SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only
(as permitted by Rule 14a-
6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
DIAL-THRU INTERNATIONAL CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3)Filing Party:
(4) Date Filed:
[LOGO]
March 28, 2000
Dear Dial-Thru International Stockholder:
I am pleased to invite you to Dial-Thru International's Annual Meeting of
Stockholders. The meeting will be held at 10:00 a.m. on Monday, May 15, 2000 at
the Harvey Hotel, 4545 W. John Carpenter Frwy., Hwy. 114 and Esters Rd.,
Irving, Texas (phone no. 972-929-4500).
At the meeting, you and the other stockholders will be asked to (1) elect
five directors to the Dial-Thru International Board; (2) approve the 2000
Omnibus Securities Plan, which authorizes the granting of restricted and bonus
stock, and incentive and non-qualified stock options, to employees, directors
and consultants of Dial-Thru International; and (3) ratify the appointment of
King Griffin & Adamson, P.C. as the Company's independent auditors for the
current fiscal year. You will also have the opportunity to hear what has
happened in our business in the past year and to ask questions. You will find
other detailed information about Dial-Thru International and its operations,
including its audited financial statements, in the enclosed Annual Report.
We hope you can join us on May 15. Whether or not you can attend, please
read the enclosed Proxy Statement. When you have done so, please mark your
votes on the enclosed proxy, sign and date the proxy, and return it to us in
the enclosed envelope. Your vote is important, so please return your proxy
promptly.
Yours truly,
/s/ Roger D. Bryant
_____________________________________
Roger D. Bryant
Chairman and Chief Executive Officer
DIAL-THRU INTERNATIONAL CORPORATION
8100 JETSTAR, SUITE 100
IRVING, TEXAS 75063
----------------
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 15, 2000
----------------
To the Stockholders of Dial-Thru International Corporation:
NOTICE IS HEREBY given that the 2000 Annual Meeting of Stockholders (the
"Meeting") of Dial-Thru International Corporation (the "Company") will be held
at the Harvey Hotel, 4545 W. John Carpenter Frwy., Hwy. 114 and Esters Rd.,
Irving, Texas (phone no. 972-929-4500) on Monday, May 15, 2000 at 10:00 a.m.,
for the following purposes:
1. To elect 5 Directors to serve until the 2001 Annual Meeting of
Stockholders and until their successors are duly elected and qualified;
2. To consider a proposal to adopt and approve the Company's 2000
Omnibus Securities Plan.
3. To consider and act upon a proposal to ratify the selection of King,
Griffin & Adamson P.C., to serve as independent auditors for its current
fiscal year; and
4. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on March 24, 2000 as
the record date for the determination of Stockholders entitled to notice of and
to vote at the Meeting or any adjournments thereof.
A list of stockholders of the Company entitled to notice of and to vote at
the Meeting will be available for examination at the Meeting and during
ordinary business hours at the principal offices of the Company at the address
set forth above for ten days prior the Meeting.
You are cordially invited to attend the Meeting.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AT THE MEETING REGARDLESS OF
THE NUMBER OF SHARES YOU HOLD. YOU ARE INVITED TO ATTEND THE MEETING IN PERSON,
BUT WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, DATE, SIGN AND RETURN
THE ACCOMPANYING PROXY IN THE ENCLOSED ENVELOPE. IF YOU DO ATTEND THE MEETING,
YOU MAY, IF YOU PREFER, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors,
/s/ John Jenkins
_____________________________________
John Jenkins
SECRETARY
March 28, 2000
DIAL-THRU INTERNATIONAL CORPORATION
8100 JETSTAR, SUITE 100
IRVING, TEXAS 75063
----------------
PROXY STATEMENT
2000 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 15, 2000
----------------
SOLICITATION AND REVOCATION OF PROXIES
This Proxy Statement and the accompanying proxy are solicited on behalf of
the Board of Directors of Dial-Thru International Corporation, formerly known
as ARDIS Telecom & Technologies, Inc., successor by merger to Canmax Inc. (the
"Company"). The proxies will be voted at the 2000 Annual Meeting of
Stockholders (the "Annual Meeting") to be held on May 15, 2000, at the time and
place and for the purposes set forth in the accompanying Notice of Annual
Meeting of Stockholders and at any adjournment(s) of the Annual Meeting. This
Proxy Statement, the accompanying proxy and the Company's Annual Report on
Form 10-K for the year ended October 31, 1999, are first being sent to
stockholders of the Company on or about March 28, 2000.
All properly completed proxies received prior to the Annual Meeting and not
revoked will be voted in accordance with your instructions. IF NO SUCH
INSTRUCTIONS ARE MADE, THEN PROXIES WILL BE VOTED
. FOR THE ELECTION OF THE NOMINEES UNDER THE CAPTION "ELECTION OF
DIRECTORS;"
. FOR THE ADOPTION AND APPROVAL OF THE COMPANY'S 2000 OMNIBUS SECURITIES
PLAN AS DESCRIBED UNDER THE CAPTION "APPROVAL OF OMNIBUS SECURITIES
PLAN;" AND
. FOR THE RATIFICATION OF THE COMPANY'S SELECTION OF KING GRIFFIN & ADAMSON
P.C. TO SERVE AS THE COMPANY'S INDEPENDENT AUDITORS DURING THE CURRENT
FISCAL YEAR.
If any other matters come before the Annual Meeting, the persons named as
proxies will vote upon such matters according to their judgment.
The Company encourages the personal attendance of its stockholders at the
Annual Meeting. The execution of the accompanying proxy will not affect a
stockholder's right to attend the Annual Meeting and to vote in person.
Proxies may be revoked if you:
- Deliver a signed, written revocation letter, dated any time before the
proxy is voted, to Mr. John Jenkins, Secretary, Dial-Thru International
Corporation, at the Company's principal executive offices, 8100 Jetstar
Drive, Suite 100, Irving, Texas 75063; or
- Sign and deliver a proxy, dated later than any previously delivered
proxy to the above address; or
- Attend the meeting and vote in person.
Attending the Annual Meeting alone will not revoke your proxy. A revocation
letter or a later-dated proxy will not be effective until received by the
Company at or prior to the Annual Meeting.
1
In addition to the solicitation of proxies by use of the mail, officers,
directors and regular employees of the Company may solicit the return of
proxies by personal interview, mail, telephone, facsimile and/or through the
internet. These persons will not be additionally compensated, but will be
reimbursed for out-of-pocket expenses. The Company will also request brokerage
houses and other custodians, nominees and fiduciaries to forward solicitation
material to the beneficial owners of shares. The Company will reimburse such
persons and the transfer agent for their reasonable out-of-pocket expenses in
forwarding such materials. The Company will bear the cost of the solicitation.
The Company's Annual Report on Form 10-K covering the Company's fiscal year
ended October 31, 1999 (the "Annual Report"), including audited financial
statements, is enclosed herewith. The Annual Report does not form any part of
the materials for the solicitation of proxies.
VOTING SECURITIES AND QUORUM
Only stockholders of record at the close of business on March 24, 2000 will
be entitled to notice of and to vote at the Annual Meeting. On March 24, 2000
the Company had issued and outstanding shares of its common stock, $.001
par value per share (the "Common Stock"), which is the only class of its
capital stock outstanding. Each share of Common Stock is entitled to one vote
on each matter presented to the stockholders. The presence, in person or by
proxy, of the holders of a majority of the issued and outstanding shares of
Common Stock is necessary to constitute a quorum at the Annual Meeting.
Abstention and broker non-votes are counted for the purposes of determining
the presence or absence of a quorum for the transaction of business.
Abstentions are counted in the tabulations of votes cast on proposals presented
to the stockholders, while broker non-votes are not counted for purposes of
determining whether a proposal has been approved. A broker non-vote occurs if a
broker or other nominee does not have discretionary authority and has not
received instructions with respect to a particular item. Assuming the presence
of a quorum, the affirmative vote of the holders on the record date of a
plurality of the shares of Common Stock outstanding, represented in person or
by proxy at the Annual Meeting, is required to elect directors for the Company.
Stockholders may not cumulate their votes in the election of directors. All
matters other than the election of directors submitted for a vote at the Annual
Meeting will be decided by a majority of the votes cast on the matter, provided
a quorum exists, except as otherwise provided by law or in the Company's
Certificate of Incorporation or Bylaws. Stockholders who fail to return a proxy
or attend the Annual Meeting will not count towards determining any required
plurality, majority or quorum.
ITEM 1.
ELECTION OF DIRECTORS AND MANAGEMENT INFORMATION
Five directors are to be elected at the Meeting, to serve until the
Company's next annual meeting of stockholders and until their respective
successors are elected and qualified, or until their earlier resignation or
removal. Each of the nominees listed below currently serves as a director of
the Company, and each of the nominees, other than Mr. Jenkins and Mr. Vierra,
was elected to the Board of Directors at the Company's 1999 Annual Meeting of
Stockholders. Unless authority to vote for one or more nominees is withheld,
the enclosed proxy will be voted "FOR" the election of all of the nominees
listed below. Although the Board of Directors does not contemplate that any of
the nominees will be unable to serve, if such a situation arises prior to the
Meeting, the persons named in the enclosed proxy will vote for the election of
such other person(s) as may be nominated by the Board of Directors.
The following table sets forth certain information regarding the executive
officers and directors of the Company who are expected to be directors and
executive officers of the Company.
2
Name Age Position with the Company
---- --- -------------------------
Roger D. Bryant......... 57 Chairman, Chief Executive Officer and Director
John Jenkins............ 38 President, Chief Operating Officer, Interim Chief
Financial Officer, Secretary and Director
Lawrence Vierra......... 54 Executive Vice President and Director
Robert M. Fidler........ 61 Director
Nick DeMare............. 45 Director
ROGER D. BRYANT has served as the Chief Executive Officer and a director of
the Company since November 15, 1994. Since December 15, 1999, Mr. Bryant has
served as the Chairman of the Company. From November 15, 1994 until December
15, 1999, Mr. Bryant served as President of the Company. Prior to joining the
Company, Mr. Bryant served as President of Network Data Corporation, a private
corporation which specialized in developing software for the convenience store
and retail petroleum industries, and as President of Wayne Division, USA, a
division of Dresser Industries Inc., a manufacturer of fuel dispensing
equipment. Mr. Bryant currently serves as a director of Field Point Petroleum
Corporation. Mr. Bryant has extensive knowledge and experience in the software
development, retail petroleum and convenience store industries. Mr. Bryant
holds a degree in electrical engineering.
JOHN JENKINS has served as director and as the President of the Company
since December 15, 1999. Mr. Jenkins has also served as the President of Dial-
Thru.com, Inc. a subsidiary of the Company, since November 2, 1999. In May of
1997, Mr. Jenkins founded Dial-Thru International Corporation, a California
corporation now known as DTI LIQ-CO, Inc., and served as its President and
Chief Executive Officer until joining the Company on November 2, 1999. Prior to
1997, Mr. Jenkins served as the President and Chief Financial Officer for
Golden Line Technology, a French telecommunications company. Prior to entering
the telecommunications industry, Mr. Jenkins owned and operated several
software, technology and real estate companies. Mr. Jenkins holds degrees in
physics and business/economics.
LAWRENCE VIERRA has served as an Executive Vice President and a Director of
the Company since January 14, 2000. From 1995 through 1999, Mr. Vierra served
as the Executive Vice President of RSL COM U.S.A., Inc., an international
telecommunications company, where Mr. Vierra was primarily responsible for
international sales. From 1987 through 1995, Mr. Vierra was a Vice President
with GTE Corporation, a telecommunications company, with primary
responsibilities for sales and marketing. Prior to 1987, Mr. Vierra held senior
executive positions in international sales, marketing and business development
with various companies such as ITC, Sprint Corporation and Charles Schwab. Mr.
Vierra has also served on the board of directors and executive committees of
various telecommunications companies. Mr. Vierra has extensive knowledge and
experience in the international sales and marketing of telecommunications
products and services. Mr. Vierra holds degrees in marketing and business
administration.
ROBERT M. FIDLER has served as a director of the Company since November
1994. Mr. Fidler joined Atlantic Richfield Company ("ARCO") in 1960, was a
member of ARCO's executive management team from 1976 to 1994 and was ARCO's
manager of New Marketing Programs from 1985 until his retirement in 1994. Mr.
Fidler has extensive knowledge and experience in managing retail petroleum
operations.
NICK DEMARE has served as a director of the Company since January 1991.
Since May, 1991, Mr. DeMare has been the President and Chief Financial Officer
of Chase Management Ltd., where his overall responsibility includes providing a
broad range of administrative, management and financial services to private and
public companies with varied interests in mineral exploration and development,
precious and base metals production, oil and gas, venture capital and computer
software. Mr. DeMare has served and continues to serve on the boards of a
number of Canadian public companies. Mr. DeMare also serves and on the board of
directors of North Lily Mining Co., a mining company, and LEK International,
Inc., an oil and gas company. Mr. DeMare is a Chartered Accountant (Canada).
3
MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors held nine meetings during the fiscal year ended
October 31, 1999. The Board of Directors has two standing committees: an Audit
Committee and a Compensation Committee. There is no standing nominating
committee. Each of the directors attended at least 75% of the meetings of the
Board of Directors and any committee on which such director served.
COMMITTEES OF THE BOARD OF DIRECTORS
Throughout the Company's 1999 fiscal year, the Audit Committee consisted of
Nick DeMare and W. Thomas Rinehart. Robert M. Fidler succeeded W. Thomas
Rinehart as a member of the Audit Committee following Mr. Rinehart's
resignation from the Board of Directors on December 1, 1999. The Audit
Committee makes recommendations to the Board of Directors or management
concerning the engagement of the Company's independent public accountants and
matters relating to the Company's financial statements, the Company's
accounting principles and its system of internal accounting controls. The Audit
Committee also reports its recommendations to the Board of Directors as to the
approval of the financial statements of the Company. The Audit Committee held
one meeting during the fiscal year ended October 31, 1999.
Throughout the Company's 1999 fiscal year, the Compensation Committee
consisted of Robert M. Fidler and W. Thomas Rinehart. Nick DeMare succeeded W.
Thomas Rinehart as a member of the Company's Compensation Committee following
Mr. Rinehart's resignation from the Company's Board of Directors on December 1,
1999. The Compensation Committee is responsible for considering and making
recommendations to the Board of Directors regarding executive compensation and
is also responsible for administration of the Company's stock option and
executive incentive compensation plans. The Compensation Committee held two
meetings during the fiscal year ended October 31, 1999.
COMPENSATION OF DIRECTORS
Each director who is not an officer of the Company receives a fee of $1,500
for each Board meeting attended. Directors are not compensated for attending
committee meetings. Further, all directors participate in the Company's Stock
Option Plan and are awarded non-qualified stock options for 5,000 shares of
Common Stock annually for service on the Board of Directors.
On April 26, 1999, the Company entered into a one-year Consulting Agreement
with W. Thomas Rinehart, who was a director of the Company at that time. Mr.
Rinehart's consulting services related to the development of software for the
Company's calling-card platform and a strategic marketing plan for the
Company's products and services. Payments under the Consulting Agreement were
$5,000 per quarter (for an aggregate of $20,000) and the issuance of a warrant
to acquire 20,000 shares of the Company's common stock at $0.45 per share, the
closing price on the date preceding the date of the warrant issuance.
SIGNIFICANT EMPLOYEES
A brief description of the business experience and position of certain
significant employees of the Company and its subsidiaries who are not also
directors is provided below.
IVOR J. FLANNERY is Vice President of Technology of RDST, Inc., formerly
known as Canmax Telecom, Inc., and has served in that capacity since January
1989. Mr. Flannery joined the Company in September 1983 and has held positions
of increasing responsibility. Prior to joining the Company, he was an Advanced
Systems Engineer for RIM Technology, a software development company which
developed point of sale systems for the retail petroleum industry.
SCOTT R. MATTHEWS is Vice President of Telecommunications Development/Sales
and Marketing of RDST, Inc. and has served in that capacity since April 1998.
From February 1996 to March 1998, Mr. Matthews was the Vice President of Sales
and Marketing at Galaxy Communications, Inc., a
4
telecommunications company. Mr. Matthews previously served as the Director of
Sales of ATCALL, Inc., a telecommunications company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND MANAGEMENT
The following table sets forth certain information as of February 1, 2000,
concerning those persons known to the Company, based on information obtained
from such persons, the Company's records and schedules required to be filed
with the Securities and Exchange Commission and delivered to the Company, with
respect to the beneficial ownership of the Company's Common Stock by (i) each
stockholder known by the Company to own beneficially 5% or more of such
outstanding Common Stock, (ii) each current director of the Company and each
nominee for election as a director, (iii) each Named Executive Officer and (iv)
all executive officers and directors of the Company as a group. Except as
otherwise indicated below, each of the entities or persons named in the table
has sole voting and investment power with respect to all shares of Common Stock
beneficially owned. Effect has been given to shares reserved for issuance under
outstanding stock options and warrants where indicated.
Amount and
Nature of
Beneficial Percent of
Name and Address of Beneficial Owner Ownership Class(1)
------------------------------------ ---------- ----------
Dodge Jones Foundation............................ 1,000,000 12.4%
400 Pine Street, Suite 900
Abilene, Texas 79601
Joseph E. Canon................................... 1,000,000(2) 12.4%
Dodge Jones Foundation
P.O. Box 176
Abilene, Texas 79601
DTI LIQ-CO, Inc................................... 1,000,000(3) 12.4%
700 South Flower, Suite 2950
Los Angeles, CA 90017
John Jenkins...................................... 1,000,000(3)(4) 12.4%
700 South Flower, Suite 2950
Los Angeles, CA 90017
Roger D. Bryant(5)................................ 650,000(6) 7.6%
Lawrence Vierra................................... 0 --
2353 Dolphin Court
Henderson, NV 89014
Nick DeMare....................................... 56,880(7) *
Chase Management
1090 West Georgia Street, Suite 1305
Vancouver, BC V6E 3V7
Robert M. Fidler.................................. 35,000(8) *
987 Laguna Road
Pasadena, California 91105
Ivor J. Flannery(6)............................... 147,218(9) 1.8%
Scott R. Matthews(6).............................. 30,000(10) *
Debra L. Burgess(6)............................... 372,778(11) 4.6%
All Executive Officers and Directors as a group (7
persons)......................................... 1,919,098(12) 21.9%
- --------
* Less than 1.0%
5
(1) Based upon 8,047,682 shares of Common Stock outstanding as of February 1,
2000.
(2) Includes 1,000,000 shares held by Dodge Jones Foundation, of which Mr.
Canon serves as the Executive Director. As such, Mr. Canon exercises
voting power over all such shares.
(3) Does not include and additional 1,000,000 shares that may be issued to DTI
LIQ-CO, Inc. pursuant to the terms of the Asset Purchase Agreement dated
November 2, 1999 between John Jenkins, DTI LIQ-CO, Inc. (formerly known as
Dial-Thru International Corporation, a California corporation), Dial-
Thru.com, Inc. (formerly known as Dial-Thru International Corporation, a
Delaware corporation) and Dial-Thru International Corporation (formerly
known as ARDIS Telecom & Technologies, Inc.) upon the achievement of
specified earnings and revenue goals.
(4) Includes 1,000,000 shares held by DTI LIQ-CO, Inc., a California
corporation that is in the process or liquidating. Mr. Jenkins is the sole
shareholder, director and executive officer of such entity and exercises
voting and investment power over all of such shares.
(5) The business address for the Company's executives is P.O. Box 2985,
Coppell, Texas 75019.
(6) Includes 300,000 shares of Common Stock which may be acquired through the
exercise of stock options which are exercisable within 60 days of February
1, 2000 ("Vested Options") and 250,000 shares subject to presently
exercisable warrants.
(7) Includes 46,600 Vested Options.
(8) Includes 30,000 Vested Options.
(9) Includes 49,000 Vested Options.
(10) Includes 30,000 Vested Options.
(11) Includes 125,000 shares subject to presently exercisable warrants. Ms.
Burgess resigned as an officer and director of the Company on January 14,
2000.
(12) Includes 455,600 Vested Options and 250,000 shares subject to presently
exercisable warrants. Excludes shares and warrants held by Ms. Burgess,
who ceased being a director, officer or employee of the Company as of
January 14, 2000.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the first quarter of 1995, a director, W. Thomas Rinehart advanced
the Company $250,000. This advance was unsecured and bore interest at the rate
of 10%. The principal balance was due on demand and could be repaid by the
Company from time to time. Principal payments of $95,765 (together with accrued
interest thereon) were repaid during the six months ended April 30, 1997, which
fully satisfied the Company's obligation.
On April 30, 1997, Founders Equity Group, Inc. ("Founders") acquired from
Electronic Data Systems ("EDS") 863,364 shares of Common Stock in a private
transaction, in connection with which the Company agreed to extend to Founders
certain registration rights similar to those previously held by EDS. On May 9,
1997, Founders exercised its right to demand that the Company file a
registration statement with regard to all of its shares of Common Stock. Under
applicable securities laws, the Company was unable to file the Founders
registration statement until after the filing of a registration statement
relating to the proposed Merger of the Company with Auto-Gas Systems, Inc.,
which merger was subsequently abandoned. Pursuant to the terms of the
registration rights agreement with Founders, the Company was to have filed a
registration statement on or about July 23, 1997 or incur a registration
penalty of 50,000 shares per month. Founders agreed to extend the registration
obligation until August 26, 1997 in exchange for its receipt of a warrant to
acquire 50,000 shares of Common Stock at an exercise price of $2.00 per share.
The closing price for the Common Stock on August 25, 1997 was $2.375. In
addition, in May of 1997, the Company retained Founders to provide advisory
services regarding the proposed Merger with Auto-Gas Systems, Inc., and agreed
to pay to Founders a fee of $25,000 for such services. The fee for said
services was determined by arms-length negotiations; however, the Company did
not solicit other advisors to provide such services.
On April 30, 1997, the Dodge Jones Foundation acquired from EDS 1,000,000
shares of Common Stock in a private transaction, in connection with which the
Company agreed to extend to the Dodge Jones Foundation certain registration
rights similar to those previously held by EDS.
6
On October 30, 1997, Founders advanced the Company $100,000. The advance was
unsecured and had an interest rate of 12%. On November 6, 1997, the Company
repaid principal and interest of $100,230, which fully satisfied its obligation
with regard to such advance.
On December 15, 1997, the Company executed a convertible loan agreement (the
"Original Agreement") with Founders, which held beneficial ownership of in
excess of 5% of the Company's securities at the time, providing for financing
of up to $500,000 at an interest rate of 10% per annum. Advances under the
Original Agreement were secured by a lien on all of the Company's assets.
Indebtedness outstanding under the Original Agreement was convertible, at the
option of Founders, into shares of Common Stock at a conversion price of $1.25
per share, subject to adjustment for certain events, and was redeemable at the
option of the Company at 110% of par. The closing price for the Common Stock on
December, 1997 was $1.25.
On February 5, 1998, Founders and the Company entered into an agreement
pursuant to which Founders agreed to provide financial advisory and consulting
services to the Company. Founders was publicly known as a significant
shareholder and financial supporter of the Company and was approached by agents
representing parties interested in acquiring the Company's software division to
determine whether the Company would be interested in pursuing such a
transaction. The Company agreed to retain Founders to assist it in evaluating
the proposed offer and in negotiating any agreements that might result
therefrom. Under the terms of the agreement, the Company agreed to pay to
Founders a fee equal to 3% of the value of the consideration received in any
sale or merger of any division or subsidiary of the Company. Subsequently, the
Company reestablished discussions with a party that had previously expressed an
interest in acquiring the Company's software division, and Founders provided
advice and counseling during the negotiation of the sale of the Company's
software division. As a result of this agreement, Founders received $120,000
calculated based upon the initial $4.0 million received upon the sale of the
Company's software division and waived its right to receive any additional fees
on the contingent payments from that sale of up to $3.625 million. However,
Founders did not deliver any formal advisory or fairness opinion to the
Company. The fee for Founders services was determined by arms-length
negotiation; however, the Company did not solicit other advisors to provide
said services and therefor the Company did not determine whether the fees were
comparable to that which would have been obtainable from disinterested third
parties.
On February 11, 1998, the Company and Founders executed a loan commitment
letter (the "Loan Commitment") which provided for a multiple advance loan of up
to $2 million upon terms similar to the Original Agreement; however,
indebtedness outstanding under the Loan Commitment was convertible into shares
of Common Stock at a conversion price equal to the average closing prices of
the Common Stock over the five-day trading period immediately preceding the
date of each advance. As consideration for the Loan Commitment, the Company
paid a commitment fee of $10,000. On February 24, 1998, Founders advanced
$150,000 under the Loan Commitment which was convertible into shares of Common
Stock at a conversion price equal to $1.025.
As of March 31, 1998, Founders (and certain of its affiliates) entered into
the First Restated Loan Agreement (the "Loan Agreement") which consolidated all
rights and obligations of the Company to Founders under the Original Agreement
and the Loan Commitment. Amounts advanced under the Loan Agreement bear
interest at the rate of 12% per annum, are secured by a lien on all of the
Company's assets and are convertible into shares of Common Stock, at the option
of Founders, at $.80 per share. The closing price of the Common Stock on March
30, 1998 was $0.75. On August 25, 1998, Founders agreed to release its lien on
all of the Company's assets upon the consummation of the proposed sale of its
software division. As consideration for the release, the Company agreed, upon
the consummation of the proposed sale of its software business, to repay $1.0
million of the $1.5 million currently outstanding under the Loan Agreement, and
to allow Founders to convert the remaining $500,000 plus all accrued but unpaid
interest outstanding under the Loan Agreement into shares of Common Stock at a
conversion price of $.50 per share. The closing price of Common Stock on August
24, 1998 was $.593. The Company used 1,000,000 from the sale of its software
business to pay down the indebtedness to Founders.
7
On December 11, 1998, the Company and Founders executed Amendment No. 1 to
the Loan Agreement, pursuant to which the Company agreed to defer Founders'
conversion of the remaining indebtedness outstanding under the Loan Agreement
in exchange for (a) Founders' waiver of any registration obligation under the
Registration Rights Agreement dated May 1, 1997 or under the Loan Agreement
until February 1, 1999 or the Company's earlier delivery of a conversion
notice, (b) the adjustment of the conversion price for the remaining
convertible indebtedness outstanding under the Loan Agreement ($500,000) from
$.50 per share to the greater of $.50 per share or 75% of the average closing
price of the Common Stock over the ten trading days preceding the delivery of a
conversion notice, and (c) Founders' agreement to convert the remaining
outstanding principal amount under the Loan Agreement ($500,000) upon written
notice from the Company at the adjusted conversion price described above.
Further, the amendment to the Loan Agreement reduced the interest rate payable
on the outstanding principal amount under the Loan Agreement from 12% to 9% per
annum. The amendment also terminated any additional funding obligations of
Founders under the Loan Agreement. On May 4, 1999, the Company repaid the
balance of the amounts outstanding ($500,000) under the Loan Agreement with
Founders and the Company's obligations under the Loan Agreement were
terminated.
The interest rate, conversion prices and exercise prices for the Company's
various transactions with Founders were determined by arms-length negotiations;
however, because of the Company's financial position and the timing of the
Company's liquidity needs throughout these periods, as well as the
unavailability of traditional bank financings during these periods, the Company
did not seek alternative sources of financing. The Company believes that the
terms of such financing were fair; however, the Company did not make any
attempt to determine whether such terms were comparable to what would have been
obtainable from disinterested, third parties.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid by the Company and its
subsidiaries during the years ended October 31, 1999, 1998 and 1997 for
services in all capacities to each of the Company's chief executive officer and
the executive officers (the "Named Executive Officers") of the Company whose
total annual salary and bonus exceeded $100,000 during fiscal 1999.
SUMMARY COMPENSATION TABLE
Securities
Name and Principal Other Annual Underlying All Other
position Year Salary($) Bonus($) Compensation Options(#) Compensation
------------------ ---- --------- -------- ------------ ---------- ------------
Roger D. Bryant......... 1999 200,000 82,066(1) -- 300,000(2) 5,860(3)
President and CEO 1998 185,000 -- -- 250,000(4) 3,230(5)
1997 185,000 -- -- 45,000 538(5)
Debra L. Burgess(6)..... 1999 165,000 82,066(1) -- 137,800(7) 2,821(8)
1998 140,000 -- -- 125,000(9) 415(5)
1997 140,000 -- -- 35,000 69(5)
Ivor J. Flannery........ 1999 129,583 36,033(1) -- 62,000(11) 1,823(12)
Vice President 1998 110,000 3,100 -- -- --
Technology(10) 1997 110,000 -- -- 23,000 --
Scott R. Matthews....... 1999 116,242 -- -- 30,000(13) 1,385(12)
Vice President 1998 62,477 5,000 -- -- --
Sales and Marketing(10) 1997 -- -- -- -- --
- --------
(1) Includes stock bonuses of 100,000 shares to each of Mr. Bryant and Ms.
Burgess and 50,000 shares to Mr. Flannery, valued at $32,066, $32,066 and
$16,033, respectively, based upon the closing price of the Common Stock on
the date preceding the grant.
(2) Includes stock options to purchase 290,000 shares of Common Stock that
were repriced to $0.40 per share on December 11, 1998 (see "Repricing of
Stock Options").
8
(3) Includes $3,230 of compensation associated with supplemental long-term
disability insurance and $2,630 of matching 401(k) plan contributions by
the Company.
(4) Includes 1997 Performance Warrants to purchase 250,000 shares of Common
Stock that vested upon the Change of Control occurring on January 30, 1998
and were repriced from $2.25 per share to $0.53 per share on July 20,
1998. The 1997 Performance Warrants were not issued under the Company's
stock option plan.
(5) Reflects compensation associated with long-term disability insurance.
(6) Ms. Burgess resigned as the Company's Executive Vice President, Chief
Operating Officer, Chief Financial Officer, Treasurer and Secretary on
January 14, 2000.
(7) Includes stock options to purchase 122,800 shares of Common Stock that
were repriced to $0.40 per share on December 11, 1998 (see "Repricing of
Stock Options").
(8) Includes $415 of compensation associated with long-term disability
insurance and $2,406 of matching 401(k) plan contributions by the Company.
(9) Includes 1997 Performance Warrants to purchase 125,000 shares of Common
Stock that vested upon the Change of Control occurring on January 30, 1998
and were repriced from $2.25 per share to $0.53 per share on July 20,
1998. The 1997 Performance Warrants were not issued under the Company's
stock option plan.
(10) Reflects positions held with the Company's subsidiary, RDST, Inc.
(11) Includes stock options to purchase 49,000 shares of Common Stock that were
repriced to $0.40 per share on December 11, 1998 (see "Repricing of Stock
Options").
(12) Reflects matching 401(k) plan contributions by the Company.
(13) Includes stock options to purchase 30,000 shares of Common Stock that were
repriced to $0.40 per share on December 11, 1998 (see "Repricing of Stock
Options").
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS
Mr. Bryant serves as the chief executive officer of the Company and its
subsidiaries, Canmax Retail Systems, Inc. ("CRSI," through which the software
business was conducted) and RDST, Inc. ("RDST," through which the Company's
prepaid telecommunications business is conducted), pursuant to a written
employment agreement dated July 1, 1998. The employment agreement provides for
certain benefits and protections upon a "Change of Control," which is defined
to occur (i) at any time a person becomes a "beneficial owner" of in excess of
thirty percent of the combined voting power of the outstanding securities of
CRSI or the Company, (ii) if, at any time during the twenty-four month period
following a merger, tender offer, consolidation, sale of assets or contested
election, or any combination thereof, at least a majority of the Company's
Board shall cease to consist of either (a) directors who served prior to such
transaction or (b) directors whose nomination for election by the stockholders
of the Company was approved by at least two-thirds of all directors then
serving, or (iii) at any time the stockholders of the Company approve an
agreement to sell or dispose of all or substantially all of the assets of CRSI
or the Company. The employment agreement also permits the Company to terminate
Mr. Bryant for "Cause", meaning a termination as a result of (a) acts of
dishonesty constituting a felony or intended to result in substantial gain for
personal enrichment at the expense of the Company or its subsidiaries, or (b)
the willful and continued failure to substantially perform his duties and
responsibilities following a demand for substantial performance by the Company.
The employment agreement prohibits Mr. Bryant from engaging in any activities
in competition with the Company or its subsidiaries during the employment term
and prohibits the executive from soliciting any employees, customers or clients
of the Company or its subsidiaries during the 2-year period following any
voluntary termination by the executive or termination for Cause. Ms. Burgess
served as an executive officer of the Company, CRSI and RDST pursuant to an
employment agreement substantially the same as Mr. Bryant's until her
resignation from the Company on January 14, 2000.
The July 1, 1997 employment agreements with Mr. Bryant and Ms. Burgess
provided for the issuance of warrants ("1997 Performance Warrants") to each
executive as additional employment compensation. Each 1997 Performance Warrant
expires 10 years from the date of issuance and, prior to the amendments to the
1997 Performance Warrants in July of 1998, were exercisable at a price of $2.25
per share, the closing price of the
9
Common Stock on July 17, 1997, the date that the Compensation Committee
approved the issuance of such warrants. The vesting of the 1997 Performance
Warrants was conditioned on the Company's achievement of certain financial
targets or upon the occurrence of a Change of Control. The 1997 Performance
Warrants vested on January 30, 1998 as a result of the Company's issuance of
shares of common stock and warrants as consideration for its acquisition of
USCommunication Services, Inc. ("USC"). Effective July 20, 1998, the
Compensation Committee reduced the exercise price of the 1997 Performance
Warrants from $2.25 per share to $0.53 per share, the closing price of the
Common Stock on July 17, 1998, the trading date preceding the date that the
Compensation Committee repriced the 1997 Performance Warrants. In addition, on
such date the Compensation Committee also issued to Mr. Bryant and Ms. Burgess
additional performance warrants (the "1998 Performance Warrants") having an
exercise price of $0.53 per share and a 10 year expiration period, the vesting
of which is dependent either upon the Company's recording of revenues in excess
of $50 million in any period of twelve consecutive months with positive
earnings during such twelve-month period or upon a Change of Control (other
than a Change of Control arising from the sale of the software division). The
1998 Performance Warrant issued to Ms. Burgess expired unexercised on her
resignation from the Company on January 14, 2000.
Mr. Bryant's employment agreement expires June 30, 2001. Mr. Bryant is
entitled to receive an annual base salary of $200,000 and to participate in any
bonus programs established by the Company's Board. Pursuant to his employment
agreement, Mr. Bryant has also been granted 1997 Performance Warrants to
acquire 250,000 shares of Common Stock and 1998 Performance Warrants to acquire
an additional 100,000 shares of Common Stock. Pursuant to the terms of his
agreement, Mr. Bryant may elect to voluntarily terminate his employment within
90 days following a Change of Control and receive a lump sum payment equal to
one year's base salary. Mr. Bryant's employment agreement also provides for the
vesting of all outstanding options and warrants to acquire Common Stock held by
Mr. Bryant upon a Change of Control (other than a Change of Control arising
from the sale of the software division). If Mr. Bryant is terminated during his
employment period without Cause, he will be entitled to continue to receive his
base salary and benefits for a period of two years and an amount equal to any
bonus paid during the preceding 12 months (payable in 24 monthly installments)
in accordance with CRSI's standard payroll cycle; provided, however, that such
amounts shall be payable in a lump sum following a Change of Control.
Pursuant to the terms of her employment agreement, Ms. Burgess was entitled
to receive an annual base salary of $165,000 and to participate in any bonus
programs established by the Company's Board. Pursuant to her employment
agreement, Ms. Burgess was also granted 1997 Performance Warrants to acquire
125,000 shares of Common Stock and 1998 Performance Warrants to acquire 200,000
shares of Common Stock. Ms. Burgess' 1998 Performance Warrants expired
unexercised upon her resignation from the Company on January 14, 2000. Pursuant
to the terms of her agreement, Ms. Burgess was entitled to similar Change of
Control protections and benefits as provided in Mr. Bryant's employment
agreement. Ms. Burgess' employment agreement also provided that she would be
entitled to continue to receive her base salary and benefits for a period of
one year, plus an amount equal to 50% of any bonus paid during preceding 12
months following any termination without Cause. Ms. Burgess' employment
agreement was terminated upon her resignation from the Company on January 14,
2000. Pursuant to the terms of the severance arrangement between Ms. Burgess
and the Company, Ms. Burgess will be entitled to continue to receive her base
salary (of $165,000 annually) in accordance with the Company's regular payroll
cycle for 12 months, and shall continue to receive health benefits from the
Company for a period of 12 months (unless Ms. Burgess obtains other employment
that provides comparable benefits, in which case the Company's obligation to
provide health benefits shall cease).
The Company and RDST are both parties to written employment agreements with
Ivor J. Flannery, the Vice President of Technology of RDST, and Scott R.
Matthews, the Vice President of Telecommunications Development/Sales and
Marketing of RDST. Each employment agreement requires the Company to give at
least six month's prior written notice of any termination of employment without
Cause. The employment agreement for Mr. Flannery provides for an annualized
base salary of $110,000, while the employment agreement with Mr. Matthews
provides for an annualized base salary of $95,000.
10
In the event the Company terminates either Mr. Flannery or Mr. Matthews
without cause upon less than six months prior written notice, such employee is
entitled, for a period of six months from the date of delivery of notice of
termination without cause, (i) to continue to receive the base salary in effect
at the time of termination in accordance with the Company's regular payroll
cycle, (ii) to receive monthly payments equal to one-twelfth of any bonuses
paid during the 12-month period preceding the date of termination, and (iii) to
continue to participate in all regular employee benefit plans of the Company.
Each employment contract provides that if such employee is involuntarily
terminated (other than for "cause") in contemplation of, or within six months
following, a Change of Control, then the employee would be entitled to receive
a lump sum severance payment equal to fifty percent (50%) of the employee's
annualized base salary in effect at the time of the involuntary termination
plus 50% of any bonuses paid during the preceding 12 month period. Each
employment contract also provides that the employee is entitled to continue to
participate in any employee benefit plans for a period of six months following
the date of termination, and that upon a Change of Control any unvested options
held by such employee would be immediately vested and exercisable. In addition,
Mr. Flannery and Mr. Matthews have each been granted 1998 Performance Warrants
to acquire 100,000 shares of Common Stock.
On November 2, 1999, the Company acquired the assets and business operations
of DTI LIQ-CO, Inc., a California corporation formerly known as Dial-Thru
International Corporation. In connection with the acquisition, the Company and
John Jenkins, the sole shareholder of the seller in the transaction, entered
into an employment agreement with a two-year term and an annual base salary of
$175,000. Mr. Jenkins is entitled to participate in any benefit programs
established for the Company's executive officers. Mr. Jenkins is also
guaranteed to receive a $10,000 bonus if the business acquired by the Company
from Mr. Jenkins achieves average monthly revenues in excess of $1.9 million
and average earnings (before interest, taxes, depreciation and amortization) of
in excess of $235,000 during any period of three consecutive months ending on
or before October 31, 2001, and is entitled to receive an additional $20,000 if
the acquired business produces average monthly revenues in excess of $3.8
million and average monthly earnings (before interest, taxes, depreciation and
amortization) in excess of $475,000 during any period of three consecutive
months ending on or before October 31, 2001. Pursuant to the terms of his
agreement, Mr. Jenkins is entitled to terminate his employment voluntarily
within 90 days following a Change of Control and receive one year's annualized
base salary in effect at the time of termination as a lump sum payment.
Further, if Mr. Jenkins is involuntarily terminated other than for Cause in
contemplation of or within two years following a Change of Control, the Company
is obligated to pay to Mr. Jenkins a lump sum severance payment equal to his
annualized base salary in effect at the time of the involuntary termination
plus 50% of any bonuses paid during the preceding 12-month period. Mr. Jenkins'
employment agreement also provides for the vesting of all outstanding options
and warrants to acquire Common Stock held by Mr. Jenkins upon a Change of
Control. If Mr. Jenkins is terminated during his employment period without
Cause, he will be entitled to continue to receive his base salary and benefits
for a period of one year and 50% of any bonuses paid during the preceding 12
months in accordance with the Company's standard payroll cycle.
STOCK OPTIONS
The Board of Directors introduced a stock option plan (the "Stock Option
Plan"), pursuant to a resolution dated March 29, 1990, in the form approved by
the Company's stockholders at an annual general meeting held March 20, 1990.
The Stock Option Plan authorizes the Directors to grant options to purchase
common shares of the Company provided that, when exercised, such options will
not exceed 2.3 million shares of Common Stock and no options will be granted to
any individual director or employee which will, when exercised, exceed 5% of
the issued and outstanding shares of Common Stock. The term of any option
granted under the Stock Option Plan is fixed by the Board of Directors at the
time the options are granted, provided that the exercise period may not be
longer than 10 years from the date of granting. The exercise price of any
options granted under the Stock Option Plan is the fair market value at the
date of grant. On February 26, 1998, the Board of Directors increased the
number of shares issuable under the Stock Option Plan from 1.2 million shares
to 2.3 million shares so that stock options previously granted by the Board in
excess of those permitted by the Stock Option Plan could be covered by the
plan. On August 25, 1998, the Board of Directors approved an amendment to the
11
Stock Option Plan to extend the exercise period of any option holder that
becomes an employee of a party continuing or surviving any merger or acquiring
any material portion of the assets of the Company to two years from the date of
such an event. Prior to these amendments, a former employee would have had a
thirty-day period following their termination of employment without cause in
which to exercise a stock option. On January 14, 2000, the Board of Directors
approved an amendment to the Stock Option Plan to allow option holders to use
stock or other consideration acceptable to the Board of Directors to exercise
stock options, and to allow the Board the flexibility to amend the terms of the
plan and stock option grants. These amendments also clarified the obligations
of option holders desiring to exercise their stock options to provide the
Company with sufficient amounts to pay withholding and other taxes due upon the
exercise of a stock option. As of February 1, 2000, 1,308,668 shares of Common
Stock had been issued under the Stock Option Plan, 896,622 shares remain
subject to outstanding options under the Stock Option Plan, and 94,710 shares
were available under the Stock Option Plan.
On February 24, 2000, the Board of Directors adopted the 2000 Omnibus
Securities Plan (the "2000 Securities Plan"), in the form attached as Annex A
to this Proxy Statement. The 2000 Securities Plan is being submitted to the
stockholders of the Company for approval. See "ITEM 2-Approval of the Company's
2000 Omnibus Securities Plan." The 2000 Securities Plan authorizes the Company
to issue up to one million shares of common stock under the 2000 Securities
Plan, either as bonus or restricted stock or upon the exercise of stock options
granted under the 2000 Securities Plan. As of March 1, 2000, no shares or
options had been issued or granted under the 2000 Securities Plan.
12
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to stock options
pursuant to the Company's stock option plans granted to the Named Executive
Officers during fiscal year ended October 31, 1999.
Individual Grants
------------------------------
Number of % of Total
Securities Options Granted
Underlying to Employees in Exercise Price
Name Options Granted Fiscal Year ($/Sh) Expiration Date
- ---- --------------- --------------- -------------- ---------------
Roger D. Bryant......... 35,000(1) 3.9% $0.40 10/25/00
Roger D. Bryant......... 50,000(1) 5.5% $0.40 12/28/00
Roger D. Bryant......... 50,000(1) 5.5% $0.40 12/28/01
Roger D. Bryant......... 50,000(1) 5.5% $0.40 12/28/02
Roger D. Bryant......... 50,000(1) 5.5% $0.40 12/28/03
Roger D. Bryant......... 10,000(1) 1.1% $0.40 07/22/01
Roger D. Bryant......... 5,000(1) 0.6% $0.40 04/30/02
Roger D. Bryant......... 13,333(1) 1.5% $0.40 04/30/03
Roger D. Bryant......... 13,333(1) 1.5% $0.40 04/30/04
Roger D. Bryant......... 13,334(1) 1.5% $0.40 04/30/05
Roger D. Bryant......... 5,000 0.6% $0.30 01/25/04
Roger D. Bryant......... 5,000 0.6% $0.45 04/20/04
Debra L. Burgess........ 15,800(1) 1.8% $0.40 10/25/00(2)
Debra L. Burgess........ 12,500(1) 1.4% $0.40 12/28/00(2)
Debra L. Burgess........ 12,500(1) 1.4% $0.40 12/28/01(2)
Debra L. Burgess........ 12,500(1) 1.4% $0.40 12/28/02(2)
Debra L. Burgess........ 12,500(1) 1.4% $0.40 12/28/03(2)
Debra L. Burgess........ 19,000(1) 2.1% $0.40 07/22/01(2)
Debra L. Burgess........ 5,000(1) 0.6% $0.40 04/30/02(2)
Debra L. Burgess........ 8,333(1) 0.9% $0.40 04/30/03(2)
Debra L. Burgess........ 8,333(1) 0.9% $0.40 04/30/04(2)
Debra L. Burgess........ 8,334(1) 0.9% $0.40 04/30/05(2)
Debra L. Burgess........ 8,000(1) 0.9% $0.40 11/09/00(2)
Debra L. Burgess........ 5,000(1) 0.6% $0.40 04/25/01(2)
Debra L. Burgess........ 5,000 0.6% $0.30 01/25/04(2)
Debra L. Burgess........ 5,000 0.6% $0.45 04/26/04(2)
Ivor J. Flannery........ 3,750(1) 0.4% $0.40 12/28/00
Ivor J. Flannery........ 3,750(1) 0.4% $0.40 12/28/01
Ivor J. Flannery........ 3,750(1) 0.4% $0.40 12/28/02
Ivor J. Flannery........ 3,750(1) 0.4% $0.40 12/28/03
Ivor J. Flannery........ 5,000(1) 0.6% $0.40 04/30/03
Ivor J. Flannery........ 5,000(1) 0.6% $0.40 04/30/04
Ivor J. Flannery........ 5,000(1) 0.6% $0.40 04/30/05
Ivor J. Flannery........ 19,000(1) 2.1% $0.40 04/28/01
Scott R. Matthews....... 10,000(1) 1.1% $0.40 04/15/04
Scott R. Matthews....... 20,000(1) 2.2% $0.40 07/01/04
- --------
(1) Represents stock options that were repriced to $0.40 per share on December
11, 1998.
(2) Pursuant to the terms of the option plan and the severance agreement with
Ms. Burgess, Ms. Burgess' options expired on February 14, 2000, thirty days
following her resignation from the Company.
The following table sets forth information with respect to the number of
options held at fiscal year end and the aggregate value of in-the-money options
held at fiscal year end by each of the Named Executive Officers. None of the
Named Executive Officers exercised options in fiscal 1999.
13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money Options at
Options at FY-END(#) FY-END(1)
Shares Acquired Value ------------------------- ------------------------
Name on Exercise(#) Realized($) Exercisable Unexercisable Exerisable Unexercisable
---- --------------- ----------- ----------- ------------- ---------- -------------
Roger D. Bryant(2)...... -- -- 550,000 -- $229,000 --
Debra L. Burgess(3)..... -- -- 262,800 -- $108,830 --
Ivor J. Flannery........ -- -- 44,000 5,000 $ 20,900 2,375
Scott R. Matthews....... -- -- 30,000 -- $ 14,250 --
- --------
(1) Calculated by determining the difference between the fair market value of
the Common Stock underlying the Options on October 29, 1999 ($0.875 per
share) and the exercise price of such options.
(2) Includes vested 1997 Performance Warrants to purchase 250,000 shares of
Common Stock. The 1997 Performance Warrants were not issued under the
Company's stock option plan.
(3) Includes vested 1997 Performance Warrants to purchase 125,000 shares of
Common Stock. The 1997 Performance Warrants were not issued under the
Company's stock option plan.
REPRICING OF STOCK OPTIONS
On December 11, 1998, following the Company's sale of its software business,
the Company repriced the outstanding stock options of the officers and
directors that were continuing their employment with the Company with exercise
prices lower than the terms of the original grant. In fiscal 1999, the
Company's Compensation Committee consisted of two outside directors, Mr. Fidler
and Mr. Rinehart. The Compensation Committee was responsible for determining
the compensation of the Company's executive officers and senior management. The
report of the Compensation Committee regarding the repricing of the stock
options during fiscal 1999 is set forth below.
COMPENSATION COMMITTEE REPORT ON STOCK OPTION REPRICING
Following the Company's sale of its software business on December 7, 1998, a
majority of the Company's employees terminated their employment relationship
with the Company and accepted positions with Affiliated Computer Services,
Inc., the purchaser of the software business. The remaining directors and
employees of the Company were presented with the challenge of launching the
Company's telecommunications business. Although the Company had operated as a
software development company for many years, the Company was a new entrant to
the telecommunications industry. The Compensation Committee recommended the
repricing of all outstanding options by the remaining employees and directors
of the Company to properly incentivize these people and to reward their risk in
continuing with what was then essentially a start-up business. In addition, the
Compensation Committee considered the various exercise prices of the then
outstanding stock options relative to the decline in the Company's market value
during the period leading up to and immediately following the sale of the
Company's software business. The Compensation Committee recommended the
repricing of the options held by the employees and directors of the Company to
insure that the prior option grants would continue to provide appropriate
incentives for these people to continue their services with the Company and to
provide management with incentives to maximize shareholder value in light of
the market price for the Common Stock as of the date of repricing. The
Compensation Committee considers equity ownership in the Company a valuable
component in rewarding performance and providing appropriate incentives to
management to encourage the long-term growth and profitability of the Company.
COMPENSATION COMMITTEE:
Robert M. Fidler (Chairman)
W. Thomas Rinehart
14
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors and executive officers and persons who own more than
10% of the Company's common stock to file with the SEC initial reports of
ownership and reports of changes in ownership of common stock and other equity
securities of the Company. Officers, directors and greater than 10%
stockholders are required by SEC regulations to furnish the Company with copies
of all Section 16(a) reports they file. To the Company's knowledge, based
solely on the review of the copies of such reports filed during the fiscal year
ended October 31, 1999, all Section 16(a) filing requirements applicable to its
officers, directors and greater than 10% beneficial owners were complied with,
except that the Form 5 Annual Statement of Beneficial Ownership of Securities
Report to have been filed by Robert M. Fidler on or about December 15, 1999 was
filed thirty days late.
ITEM 2.
APPROVAL OF THE COMPANY'S 2000 OMNIBUS SECURITIES PLAN
On February 24, 2000, the Board of Directors adopted, subject to stockholder
approval, the 2000 Omnibus Securities Plan of Dial-Thru International
Corporation, the text of which is attached as Annex A to this Proxy Statement.
Unless the 2000 Securities Plan is approved by the stockholders on or before
February 24, 2001, it and all awards granted pursuant thereto will, under the
terms of the plan, be null and void. The material features of the 2000
Securities Plan are discussed below, but the description is subject to, and is
qualified in its entirety by, the full text of the 2000 Securities Plan.
Stockholders are urged to read the 2000 Securities Plan in its entirety.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO APPROVE
THE 2000 SECURITIES PLAN.
PURPOSE
The purpose of the 2000 Securities Plan is to promote the interests of the
Company (including its subsidiaries) and its stockholders by using investment
interests in the Company to attract, retain and motivate its management and
other persons, including officers, directors, key employees and certain
consultants, to encourage and reward such persons' contributions to the
performance of the Company and to align their interests with the interests of
the Company's stockholders. In furtherance of this purpose, the 2000 Securities
Plan authorizes the granting of the following types of stock-based awards
(each, an "Award"):
. stock options;
. restricted stock awards;
. unrestricted stock awards;
. performance stock awards; and
. performance option awards.
Each of these types of Awards is described below under "Awards."
A total of 1,000,000 shares of Common Stock (subject to adjustment as
described below) are reserved for issuance under the 2000 Securities Plan.
Shares of Common Stock issued under the 2000 Securities Plan may be authorized
but unissued shares, or shares reacquired by the Company, including shares
purchased on the open market. The unexercised, unearned or yet-to-be acquired
portions of any Award that expire, terminate or are canceled, and shares of
Common Stock issued pursuant to Awards under the 2000 Securities Plan that are
reacquired by the Company pursuant to the terms under which such shares were
issued, will again become available for the grant of further Awards.
15
Nothing in the 2000 Securities Plan or in any Award granted pursuant to it
confers upon any participant any right to continue in the employ of the Company
or to interfere in any way with the right of the Company to terminate the
employment of any person at any time.
The holder of an Award granted pursuant to the 2000 Securities Plan does not
have any of the rights or privileges of a stockholder, except with respect to
shares that have actually been issued. Stockholders are urged to read the 2000
Securities Plan in its entirety.
ADMINISTRATION
The 2000 Securities Plan is administered by the Stock Plan Committee of the
Board of Directors, which must be comprised solely of at least two non-employee
directors, unless the board elects to opt-out of this committee requirement.
The Stock Plan Committee may, but is not required to be, the same as the
Compensation Committee of the Board. The Stock Plan Committee is currently the
same as the Compensation Committee, which is comprised of Messrs. Fidler and
DeMare. The Stock Plan Committee has full authority, in its discretion, to:
. select the persons to whom Awards will be granted;
. grant Awards under the 2000 Securities Plan;
. determine the number of shares to be covered by each Award;
. determine the nature, amount, pricing, timing and other terms of the
Award;
. interpret, construe and implement the provisions of the 2000 Securities
Plan (including the authority to adopt rules and regulations for carrying
out the purposes of the plan); and
. terminate, modify or amend the 2000 Securities Plan.
ELIGIBILITY
Key employees (including employees who are also directors or officers),
directors and certain consultants of the Company are eligible to be granted
Awards under the 2000 Securities Plan at the discretion of the Stock Plan
Committee. In determining the eligibility of any employee, as well as in
determining the number of shares to be covered by an Award and the type or
types of Awards to be made, the Stock Plan Committee may consider:
. the position, responsibilities and importance of the participant to the
Company; and
. such other factors as the Stock Plan Committee deems relevant.
AWARDS
Stock Options. Incentive stock options and non-qualified stock options may
be granted for such number of shares of Common Stock as the Stock Plan
Committee determines, except that no participant may be granted options to
acquire more than 250,000 shares of Common Stock in any one calendar year.
The exercise price for each stock option is determined by the Stock Plan
Committee. Stock options must have an exercise price of at least 100% (or at
least 110% in the case of incentive stock options granted to certain employees
owning more than 10% of the outstanding voting stock) of the fair market value
of the Common Stock on the date the stock option is granted. Under the 2000
Securities Plan, fair market value of the Common Stock for a particular date is
generally the closing price per share for the stock as quoted on the OTC
Bulletin Board on such date.
No stock option may be exercised after the expiration of ten years from the
date of grant (or five years in the case of incentive stock options granted to
certain employees owning more than 10% of the outstanding
16
voting stock). Pursuant to the 2000 Securities Plan, the aggregate fair market
value of the Common Stock for which one or more incentive stock options granted
to any participant may for the first time become exercisable as incentive stock
options under the federal tax laws during any one calendar year shall not
exceed $100,000.
A stock option may be exercised in whole or in part according to the terms
of the applicable stock option agreement by delivery of written notice of
exercise to the Company specifying the number of shares to be purchased. The
exercise price for each stock option may be paid by the participant in cash or
by such other means as the Stock Plan Committee may authorize. Fractional
shares are not to be issued upon exercise of a stock option.
The Stock Plan Committee may, in its discretion, at any time after the grant
of a stock option, accelerate vesting of such option as a whole or in part by
increasing the number of shares then purchasable. However, the Stock Plan
Committee may not increase the total number of shares subject to an option.
Subject to the foregoing and the other provisions of the 2000 Securities
Plan, stock options may be exercised at such times and in such amounts and be
subject to such restrictions and other terms and conditions, if any, as
determined by the Stock Plan Committee.
Restricted Stock. Restricted stock may be awarded by the Stock Plan
Committee subject to such terms, conditions and restrictions as it deems
appropriate. Restrictions may include limitations on voting rights and
transferability of the shares, restrictions based on the duration of employment
or engagement with the Company, and Company or individual performance.
Restricted stock may not be sold or encumbered until all restrictions are
terminated or expire. In this regard, the Secretary of the Company or such
other escrow holder as the Stock Plan Committee may appoint shall retain
physical custody of each certificate representing restricted stock until all
restrictions imposed under the applicable Award agreement shall expire or be
removed.
The Stock Plan Committee may require a participant to pay the Company an
amount at least equal to the par value of the Common Stock awarded to the
participant. Subject to any limitations imposed by the applicable Award
agreement, from the date a participant becomes the holder of record of
restricted stock, a participant has all the rights of a stockholder with
respect to such shares, including the right to vote the shares and to receive
all dividends and other distributions paid with respect to the shares.
The 2000 Securities Plan provides that to the extent the Stock Plan
Committee elects to grant an Award of restricted stock, the Award agreement
applicable thereto shall, except in certain specified situations, provide the
Company with the right to repurchase the restricted stock then subject to
restrictions immediately upon a termination of employment or engagement for any
reason whatsoever at a cash price per share equal to the price paid by the
participant for the restricted stock.
Unrestricted Stock. The Stock Plan Committee may, in its discretion, grant
an Award of unrestricted stock to any eligible participant, pursuant to which
such participant may receive shares of Common Stock free of any vesting
restrictions under the 2000 Securities Plan. The Stock Plan Committee may also
sell shares of unrestricted stock to eligible participants at a purchase price
determined in its discretion. Unrestricted stock may be granted or sold in
respect of past services or other valid consideration, or in lieu of any cash
compensation due to such individual.
Each participant who has made an election to receive shares of unrestricted
stock will have the right to defer receipt of up to 100% of such shares in
accordance with rules established by the Stock Plan Committee for that purpose
and such election shall be effective on the later of six months and one day
from the date of such election or the beginning of the next calendar year. The
deferred unrestricted stock shall be entitled to receive dividend equivalent
rights (as described below) settled in shares of Common Stock.
Performance Stock and Option Awards. The Stock Plan Committee may make
performance stock awards under the 2000 Securities Plan based upon terms and
conditions it deems appropriate. The Stock Plan Committee may make performance
stock or option awards independent of or in connection with the granting of
17
any other Award under the 2000 Securities Plan. The Stock Plan Committee, in
its discretion, shall determine whether and to whom performance stock or option
awards shall be made, the performance criteria applicable under each such
Award, the periods during which performance is to be measured, and all other
limitations and conditions applicable to the awarded shares. The Stock Plan
Committee may utilize any of the following performance criteria when granting
performance stock or option awards:
. net income;
. pre-tax income;
. operating income;
. cash flow;
. earnings per share;
. return on equity;
. return on invested capital or assets;
. cost reductions or savings;
. funds from operations;
. appreciation in the fair market value of the Common Stock;
. earnings before any one or more of the following: interest, taxes,
depreciation or amortization; and
. such other criteria deemed appropriate by the Stock Plan Committee.
A participant receiving a performance stock or option award shall have the
rights of a stockholder only as to shares actually received by the participant
and not with respect to shares subject to the Award but not actually received.
At any time prior to the participant's termination of employment (or other
business relationship) by the Company, the Stock Plan Committee may, in its
discretion, accelerate, waive or, subject to the other provisions of the 2000
Securities Plan, amend any and all performance criteria specified under any
performance stock or option award.
EFFECT OF TERMINATION
Unless provided otherwise in writing (which may be entered into at any time
before or after termination of employment of the participant), in the event of
the termination of a participant's engagement, all of the participant's
unvested Awards shall terminate and all of the participant's unexercised Awards
shall expire and become unexercisable as of the earlier of:
. the date such Awards would have expired in accordance with their terms
had the participant remained employed or otherwise engaged by the
Company;
. six months after the participant's engagement is terminated as a result
of death or permanent disability; and
. ninety days after the participant's engagement is terminated for any
other reason.
The Stock Plan Committee may, in its discretion, designate shorter or longer
periods to exercise Awards following a participant's termination of engagement;
however, any shorter periods shall be effective only if provided for in the
Award agreement or is otherwise consented to by the affected participant.
Awards may only be claimed to the extent that installments thereof had become
exercisable on or before the date of termination of the engagement. Further,
the Stock Plan Committee may, in its discretion, elect to accelerate the
vesting of all or any portion of any Awards that had not vested prior to the
date of termination.
18
NON-TRANSFERABILITY
No Award made under the 2000 Securities Plan may be sold, pledged or
otherwise assigned in any manner other than by will or the laws of descent and
distribution or, subject to the consent of the Stock Plan Committee, pursuant
to a qualified domestic relations order, unless and until such Award has been
exercised, or the shares underlying such Award have been issued, and all
restrictions applicable to such shares have lapsed.
ADJUSTMENT
In general, the aggregate number of shares as to which Awards may be granted
to participants under the 2000 Securities Plan, the number and kind of shares
thereof covered by each outstanding Award, and/or the price per share thereof
in each such Award will, upon a determination of the Stock Plan Committee, all
be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from an increase, decrease or exchange
in the outstanding shares of Common Stock or additional shares or new or
different shares are distributed in respect of such shares of Common Stock,
through merger, consolidation, sale or exchange of all or substantially all of
the assets of the Company, reorganization, recapitalization, reclassification,
stock dividend, stock split, reverse stock split, spin-off or other
distribution with respect to such shares.
Fractional interests will not be issued upon any adjustments made by the
Stock Plan Committee; however, the committee may, in its discretion, make a
cash payment in lieu of any fractional shares of Common Stock issuable as a
result of such adjustments.
CHANGE IN CONTROL
The 2000 Securities Plan provides that, in the event of a change in control
of the Company, outstanding Awards, whether or not vested, shall automatically
terminate unless:
. the 2000 Securities Plan is continued and/or the outstanding Awards
assumed;
. the outstanding Awards are substituted with new awards covering the
securities of a successor entity; or
. the Board of Directors of the Company has otherwise provided for:
. the acceleration of the vesting of the Awards and/or
. the cancellation of the Awards and their automatic conversion into the
right to receive the consideration payable to the holders of the Common
Stock as a result of the change in control
If the Awards terminate because none of the preceding actions were provided
for, then each participant shall have the right, prior to the change in control
event, to exercise the participant's Awards to the fullest extent, including
any installments which had not previously vested.
AMENDMENT AND TERMINATION OF THE PLAN
The 2000 Securities Plan terminates on February 24, 2010. The 2000
Securities Plan provides that the Stock Plan Committee may at any time suspend,
discontinue, revise or amend the plan and the plan as so revised or amended
will govern all Awards granted thereunder, including those granted before such
revision or amendment. The 2000 Securities Plan acknowledges, however, that no
revision or amendment will function to alter, impair or diminish any rights or
obligations under any Award previously granted (without the consent of the
affected participants).
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the principal federal income tax
consequences of the grant and exercise of Awards under present law. This
summary is not intended to be exhaustive and does not describe foreign, state
or local tax consequences. RECIPIENTS OF AWARDS ARE ADVISED TO CONSULT THEIR
19
PERSONAL TAX ADVISORS WITH REGARD TO ALL TAX CONSEQUENCES ARISING WITH RESPECT
TO THE AWARDS.
Tax Withholding. If a distribution is made under this 2000 Securities Plan
in cash, the Company will withhold taxes as required by law. If an Award is
satisfied in the form of shares of the Common Stock, then no shares may be
issued unless and until arrangements satisfactory to the Company have been made
to satisfy any tax withholding obligations applicable with respect to such
Award.
Deductibility of Awards. Company deductions for Awards granted under the
2000 Securities Plan are limited by Section 162(m) of the Internal Revenue Code
of 1986 (the "Code") which generally limits the Company's deduction for non-
performance based compensation to $1.0 million per year for the Company's CEO
and its other four most highly compensated officers. The Company has not paid
any compensation to any executive officers that was not deductible by reason of
the prohibition of Section 162(m).
Incentive Stock Options. Pursuant to the 2000 Securities Plan, employees may
be granted stock options which are intended to qualify as "incentive stock
options" under the provisions of Section 422 of the Code. An optionee will not
recognize any taxable income for federal income tax purposes upon receipt of an
incentive stock option or, generally, at the time of exercise of an incentive
stock option. The exercise of an incentive stock option generally will result
in an increase in an optionee's taxable income for alternative minimum tax
purposes.
If an optionee exercises an incentive stock option and does not dispose of
the shares received in a subsequent "disqualifying disposition" (generally, a
sale, gift or other transfer within two years after the date of grant of the
incentive stock option or within one year after the shares are transferred to
the optionee), upon disposition of the shares any amount realized in excess of
the optionee's tax basis in the shares disposed of will be treated as a long-
term capital gain, and any loss will be treated as a long-term capital loss. In
the event of a disqualifying disposition, the difference between the fair
market value of the shares received on the date of exercise and the exercise
price (limited, in the case of a taxable sale or exchange, to the excess of the
amount realized upon disposition over the optionee's tax basis in the shares)
will be treated as compensation received by the optionee in the year of
disposition. Any additional gain will be taxable as a capital gain and any loss
as a capital loss, which will be long-term or short-term depending on the
length of time the optionee held the shares.
If the exercise price of an incentive stock option is paid in whole or in
part with shares of Common Stock, no income gain or loss generally will be
recognized by the optionee with respect to the shares of Common Stock paid as
the exercise price. However, if such shares of Common Stock were received upon
the exercise of an incentive stock option, the use of those shares as payment
of the exercise price will be considered a disposition for purposes of
determining whether there has been a disqualifying disposition of those shares.
Neither the Company nor any of its subsidiaries will be entitled to a
deduction with respect to shares received by an optionee upon exercise of an
incentive stock option and not disposed of in a disqualifying disposition. If
an amount is treated as compensation received by an optionee because of a
disqualifying disposition, the Company or one of its subsidiaries generally
will be entitled to a corresponding deduction in the same amount for
compensation paid.
Non-Qualified Stock Options. An optionee will not recognize any taxable
income for federal income tax purposes upon receipt of a non-qualified stock
option. Upon the exercise of a non-qualified stock option the amount by which
the fair market value of the shares received, determined as of the date of
exercise, exceeds the exercise price will be treated as compensation received
by the optionee in the year of exercise. If the exercise price of a non-
qualified stock option is paid in whole or in part with shares of Common Stock,
(i) no income, gain or loss will be recognized by the optionee on the receipt
of shares equal in value on the date of exercise to the shares delivered in
payment of the exercise price, and (ii) no income, gain or loss will be
recognized by the optionee with respect to the shares of Common Stock paid as
the exercise price of the option. The fair market value of the remainder of the
shares received upon exercise of the non-qualified stock
20
option, determined as of the date of exercise, less the amount of cash, if any,
paid upon exercise will be treated as compensation income received by the
optionee on the date of exercise of the stock option. The Company or one of its
subsidiaries generally will be entitled to a deduction for compensation paid in
the same amount treated as compensation received by the optionee.
Restricted Stock. A recipient of restricted stock will not recognize any
taxable income for federal income tax purposes in the year of the Award,
provided the shares are subject to restrictions (that is, they are non-
transferable and subject to a substantial risk of forfeiture). However, the
recipient may elect under Section 83(b) of the Code to recognize compensation
income in the year of the Award in an amount equal to the fair market value of
the shares on the date of the Award (less the amount paid by the recipient for
such shares), determined without regard to the restrictions. If the recipient
does not make a Section 83(b) election, the fair market value of the shares on
the date the restrictions lapse (less the amount paid by the recipient for such
shares) will be treated as compensation income to the recipient and will be
taxable in the year the restrictions lapse. The Company or one of its
subsidiaries generally will be entitled to a deduction for compensation paid in
the same amount treated as compensation income to the recipient.
Unrestricted Stock. Any shares of common stock received pursuant to an Award
of unrestricted stock will be treated as compensation income received by the
recipient generally in the year in which the recipient receives such shares. In
each case, the amount of compensation income will equal the fair market value
of the shares of Common Stock on the date compensation income is recognized
(less the amount, if any, paid by the recipient for such shares). The Company
or one of its subsidiaries generally will be entitled to a corresponding
deduction in the same amount for compensation paid.
Performance Stock Awards. A recipient of a performance stock award will not
recognize any taxable income for federal income tax purposes upon receipt of
the Award. Any shares of Common Stock received pursuant to the Award will be
treated as compensation income received by the recipient generally in the year
in which the recipient receives such shares of Common Stock. The amount of
compensation income will equal the fair market value of the shares of Common
Stock on the date compensation income is recognized. The Company or one of its
subsidiaries generally will be entitled to a deduction for compensation paid in
the same amount treated as compensation income to the recipient.
Other Tax Matters. The exercise by a recipient of a stock option, the lapse
of restrictions on restricted stock, or the deemed earnout of performance stock
awards following the occurrence of a change in control, in certain
circumstances, may result in:
(1) a 20% federal excise tax (in addition to federal income tax) to the
recipient on certain payments of Common Stock or cash resulting from
such exercise or deemed earnout of performance stock awards or, in the
case of restricted stock, on all or a portion of the fair market value
of the shares on the date the restrictions lapse; and
(2) the loss of a compensation deduction which would otherwise be allowable
to the Company or one of its subsidiaries as explained above.
AWARDS GRANTED UNDER THE 2000 SECURITIES PLAN
Presently, approximately 50 persons would be eligible to be considered for
Awards under the 2000 Securities Plan.
It is not possible to determine the number of shares that will be awarded
under the 2000 Securities Plan in the future to any particular individual. No
Awards have been granted under the 2000 Securities Plan.
ITEM 3.
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors has approved King, Griffin & Adamson P.C. to serve as
independent auditors of the Company for the fiscal year ending October 31,
2000, and recommends ratification by the stockholders of
21
such appointment. Such ratification requires the affirmative vote of the
holders of a majority of the Common Stock of the Company entitled to vote on
this matter and represented in person or by proxy at the Meeting. Abstentions
on this proposal will have the same legal effect as a vote against this
proposal. Broker non-votes will have no effect on the outcome of the vote on
this proposal. In the event the appointment is not ratified, the Board of
Directors will consider the appointment of other independent auditors. The
Board of Directors may terminate the appointment of King, Griffin & Adamson
P.C. as the Company's independent auditors without the approval of the
stockholders of the Company if the Board of Directors deems such termination
necessary or appropriate. A representative of King, Griffin & Adamson P.C. is
expected to attend the Meeting and will have the opportunity to make a
statement, if such representative desires to do so, and will be available to
respond to appropriate questions.
Ernst & Young LLP ("E&Y") served as independent auditors of the Company for
the fiscal year most recently completed and until July 13, 1998. By letter
dated July 13, 1998, E&Y resigned as the independent accountants of the
Company.
Neither of E&Y's reports the Company's fiscal years ended October 31, 1997
or October 31, 1996 contained any adverse opinion or a disclaimer of opinion,
or were qualified or modified as to uncertainty, audit scope or accounting
principles.
During the Company's fiscal years ended October 31, 1997 and 1996 and the
subsequent interim periods preceding the resignation of E&Y, there were no
disagreements with E&Y on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which
disagreements, if not resolved to the satisfaction of E&Y, would have caused
E&Y to make reference to the subject matter of the disagreement in connection
with its report.
During Company's fiscal years ended October 31, 1997 and 1996 and the
subsequent interim periods preceding the resignation of E&Y, E&Y did not advise
the Company (i) that the internal controls necessary for the Company to develop
reliable financial statements did not exist; (ii) that information had come to
E&Y's attention that led it to no longer be able to rely on management's
representations, or that made it unwilling to be associated with the financial
statements prepared by management; (iii) of the need to expand significantly
the scope of its audits or that information had come to E&Y's attention that if
further investigated may have (A) materially impacted the fairness or
reliability of either a previously issued audit report or the underlying
financial statements, or the financial statements issued or to be issued
covering such fiscal periods subsequent to the date of the most recent
financial statements covered by an audit report (including information that may
have prevented it from rending an unqualified audit report on those financial
statements), or (B) caused it to be unwilling to rely on management's
representations or be associated with the Company's financial statements, and
due to E&Y's resignation (due to audit scope limitations or otherwise) or for
any other reason, E&Y did not so expand the scope of its audit or conduct such
further investigation; or (iv) that information had come to E&Y's attention
that it had concluded materially impacted the fairness or reliability of either
(A) previously issued audit reports or the underlying financial statements, or
(B) the financial statements issued or to be issued covering the fiscal periods
subsequent to the date of the most recent financial statements covered by an
audit report (including information that, unless resolved to E&Y's
satisfaction, would prevent it from rendering an unqualified audit report on
those financial statements), and due to E&Y's resignation, the issue was not
resolved to E&Y's satisfaction prior to its resignation.
On July 15, 1998, the Company engaged King, Griffin & Adamson P.C. ("KG&A")
as its independent principal accountants to audit its financial statements for
the fiscal year ending October 31, 1998. Neither the Company nor anyone on its
behalf has consulted KG&A prior to July 15, 1998 regarding either (a) the
application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
the Company's financial statements, and no written report was provided to
Company or oral advice was provided that KG&A concluded was an important factor
considered by the Company in reaching a decision as to the accounting, auditing
or financial reporting issue, or (b) any
22
matter that was either the subject of a disagreement with E&Y or any event that
would otherwise be reportable arising from the Company's prior relationship
with E&Y.
STOCKHOLDER PROPOSALS
Any stockholder who wishes to submit a proposal for inclusion in the
Company's proxy materials and for presentation at the Company's 2001 Annual
Meeting of Stockholders must forward such proposal to the Secretary of the
Company at the address indicated on the first page of this proxy statement, so
that the Secretary receives it no later than November 28, 2000.
ADVANCE NOTICE REQUIREMENTS
The Company's bylaws require that stockholder proposals and director
nominations by stockholders be made in compliance with certain advance notice
requirements set forth in the Company's bylaws. For business to be properly
brought before an annual meeting by a stockholder, the stockholder must deliver
a written notice to the Secretary of the Company no later than 90 days prior to
the date of the scheduled meeting; however, if less than 100 days' notice or
prior public disclosure of the date of the scheduled meeting is given, notice
by the stockholder must be given no later than the close of business on the
tenth day following the Company's public disclosure or mailing of a notice
setting forth the date of the annual meeting. A stockholder's notice to the
Secretary with regard to an annual meeting shall set forth, as to each matter
that the stockholder proposes to bring before the meeting,
. a brief description of the business desired to be brought before the
meeting and the reasons for conducting such business at the annual
meeting,
. the name and address, as they appear on the Company's books, of the
stockholders supporting the proposal,
. the class and number of shares of the Company that are beneficially owned
by the supporting stockholders on the date of the presenting
stockholder's notice, and
. any material interest of the presenting or supporting stockholders in
such business.
Any stockholder desiring to nominate a person to serve as a director of the
Company must provide written notice of the stockholder's intent to make such
nomination to the Secretary of the Company no less than 90 days prior to the
scheduled meeting; provided that if less than 100 days' notice or a public
disclosure of the date of the scheduled meeting is given, notice by the
stockholder must be given no later than the close of business on the tenth day
following the Company's public disclosure or the mailing of a notice setting
forth the date of the annual meeting. Any notice regarding a stockholder's
proposal to nominate a director for election at an annual meeting must set
forth
. the name, age, business address and residence address of the person or
persons intended to be nominated,
. a representation that the stockholder is a holder of record of stock of
the Company entitled to vote at the meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons
specified in the notice,
. a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons pursuant to
which the nominations are to be made by the stockholder,
. such other information regarding each nominee proposed by the stockholder
that would have been required if it had been included in a proxy
statement filed in accordance with the rules of the Securities and
Exchange Commission, and
. the consent of each nominee to serve as director of the Company if so
elected.
23
The Chairman of the meeting may refuse to bring any business before the
meeting that is not properly brought before the meeting in accordance with the
Company's bylaws. Copies of the Company's bylaws are available upon written
request to the Secretary of the Company. The advance notice requirements for
the Company's annual meetings do not supersede the requirements or conditions
established by the Securities and Exchange Commission for stockholder proposals
to be included in the Company's proxy materials for a meeting of stockholders.
OTHER MATTERS
The Board of Directors is not aware of any other matters that are to be
presented for action at the Meeting. However, if any other matters properly
come before the Meeting or any adjournment(s) thereof, it is intended that the
enclosed proxy will be voted in accordance with the judgment of the persons
voting the proxy.
By Order of the Board of Directors
/ s/ John Jenkins
_____________________________________
John Jenkins
Secretary
March 28, 2000
24
ANNEX A
DIAL-THRU INTERNATIONAL CORPORATION
2000 OMNIBUS SECURITIES PLAN
Adopted Effective February 24, 2000
TABLE OF CONTENTS
ARTICLE 1. PURPOSE OF PLAN............................................... 1
ARTICLE 2. EFFECTIVE DATE AND TERM OF PLAN............................... 1
2.1 Term of Plan.................................................... 1
2.2 Effect on Awards................................................ 1
2.3 Stockholder Approval............................................ 1
ARTICLE 3. SHARES SUBJECT TO PLAN........................................ 1
3.1 Number of Shares................................................ 1
3.2 Source of Shares................................................ 1
3.3 Availability of Unused Shares................................... 1
3.4 Adjustment Provisions........................................... 1
3.5 Substitute Awards............................................... 2
ARTICLE 4. ADMINISTRATION OF PLAN........................................ 2
4.1 Administering Body.............................................. 2
4.2 Authority of Administering Body................................. 3
4.3 Eligibility..................................................... 3
4.4 No Liability.................................................... 3
4.5 Amendments...................................................... 4
4.6 Other Compensation Plans........................................ 4
4.7 Plan Binding on Successors...................................... 4
4.8 References to Successor Statutes, Regulations and Rules......... 4
4.9 Issuances for Compensation Purposes Only........................ 4
4.10 Invalid Provisions.............................................. 4
4.11 Governing Law................................................... 5
ARTICLE 5. GENERAL AWARD PROVISIONS...................................... 5
5.1 Participation in the Plan....................................... 5
5.2 Award Agreements................................................ 5
5.3 Exercise of Awards.............................................. 5
5.4 Payment for Awards.............................................. 5
5.5 No Employment or Other Continuing Rights........................ 6
5.6 Restrictions Under Applicable Laws and Regulations.............. 6
5.7 Additional Conditions........................................... 7
5.8 No Privileges of Stock Ownership................................ 7
5.9 Non-Transferable................................................ 7
5.10 Information to Recipients....................................... 8
5.11 Withholding Taxes............................................... 8
5.12 Legends on Common Stock Certificates............................ 8
5.13 Effect of Termination of Employment on Awards................... 8
Effect of Termination of Engagement on Awards--Non-employees
5.14 Only............................................................ 9
5.15 Transfer; Leave of Absence...................................... 9
5.16 Limits on Awards to Certain Eligible Persons.................... 9
ARTICLE 6. STOCK OPTIONS................................................. 10
6.1 Nature of Stock Options......................................... 10
6.2 Option Exercise Price........................................... 10
6.3 Option Period and Vesting....................................... 10
6.4 Special Provisions Regarding Incentive Stock Options............ 10
6.5 Vesting Based Upon Performance Criteria......................... 11
6.6 Restrictions.................................................... 11
i
ARTICLE 7. RESTRICTED STOCK AWARDS......................................... 11
7.1 Nature of Restricted Stock Awards................................. 11
7.2 Rights as Stockholders............................................ 11
7.3 Restriction....................................................... 11
7.4 Repurchase or Restricted Stock.................................... 12
7.5 Escrows........................................................... 12
7.6 Vesting of Restricted Stock....................................... 12
7.7 Waiver, Deferral and Reinvestment of Dividends.................... 12
ARTICLE 8. UNRESTRICTED STOCK AWARDS....................................... 12
8.1 Grant or Sale of Unrestricted Stock............................... 12
ARTICLE 9. PERFORMANCE STOCK AWARDS........................................ 12
9.1 Nature of Performance Stock Awards................................ 12
9.2 Rights as a Stockholder........................................... 13
9.3 Acceleration, Waiver, Etc......................................... 13
ARTICLE 10. REORGANIZATIONS................................................ 13
10.1 Corporate Transactions Not Involving a Change in Control.......... 13
10.2 Corporate Transactions Involving a Change in Control.............. 13
ARTICLE 11. DEFINITIONS.................................................... 14
ii
DIAL-THRU INTERNATIONAL CORPORATION
2000 OMNIBUS SECURITIES PLAN
1. PURPOSE OF PLAN
The Company has adopted this Plan to promote the interests of the Company,
its Affiliated Entities and its stockholders by using investment interests in
the Company to attract, retain and motivate its management and other persons,
including officers, directors, key employees and certain consultants, to
encourage and reward such persons' contributions to the performance of the
Company and to align their interests with the interests of the Company's
stockholders. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in Article 11.
2. EFFECTIVE DATE AND TERM OF PLAN
2.1 Term of Plan. This Plan became effective as of the Effective Date and
shall continue in effect until the Expiration Date, at which time this Plan
shall automatically terminate.
2.2 Effect on Awards. Awards may be granted during the Plan Term, but no
Awards may be granted after the Plan Term. Notwithstanding the foregoing, each
Award properly granted under this Plan during the Plan Term shall remain in
effect after termination of this Plan until such Award has been exercised,
terminated or expired, as applicable, in accordance with its terms and the
terms of this Plan.
2.3 Stockholder Approval. This Plan shall be approved by the Company's
stockholders within twelve (12) months after the Effective Date. The
effectiveness of any Awards granted prior to such stockholder approval shall be
specifically subject to, and conditioned upon, such stockholder approval.
3. SHARES SUBJECT TO PLAN
3.1 Number of Shares. The maximum number of shares of Common Stock reserved
and available for issuance under this Plan shall be 1,000,000 subject to
adjustment as set forth in Section 3.4.
3.2 Source of Shares. The Common Stock to be issued under this Plan will be
made available, at the discretion of the Board, either from authorized but
unissued shares of Common Stock or from previously issued shares of Common
Stock reacquired by the Company, including without limitation, shares purchased
on the open market.
3.3 Availability of Unused Shares. Shares of Common Stock underlying
unexercised, unearned or yet-to-be acquired portions of any Award granted under
this Plan that expire, terminate or are canceled, and shares of Common Stock
issued pursuant to Awards under this Plan that are reacquired by the Company
pursuant to the terms under which such shares were issued, will again become
available for the grant of further Awards under this Plan. Notwithstanding the
provisions of this Section 3.3, no shares of Common Stock may again be
optioned, granted or awarded if such action would cause an Incentive Stock
Option to fail to qualify as an incentive stock option under Section 422 of the
IRC.
3.4 Adjustment Provisions.
(a) If (i) the outstanding shares of Common Stock of the Company are
increased, decreased or exchanged for a different number or kind of shares
or other securities, or if additional shares or new or different shares or
other securities are distributed in respect of such shares of Common Stock
(or any stock or securities received with respect to such Common Stock),
through merger, consolidation, sale or exchange of all or substantially all
of the assets of the Company, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split, spin-
off or other distribution with respect to such shares of Common Stock (or
any stock or securities received with respect to such Common Stock),
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or (ii) the value of the outstanding shares of Common Stock of the Company
is reduced by reason of an extraordinary cash dividend, an appropriate and
proportionate adjustment may be made in (1) the maximum number and kind of
shares or securities available for issuance under this Plan, (2) the number
and kind of shares or other securities that can be granted to any one
individual Recipient under his or her Awards, (3) the number and kind of
shares or other securities subject to then outstanding Awards under this
Plan, and/or (4) the price for each share or other unit of any other
securities subject to then outstanding Awards under this Plan, without
changing the aggregate exercise price (i.e., the exercise price multiplied
by the number of securities comprising such Awards) as to which such Awards
remain exercisable.
(b) No fractional interests will be issued under this Plan resulting
from any adjustments, but the Administering Body, in its sole discretion,
may make a cash payment in lieu of any fractional shares of Common Stock
issuable as a result of such adjustments.
(c) To the extent any adjustments relate to stock or securities of the
Company, such adjustments shall be made by the Administering Body, whose
determination in that respect shall be final, binding and conclusive.
(d) The grant of Awards pursuant to this Plan shall not affect in any
way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure or to merge or to consolidate or to dissolve, liquidate or sell,
or transfer all or any part of its business or assets.
(e) No adjustment to the terms of an Incentive Stock Option shall be
made unless such adjustment either (i) would not cause such Incentive Stock
Option to lose its status as an incentive stock option under the provisions
of the IRC or (ii) is agreed to in writing by the Administering Body and
the Recipient.
3.5 Substitute Awards. The Administering Body may grant Awards under this
Plan in substitution for stock and stock based Awards held by employees of
another corporation who become employees of the Company or a Subsidiary
Corporation as a result of a merger or consolidation of the employing
corporation with the Corporation or a Subsidiary Corporation or the acquisition
by the Company or a Subsidiary Corporation of property or stock of the
employing corporation. The Administering Body may direct that the substitute
Awards be granted on such terms and conditions as the Administering Body
considers appropriate in the circumstances.
4. ADMINISTRATION OF PLAN
4.1 Administering Body.
(a) Subject to the provisions of Section 4.1(b)(ii), this Plan shall be
administered by the Board or by the Stock Plan Committee of the Board
appointed pursuant to Section 4.1(b). The Stock Plan Committee may (but is
not required to be), in the discretion of the Board, the same as the
Compensation Committee of the Board.
(b)
(i) The Board in its sole discretion may from time to time appoint a
Stock Plan Committee of not less than two (2) Board members to administer
this Plan and, subject to applicable law, to exercise all of the powers,
authority and discretion of the Board under this Plan. The Board may from
time to time increase or decrease (but not below two (2)) the number of
members of the Stock Plan Committee, remove from membership on the Stock
Plan Committee all or any portion of its members, and/or appoint such
person or persons as it desires to fill any vacancy existing on the Stock
Plan Committee, whether caused by removal, resignation or otherwise. The
Board may disband the Stock Plan Committee at any time and thereby revest
in the Board the administration of this Plan.
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(ii) Notwithstanding the foregoing provisions of this Section 4.1(b) to
the contrary, upon becoming and so long as the Company remains an Exchange
Act Registered Company and has not, by action of the Board, elected to opt
out of the provisions of this Section 4.1(b)(ii), (1) the Board shall
appoint the Stock Plan Committee, (2) this Plan shall be administered by
the Stock Plan Committee and (3) each member of the Stock Plan Committee
shall be a Non-employee Director, and, in addition, if Awards are to be
made to persons subject to Section 162(m) of the IRC and such Awards are
intended to constitute Performance-Based Compensation, then each member of
the Stock Plan Committee shall, in addition to being a Non-employee
Director, be an Outside Director.
(iii) The Stock Plan Committee shall report to the Board the names of
Eligible Persons granted Awards, the precise type of Award granted, the
number of shares of Common Stock issuable pursuant to such Award and the
terms and conditions of each such Award.
4.2 Authority of Administering Body.
(a) Subject to the express provisions of this Plan, the Administering
Body shall have the power to interpret and construe this Plan and any
agreements or other documents defining the rights and obligations of the
Company and such Eligible Persons who have been granted Awards hereunder
and thereunder, to determine all questions arising hereunder and
thereunder, to adopt and amend such rules and regulations for the
administration hereof and thereof as it may deem desirable, and otherwise
to carry out the terms of this Plan and such agreements and other
documents. The interpretation and construction by the Administering Body of
any provisions of this Plan or of any Award shall be conclusive and
binding. Any action taken by, or inaction of, the Administering Body
relating to this Plan or any Award shall be within the absolute discretion
of the Administering Body and shall be conclusive and binding upon all
persons. Subject only to compliance with the express provisions hereof, the
Administering Body may act in its absolute discretion in matters related to
this Plan and any and all Awards.
(b) Subject to the express provisions of this Plan, the Administering
Body may from time to time, in its discretion, select the Eligible Persons
to whom, and the time or times at which, such Awards shall be granted, the
nature of each Award, the number of shares of Common Stock that comprise or
underlie each Award, the period for the purchase or exercise of each Award,
as applicable, the Performance Criteria applicable to the Award, if any,
and such other terms and conditions applicable to each individual Award as
the Administering Body shall determine. The Administering Body may grant,
at any time, new Awards to an Eligible Person who has previously received
Awards whether such prior Awards are still outstanding, have previously
been canceled, disposed of or exercised as a whole or in part, as
applicable, or are canceled in connection with the issuance of new Awards.
The Administering Body may grant Awards singly, in combination or in tandem
with other Awards, as it determines in its discretion. Any and all terms
and conditions of the Awards, including the purchase or exercise price, as
the case may be, may be established by the Administering Body without
regard to existing Awards.
(c) Any action of the Administering Body with respect to the
administration of this Plan shall be taken pursuant to a majority vote of
the authorized number of members of the Administering Body or by the
unanimous written consent of its members; provided, however, that (i) if
the Administering Body is the Stock Plan Committee and consists of two (2)
members, then actions of the Administering Body must be unanimous and (ii)
if the Administering Body is the Board, actions taken at a meeting of the
Board shall be valid if approved by directors constituting a majority of
the required quorum for such meeting.
4.3 Eligibility. Only Eligible Persons shall be eligible to receive Awards
under this Plan as shall be selected from time to time by the Administering
Body, in its sole and absolute discretion.
4.4 No Liability. No member of the Board or the Stock Plan Committee or any
designee thereof will be liable for any action or inaction with respect to this
Plan or any Award or any transaction arising under this Plan or any Award,
except in circumstances constituting bad faith of such member.
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4.5 Amendments.
(a) The Administering Body may, insofar as permitted by applicable law,
rule or regulation, from time to time suspend or discontinue this Plan or
revise or amend it in any respect whatsoever, and this Plan as so revised
or amended will govern all Awards hereunder, including those granted before
such revision or amendment; provided, however, that no such revision or
amendment shall alter, impair or diminish any rights or obligations under
any Award previously granted under this Plan, without the written consent
of the Recipient. Without limiting the generality of the foregoing, the
Administering Body is authorized to amend this Plan to comply with or take
advantage of amendments to applicable laws, rules or regulations, including
amendments to the Securities Act, Exchange Act or the IRC or any rules or
regulations promulgated thereunder. No stockholder approval of any
amendment or revision shall be required unless (i) such approval is
required by applicable law, rule or regulation or (ii) an amendment or
revision to this Plan is required by any stock exchange or automated
quotation system then listing the shares of Common Stock.
(b) The Administering Body may, with the written consent of a Recipient,
make such modifications in the terms and conditions of an Award as it deems
advisable. Without limiting the generality of the foregoing, the
Administering Body may, in its discretion with the written consent of
Recipient, at any time and from time to time after the grant of any Award
(i) accelerate or extend the vesting or exercise period of any Award as a
whole or in part, (ii) adjust or reduce the purchase or exercise price, as
applicable, of Awards held by such Recipient by cancellation of such Awards
and granting of Awards at lower purchase or exercise prices or by
modification, extension or renewal of such Awards and (iii) reduce or
otherwise modify the Performance Criteria applicable to any Award. In the
case of Incentive Stock Options, Recipients acknowledge that extensions of
the exercise period may result in the loss of the favorable tax treatment
afforded incentive stock options under Section 422 of the IRC.
(c) Except as otherwise provided in this Plan or in the applicable Award
Agreement, no amendment, revision, suspension or termination of this Plan
will, without the written consent of the Recipient, alter, terminate,
impair or adversely affect any right or obligation under any Award
previously granted under this Plan.
4.6 Other Compensation Plans. The adoption of this Plan shall not affect any
other stock option, securities purchase, incentive or other compensation plans
in effect for the Company, and this Plan shall not preclude the Company from
establishing any other forms of incentive or other compensation for Employees,
Directors, Consultants or others, whether or not approved by stockholders.
4.7 Plan Binding on Successors. This Plan shall be binding upon the
successors and assigns of the Company.
4.8 References to Successor Statutes, Regulations and Rules. Any reference
in this Plan to a particular statute, regulation or rule shall also refer to
any successor provision of such statute, regulation or rule.
4.9 Issuances for Compensation Purposes Only. This Plan constitutes an
"employee benefit plan" as defined in Rule 405 promulgated under the Securities
Act. Awards to eligible Employees or Directors shall be granted for any lawful
consideration, including compensation for services rendered, promissory notes
or otherwise. Awards to Consultants shall be granted only in exchange for bona
fide services rendered by such consultants or advisors and such services must
not be in connection with the offer and sale of securities in a capital-raising
transaction.
4.10 Invalid Provisions. In the event that any provision of this Plan is
found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering any other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect to the same extent as though
the invalid and unenforceable provision were not contained herein.
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4.11 Governing Law. This Agreement shall be governed by and interpreted in
accordance with the internal laws of the State of Delaware, without giving
effect to the principles of the conflicts of laws thereof.
5. GENERAL AWARD PROVISIONS
5.1 Participation in the Plan.
(a) A person shall be eligible to receive Award grants under this Plan
if, at the time of the grant of such Award, such person is an Eligible
Person.
(b) Incentive Stock Options may be granted only to Employees meeting the
employment requirements of Section 422 of the IRC.
(c) Notwithstanding anything to the contrary herein, the Administering
Body may, in order to fulfill the purposes of this Plan, modify grants of
Awards to Recipients who are foreign nationals or employed outside of the
United States to recognize differences in applicable law, tax policy or
local custom.
5.2 Award Agreements.
(a) Each Award granted under this Plan shall be evidenced by an Award
Agreement, which shall be duly executed on behalf of the Company and by the
Recipient or, in the Administering Body's discretion, a confirming
memorandum issued by the Company to the Recipient setting forth such terms
and conditions applicable to such Award as the Administering Body may in
its discretion determine. Award Agreements may but need not be identical
and shall comply with and be subject to the terms and conditions of this
Plan, a copy of which shall be provided to each Recipient and incorporated
by reference into each Award Agreement. Any Award Agreement may contain
such other terms, provisions and conditions not inconsistent with this Plan
as may be determined by the Administering Body.
(b) In case of any conflict between this Plan and any Award Agreement,
this Plan shall control.
(c) In consideration of the granting of an Award under the Plan, if
requested by the Company, the Recipient shall agree, in the Award
Agreement, to remain in the employ of (or to consult for or to serve as a
Non-employee Director of, as applicable) the Company or any Affiliated
Entity for a period of at least one (1) year (or such shorter period as may
be fixed in the Award Agreement or by action of the Administering Body
following grant of the Award) after the Award is granted (or, in the case
of a Non-employee Director, until the next annual meeting of stockholders
of the Company).
5.3 Exercise of Awards. No Award granted hereunder shall be issuable or
exercisable except in respect of whole shares, and fractional share interests
shall be disregarded. Not less than 100 shares of Common Stock (or such other
amount as is set forth in the applicable Award Agreement) may be purchased at
one time and Stock Options, or other Awards, as applicable, must be purchased
or exercised, as applicable, in multiples of 100 unless the number purchased is
the total number at the time available for purchase under the terms of the
Award. An Award shall be deemed to be claimed or exercised when the Secretary
or other designated official of the Company receives appropriate written
notice, on such form acceptable to the Company, from the Recipient, together
with payment of the applicable purchase or exercise price made in accordance
with the Award Agreement and any amounts required under Section 5.11.
Notwithstanding any other provision of this Plan, the Administering Body may
impose, by rule and/or in Award Agreements, such conditions upon the exercise
of Awards (including without limitation conditions limiting the time of
exercise to specified periods) as may be required to satisfy applicable
regulatory requirements, including without limitation Rule 16b-3 and Rule 10b-5
under the Exchange Act, and any amounts required under Section 5.11 or other
applicable section of or regulation under the IRC.
5.4 Payment for Awards.
(a) Awards requiring payment of a purchase or exercise price shall be
payable upon the exercise of such Award pursuant to any Award granted
hereunder by delivery of legal tender of the United States or
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payment of such other consideration as the Administering Body may from time
to time deem acceptable in any particular instance.
(b) The Company may assist any person to whom Awards are granted
hereunder (including without limitation any Employee, Director or
Consultant of the Company) in the payment of the exercise price or other
amounts payable in connection with the receipt or exercise of such Award,
by lending such amounts to such person on such terms and at such rates of
interest and upon such security (if any) as shall be approved by the
Administering Body.
(c) In the discretion of the Administering Body, payments for purchase
or exercise of Awards may be by matured capital stock of the Company (i.e.,
owned longer than six (6) months) delivered in transfer to the Company by
or on behalf of the person exercising the Award and duly endorsed in blank
or accompanied by stock powers duly endorsed in blank, with signatures
guaranteed in accordance with the Exchange Act if required by the
Administering Body (valued at Fair Market Value as of the exercise date),
or such other consideration as the Administering Body may from time to time
in the exercise of its discretion deem acceptable in any particular
instance; provided, however, that the Administering Body may, in the
exercise of its discretion, (i) allow exercise of Stock Options in a
broker-assisted or similar transaction in which the exercise price is not
received by the Company until promptly after exercise, and/or (ii) allow
the Company to loan the applicable purchase or exercise price to the
Recipient, if the purchase or exercise will be followed by a prompt sale of
some or all of the underlying shares and a portion of the sale proceeds is
dedicated to full payment of the purchase or exercise price and amounts
required pursuant to Section 5.11.
5.5 No Employment or Other Continuing Rights. Nothing contained in this Plan
(or in any Award Agreement or in any other agreement or document related to
this Plan or to Awards granted hereunder) shall confer upon any Eligible Person
or Recipient any right to continue in the employ (or other business
relationship) of the Company or any Affiliated Entity or constitute any
contract or agreement of employment or engagement, or interfere in any way with
the right of the Company or any Affiliated Entity to reduce such person's
compensation or other benefits or to terminate the employment or engagement of
such Eligible Person or Recipient, with or without cause. Except as expressly
provided in this Plan or in any Award Agreement pursuant to this Plan, the
Company shall have the right to deal with each Recipient in the same manner as
if this Plan and any such Award Agreement did not exist, including without
limitation with respect to all matters related to the hiring, retention,
discharge, compensation and conditions of the employment or engagement of the
Recipient. Any questions as to whether and when there has been a termination of
a Recipient's employment or engagement, the reason (if any) for such
termination, and/or the consequences thereof under the terms of this Plan or
any statement evidencing the grant of Awards pursuant to this Plan shall be
determined by the Administering Body, and the Administering Body's
determination thereof shall be final and binding.
5.6 Restrictions Under Applicable Laws and Regulations.
(a) All Awards granted under this Plan shall be subject to the
requirement that, if at any time the Company shall determine, in its
discretion, that the listing, registration or qualification of the shares
subject to any such Award granted under this Plan upon any securities
exchange or under any federal, state or foreign law, or the consent or
approval of any government regulatory body, is necessary or desirable as a
condition of, or in connection with, the granting of such Awards or the
issuance, if any, or purchase of shares in connection therewith, such
Awards may not be granted or exercised as a whole or in part unless and
until such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Company. During the term of this Plan, the Company will use reasonable
efforts to seek to obtain from the appropriate regulatory agencies any
requisite qualifications, consents, approvals or authorizations in order to
issue and sell such number of shares of its Common Stock as shall be
sufficient to satisfy the requirements of this Plan. The inability of the
Company to obtain from any such regulatory agency having jurisdiction
thereof the qualifications, consents, approvals or authorizations deemed by
the Company to be necessary for the lawful issuance and sale of
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any shares of its Common Stock hereunder shall relieve the Company of any
liability in respect of the nonissuance or sale of such stock as to which
such requisite authorization shall not have been obtained.
(b) The Company shall be under no obligation to register or qualify the
issuance of Awards or underlying shares of Common Stock under the
Securities Act or applicable state securities laws. Unless the shares of
Common Stock applicable to any such Award have been registered under the
Securities Act and qualified or registered under applicable state
securities laws, the Company shall be under no obligation to issue any
shares of Common Stock covered by any Award unless the Award and underlying
shares of Common Stock, as applicable, may be issued pursuant to applicable
exemptions from such registration or qualification requirements. In
connection with any such exempt issuance, the Administering Body may
require the Recipient to provide a written representation and undertaking
to the Company, satisfactory in form and scope to the Company and upon
which the Company may reasonably rely, that such Recipient is acquiring
such securities for his or her own account as an investment and not with a
view to, or for sale in connection with, the distribution of any such
shares of stock, and that such person will make no transfer of the same
except in compliance with any rules and regulations in force at the time of
such transfer under the Securities Act and other applicable law, and that
if shares of stock are issued without such registration, a legend to this
effect (together with any other legends deemed appropriate by the
Administering Body) may be endorsed upon the securities so issued. The
Company may also order its transfer agent to stop transfers of such
securities. The Administering Body may also require the Recipient to
provide the Company such information and other documents as the
Administering Body may request in order to satisfy the Administering Body
as to the investment sophistication and experience of the Recipient and as
to any other conditions for compliance with any such exemptions from
registration or qualification.
5.7 Additional Conditions. Any Award may also be subject to such other
provisions (whether or not applicable to any other Award or Eligible Person) as
the Administering Body determines appropriate including without limitation (a)
provisions to assist the Recipient in financing the purchase of Common Stock
issuable as a result of such Award, (b) provisions for the forfeiture of or
restrictions on resale or other disposition of shares of Common Stock acquired
under any form of benefit, (c) provisions giving the Company the right to
repurchase shares of Common Stock acquired under any form of benefit in the
event the Recipient elects to dispose of such shares, and (d) provisions to
comply with federal and state securities laws and federal and state income tax
withholding requirements.
5.8 No Privileges of Stock Ownership. Except as otherwise set forth herein,
a Recipient shall have no rights as a stockholder with respect to any shares
issuable or issued in connection with an Award until the date of the receipt by
the Company of all amounts payable in connection with the purchase or exercise,
as applicable, of the Award, the satisfaction or waiver of all applicable
Performance Criteria and performance by the Recipient of all obligations
applicable thereto. Status as an Eligible Person shall not be construed as a
commitment that any Award will be granted under this Plan to an Eligible Person
or to Eligible Persons generally. No person shall have any right, title or
interest in any fund or in any specific asset (including shares of capital
stock) of the Company by reason of any Award granted hereunder. Neither this
Plan (nor any documents related hereto) nor any action taken pursuant hereto
(or thereto) shall be construed to create a trust of any kind or a fiduciary
relationship between the Company and any Person. To the extent that any Person
acquires a right to receive Awards hereunder, such right shall be no greater
than the right of any unsecured general creditor of the Company.
5.9 Non-Transferable.
(a) No Award under the Plan may be sold, pledged, assigned or
transferred in any manner other than by will or the laws of descent and
distribution or, subject to the consent of the Administering Body, pursuant
to a DRO, unless and until such Award has been exercised, or the shares
underlying such Award have been issued, and all restrictions applicable to
such shares have lapsed. No Award or interest or right therein shall be
subject to liability for the debts, contracts or engagements of the
Recipient or his or her successors in interest or shall be subject to
disposition by transfer, alienation, anticipation, pledge,
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encumbrance, assignment or any other means whether such disposition be
voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null
and void and of no effect, except to the extent that such disposition is
permitted by the preceding sentence.
(b) During the lifetime of the Recipient, only he or she may exercise an
Option or other Award (or any portion thereof) granted to him or her under
the Plan, unless it has been disposed of with the consent of the
Administering Body pursuant to a DRO. After the death of the Recipient, any
exercisable portion of an Option or other Award may, prior to the time when
such portion becomes unexercisable under the Plan or the applicable Award
Agreement, be exercised by his personal representative or by any person
empowered to do so under the deceased Recipient's will or under the then
applicable laws of descent and distribution.
5.10 Information to Recipients.
(a) The Administering Body in its sole discretion shall determine what,
if any, financial and other information shall be provided to Recipients and
when such financial and other information shall be provided after giving
consideration to applicable federal and state laws, rules and regulations,
including without limitation applicable federal and state securities laws,
rules and regulations.
(b) The furnishing of financial and other information that is
confidential to the Company shall be subject to the Recipient's agreement
that the Recipient shall maintain the confidentiality of such financial and
other information, shall not disclose such information to third parties,
and shall not use the information for any purpose other than evaluating an
investment in the Company's securities under this Plan. The Administering
Body may impose other restrictions on the access to and use of such
confidential information and may require a Recipient to acknowledge the
Recipient's obligations under this Section 5.10(b) (which acknowledgment
shall not be a condition to the Recipient's obligations under this Section
5.10(b)).
5.11 Withholding Taxes. Whenever the granting, vesting or exercise of any
Award granted under this Plan, or the transfer of any shares issued upon
exercise of any Award, gives rise to tax or tax withholding liabilities or
obligations, the Administering Body shall have the right to require the
Recipient to remit to the Company an amount sufficient to satisfy any federal,
state and local withholding tax requirements prior to issuance of such shares.
The Administering Body may, in the exercise of its discretion, allow
satisfaction of tax withholding requirements by accepting delivery of stock of
the Company (or by withholding a portion of the stock otherwise issuable in
connection with such Awards).
5.12 Legends on Common Stock Certificates. Each certificate representing
shares acquired as a result of any Award granted hereunder shall be endorsed
with all legends, if any, required by applicable federal and state securities
and other laws to be placed on the certificate. The determination of which
legends, if any, shall be placed upon such certificates shall be made by the
Administering Body in its sole discretion and such decision shall be final and
binding.
5.13 Effect of Termination of Employment on Awards--Employees Only.
(a) Termination. Subject to Section 5.13(b), and except as otherwise
provided in a written agreement between the Company and the Recipient,
which may be entered into at any time before or after termination of
employment of the Recipient, in the event of the termination of an Employee
Recipient's employment, all of the Recipient's unvested Awards shall
terminate and all of the Recipient's unexercised Awards shall expire and
become unexercisable as of the earlier of (A) the date such Awards would
have expired in accordance with their terms had the Recipient remained
employed and (B) (i) six (6) months after the Recipient's engagement is
terminated as a result of death or Permanent Disability and (ii) ninety
(90) days after Recipient's engagement is terminated for any other reason.
(b) Alteration of Vesting and Exercise Periods. Notwithstanding anything
to the contrary in Section 5.13(a), the Administering Body may in its
discretion designate shorter or longer periods to claim
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or otherwise exercise Awards following a Recipient's termination of
employment; provided, however, that any shorter periods determined by the
Administering Body shall be effective only if provided for in the
instrument that evidences the grant to the Recipient of such Award or if
such shorter period is agreed to in writing by the Recipient.
Notwithstanding anything to the contrary herein, Awards shall be claimed or
exercisable by a Recipient following such Recipient's termination of
employment only to the extent that installments thereof had become
exercisable on or prior to the date of such termination; and provided,
further, that the Administering Body may, in its discretion, elect to
accelerate the vesting of all or any portion of any Awards that had not
vested on or prior to the date of such termination.
5.14 Effect of Termination of Engagement on Awards--Non-Employees Only.
(a) Termination. Subject to Section 5.14(b), and except as otherwise
provided in a written agreement between the Company and the Recipient,
which may be entered into at any time before or after termination of
engagement of the Recipient, in the event of the termination of any non-
Employee Recipient's engagement (including, Directors and Consultants), all
of the Recipient's unvested Awards shall terminate and all of the
Recipient's unexercised Awards shall expire and become unexercisable as of
the earlier of (A) the date such Awards would have expired in accordance
with their terms had the Recipient remained engaged by the Company and
(B)(i) six (6) months after Recipient's engagement is terminated as a
result of death or Permanent Disability and (ii) ninety (90) days after
Recipient's engagement is terminated for any other reason.
(b) Alteration of Vesting and Exercise Periods. Notwithstanding anything
to the contrary in Section 5.14(a), the Administering Body may, in its
discretion, designate shorter or longer periods to claim or otherwise
exercise Awards following a non-Employee Recipient's termination of
engagement; provided, however, that any shorter periods determined by the
Administering Body shall be effective only if provided for in the
instrument that evidences the grant to the Recipient of such Award or if
such shorter period is agreed to in writing by the Recipient.
Notwithstanding anything to the contrary herein, awards shall be claimed or
exercisable by a Recipient following such Recipient's termination of
engagement only to the extent that the installments thereof had become
exercisable on or prior to the date of such termination; and provided
further, that the Administering Body may, in its discretion, elect to
accelerate the vesting of all or any portion of any Awards that had not
vested on or prior to the date of such termination.
5.15 Transfer; Leave of Absence. For purposes of this Plan, the transfer by
a Recipient to the employment or engagement of (i) the Company from a
Subsidiary Corporation, (ii) from the Company to a Subsidiary Corporation or
(iii) from one Subsidiary Corporation to another Subsidiary Corporation
(including, with respect to Consultants, the assignment between the Company and
a Subsidiary Corporation or between two Subsidiary Corporations, as applicable,
of an agreement pursuant to which such services are rendered) or, with respect
solely to Employees, an approved leave of absence for military service,
sickness, or for any other purpose approved by the Company, shall not be deemed
a termination. In the case of any Employee on an approved leave of absence, the
Administering Body may make such provision respecting continuance of Awards as
the Administering Body in its discretion deems appropriate, except that in no
event shall a Stock Option or other Award be exercisable after the date such
Award would expire in accordance with its terms had the Recipient remained
continuously employed.
5.16 Limits on Awards to Certain Eligible Persons.
(a) Limitations Applicable to Section 162(m)
Participants. Notwithstanding any other provision of this Plan, in order
for the compensation attributable to Awards hereunder to qualify as
Performance-Based Compensation, no one Eligible Person shall be granted any
one or more Awards with respect to more than 250,000 shares of Common Stock
in any one calendar year. The limitation set forth in this Section 5.16
shall be subject to adjustment as provided in Section 3.4 and under Article
11, but only to the extent such adjustment would not affect the status of
compensation attributable to Awards hereunder as Performance-Based
Compensation.
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(b) Limitations Applicable to Section 16 Persons. Notwithstanding any
other provision of this Plan, the Plan, and any Award granted or awarded to
any individual who is then subject to Section 16 of the Exchange Act, shall
be subject to any additional limitations set forth in any applicable
exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable
law, the Plan and Awards granted or awarded hereunder shall be deemed
amended to the extent necessary to conform to such applicable exemptive
rule.
6. STOCK OPTIONS
6.1 Nature of Stock Options. Subject to the limitations provided otherwise
herein, Stock Options may be Incentive Stock Options or Non-qualified Stock
Options.
6.2 Option Exercise Price. The exercise price for each Stock Option shall be
determined by the Administering Body as of the date such Stock Option is
granted. The exercise price shall be no less than the Fair Market Value of the
Common Stock subject to the Option. The Administering Body may, with the
consent of the Recipient and subject to compliance with statutory or
administrative requirements applicable to Incentive Stock Options, amend the
terms of any Stock Option to provide that the exercise price of the shares
remaining subject to the Stock Option shall be reestablished at a price not
less than 100% of the Fair Market Value of the Common Stock on the effective
date of the amendment. No modification of any other term or provision of any
Stock Option that is amended in accordance with the foregoing shall be
required, although the Administering Body may, in its discretion, make such
further modifications of any such Stock Option as are not inconsistent with
this Plan.
6.3 Option Period and Vesting. Stock Options granted hereunder shall vest
and may be exercised as determined by the Administering Body, except that
exercise of such Stock Options after termination of the Recipient's employment
or engagement shall be subject to Section 5.13 or 5.14, as the case may be.
Each Stock Option granted hereunder and all rights or obligations thereunder
shall expire on such date as shall be determined by the Administering Body, but
not later than ten (10) years after the date the Stock Option is granted and
shall be subject to earlier termination as provided herein or in the Award
Agreement. The Administering Body may, in its discretion at any time and from
time to time after the grant of a Stock Option, accelerate vesting of such
Option as a whole or in part by increasing the number of shares then
purchasable, provided that the total number of shares subject to such Stock
Option may not be increased. Except as otherwise provided herein, a Stock
Option shall become exercisable, as a whole or in part, on the date or dates
specified by the Administering Body and thereafter shall remain exercisable
until the expiration or earlier termination of the Stock Option.
6.4 Special Provisions Regarding Incentive Stock Options.
(a) Notwithstanding anything in this Article 6 to the contrary, the
exercise price and vesting period of any Stock Option intended to qualify
as an Incentive Stock Option shall comply with the provisions of Section
422 of the IRC and the regulations thereunder. As of the Effective Date,
such provisions require, among other matters, that (i) the exercise price
must not be less than the Fair Market Value of the underlying stock as of
the date the Incentive Stock Option is granted, and not less than 110% of
the Fair Market Value as of such date in the case of a grant to a
Significant Stockholder; and (ii) that the Incentive Stock Option not be
exercisable after the expiration of five (5) years from the date of grant
in the case of an Incentive Stock Option granted to a Significant
Stockholder.
(b) The aggregate Fair Market Value (determined as of the respective
date or dates of grant) of the Common Stock for which one or more Incentive
Stock Options granted to any Recipient under this Plan (or any other option
plan of the Company or any of its Subsidiary Corporations or affiliates)
may for the first time become exercisable as Incentive Stock Options under
the federal tax laws during any one calendar year shall not exceed
$100,000.
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(c) Any Options granted as Incentive Stock Options pursuant to this Plan
that for any reason fail or cease to qualify as such shall be treated as
Non-qualified Stock Options.
6.5 Vesting Based Upon Performance Criteria. The Administering Body may make
the vesting of any Stock Option grants hereunder subject to the attainment of
specified Performance Criteria. The Administering Body, in its sole discretion,
shall determine whether and to whom Stock Options having vesting based upon the
attainment of specified Performance Criteria shall be made, the Performance
Criteria applicable under each such Stock Option, the periods during which
performance is to be measured, and other limitations and conditions applicable
to such Stock Options; provided, however, that the Administering Body may rely
on the Performance Criteria and other standards applicable to other performance
unit plans of the Company in setting the standards for the vesting of Stock
Options granted under the Plan. At any time prior to a participant's
termination of employment (or other business relationship) by the Company, the
Administering Body may, in its sole discretion, accelerate, waive or, subject
to other provisions of this Plan, amend any and all of the goals, restrictions
or conditions of any Performance Criteria imposed in connection with the grant
of any Stock Option.
6.6 Restrictions. The Administering Body, in its sole and absolute
discretion, may impose such restrictions on the ownership and transferability
of the shares purchasable upon the exercise of an Option as it deems
appropriate. Any such restriction shall be set forth in the respective Award
Agreement and may be referred to on the certificates evidencing such shares.
The Recipient shall give the Company prompt notice of any disposition of shares
of Common Stock required by exercise of an Incentive Stock Option within (i)
two years from the date of granting (including the date the Option is modified,
extended or renewed for purposes of section 424(h) of the IRC) such Option to
such Recipient or (ii) one year after the transfer of such shares to such
Recipient.
7. RESTRICTED STOCK AWARDS
7.1 Nature of Restricted Stock Awards. The Administering Body may grant
Restricted Stock Awards to any Eligible Person. A Restricted Stock Award is an
Award entitling the recipient to acquire, at par value or such other purchase
price determined by the Administering Body (but not less than the par value
thereof unless permitted by applicable state law), shares of Common Stock
subject to such restrictions and conditions as the Administering Body may
determine at the time of grant ("Restricted Stock"). Conditions may be based on
continuing employment (or other business relationships) and/or the achievement
of pre-established Performance Criteria.
7.2 Rights as Stockholders. Subject to Section 7.3, upon delivery of the
shares of the Restricted Stock to the escrow holder pursuant to Section 7.5,
the Recipient shall have, unless otherwise provided by the Administering Body,
all the rights of a stockholder with respect to said shares, subject to the
restrictions in his or her Award Agreement, including the right to receive all
dividends and other distributions paid or made with respect to the shares;
provided, however, that in the discretion of the Administering Body, any
extraordinary distributions with respect to the Common Stock shall be subject
to the restrictions set forth in Section 7.3.
7.3 Restriction. All shares of Restricted Stock issued under this Plan
(including any shares received by holders thereof with respect to shares of
Restricted Stock as a result of stock dividends, stock splits or any other form
of recapitalization) shall, in the terms of each individual Award Agreement, be
subject to such restrictions as the Administering Body shall provide, which
restrictions may include, without limitation, restrictions concerning voting
rights and transferability and restrictions based on duration of employment or
engagement with the Company or its Affiliated Entities, Company performance and
individual performance; provided, however, that, unless the Administering Body
otherwise provides in the terms of the Award Agreement or otherwise, no share
of Restricted Stock granted to a person subject to Section 16 of the Exchange
Act shall be sold, assigned or otherwise transferred until at least six (6)
months and one (1) day have elapsed from the date on which the Restricted Stock
was issued, and provided, further, that, except with respect to shares of
Restricted Stock granted to Section 162(m) participants, by action taken after
the Restricted Stock is
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issued, the Administering Body may, on such terms and conditions as it may
determine to be appropriate, remove any or all of the restrictions imposed by
the terms of the Award Agreement. Restricted Stock may not be sold or
encumbered until all restrictions are terminated or expire.
7.4 Repurchase of Restricted Stock. The Administering Body shall provide in
the terms of each individual Award Agreement that the Company shall have a
right to repurchase from the Recipient the Restricted Stock then subject to
restrictions under the Award Agreement immediately upon a termination of
employment (with or without cause and for any reason whatsoever) or, if
applicable, upon a termination of engagement (with or without cause and for any
reason whatsoever) between the Recipient and the Company, at a cash price per
share equal to the price paid by the Recipient for such Restricted Stock;
provided, however, that except with respect to shares of Restricted Stock
granted to Section 162(m) participants, the Administering Body in its sole and
absolute discretion may provide that no such right of repurchase shall exist in
the event of a termination of employment or engagement following a Change in
Control of the Company or because of the Recipient's death or Permanent
Disability.
7.5 Escrows. The Secretary of the Company or such other escrow holder as the
Administering Body may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the restrictions imposed
under the Award Agreement with respect to the shares evidenced by such
certificate expire or shall have been removed.
7.6 Vesting of Restricted Stock. The Administering Body at the time of grant
shall specify the date or dates and/or attainment of pre-established
Performance Criteria and other conditions on which Restricted Stock shall
become vested, subject to such further rights of the Company or its assigns as
may be specified in the instrument evidencing the Restricted Stock Award.
7.7 Waiver, Deferral and Reinvestment of Dividends. The written instrument
evidencing the Award of Restricted Stock may require or permit the immediate
payment, waiver, deferral or investment of dividends paid on the Restricted
Stock.
8. UNRESTRICTED STOCK AWARDS
8.1 Grant or Sale of Unrestricted Stock.
(a) Grant or Sale of Unrestricted Stock. The Administering Body may, in
its sole discretion, grant (or sell at a purchase price determined by the
Administering Body) an Unrestricted Stock Award to any Eligible Person,
pursuant to which such individual may receive shares of Common Stock free
of any vesting restrictions ("Unrestricted Stock") under the Plan.
Unrestricted Stock Awards may be granted or sold as described in the
preceding sentence in respect of past services or other valid
consideration, or in lieu of any cash compensation due to such individual.
(b) Deferral of Awards. Each Recipient who has made an election to
receive shares of Unrestricted Stock under this Article 8 will have the
right to defer receipt of up to 100% of such shares of Unrestricted Stock
payable to such Recipient in accordance with such rules and procedures as
may from time to time be established by the Administering Body for that
purpose, and such election shall be effective on the later of the date six
(6) months and one (1) day from the date of such election or the beginning
of the next calendar year. The deferred Unrestricted Stock shall be
entitled to receive Dividend Equivalent Rights settled in shares of Common
Stock.
9. PERFORMANCE STOCK AWARDS
9.1 Nature of Performance Stock Awards. A Performance Stock Award is an
Award entitling the Recipient to acquire shares of Common Stock upon the
attainment of specified Performance Criteria. The Administering Body may make
Performance Stock Awards independent of or in connection with the granting of
any other Award under the Plan. Performance Stock Awards may be granted under
the Plan to any Eligible
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Person. The Administering Body, in its sole discretion, shall determine whether
and to whom Performance Stock Awards shall be made, the Performance Criteria
applicable under each such Award, the periods during which performance is to be
measured, and all other limitations and conditions applicable to the awarded
shares; provided, however, that the Administering Body may rely on the
Performance Criteria and other standards applicable to other performance unit
plans of the Company in setting the standards for Performance Stock Awards
under the Plan.
9.2 Rights as a Stockholder. A Recipient receiving a Performance Stock Award
shall have the rights of a stockholder only as to shares actually received by
the Recipient under the Plan and not with respect to shares subject to the
Award but not actually received by the Recipient. A Recipient shall be entitled
to receive a stock certificate evidencing the acquisition of shares of Common
Stock under a Performance Stock Award only upon satisfaction of all conditions
specified in the Award Agreement evidencing the Performance Stock Award (or in
a performance plan adopted by the Administering Body).
9.3 Acceleration, Waiver, Etc. At any time prior to the Participant's
termination of employment (or other business relationship) by the Company, the
Administering Body may, in its sole discretion, accelerate, waive or, subject
to the other provisions of this Plan, amend any and all of the goals,
restrictions or conditions imposed under any Performance Stock Award.
10. REORGANIZATIONS
10.1 Corporate Transactions Not Involving a Change in Control. If the
Company shall consummate any Reorganization not involving a Change in Control
in which holders of shares of Common Stock are entitled to receive in respect
of such shares any securities, cash or other consideration (including without
limitation a different number of shares of Common Stock), each Award
outstanding under this Plan shall thereafter be claimed or exercisable, in
accordance with this Plan, only for the kind and amount of securities, cash
and/or other consideration receivable upon such Reorganization by a holder of
the same number of shares of Common Stock as are subject to that Award
immediately prior to such Reorganization, and any adjustments will be made to
the terms of the Award, and the underlying Award Agreement, in the sole
discretion of the Administering Body as it may deem appropriate to give effect
to the Reorganization.
10.2 Corporate Transactions Involving a Change in Control. As of the
effective time and date of any Change in Control, this Plan and any then
outstanding Awards (whether or not vested) shall automatically terminate unless
(a) provision is made in writing prior to or in connection with such
transaction for the continuance of this Plan and/or for the assumption of such
Awards, or for the substitution for such Awards of new grants covering the
securities of a successor entity or an affiliate thereof, with appropriate
adjustments as to the number and kind of securities and exercise prices, in
which event this Plan and such outstanding Awards shall continue or be
replaced, as the case may be, in the manner and under the terms so provided; or
(b) the Board otherwise has provided or shall provide in writing for such
adjustments as it deems appropriate in the terms and conditions of the then-
outstanding Awards (whether or not vested), including without limitation (i)
accelerating the vesting of outstanding Awards and/or (ii) providing for the
cancellation of Awards and their automatic conversion into the right to receive
the securities, cash and/or other consideration that a holder of the shares
underlying such Awards would have been entitled to receive upon consummation of
such Change in Control had such shares been issued and outstanding immediately
prior to the effective date and time of the Change in Control (net of the
appropriate option exercise prices). If, pursuant to the foregoing provisions
of this Section 10.2, this Plan and the Awards granted hereunder shall
terminate by reason of the occurrence of a Change in Control without provision
for any of the actions described in clause (a) or (b) hereof, then any
Recipient holding outstanding Awards shall have the right, at such time
immediately prior to the consummation of the Change in Control as the Board
shall designate, to convert, claim or exercise, as applicable, the Recipient's
Awards to the full extent not theretofore converted, claimed or exercised,
including any installments which have not yet become vested.
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11. DEFINITIONS
Capitalized terms used in this Plan and not otherwise defined shall have the
meanings set forth below:
"Administering Body" shall mean the Board as long as no Stock Plan Committee
has been appointed and is in effect and shall mean the Stock Plan Committee as
long as the Stock Plan Committee is appointed and in effect.
"Affiliated Entity" means any Parent Corporation or Subsidiary Corporation.
"Award" or "Awards," except where referring to a particular category or
grant under the Plan, shall include Incentive Stock Options, Non-qualified
Stock Options, Restricted Stock Awards, Unrestricted Stock Awards and
Performance Stock Awards.
"Award Agreement" means the agreement or confirming memorandum setting forth
the terms and conditions of the Award.
"Board" means the Board of Directors of the Company.
"Change in Control" means the following and shall be deemed to occur if any
of the following events occur:
(a) Any Person becomes after the Effective Date the beneficial owner
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
30% or more of either the then outstanding shares of Common Stock or the
combined voting power of the Company's then outstanding securities entitled
to vote generally in the election of directors; or
(b) Individuals who, as of the effective date hereof, constitute the
Board of Directors of the Company (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of Directors of the
Company, provided that any individual who becomes a director after the
effective date hereof whose election, or nomination for election by the
Company's stockholders, is approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered to be a
member of the Incumbent Board unless that individual was nominated or
elected by any Person having the power to exercise, through beneficial
ownership, voting agreement and/or proxy, 30% or more of either the
outstanding shares of Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote generally in
the election of directors, in which case that individual shall not be
considered to be a member of the Incumbent Board unless such individual's
election or nomination for election by the Company's stockholders is
approved by a vote of at least two-thirds of the directors then comprising
the Incumbent Board; or
(c) Consummation by the Company of the sale or other disposition by the
Company of all or substantially all of the Company's assets or a
reorganization or merger or consolidation of the Company with any other
Person, other than
(i) a reorganization or merger or consolidation that would result in
the voting securities of the Company outstanding immediately prior
thereto (or, in the case of a reorganization or merger or consolidation
that is preceded or accomplished by an acquisition or series of related
acquisitions by any Person, by tender or exchange offer or otherwise,
of voting securities representing 5% or more of the combined voting
power of all securities of the Company, immediately prior to such
acquisition or the first acquisition in such series of acquisitions)
continuing to represent, either by remaining outstanding or by being
converted into voting securities of another entity, more than fifty
percent (50%) of the combined voting power of the voting securities of
the Company or such other entity outstanding immediately after such
reorganization or merger or consolidation (or series of related
transactions involving such a reorganization or merger or
consolidation), or
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(ii) a reorganization or merger or consolidation effected to
implement a recapitalization or reincorporation of the Company (or
similar transaction) that does not result in a material change in
beneficial ownership of the voting securities of the Company or its
successor; or
(d) Approval by the stockholders of the Company or any order by a court
of competent jurisdiction of a plan of liquidation of the Company.
(e) Notwithstanding the foregoing, a Change in Control of the type
described in paragraph (b), (c) or (d) shall be deemed to be completed on
the date it occurs, and a Change in Control of the type described in
paragraph (a) shall be deemed to be completed as of the date the entity or
group attaining 30% or greater ownership has elected its representatives to
the Company's Board of Directors and/or caused its nominees to become
officers of the Company with the authority to terminate or alter the terms
of any employee's employment.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock of the Company as constituted on the
Effective Date of this Plan, and as thereafter adjusted as a result of any one
or more events requiring adjustment of outstanding Awards under Section 3.4
above.
"Company" means Dial-Thru International Corporation, a Delaware corporation.
"Consultant" means any consultant or advisor if:
(a) the consultant or advisor renders bona fide services to the Company
or any Affiliated Entity;
(b) the services rendered by the consultant or advisor are not in
connection with the offer or sale of securities in a capital-raising
transaction and do not directly or indirectly promote or maintain a market
for the Company's securities; and
(c) the consultant or advisor is a natural person who has contracted
directly with the Company or an Affiliated Entity to render such services.
"Director" means any person serving on the Board of the Company irrespective
of whether such person is also an Employee of the Company.
"DRO" shall mean a domestic relations order as defined by the IRC or Title I
of ERISA or the rules thereunder.
"Effective Date" means February 24, 2000, which is the date this Plan was
adopted by the Board.
"Eligible Person" shall include key Employees, Directors and Consultants of
the Company or of any Affiliated Entity.
"Employee" means any officer or other employee (as defined in accordance
with Section 3401(c) of the IRC) of the Company or any Affiliated Entity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Act Registered Company" means that the Company has any class of
any equity security registered pursuant to Section 12 of the Exchange Act.
"Expiration Date" means the tenth anniversary of the Effective Date.
"Fair Market Value" of a share of the Company's capital stock as of a
particular date shall be: (a) if the stock is listed on an established stock
exchange or exchanges (including for this purpose, the Nasdaq National Market
or SmallCap Market), the closing sale prices of the stock quoted for such date
as reported in the
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transactions index of each such exchange, as published in The Wall Street
Journal and determined by the Administering Body, or, if no sale price was
quoted in any such index for such date, then as of the next preceding date on
which such a sale price was quoted; or (b) if the stock is not then listed on
an exchange or the Nasdaq National Market or SmallCap Market, closing sales
prices per share for the stock as quoted on the National Association of
Securities Dealers over-the-counter bulletin board ("OTCBB") on such date (in
the case of (a) or (b), subject to adjustment as and if necessary and
appropriate to set an exercise price not less than 100% of the Fair Market
Value of the stock on the date an option is granted); or (c) if the stock is
not then listed on an exchange or quoted on the Nasdaq National Market or
SmallCap Market or the OTCBB, an amount determined in good faith by the
Administering Body; provided, however, that when appropriate, the Administering
Body, in determining Fair Market Value of capital stock of the Company, may
take into account such other factors as it may deem appropriate under the
circumstances. Notwithstanding the foregoing, the Fair Market Value of capital
stock for purposes of grants of Incentive Stock Options shall be determined in
compliance with applicable provisions of the IRC.
"Incentive Stock Option" means a Stock Option that qualifies as an incentive
stock option under Section 422 of the IRC, or any successor statute thereto.
"IRC" means the Internal Revenue Code of 1986, as amended.
"Non-employee Director" means any director of the Company who qualifies as a
"non-employee director" within the meaning of Rule 16b-3.
"Non-qualified Stock Option" means a Stock Option that is not an Incentive
Stock Option.
"Outside Director" means an "outside director" as defined in the regulations
adopted under Section 162(m) of the IRC.
"Parent Corporation" means any Parent Corporation as defined in Section
424(e) of the IRC.
"Performance-Based Compensation" means performance-based compensation as
described in Section 162(m) of the IRC. If the amount of compensation an
Eligible Person will receive under any Award is not based solely on an increase
in the value of Common Stock after the date of grant, the Stock Plan Committee,
in order to qualify Awards as performance-based compensation under Section
162(m) of the IRC, can condition the granting, vesting or exercisability or
purchase price of such Awards on the attainment of a preestablished, objective
performance goal. For this purpose, a preestablished, objective performance
goal may include one or more of the following performance criteria: (a) book
value; (b) earnings per share (including earnings before interest, taxes and
amortization); (c) return on equity; (d) total stockholder return; (e) return
on capital; (f) return on assets or net assets; (g) income or net income; (h)
operating income or net operating income; (i) operating margin; (j) attainment
of stated goals related to the Company's capitalization, costs, financial
condition or results of operations; and (k) any other similar performance
criteria.
"Performance Criteria" shall mean the following business criteria with
respect to the Company, any Affiliated Entity or any division or operating
unit: (a) net income, (b) pre-tax income, (c) operating income, (d) cash flow,
(e) earnings per share, (f) return on equity, (g) return on invested capital or
assets, (h) cost reductions or savings, (i) funds from operations, (j)
appreciation in the fair market value of Common Stock, (k) earnings before any
one or more of the following items: interest, taxes, depreciation or
amortization and (l) such other criteria deemed appropriate by the
Administering Body.
"Performance Stock Awards" means Awards granted pursuant to Article 9.
"Permanent Disability" shall mean that the Recipient becomes physically or
mentally incapacitated or disabled so that the Recipient is unable to perform
substantially the same services as the Recipient performed prior to incurring
such incapacity or disability (the Company, at its option and expense, being
entitled to retain
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a physician to confirm the existence of such incapacity or disability, and the
determination of such physician to be binding upon the Company and the
Recipient), and such incapacity or disability continues for a period of three
consecutive months or six months in any 12-month period or such other
period(s) as may be determined by the Stock Plan Committee with respect to any
Award, provided that for purposes of determining the period during which an
Incentive Stock Option may be exercised pursuant to Section 5.13(b)(ii)
hereof, Permanent Disability shall mean "permanent and total disability" as
defined in Section 22(e) of the IRC.
"Person" means any person, entity or group, within the meaning of Section
13(d) or 14(d) of the Exchange Act, but excluding (a) the Company and its
Subsidiary Corporations, (b) any employee stock ownership or other employee
benefit plan maintained by the Company that is qualified under ERISA and (c)
an underwriter or underwriting syndicate that has acquired the Company's
securities solely in connection with a public offering thereof.
"Plan" means this 2000 Omnibus Securities Plan of the Company.
"Plan Term" means the period during which this Plan remains in effect
(commencing on the Effective Date and ending on the Expiration Date).
"Recipient" means a person who has received Awards under this Plan or any
person who is the successor in interest to a Recipient.
"Reorganization" means any merger, consolidation or other reorganization.
"Restricted Stock" shall have the meaning ascribed thereto in Section 7.1.
"Restricted Stock Awards" means any Award granted pursuant to Article 7 of
this Plan.
"Rule 16b-3" means Rule 16b-3 under the Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Significant Stockholder" is an individual who, at the time an Award is
granted to such individual under this Plan, owns more than 10% of the combined
voting power of all classes of stock of the Company or of any Parent
Corporation or Subsidiary Corporation (after application of the attribution
rules set forth in Section 424(d) of the IRC).
"Stock Option" or "Option" means a right to purchase stock of the Company
granted under Article 6 of this Plan to an Eligible Person.
"Stock Plan Committee" means the committee appointed by the Board to
administer this Plan pursuant to Section 4.1.
"Subsidiary Corporation" means any Subsidiary Corporation as defined in
Section 424(f) of the IRC.
"Unrestricted Stock" shall have the meaning ascribed thereto in Section
8.1.
"Unrestricted Stock Award" means any Award granted pursuant to Article 8 of
this Plan.
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DIAL-THRU INTERNATIONAL CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
MAY 15, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints Roger D. Bryant and John
Jenkins, or either of them, as the true and lawful attorneys and proxies of the
undersigned, with full power of substitution, to represent the undersigned and
to vote all of the shares of Common Stock of Dial-Thru International
Corporation (the "Company"), that the undersigned is entitled to vote at the
Annual Meeting of Shareholders of the Company to be held on May 15, 2000 and at
any adjournments thereof.
1.Election of FOR All WITHHOLD
Directors nominees AUTHORITY to
named below vote for all
(except as nominees
marked to the named below
contrary)
Roger D. Bryant, John Jenkins, Nick DeMare, Robert M. Fidler, Lawrence Vierra
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write the nominee's name on the line below.)
--------------------------------------------
2.To approve and adopt the Company's 2000 Omnibus Securities Plan.
FOR AGAINST ABSTAIN
3.To ratify the selection of King, Griffin & Adamson P.C. to serve as
independent public accountants for the Company for the 2000 fiscal year.
FOR AGAINST ABSTAIN
In their discretion, to vote upon such other business as may properly come
before the meeting or any adjournments thereof.
(Continued and to be signed on Reverse Side)
(Continued from Other Side)
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFIC DIRECTIONS ARE GIVEN,
THIS PROXY WILL BE VOTED "FOR" THE ELECTION OF DIRECTORS, "FOR" EACH OF THE
PROPOSALS SET FORTH HEREIN AND IN THE DISCRETION OF THE PROXY HOLDERS ON ALL
OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
[INSERT MAILING Dated: __________________
LABEL]
_________________________
Signature of Shareholder
_________________________
Signature (if jointly
owned)
Please sign exactly as
the name appears on the
certificate or
certificates
representing shares to
be voted by this proxy.
When signing as
executor, administrator,
attorney, trustee or
guardian, please give
full title as such. If a
corporation, please sign
in full corporate name
by president or other
authorized person. If a
partnership, please sign
in partnership name by
authorized person.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED
ENVELOPE.