsection (ii), the term "person" shall not
include an employee benefit plan maintained by the Company or any person
who is the direct or indirect owner of securities of the Company
representing forty percent (40%) of the Base Capital Stock on the Effective
Date of this Plan.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(f) "Committee" shall mean the committee designated by the Board of
---------
Directors, which is authorized to administer the Plan under Section 3 hereof.
The Committee shall have membership composition which enables the Options or
other rights granted under the Plan to qualify for exemption under Rule 16b-3
with respect to persons who are subject to Section 16 of the Exchange Act.
(g) "Company" shall mean Fechtor, Detwiler, Mitchell & Co., a Delaware
-------
corporation.
(h) "Consultant" shall mean a consultant or advisor who provides bona fide
----------
services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a Consultant shall be considered employment
for all purposes of the Plan, except as provided in the second sentence of
Section 4(a).
(i) "Employee" shall mean (i) any individual who is a common-law employee
--------
of the Company or of a Subsidiary, (ii) a member of the Board of Directors,
including (without limitation) an Outside Director, or an affiliate of member of
the Board of Directors; (iii) a member of the board of directors of a
Subsidiary; or (iv) an independent contractor or advisor who performs services
for the Company or a Subsidiary. Service as a member of the Board of Directors,
a member of the board of directors of a Subsidiary or as an independent
contractor or advisor shall be considered employment for all purposes of the
Plan except the second sentence of Section 4(a).
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
(k) "Exercise Price" shall mean, in the case of an Option, the amount for
--------------
which one Share may be purchased upon exercise of such Option, as specified in
the applicable Stock Option Agreement. "Exercise Price," in the case of a SAR,
shall mean an amount, as specified in the applicable SAR Agreement, which is
subtracted from the Fair Market Value of one Share in determining the amount
payable upon exercise of such SAR.
(l) "Fair Market Value" shall mean (i) the closing price of a Share on the
-----------------
principal exchange which the Shares are trading, on the date on which the Fair
Market Value is determined (if Fair Market Value is determined on a date which
the principal exchange is closed, Fair Market Value shall be determined on the
last immediately preceding trading day), or (ii) if
-2-
the Shares are not traded on an exchange but are quoted on the Nasdaq Small cap
market or a successor quotation system, the closing price on the date on which
the Fair Market Value is determined, or (iii) if the Shares are not traded on an
exchange or quoted on the Nasdaq SmallCap market or a successor quotation
system, the fair market value of a Share, as determined by the Committee in good
faith. Such determination shall be conclusive and binding on all persons.
(m) "ISO" shall mean an employee incentive stock option described in Code
---
section 422.
(n) "Nonstatutory Option" shall mean an employee stock option that is not
-------------------
an ISO.
(o) "Offeree" shall mean an individual to whom the Committee has offered
-------
the right to acquire Shares under the Plan (other than upon exercise of an
Option).
(p) "Option" shall mean an ISO or Nonstatutory Option granted under the
------
Plan and entitling the holder to purchase Shares.
(q) "Optionee" shall mean an individual or estate who holds an Option or
---------
SAR.
(r) "Outside Director" shall mean a member of the Board of Directors who
----------------
is not a common-law employee of the Company or of a Subsidiary. Service as an
Outside Director shall be considered employment for all purposes of the Plan,
except as provided in the second sentence of Section 4(a).
(s) "Parent" shall mean any corporation (other than the Company) in an
------
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain. A corporation that attains the status of a
Parent on a date after the adoption of the Plan shall be a parent commencing as
of such date.
(t) "Participant" shall mean an individual or estate who holds an Award.
-----------
(u) "Plan" shall mean this 2000 Omnibus Equity Incentive Plan of Fechtor,
----
Detwiler, Mitchell & Co., as amended from time to time.
(v) "Purchase Price" shall mean the consideration for which one Share may
--------------
be acquired under the Plan (other than upon exercise of an Option), as specified
by the Committee.
(w) "Restricted Share" shall mean a Share awarded under the Plan.
----------------
(x) "Restricted Share Agreement" shall mean the agreement between the
---------------------------
Company and the recipient of a Restricted Share which contains the terms,
conditions and restrictions pertaining to such Restricted Shares.
(y) "SAR" shall mean a stock appreciation right granted under the Plan.
---
-3-
(z) "SAR Agreement" shall mean the agreement between the Company and an
-------------
Optionee which contains the terms, conditions and restrictions pertaining to his
or her SAR.
(aa) "Service" shall mean service as an Employee.
-------
(bb) "Share" shall mean one share of common stock, as adjusted in
-----
accordance with Section 12 (if applicable).
(cc) "Stock" shall mean the common stock of the Company.
-----
(dd) "Stock Option Agreement" shall mean the agreement between the Company
----------------------
and an Optionee which contains the terms, conditions and restrictions pertaining
to his Option.
(ee) "Stock Purchase Agreement" shall mean the agreement between the
------------------------
Company and an Offeree who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.
(ff) "Stock Unit" shall mean a bookkeeping entry representing the
----------
equivalent of one Share, as awarded under the Plan.
(gg) "Stock Unit Agreement" shall mean the agreement between the Company
--------------------
and the recipient of a Stock Unit which contains the terms, conditions and
restrictions pertaining to such Stock Unit.
(hh) "Subsidiary" shall mean any corporation, if the Company and/or one or
----------
more other Subsidiaries own not less than fifty percent (50%) of the total
combined voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of the Plan shall be considered a Subsidiary commencing as of such date.
(ii) "Total and Permanent Disability" shall mean that the Optionee is
------------------------------
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment.
SECTION 3. ADMINISTRATION.
---------------
(a) Committee. The Plan shall be administered by the Board of Directors
---------
or the Committee which shall consist of two or more Outside Directors (although
Committee functions may be delegated to officers to the extent the Awards relate
to persons who are not subject to the reporting requirements of Section 16 of
the Exchange Act). If no Committee has been appointed, the entire Board of
Directors shall constitute the Committee. The Committee shall select one of its
members as Chairman and shall appoint a Secretary, who need not be a member of
the Committee. The Committee shall hold meetings at such times and places as it
may determine and minutes of such meetings shall be recorded. Acts by a majority
of the Committee in a meeting at which a quorum is present and acts approved in
writing by a majority of the members of the Committee shall be valid acts of the
Committee.
(b) Committee Responsibilities. Subject to the provisions of the Plan,
--------------------------
the Committee
-4-
shall have full-authority and discretion to take the following actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms relating
to the Plan;
(iii) To authorize any person to execute, on behalf of the Company,
any instrument required to carry out the purposes of the Plan;
(iv) To determine when Shares are to be awarded or offered for sale
and when Options are to be granted under the Plan;
(v) To select the Offerees and Optionees;
(vi) To determine the number of Shares to be offered to each Offeree
or to be made subject to each Option;
(vii) To prescribe the terms and conditions of each award or sale of
Shares, including (without limitation) the Purchase Price, the vesting of
the award (including accelerating the vesting of awards) and to specify the
provisions of the Stock Purchase Agreement relating to such award or sale;
(viii) To prescribe the terms and conditions of each Option, including
(without limitation) the Exercise Price, the vesting or duration of the
Option (including accelerating the vesting of the Option), to determine
whether such Option is to be classified as an ISO or as a Nonstatutory
Option, and to specify the provisions of the Stock Option Agreement
relating to such Option;
(ix) To amend any outstanding Stock Purchase Agreement or Stock
Option Agreement, subject to applicable legal restrictions and to the
consent of the Offeree or Optionee who entered into such agreement;
(x) To prescribe the consideration for the grant of each Option or
other right under the Plan and to determine the sufficiency of such
consideration;
(xi) To determine the disposition of each Option or other right
under the Plan in the event of an Optionee's or Offeree's divorce or
dissolution of marriage;
(xii) To determine whether Options or other rights under the Plan
will be granted in replacement of other grants under an incentive or other
compensation plan of an acquired business;
(xiii) To correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, any Stock Option Agreement or any Stock Purchase
Agreement; and
(xiv) To take any other actions deemed necessary or advisable for the
administration of the Plan.
-5-
Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Options or other rights under
the Plan to persons subject to Section 16 of the Exchange Act. All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Offerees, all Optionees, and all persons deriving their rights from an
Offeree or Optionee. No member of the Committee shall be liable for any action
that he has taken or has failed to take in good faith with respect to the Plan,
any Option, or any right to acquire Shares under the Plan.
(c) Committee for Non-Officer Grants. The Board of Directors may also
--------------------------------
appoint a secondary committee of the Board of Directors, which shall be composed
of one or more directors of the Company who need not satisfy the requirements of
Section 3(a). Such secondary committee may administer the Plan with respect to
Employees and Consultants who are not considered officers or directors of the
Company under Section 16 of the Exchange Act, may grant Awards under the Plan to
such Employees and Consultants and may determine all features and conditions of
such Awards within the limitations of this Section 3(c), any reference in the
Plan to the Committee shall include such secondary committee.
(d) Financial Reports. To the extent required by applicable law, and not
-----------------
less often than annually, the Company shall furnish to Offerees, Optionees and
Shareholders who have received Stock under the Plan its financial statements
including a balance sheet regarding the Company's financial condition and
results of operations, unless such Offerees, Optionees or Shareholders have
duties with the Company that assure them access to equivalent information. Such
financial statements need not be audited.
SECTION 4. ELIGIBILITY.
-----------
(a) General Rule. Only Employees shall be eligible for the grant of
------------
Restricted Shares, Stock Units, NSOs or SARs. In addition, only individuals who
are employed as common-law employees by the Company, a Parent or a Subsidiary
shall be eligible for the grant of ISOs.
(b) Limitation On Grants. No Employee shall be granted Options to purchase
--------------------
more than two hundred fifty thousand (250,000) Shares in any fiscal year of the
Company.
(c) Ten-Percent Stockholders. An Employee who owns more than ten percent
------------------------
(10%) of the total combined voting power of all classes of outstanding stock of
the Company or any of its Subsidiaries shall not be eligible for designation as
an Offeree or Optionee unless (i) the Exercise Price for an ISO (and a NSO to
the extent required by applicable law) is at least one hundred ten percent
(110%) of the Fair Market Value of a Share on the date of grant, (ii) the
Purchase Price of Shares is at least one hundred percent (100%) of the Fair
Market Value of a Share on the date of grant, and (iii) in the case of an ISO,
such ISO by its terms is not exercisable after the expiration of five years from
the date of grant. Notwithstanding the preceding sentence in this Section 4(c),
if the Shares are exercised prior to vesting pursuant to the Stock Purchase
Agreement, and the Fair Market Value of the Shares at such time equals the
Exercise Price, the limit of 100% provided in Section 260.140.42(b)(2) in Title
10 of the California Code of
-6-
Regulations shall apply to the Exercise Price for an NSO.
(d) Attribution Rules. For purposes of Subsection (c) above, in
-----------------
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries.
(e) Outstanding Stock. For purposes of Subsection (c) above, "outstanding
-----------------
stock" shall include all stock actually issued and outstanding immediately after
the grant. "Outstanding stock" shall not include shares authorized for issuance
under outstanding options held by the Employee or by any other person.
SECTION 5. STOCK SUBJECT TO PLAN.
---------------------
(a) Basic Limitation. Shares offered under the Plan shall be authorized
----------------
but unissued Shares or treasury Shares. The maximum aggregate number of Options,
SARs, Stock Units and Restricted Shares awarded under the Plan shall not exceed
(a) one million five hundred thousand (1,500,000) Shares, plus the additional
Shares described in Sections (b) and (c). The limitation of this Section 5(a)
shall be subject to adjustment pursuant to Section 12.
(b) Annual Increase in Shares. As of January 1 of each year, commencing
-------------------------
with the year 2001, the aggregate number of Options, SARs, Stock Units and
Restricted Shares that may be awarded under the Plan shall automatically
increase by a number equal to the lesser of (i) one hundred fifty thousand
(150,000) shares, (ii) ten percent (10%) of the outstanding shares on such date
or (iii) a lesser amount determined by the Board. The aggregate number of Shares
which may be issued under the Plan shall at all times be subject to adjustment
pursuant to Section 12. The number of Shares which are subject to Options or
other rights outstanding at any time under the Plan shall not exceed the number
of Shares which then remain available for issuance under the Plan. The Company,
during the term of the Plan, shall at all times reserve and keep available
sufficient Shares to satisfy the requirements of the Plan.
(c) Additional Shares. If Restricted Shares or Shares issued upon the
-----------------
exercise of Options are forfeited, then such Shares shall again become available
for Awards under the Plan. If Stock Units, Options or SARs are forfeited or
terminate for any other reason before being exercised, then the corresponding
Shares shall again become available for Awards under the Plan. If Stock Units
are settled, then only the number of Shares (if any) actually issued in
settlement of such Stock Units shall reduce the number available under Section
5(a) and the balance shall again become available for Awards under the Plan. If
SARs are exercised, then only the number of Shares (if any) actually issued in
settlement of such SARs shall reduce the number available in Section 5(a) and
the balance shall again become available for Awards under the Plan. The
foregoing notwithstanding, the aggregate number of Shares that may be issued
under the Plan upon the exercise of ISOs shall not be increased when Restricted
Shares or other Shares are forfeited.
(d) Dividend Equivalents. Any dividend equivalents paid or credited under
--------------------
the Plan shall not be applied against the number of Restricted Shares, Stock
Units, Options or SARs
-7-
available for Awards, whether or not such dividend equivalents are converted
into Stock Units.
SECTION 6. RESTRICTED SHARES.
-----------------
(a) Restricted Stock Agreement. Each grant of Restricted Shares under the
--------------------------
Plan shall be evidenced by a Restricted Stock Agreement between the recipient
and the Company. Such Restricted Shares shall be subject to all applicable terms
of the Plan and may be subject to any other terms that are not inconsistent with
the Plan. The provisions of the various Restricted Stock Agreements entered into
under the Plan need not be identical.
(b) Payment for Awards. Subject to the following provisions in this
------------------
Section 6(b), Restricted Shares may be sold or awarded under the Plan for such
consideration as the Committee may determine, including (without limitation)
such forms of payment as set forth in Section 8 as well as past services and
future services. Unless otherwise permitted by applicable law, the Purchase
Price of Shares to be offered under the Plan shall not be less than eighty-five
percent (85%) of the Fair Market Value of a Restricted Share on the date of
grant (100% for 10% shareholders), except as otherwise provided in Section 4(c).
In addition, to the extent that an Award consists of newly issued Restricted
Shares, the Award recipient shall furnish consideration with a value not less
than the par value of such Restricted Shares in the form of cash, cash
equivalents, or past services rendered to the Company (or a Parent or
Subsidiary), as the Committee may determine.
(c) Vesting. Each Award of Restricted Shares may or may not be subject to
-------
vesting. Vesting shall occur, in full or in installments, upon satisfaction of
the conditions specified in the Restricted Stock Agreement. To the extent
required by applicable law, each Award of Restricted Shares shall become
exercisable no less rapidly than the rate of 20% per year for each of the first
five (5) years from the date of grant. Subject to the preceding sentence, the
exercisability of any Award of Restricted Shares shall be determined by the
Committee in its sole discretion. In addition, a Restricted Stock Agreement may
provide for accelerated vesting in the event of the Participant's death,
disability or retirement or other events. The Committee may determine, at the
time of granting Restricted Shares of thereafter, that all or part of such
Restricted Shares shall become vested in the event that a Change in Control
occurs with respect to the Company.
(d) Voting and Dividend Rights. The holders of Restricted Shares awarded
--------------------------
under the Plan shall have the same voting, dividend and other rights as the
Company's other stockholders. A Restricted Stock Agreement, however, may require
that the holders of Restricted Shares invest any cash dividends received in
additional Restricted Shares. Such additional Restricted Shares shall be subject
to the same conditions and restrictions as the Award with respect to which the
dividends were paid.
SECTION 7. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
(a) Stock Option Agreement. Each grant of an Option under the Plan shall
----------------------
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The Stock Option Agreement shall
-8-
specify whether the Option is an ISO or an NSO. The provisions of the various
Stock Option Agreements entered into under the Plan need not be identical.
Options may be granted in consideration of a reduction in the Optionee's other
compensation. A Stock Option Agreement may provide that a new Option will be
granted automatically to the Optionee when he or she exercises a prior Option
and pays the Exercise Price in a form described in Section 8.
(b) Number of Shares. Each Stock Option Agreement shall specify the number
----------------
of Shares that are subject to the Option and shall provide for the adjustment of
such number in accordance with Section 12. Options granted to an Optionee in a
single fiscal year of the Company shall not cover more than two hundred fifty
thousand (250,000) Shares. The limitations set forth in the preceding sentence
shall be subject to adjustment in accordance with Section 12.
(c) Exercise Price. Each Stock Option Agreement shall specify the Exercise
--------------
Price. The Exercise Price of an ISO shall not be less than 100 percent (100%) of
the Fair Market Value of a Share on the date of grant, except as otherwise
provided in Section 4(d) and the Exercise Price of an NSO shall not be less than
85% of the Fair Market Value of a Share on the date of grant. In the case of an
NSO, a Stock Option Agreement may specify an Exercise Price that varies in
accordance with a predetermined formula while the NSO is outstanding. Subject to
the foregoing in this Section 7(c), the Exercise Price under any Option shall be
determined by the Committee at its sole discretion. The Exercise Price shall be
payable in one of the forms described in Section 8.
(d) Exercisability and Term. Each Stock Option Agreement shall specify the
-----------------------
date when all or any installment of the Option is to become exercisable. To the
extent required by applicable law, an Option shall become exercisable no less
rapidly than the rate of 20% per year for each of the first five (5) years from
the date of grant. Subject to the preceding sentence, the exercisability of any
Option shall be determined by the Committee in its sole discretion.
The Stock Option Agreement shall also specify the term of the Option;
provided that the term of an ISO shall in no event exceed ten (10) years from
the date of grant (five (5) years for Employees described in Section 4(c)). A
Stock Option Agreement may provide for accelerated exercisability in the event
of the Optionee's death, disability, or retirement or other events and may
provide for expiration prior to the end of its term in the event of the
termination of the Optionee's service. Options may be awarded in combination
with SARs, and such an Award may provide that the Options will not be
exercisable unless the related SARs are forfeited. Subject to the foregoing in
this Section 7(d), the Committee in its sole discretion shall determine when all
or any installment of an Option is to become exercisable and when an Option is
to expire.
(e) Nontransferability. During an Optionee's lifetime, his Option(s) shall
------------------
be exercisable only by him and shall not be transferable. In the event of an
Optionee's death, his Option(s) shall not be transferable other than by will or
by the laws of descent and distribution, or by instrument to an inter vivos or
testamentary trust in which the Options are to be passed on to beneficiaries
upon the death of an Optionee.
(f) Exercise of Options Upon Termination of Service. Each Stock Option
-----------------------------------------------
Agreement shall set forth the extent to which the Optionee shall have the right
to exercise the Option
-9-
following termination of the Optionee's Service with the Company and its
Subsidiaries, and the right to exercise the Option of any executors or
administrators of the Optionee's estate or any person who has acquired such
Option(s) directly from the Optionee by bequest or inheritance. Such provisions
shall be determined in the sole discretion of the Committee, need not be uniform
among all Options issued pursuant to the Plan, and may reflect distinctions
based on the reasons for termination of Service.
(g) Effect of Change in Control. The Committee may determine, at the time
---------------------------
of granting an Option or thereafter, that such Option shall become exercisable
as to all or part of the Shares subject to such Option in the event that a
Change in Control occurs with respect to the Company, provided, however, that in
the case of an ISO, the acceleration of exercisability shall not occur without
the Optionee's written consent.
(h) Leaves of Absence. An Employee's Service shall cease when such
-----------------
Employee ceases to be actively employed by, or a consultant or adviser to, the
Company (or any subsidiary) as determined in the sole discretion of the Board of
Directors. For purposes of Options, Service does not terminate when an Employee
goes on a bona fide leave of absence, that was approved by the Company in
writing, if the terms of the leave provide for continued service crediting, or
when continued service crediting is required by applicable law. However, for
purposes of determining whether an Option is entitled to ISO status, an
Employee's Service will be treated as terminating ninety (90) days after such
Employee went on leave, unless such Employee's right to return to active work is
guaranteed by law or by a contract. Service terminates in any event when the
approved leave ends, unless such Employee immediately returns to active work.
The Company determines which leaves count toward Service, and when Service
terminates for all purposes under the Plan.
(i) No Rights as a Stockholder. An Optionee, or a transferee of an
--------------------------
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his Option until the date of the issuance of a stock certificate for
such Shares. No adjustments shall be made, except as provided in Section 12.
(j) Modification, Extension and Renewal of Options. Within the limitations
----------------------------------------------
of the Plan, the Committee may modify, extend or renew outstanding options or
may accept the cancellation of outstanding options (whether granted by the
Company or by another issuer) in return for the grant of new Options for the
same or a different number of Shares and at the same or a different exercise
price. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, alter or impair his rights or increase his
or her rights or obligations under such Option.
(k) Restrictions on Transfer of Shares. Any Shares issued upon exercise of
----------------------------------
an Option shall be subject to such special forfeiture conditions, rights of
repurchase, and other transfer restrictions as the Committee may determine. Such
restrictions shall be set forth in the applicable Stock Option Agreement and
shall apply in addition to any general restrictions that may apply to all
holders of Shares. Notwithstanding the foregoing in this Section 7(k) and to the
extent that a Stock Option Agreement so provides, an Optionee shall have the
right to transfer all or any portion of Optionee's interest in the Shares to a
trust established by Optionee for the benefit of Optionee, Optionee's spouse, or
Optionee's children, provided that the trustee on
-10-
behalf of the trust shall agree in writing to be bound by the terms and
conditions of the Stock Option Agreement under which the Options are granted.
(l) Buyout Provisions. The Committee may at any time (a) offer to buy out
-----------------
for a payment in cash or cash equivalents an Option previously granted or (b)
authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.
SECTION 8. PAYMENT FOR SHARES.
------------------
(a) General Rule. The entire Exercise Price of Shares issued under the
------------
Plan shall be payable in cash or cash equivalents at the time when such Shares
are purchased, except as provided in Subsections (b) through (g) below.
(b) Surrender of Stock. To the extent that a Stock Option Agreement so
------------------
provides, payment may be made all or in part by surrendering, or attesting to
the ownership of, Shares which have already been owned by the Optionee or his
representative for more than twelve (12) months. Such Shares shall be valued at
their Fair Market Value on the date when the new Shares are purchased under the
Plan. The Optionee shall not surrender, or attest to the ownership of, Shares in
payment of the Exercise Price if such action would cause the Company to
recognize compensation expense (or additional compensation expense) with respect
to the Option for financial reporting purposes.
(c) Services Rendered. At the discretion of the Committee, Shares may be
-----------------
awarded under the Plan in consideration of services rendered to the Company or a
Subsidiary prior to the award. If Shares are awarded without the payment of a
Purchase Price in cash, the Committee shall make a determination (at the time of
the Award) of the value of the services rendered by the Offeree and the
sufficiency of the consideration to meet the requirements of Section 6(c).
(d) Exercise/Sale. To the extent that a Stock Option Agreement so
-------------
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker to sell
Shares and to deliver all or part of the sale proceeds to the Company in payment
of the aggregate Exercise Price.
(e) Exercise/Pledge. To the extent that a Stock Option Agreement so
---------------
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker or lender
to pledge Shares, as security for a loan, and to deliver all or part of the loan
proceeds to the Company in payment of the aggregate Exercise Price.
(f) Promissory Note. To the extent that a Stock Option Agreement so
---------------
provides, payment may be made all or in part by delivering (on a form prescribed
by the Company) a full-recourse promissory note. However, the par value of the
Shares being purchased under the Plan, if newly issued, shall be paid in cash or
cash equivalents.
(g) Combination of Forms of Payment. To the extent that a Stock Option
-------------------------------
Agreement so provides, payment may be made by a combination of considerations
set forth in subsections (a) through (f) above.
-11-
(h) Other Forms of Payment. To the extent that a Stock Option Agreement so
----------------------
provides, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.
SECTION 9. AUTOMATIC GRANTS TO OUTSIDE DIRECTORS.
-------------------------------------
(a) Initial Grants. Each Outside Director shall automatically be granted a
--------------
Nonstatutory Option to purchase twenty-four thousand (24,000) Shares (subject to
adjustment under Section 12) as a result of his or her election or appointment
as an Outside Director. Such NSO shall be granted on the date when such Outside
Director first joins the Board of Directors and shall become exercisable in
three (3) equal installments at one-year intervals commencing one year from the
date of grant.
(b) Other Grants. Each third anniversary of the date that an Outside
------------
Director takes office as a member of the Board of Directors, each Outside
Director who will continue serving as a member of the Board of Directors
thereafter shall receive a Nonstatutory Option to purchase twenty-four thousand
(24,000) Shares (subject to adjustment under Section 12). All such Nonstatutory
Options shall vest and become exercisable pursuant to the terms and conditions
set forth in the Stock Option Agreement.
(c) Exercise Price. The Exercise Price of all Nonstatutory Options granted
--------------
to an Outside Director under this Section 9 shall be equal to one hundred
percent (100%) of the Fair Market Value of a Share on the date of grant, payable
in one of the forms described in Section 8.
(d) Term. All Nonstatutory Options granted to an Outside Director under
----
this Section 9 shall terminate on the earliest of (A) the tenth (10th)
anniversary of the date of grant of such Options or (B) the date twelve (12)
months after the termination of such Outside Director's service for any reason.
(e) Modification. This Section 9 shall not be modified more often than
------------
once every six (6) months, except as may be necessary or advisable to comport
with the requirements of any applicable law or regulation.
(f) Accelerated Exercisability. All NSOs granted to an Outside Director
--------------------------
under this Section 9 shall also become exercisable in full in the event of:
(i) The Termination of such Director's service because of death,
total and permanent disability or retirement at or after age 65; or
(ii) A Change in Control with respect to the Company.
(g) Affiliates of Outside Directors. The Committee may provide that NSOs
-------------------------------
that otherwise would be granted to an Outside Director under this Section 9
shall instead be granted to an affiliate of such Outside Director. Such
affiliate shall then be deemed to be an Outside Director for purposes of the
Plan, provided that the service-related vesting and termination provisions
pertaining to the NSOs shall be applied with regard to the service of the
Outside Director.
-12-
(h) Supersedes Other Grants. This Section 9 is intended to incorporate and
-----------------------
thereby supersede any other formula-based granting of Options to Outside
Directors of the Company and, accordingly, (i) such other formula-based grant
provisions (including those set forth in Section 2.2 of the JMC Group, Inc.
Executive Stock Option Plan) are hereby supplanted by this Section 9, and (ii)
Outside Directors of the Company shall be given credit for periods of service
prior to the date of this Plan with respect to calculations made under Section
9(b) and in respect of which options have not yet been awarded.
SECTION 10. STOCK APPRECIATION RIGHTS.
--------------------------
(a) SAR Agreement. Each grant of a SAR under the Plan shall be evidenced
-------------
by a SAR Agreement between the Optionee and the Company. Such SAR shall be
subject to all applicable terms of the Plan and may be subject to any other
terms that are not inconsistent with the Plan. The provisions of the various SAR
Agreements entered into under the Plan need not be identical. SARs may be
granted in consideration of a reduction in the Optionee's other compensation.
(b) Number of Shares. Each SAR Agreement shall specify the number of
----------------
Shares to which the SAR pertains and shall provide for the adjustment of such
number in accordance with Section 12. SARs granted to any Optionee in a single
calendar year shall in no event pertain to more than two hundred fifty thousand
(250,000) Shares. The limitations set forth in the preceding sentence shall be
subject to adjustment in accordance with Section 12.
(c) Exercise Price. Each SAR Agreement shall specify the Exercise Price. A
--------------
SAR Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the SAR is outstanding.
(d) Exercisability and Term. Each SAR Agreement shall specify the date
-----------------------
when all or any installment of the SAR is to become exercisable. The SAR
Agreement shall also specify the term of the SAR. A SAR Agreement may provide
for accelerated exercisability in the event of the Optionee's death, disability
or retirement or other events and may provide for expiration prior to the end of
its term in the event of the termination of the Optionee's service. SARs may be
awarded in combination with Options, and such an Award may provide that the SARs
will not be exercisable unless the related Options are forfeited. A SAR may be
included in an ISO only at the time of grant but may be included in an NSO at
the time of grant or thereafter. A SAR granted under the Plan may provide that
it will be exercisable only in the event of a Change in Control.
(e) Effect of Change in Control. The Committee may determine, at the time
---------------------------
of granting a SAR or thereafter, that such SAR shall become fully exercisable as
to all Shares subject to such SAR in the event that a Change in Control occurs
with respect to the Company.
(f) Exercise of SARs. Upon exercise of a SAR, the Optionee (or any person
----------------
having the right to exercise the SAR after his or her death) shall receive from
the Company (a) Shares, (b) cash or (c) a combination of Shares and cash, as the
Committee shall determine. The amount of cash and/or the Fair Market Value of
Shares received upon exercise of SARs shall, in the aggregate, be equal to the
amount by which the Fair Market Value (on the date of surrender) of
-13-
the Shares subject to the SARs exceeds the Exercise Price. If, on the date when
a SAR expires, the Exercise Price under such SAR is less than the Fair Market
Value on such date but any portion of such SAR has not been exercised or
surrendered, then such SAR shall automatically be deemed to be exercised as of
such date with respect to such portion.
(g) Modification or Assumption of SARs. Within the limitations of the
----------------------------------
Plan, the Committee may modify, extend or assume outstanding SARs or may accept
the cancellation of outstanding SARs (whether granted by the Company or by
another issuer) in return for the grant of new SARs for the same or a different
number of shares and at the same or a different exercise price. The foregoing
notwithstanding, no modification of a SAR shall, without the consent of the
Optionee, alter or impair his or her rights or obligations under such SAR.
SECTION 11. STOCK UNITS.
------------
(a) Stock Unit Agreement. Each grant of Stock Units under the Plan shall
---------------------
be evidenced by a Stock Unit Agreement between the recipient and the Company.
Such Stock Units shall be subject to all applicable terms of the Plan and may be
subject to any other terms that are not inconsistent with the Plan. The
provisions of the various Stock Unit Agreements entered into under the Plan need
not be identical. Stock Units may be granted in consideration of a reduction in
the recipient's other compensation.
(b) Payment for Awards. To the extent that an Award is granted in the form
------------------
of Stock Units, no cash consideration shall be required of the Award recipients.
(c) Vesting Conditions. Each Award of Stock Units may or may not be
------------------
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Stock Unit Agreement. A Stock
Unit Agreement may provide for accelerated vesting in the event of the
Participant's death, disability or retirement or other events. The Committee may
determine, at the time of granting Stock Units or thereafter, that all or part
of such Stock Units shall become vested in the event that a Change in Control
occurs with respect to the Company.
(d) Voting and Dividend Rights. The holders of Stock Units shall have no
--------------------------
voting rights. Prior to settlement or forfeiture, any Stock Unit awarded under
the Plan may, at the Committee's discretion, carry with it a right to dividend
equivalents. Such right entitles the holder to be credited with an amount equal
to all cash dividends paid on one Share while the Stock Unit is outstanding.
Dividend equivalents may be converted into additional Stock Units. Settlement of
dividend equivalents may be made in the form of cash, in the form of Shares, or
in a combination of both. Prior to distribution, any dividend equivalents which
are not paid shall be subject to the same conditions and restrictions as the
Stock Units to which they attach.
(e) Form and Time of Settlement of Stock Units. Settlement of vested Stock
------------------------------------------
Units may be made in the form of (a) cash, (b) Shares or (c) any combination of
both, as determined by the Committee. The actual number of Stock Units eligible
for settlement may be larger or smaller than the number included in the original
Award, based on predetermined performance factors. Methods of converting Stock
Units into cash may include (without limitation) a method based on the average
Fair Market Value of Shares over a series of trading days. Vested Stock
-14-
Units may be settled in a lump sum or in installments. The distribution may
occur or commence when all vesting conditions applicable to the Stock Units have
been satisfied or have lapsed, or it may be deferred to any later date. The
amount of a deferred distribution may be increased by an interest factor or by
dividend equivalents. Until an Award of Stock Units is settled, the number of
such Stock Units shall be subject to adjustment pursuant to Section 12.
(f) Death of Recipient. Any Stock Units Award that becomes payable after
------------------
the recipient's death shall be distributed to the recipient's beneficiary or
beneficiaries. Each recipient of a Stock Units Award under the Plan shall
designate one or more beneficiaries for this purpose by filing the prescribed
form with the Company. A beneficiary designation may be changed by filing the
prescribed form with the Company at any time before the Award recipient's death.
If no beneficiary was designated or if no designated beneficiary survives the
Award recipient, then any Stock Units Award that becomes payable after the
recipient's death shall be distributed to the recipient's estate.
(g) Creditors' Rights. A holder of Stock Units shall have no rights other
-----------------
than those of a general creditor of the Company. Stock Units represent an
unfunded and unsecured obligation of the Company, subject to the terms and
conditions of the applicable Stock Unit Agreement.
SECTION 12. PROTECTION AGAINST DILUTION.
---------------------------
(a) Adjustments. In the event of a subdivision of the outstanding Shares,
-----------
a declaration of a dividend payable in Shares, a declaration of a dividend
payable in a form other than Shares in an amount that has a material effect on
the price of Shares, a combination or consolidation of the outstanding Shares
(by reclassification or otherwise) into a lesser number of Shares, a
recapitalization, a spin-off or a similar occurrence, the Committee shall make
such adjustments as it, in its sole discretion, deems appropriate in one or more
of:
(i) The number of Options, SARs, Restricted Shares and Stock Units
available for future Awards under Section 5;
(ii) The limitations set forth in Sections 7(b) and 10(b);
(iii) The number of NSOs to be granted to Outside Directors under
Section 9;
(iv) The number of Shares covered by each outstanding Option and SAR;
(v) The Exercise Price under each outstanding Option and SAR; or
(vi) The number of Stock Units included in any prior Award which has
not yet been settled.
Except as provided in this Section 12, a Participant shall have no rights by
reason of any issue by the Company of stock of any class or securities
convertible into stock of any class, any subdivision or consolidation of shares
of stock of any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
(b) Dissolution or Liquidation. To the extent not previously exercised
--------------------------
or settled,
-15-
Options, SARs and Stock Units shall terminate immediately prior to the
dissolution or liquidation of the Company.
(c) Reorganizations. In the event that the Company is a party to a merger
---------------
or other reorganization, outstanding Awards shall be subject to the agreement of
merger or reorganization. Such agreement shall provide for:
(i) The continuation of the outstanding Awards by the Company, if
the Company is a surviving corporation;
(ii) The assumption of the outstanding Awards by the surviving
corporation or its parent or subsidiary;
(iii) The substitution by the surviving corporation or its parent or
subsidiary of its own awards for the outstanding Awards;
(iv) Full exercisability or vesting and accelerated expiration of the
outstanding Awards; or
(v) Settlement of the full value of the outstanding Awards in cash
or cash equivalents followed by cancellation of such Awards.
(d) Reservation of Rights. Except as provided in this Section 12, an
----------------------
Optionee or Offeree shall have no rights by reason of any subdivision or
consolidation of shares of stock of any class, the payment of any dividend or
any other increase or decrease in the number of shares of stock of any class.
Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure, to merge or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
(e) Notice of Adjustment. Whenever the Company shall take any action
---------------------
resulting in any adjustment provided for in this Section 12, the Company shall
forthwith deliver notice of such action to each Optionee, which notice shall set
forth the number of Shares subject to the Option and the Exercise Price thereof
resulting from such adjustment.
SECTION 13. DEFERRAL OF AWARDS.
-------------------
The Committee (in its sole discretion) may permit or require a Participant
to:
(a) Have cash that otherwise would be paid to such Participant as a result
of the exercise of a SAR or the settlement of Stock Units credited to a deferred
compensation account established for such Participant by the Committee as an
entry on the Company's books;
(b) Have Shares that otherwise would be delivered to such Participant as a
result of the exercise of an Option or SAR converted into an equal number of
Stock Units; or
-16-
(c) Have Shares that otherwise would be delivered to such Participant as a
result of the exercise of an Option or SAR or the settlement of Stock Units
converted into amounts credited to a deferred compensation account established
for such Participant by the Committee as an entry on the Company's books. Such
amounts shall be determined by reference to the Fair Market Value of such Shares
as of the date when they otherwise would have been delivered to such
Participant.
A deferred compensation account established under this Section 13 may be
credited with interest or other forms of investment return, as determined by the
Committee. A Participant for whom such an account is established shall have no
rights other than those of a general creditor of the Company. Such an account
shall represent an unfunded and unsecured obligation of the Company and shall be
subject to the terms and conditions of the applicable agreement between such
Participant and the Company. If the deferral or conversion of Awards is
permitted or required, the Committee (in its sole discretion) may establish
rules, procedures and forms pertaining to such Awards, including (without
limitation) the settlement of deferred compensation accounts established under
this Section 13.
SECTION 14. AWARDS UNDER OTHER PLANS.
------------------------
The Company may grant awards under other plans or programs. Such awards may
be settled in the form of Shares issued under this Plan. Such Shares shall be
treated for all purposes under the Plan like Shares issued in settlement of
Stock Units and shall, when issued, reduce the number of Shares available under
Section 5.
SECTION 15. LEGAL AND REGULATORY REQUIREMENTS.
----------------------------------
Shares shall not be issued under the Plan unless the issuance and delivery
of such Shares complies with (or is exempt from) all applicable requirements of
law, including (without limitation) the Securities Act of 1933, as amended, the
rules and regulations promulgated thereunder, and the regulations of any stock
exchange on which the Company's securities may then be listed, and the Company
has obtained the approval or favorable ruling from any governmental agency which
the Company determines is necessary or advisable.
SECTION 16. WITHHOLDING TAXES.
------------------
(a) General. To the extent required by applicable federal, state, local or
-------
foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.
(b) Share Withholding. The Committee may permit a Participant to satisfy
-----------------
all or part of his or her withholding or income tax obligations by having the
Company withhold all or a portion of any Shares that otherwise would be issued
to him or her or by surrendering all or a portion of any Shares that he or she
previously acquired. Such Shares shall be valued at their Fair Market Value on
the date when taxes otherwise would be withheld in cash.
-17-
SECTION 17. LIMITATION ON PARACHUTE PAYMENTS.
--------------------------------
(a) Scope of Limitation. This Section 17 shall apply to an Award unless
--------------------
the Committee, at the time of making an Award under the Plan or at any time
thereafter, specifies in writing that such Award shall not be subject to this
Section 17. If this Section 17 applies to an Award, it shall supersede any
contrary provision of the Plan or of any Award granted under the Plan.
(b) Basic Rule. In the event that the independent auditors most recently
----------
selected by the Board (the "Auditors") determine that any payment or transfer by
the Company under the Plan to or for the benefit of a Participant (a "Payment")
would be nondeductible by the Company for federal income tax purposes because of
the provisions concerning "excess parachute payments" in Section 280G of the
Code, then the aggregate present value of all Payments shall be reduced (but not
below zero) to the Reduced Amount. For purposes of this Section 17, the "Reduced
Amount" shall be the amount, expressed as a present value, which maximizes the
aggregate present value of the Payments without causing any Payment to be
nondeductible by the Company because of Section 280G of the Code.
(c) Reduction of Payments. If the Auditors determine that any Payment
---------------------
would be nondeductible by the Company because of Section 280G of the Code, then
the Company shall promptly give the Participant notice to that effect and a copy
of the detailed calculation thereof and of the Reduced Amount, and the
Participant may then elect, in his or her sole discretion, which and how much of
the Payments shall be eliminated or reduced (as long as after such election the
aggregate present value of the Payments equals the Reduced Amount) and shall
advise the Company in writing of his or her election within 10 days of receipt
of notice. If no such election is made by the Participant within such 10-day
period, then the Company may elect which and how much of the Payments shall be
eliminated or reduced (as long as after such election the aggregate present
value of the Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. For purposes of this Section 17, present
value shall be determined in accordance with Section 280G(d)(4) of the Code. All
determinations made by the Auditors under this Section 17 shall be binding upon
the Company and the Participant and shall be made within sixty (60) days of the
date when a Payment becomes payable or transferable. As promptly as practicable
following such determination and the elections hereunder, the Company shall pay
or transfer to or for the benefit of the Participant such amounts as are then
due to him or her under the Plan and shall promptly pay or transfer to or for
the benefit of the Participant in the future such amounts as become due to him
or her under the Plan.
(d) Overpayments and Underpayments. As a result of uncertainty in the
------------------------------
application of Section 280G of the Code at the time of an initial determination
by the Auditors hereunder, it is possible that Payments will have been made by
the Company that should not have been made (an "Overpayment") or that additional
Payments that will not have been made by the Company could have been made (an
"Underpayment"), consistent in each case with the calculation of the Reduced
Amount hereunder. In the event that the Auditors, based upon the assertion of a
deficiency by the Internal Revenue Service against the Company or the
Participant that the Auditors believe has a high probability of success,
determine that an Overpayment has been made, such Overpayment shall be treated
for all purposes as a loan to the Participant which he or
-18-
she shall repay to the Company, together with interest at the applicable federal
rate provided in Section 7872(f)(2) of the Code; provided, however, that no
amount shall be payable by the Participant to the Company if and to the extent
that such payment would not reduce the amount subject to taxation under Section
4999 of the Code. In the event that the Auditors determine that an Underpayment
has occurred, such Underpayment shall promptly be paid or transferred by the
Company to or for the benefit of the Participant, together with interest at the
applicable federal rate provided in Section 7872(f)(2) of the Code.
(e) Related Corporations. For purposes of this Section 18, the term
---------------------
"Company" shall include affiliated corporations to the extent determined by the
Auditors in accordance with Section 280G(d)(5) of the Code.
SECTION 18. NO EMPLOYMENT RIGHTS.
---------------------
No provision of the Plan, nor any right or Option granted under the Plan,
shall be construed to give any person any right to become, to be treated as, or
to remain an Employee. The Company and its Subsidiaries reserve the right to
terminate any person's Service at any time and for any reason, with or without
notice.
SECTION 19. DURATION AND AMENDMENTS.
------------------------
(a) Term of the Plan. The Plan, as set forth herein, shall become
----------------
effective on the date of its adoption by the Board of Directors, subject to the
approval of the Company's shareholders. In the event that the shareholders fail
to approve the Plan within twelve (12) months after its adoption by the Board of
Directors, any grants already made shall be null and void, and no additional
grants shall be made after such date. The Plan shall terminate automatically ten
(10) years after its adoption by the Board of Directors and may be terminated on
any earlier date pursuant to Subsection (b) below.
(b) Right to Amend or Terminate the Plan. The Board of Directors may amend
------------------------------------
the Plan at any time and from time to time. An amendment of the Plan shall be
subject to the approval of the Company's stockholders only to the extent
required by applicable laws, regulations or rules.
(c) Effect of Amendment or Termination. No Shares shall be issued or sold
-----------------------------------
under the Plan after the termination thereof, except upon exercise of an Option
granted prior to such termination. The termination of the Plan, or any amendment
thereof, shall not affect any Award previously granted under the Plan, except
with consent of the person to whom the Award was granted.
SECTION 20. NOTICE.
-------
Any notice to be given under the terms of the Plan shall be addressed to
the Company in care of its Secretary at its principal office, and any notice to
be given to a Participant shall be addressed to such Participant at the address
maintained by the Company for such person or at such other address as the
Participant may specify in writing to the Company.
-19-
SECTION 21. EXECUTION.
----------
To record the adoption of the Plan by the Board of Directors effective as
of February 28, 2000, the Company has caused its authorized officer to execute
the same.
FECHTOR, DETWILER, MITCHELL & CO.
By /s/ James K. Mitchell
-------------------------------
Chairman
-20-
- -------------------------------------------------------------------------------
FECHTOR, DETWILER, MITCHELL & CO.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned appoints James Mitchell and Stephen Frank, and each of
them, proxies with full power of substitution, to vote all shares of Common
Stock of Fechtor, Detwiler, Mitchell & Co. (the "Company") held of record by the
undersigned as of March 31, 2000 at the Annual Meeting of Stockholders of the
Company, to be held at The Inn at Rancho Santa Fe, 5951 Linea Del Cielo, Rancho
Santa Fe, California, on May 22, 2000, at 10:00 a.m., Pacific Daylight Savings
Time, and at any and all adjournments thereof, upon the following matters:
ANNUAL MEETING OF SHAREHOLDERS
(continued and to be signed on the reverse side)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE
- -------------------------------------------------------------------------------
Please mark your
vote as this [X]
FOR AGAINST ABSTAIN
(1) Proposal to approve the Fechtor,
Detwiler, Mitchell & Co. 2000 Omnibus
Equity Incentive Plan. [_] [_] [_]
FOR WITHHOLD AUTHORITY
(2) Proposal to elect the nominees Edward Baran
and Edward Hughes as Directors. [_] [_]
FOR AGAINST ABSTAIN
(3) Proposal to ratify the selection of
Deloitte and Touche LLP as the Company's
independent auditors. [_] [_] [_]
(4) In accordance with the discretion of the
proxy holders, upon such other matters
as may properly come before the Annual
Meeting and at any and all adjournments
thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR
EACH OF THE FOREGOING PROPOSALS. THIS PROXY, WHEN
PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER.
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED
FOR EACH OF THE ABOVE PROPOSALS.
__
|
Signature or signatures of Stockholders
---------------------------------------
---------------------------------------
Dated: , 2000
---------------------
(Your signature should conform exactly to your name as printed hereon. Any
co-owners may sign. Executors, administrators, trustees, etc. should give full
title as such. If the stockholder is a corporation, a duly authorized officer
should sign on behalf of the corporation and should indicate his or her title.)
- -------------------------------------------------------------------------------
FOLD AND DETACH HERE