MYSTIQUE DEVELOPMENTS, INC.
1820 SOUTH ELENA AVENUE, SUITE B
REDONDO BEACH, CALIFORNIA 90277
(310) 546-5741
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 17, 1997
TO THE STOCKHOLDERS:
The Annual Meeting of the Stockholders of MYSTIQUE DEVELOPMENTS, INC., will
be held at 1801 Broadway, Suite 600, Denver, Colorado at 10:30 a.m. on October
17, 1997, for the purpose of considering and voting upon the following:
1. To elect three directors to hold office until the next Annual Meeting of
Stockholders and until their successors are elected and qualified;
2. To approve an Equity Incentive Plan;
3. To approve an Incentive Stock Option Plan;
4. To ratify previously granted stock options;
5. To approve the appointment of Coopers & Lybrand L.L.P. as the Company's
independent auditors;
6. To amend and restate the Company's Articles of Incorporation to change
the name of the Company to Colorado Wyoming Reserve Company and to delete the
provisions permitting cumulative voting in the election of directors; and
7. To transact such other matters as may properly come before the meeting
or any adjournment(s) thereof.
Only stockholders of record as of the close of business on September 22,
1997 (the "Record Date"), will be entitled to notice of or to vote at this
meeting or any postponement or adjournment(s) thereof. A copy of the Annual
Report to Stockholders for the Fiscal Year Ended June 30, 1997, is enclosed with
this Notice and Proxy Statement.
WE HOPE YOU WILL BE ABLE TO ATTEND THE MEETING IN PERSON. WHETHER OR NOT
YOU PLAN TO ATTEND, PLEASE DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ACCOMPANYING, ADDRESSED ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. STOCKHOLDERS WHO ATTEND THE MEETING MAY REVOKE
THEIR PROXIES AND VOTE IN PERSON IF THEY SO DESIRE.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ FAISAL CHAUDHARY
Faisal Chaudhary
Secretary
October 3, 1997
MYSTIQUE DEVELOPMENTS, INC.
PROXY STATEMENT
FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON OCTOBER 17, 1997
INTRODUCTION
This Proxy Statement is furnished to stockholders of Mystique Developments,
Inc., a Wyoming corporation (the "Company"), in connection with the solicitation
of proxies by the Board of Directors of the Company for use at the Annual
Meeting of Stockholders of the Company to be held on October 17, 1997 (the
"Meeting"), and at any adjournment thereof, for the purpose of considering and
voting upon the matters set forth in the Notice of Annual Meeting. The Meeting
will be held at 1801 Broadway, Suite 600, Denver, Colorado at 10:30 a.m. This
Proxy Statement and Proxy are being mailed to Stockholders on or about October
3, 1997.
SHARES OUTSTANDING AND VOTING RIGHTS
Only holders of the Company's $0.01 par value common stock ("Common Stock")
of record as of the close of business on September 22, 1997 (the "Record Date"),
will be entitled to notice of and to vote on matters presented at the Meeting.
On September 22, 1997 there were 1,595,076 shares of Common Stock issued and
outstanding, which constituted all of the outstanding voting securities of the
Company. A majority of the Company's outstanding Common Stock represented in
person or by proxy shall constitute a quorum at the Meeting. WITH RESPECT TO THE
ELECTION OF DIRECTORS (PROPOSAL ONE) THE COMPANY'S ARTICLES OF INCORPORATION
ENTITLE EACH SHARE OF COMMON STOCK TO VOTE CUMULATIVELY. Under cumulative
voting, each share of Common Stock carries the number of votes equal to the
number of directorship vacancies to be filled at the meeting. Thus, each
stockholder has a number of votes equal to the number of shares he owns
multiplied by the number of directorship vacancies. The stockholder may
distribute such votes as he wishes among the candidates for each of the
directorships. If a quorum is present at the Meeting, each directorship vacancy
will be filled by the candidate for such vacancy receiving the greatest number
of affirmative votes. With respect to all corporate matters other than the
election of directors, each share of Common Stock is entitled to one vote and
each fractional share is entitled to a fractional vote on any matters presented
at the Meeting. If a quorum is present at the Meeting, the affirmative vote of a
majority of shares voting is required for the approval of Proposals Two, Three,
Four, Five and Six, and any other proper matter.
If the enclosed Proxy is properly executed and returned, the shares
represented thereby will be voted at the Meeting in the manner specified. If no
specification is made on the Proxy, then the shares shall be voted in accordance
with the recommendations of the Board of Directors. A Proxy may be revoked by a
stockholder at any time prior to the exercise thereof by written notice to the
Secretary of the Company, by submission of another Proxy bearing a later date,
or by attending the Meeting and voting in person.
The accompanying Proxy will also be voted in connection with the
transaction of such other business as may properly come before the Meeting or
any adjournment or adjournments thereof. Management knows of no other matters
other than the matters set forth above to be considered at the Meeting. If,
however, any other matters properly come before the Meeting or any adjournment
or adjournments thereof, the persons named in the accompanying Proxy will vote
such Proxy in accordance with their best judgment on any such matter. The
persons named in the accompanying Proxy will also, if in their judgment it is
deemed to be advisable, vote to adjourn the Meeting from time to time.
PROXY SOLICITATIONS
The cost of proxy solicitation by or on behalf of the Board of Directors
will be borne by the Company. In addition to solicitation of proxies by use of
the mail, certain of the Company's officers, directors or employees may solicit
proxies personally or by telephone. Such officers, directors or employees will
receive no additional remuneration in connection with the solicitation of
proxies. The Company will also, where appropriate, request brokers, dealers,
banks and their nominees to transmit proxy materials to their clients and will
reimburse them for reasonable expenses related thereto.
ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
CUMULATIVE VOTING IS PERMITTED
Under the Company's Articles of Incorporation (the "Articles of
Incorporation"), the number of directors on the Company's Board of Directors is
determined according to the Company's Bylaws. The current number of members of
the Board of Directors is fixed at three. At the Meeting, directors shall be
elected to serve until the Annual Meeting of Stockholders in the year 1998.
Pursuant to the requirements of the Articles of Incorporation, directors
are elected by cumulative voting. This method of voting applies for purposes of
electing directors only. Under cumulative voting, each share of Common Stock
carries the number of votes equal to the number of directorship vacancies to be
filled at the meeting. Thus, each stockholder has a number of votes equal to the
number of shares owned, multiplied by the number of directorship vacancies to be
filled at the meeting. The stockholder may distribute such votes as he wishes
among the candidates for each of the directorships (i.e., the stockholder may
cast all such votes for a single nominee or may distribute them among any two or
more nominees). If a quorum is present at the Meeting, the three nominees who
receive the highest number of votes represented in person or by proxy at the
Meeting shall be the directors who will serve for the next year and until their
successors are elected and qualified.
The board is currently composed of three members. Each of the nominees for
election is currently a director of the Company. The nominees for election as
directors to serve for a one year term expiring at the Annual Meeting of
Stockholders in the year 1998 are Kim M. Fuerst, Faisal Chaudhary and J. Samuel
Butler. All of the nominees have expressed their willingness to serve, but if,
because of circumstances not contemplated, any of the nominees is not available
for election, the Proxy holders named in the enclosed Proxy form intend to vote
for such other person or persons as the Board of Directors may nominate.
Information with respect to each nominee is set forth under the heading entitled
"Management - Directors and Executive Officers."
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" THE
ELECTION AS DIRECTORS OF THE PERSONS NOMINATED.
APPROVAL OF THE COMPANY'S EQUITY INCENTIVE PLAN
(PROPOSAL NO. 2)
The Board of Directors of the Company has adopted, and submits for
shareholder approval, the Mystique Developments, Inc. Equity Incentive Plan. A
majority of the shares represented in person or by proxy which are entitled to
be voted at the Meeting is required for adoption of this proposal. The summary
of the Plan which appears below is qualified by reference to the full text of
the Plan attached hereto as Appendix I.
On April 5, 1997, the Board of Directors of the Company adopted the Plan
under which various equity incentives may be granted to certain key employees,
non-employee directors and consultants of the Company in order to provide such
participants with added incentives to continue in the long-term service of the
Company and to
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attract, retain and motivate such participants by providing an opportunity for
investment in the Company to seek to enhance the profitability and value added
of the Company for the benefit of its shareholders.
One of the purposes of the Plan is to provide performance based incentives.
Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"),
enacted in 1993, generally limits the Company's federal income tax deduction for
compensation paid to the Company's chief executive officer and four other
highest paid executives in excess of $1 million to any executive. However, to
the extent compensation is "performance-based compensation" within the meaning
of Code section 162(m), it will not be subject to the Code section 162(m)
deduction limitation. While the Company does not presently expect to make awards
that would approach the $1 million limit at the time of grant, the value of
stock-based awards could rise substantially over time, and the Company desires
to have maximum flexibility in structuring awards to attain the best tax result
for the Company and the participant. Additionally, as discussed below, some of
the shares of Company stock issued under the Plan may not be performance based.
Set forth below is a description of the features of the Plan.
EQUITY INCENTIVE PLAN SUMMARY
To ensure the availability of equity awards to attract, motivate and retain
employees, on April 5, 1997, the Board of Directors adopted the Plan, subject to
stockholder approval at the Annual Meeting, under which 2,500,000 shares of
Common Stock will be authorized for issuance.
The Plan is intended to advance the interests of the Company by providing
long-term incentives to the Company's employees, non-employee directors and
consultants. Under the Plan, the Company may grant to employees and consultants
awards of stock, restricted stock, stock options, performance shares,
performance units or any combination thereof.
The Plan is administered by the Board of Directors or the Incentive Plan
Committee with respect to all grants. The Incentive Plan Committee, if appointed
by the Board, would consist of at least two "non-employee" and "outside" members
of the Board. Subject to the terms of the Plan, the Board of Directors
determines the persons to whom awards are granted, the type of award granted,
the number of shares granted, the vesting schedule, the type of consideration to
be paid to the Company upon exercise of options and the terms of any option.
Under the Plan, the Company may grant both ISOs intended to qualify under
Section 422 of the Code, and options which are not qualified as incentive stock
options ("non-statutory stock options"). Incentive stock options may be granted
only to persons who are employees of the Company.
ISOs may not be granted at an exercise price of less than the fair market
value of the Common Stock on the date of grant. The exercise price of
non-statutory stock options granted under the Plan may be less than the fair
market value of the Common Stock on the date of grant, such exercise price to be
determined by the Board of Directors. The exercise price of ISOs granted to
holders who own more than 10% of the total combined voting power of all classes
of stock of the Company or any parent or subsidiary corporation of the Company
must be at least 110% of the fair market value of the Common Stock on the date
of grant, and the term of these options cannot exceed five years. In all other
cases, the terms of the options cannot exceed 10 years from the date of grant.
Under the performance award component of the Plan, participants may be
granted an award denominated in shares of Common Stock or in dollars.
Achievement of the performance targets, or multiple performance targets
established by the Board of Directors relating to corporate, group, unit or
individual performance, based upon standards set by the Board of Directors, will
entitle the participant to payment at the full amount specified with respect to
the award, subject to adjustment at the discretion of the Board of Directors in
the event of performance exceeding the minimum performance target, but below the
maximum performance target applicable to such award. Payment may be made in
cash, Common Stock or any combination thereof, as determined by the Board of
Directors, and will be adjusted in the event the participant ceases to be an
employee of the Company before the end of a performance cycle by reason of
death, disability or retirement. The Plan provides for cancellation of all
outstanding awards upon a participant's termination of employment for any other
reason during a performance cycle.
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Under the restricted stock component of the Plan, the Company may, in
selected cases. issue to a plan participant a given number of shares of
restricted stock. Restricted stock under the Plan is Common Stock restricted as
to sale, pending fulfillment of such vesting schedule and employment
requirements as the Board of Directors determines. Prior to the lifting of the
restrictions, the participant will nevertheless be entitled to receive
distributions in liquidation and dividends on, and to vote the shares of, the
restricted stock. The Plan provides for forfeiture of restricted stock for
breach of the conditions of grant. Upon a participant's death, disability or
retirement, all employment period and other applicable restrictions will lapse
and such shares will be fully nonforfeitable.
As of September 22, 1997, there were no outstanding options under the Plan.
The Board of Directors may amend the Plan at any time or may terminate such
plan without the approval of the stockholders. However, stockholder approval is
required for any amendment which increases the number of shares for which
options may be granted, changes the designation of the class of persons eligible
to participate or changes in any material respect the limitation or provisions
of the options subject to the plans. However, no action by the Board of
Directors or stockholders may alter or impair any award previously granted
without the consent of the award holder.
FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
The following is a general summary of the federal income tax consequences
that may apply to recipients of options, performance shares and performance
units under the Plan. Because the application of tax laws may vary according to
individual circumstances, a participant should seek professional tax advice
concerning the tax consequences to him of participating in the Plan, including
the potential application and effect of state, local and foreign tax laws and
estate and gift tax considerations.
Incentive Stock Options ("ISO")
A participant who is granted an ISO recognizes no taxable income when the
ISO is granted. Generally, no taxable income is recognized upon exercise of an
ISO unless the alternative minimum tax applies as described below. Instead, a
participant who exercises an ISO recognizes taxable gain or loss when he sells
his shares. Any gain or loss recognized on the sale of shares acquired upon
exercise of an ISO is taxed as long-term capital gain or loss if the shares have
been held for more than one year after the option was exercised and for more
than two years after the option was granted. In this event, the Company receives
no deduction with respect to the ISO shares. Long-term capital gains of
individuals presently may be taxed at lower rates than ordinary income but the
deductibility of capital losses remains subject to limitation.
If the participant disposes of the shares within one year after the option
was exercised or within two years after the option was granted (a "disqualifying
disposition"), he recognizes ordinary income on disposition of the shares, to
the extent of the difference between the fair market value on the date of
exercise (or potentially up to six months thereafter if the participant is
subject to Section 16(b) of the Exchange Act) and the option price; provided,
however, that in the case of a disposition where a loss, if sustained, would be
recognized for tax purposes, the ordinary income recognized shall not exceed the
net gain upon such disposition. Any additional gain will be taxed as capital
gain. Any loss will be taxed as a capital loss. The Company generally receives a
corresponding deduction in the year of disposition equal to the amount of
ordinary income recognized by the participant.
Effect of Alternative Minimum Tax
Certain taxpayers who have significant tax preferences (and other items
allowed favorable treatment for regular tax purposes) may be subject to the
alternative minimum tax ("AMT"). The AMT is payable only if and to the extent
that it exceeds the taxpayer's regular tax liability, and any AMT paid generally
may be credited against subsequent regular tax liability. For purposes of the
AMT, an ISO is treated as if it were an NSO (see below). Thus, the difference
between fair market value on the date of exercise (or potentially up to six
months thereafter) and the option price is included in income for AMT purposes,
and the taxpayer receives a basis equal to such fair market
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value for subsequent AMT purposes. However, regular tax treatment (see above)
will apply for AMT purposes if a disqualifying disposition, where a loss, if
sustained, would be recognized, occurs in the same taxable year as the options
are exercised.
Non-Statutory Stock Options ("NSO")
The tax treatment of NSOs differs significantly from the tax treatment of
ISOs. No taxable income is recognized when an NSO is granted. but upon the
exercise of an NSO, the difference between the fair market value of the shares
on the date of exercise and the option price is taxable as ordinary income and
generally is deductible by the Company. If the participant is subject to Section
16(b) of the Exchange Act, the date for measuring taxable income potentially may
be deferred for up to six months after the date of exercise (unless the optionee
makes an election under Section 83 (b) of the Code within 30 days after
exercise), in which case the participant will be taxed currently upon exercise
of the NSO in an amount equal to the excess, if any, of the fair market value of
the shares at that time over the option price. Any future appreciation in the
shares will be treated as capital gain upon the sale or exchange of the shares.
Restricted Stock
In general, a participant will not recognize taxable income upon the
receipt of Restricted Stock, because such stock will be subject to restrictions
which constitute a "substantial risk of forfeiture" within the meaning of
Section 83 of the Internal Revenue Code of 1986, as amended (the "Code")
(including, for this purpose, any restriction under Section 16(b) of the
Exchange Act). Rather, the participant will recognize ordinary income at such
time as the restrictions no longer apply, in an amount equal to the fair market
value of the stock at that time over the amount, if any, paid for the stock.
However, a participant may elect to be taxed currently upon receipt of the stock
(without regard to such restrictions) by making an election under Section 83(b)
of the Code within 30 days of receipt. In this event, the participant will
recognize ordinary income at the time of the receipt of the stock in an amount
equal to the excess, if any, of the fair market value of the stock at that time
over the amount, if any, paid for the stock. However, if the shares are later
forfeited, the participant will not be entitled to any loss (except for any
amount actually paid for the stock). Any future appreciation in the stock will
be treated as capital gain upon the sale or exchange of the stock. The amount of
compensation income to the participant generally is deductible by the Company.
Any dividends paid to the participant on Restricted Stock before the stock is
taken into income are ordinary compensation income to the participant and
generally are deductible by the Company.
Performance Shares
A participant will recognize taxable income upon the receipt of stock in
payment of performance shares in an amount equal to the fair market value of the
stock at such time. If the participant is subject to Section 16(b) of the
Exchange Act, the date of taxation potentially may be deferred for up to six
months (unless the participant makes an election under Section 83(b) of the Code
within 30 days after receipt). The amount of income recognized by the
participant generally is deductible by the Company.
Performance Units
A participant will recognize ordinary compensation income on the receipt of
cash in payment of performance units. This amount generally is deductible by the
Company.
Withholding
The Company may withhold any taxes required by any law or regulation of any
governmental authority, whether federal, state or local, in connection with any
stock option or other award under the Plan, including, but not limited to
withholding of any portion of any payment or withholding from other compensation
payable to the participant, unless such person reimburses the Company for such
amount.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AND IN FAVOR OF ADOPTION OF
THE EQUITY INCENTIVE PLAN
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APPROVAL OF INCENTIVE STOCK OPTION PLAN
(PROPOSAL NO. 3)
The Board of Directors of the Company has adopted, and submits for
shareholder approval, the Incentive Stock Option Plan for Kim M. Fuerst,
President of the Company (the "Incentive Plan"). A majority of the shares
represented in person or by proxy which are entitled to be voted at the Meeting
is required for approval of this proposal. The summary of the Incentive Plan
below is qualified by reference to the full text of the Plan, attached hereto as
Appendix II.
On October 18, 1996, the Board of Directors of the Company adopted the
Incentive Plan, subject to stockholder approval at the next Annual Meeting,
under which incentive stock options for the purchase of 500,000 shares of Common
Stock may be granted to Kim M. Fuerst to provide him with added incentives to
continue in the long-term service of the Company and to create in him a more
direct interest in the future success of the Company operations by relating his
incentive compensation to increases in stockholder value. The Incentive Plan is
administered by the Board of Directors, which may amend the Incentive Plan at
any time or may terminate such plan without the approval of the stockholders,
unless such approval is necessary or desirable. However, no such amendment may
adversely affect any award previously granted without the consent of Mr. Fuerst.
Under the Incentive Plan, all stock options are intended to qualify as ISOs
under Section 422 of the Internal Revenue Code of 1986, as amended (the "Code").
ISOs may not be granted at an exercise price of less than the fair market value
of the Common Stock on the date of grant, such exercise price to be determined
by the Board of Directors. On October 18, 1996, the Board of Directors
authorized (subject to stockholder ratification) a grant to Mr. Fuerst of all
500,000 options at an exercise price of $1.00 per share, which the Board
determined to be the fair market value of the Common Stock as of such date. (See
Proposal No. 4.) The options expire on October 17, 2006.
FEDERAL INCOME TAX CONSEQUENCES OF THE INCENTIVE PLAN
The general summary of federal income tax consequences set forth above
relating to Incentive Stock Options, the Effect of Alternative Minimum Tax and
Withholding under the Company's Equity Incentive Plan (Proposal No. 2) is
applicable to the ISOs granted to Mr. Fuerst under the Incentive Plan. Please
refer to such discussions under Proposal No. 2.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AND IN FAVOR OF ADOPTION OF
THE INCENTIVE STOCK OPTION PLAN.
RATIFICATION OF PREVIOUSLY GRANTED STOCK OPTIONS
(PROPOSAL NO. 4)
On October 18, 1996, the Board of Directors authorized grants to Faisal
Chaudhary and J. Samuel Butler, directors of the Company, of nonqualified stock
options to purchase 500,000 and 200,000 shares, respectively, of the Company's
common stock, $.01 par value per share, at an exercise price of $1.00 per share.
The Board of Directors determined that the exercise price of $1.00 per share was
equal to the fair market value of the Company's Common Stock on such date. The
options were immediately exercisable and will expire on October 17, 2006. To
date, however, all such options remain unexercised.
Also on October 18, 1996, the Board of Directors authorized a grant to Kim
M. Fuerst, President and CEO of the Company, of options to purchase 500,000
shares of Common Stock at an exercise price of $1.00 per share, determined by
the Board of Directors to equal the fair market value of the Company's Common
Stock on the date of the option grant. Mr. Fuerst's options are intended to
qualify as incentive stock options under the requirements of
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Section 422 of the Internal Revenue Code of 1986, as amended, and were granted
pursuant to the Incentive Stock Option Plan approved by the Board on October 18,
1996 and submitted herewith for stockholder approval (See Proposal No. 3.). Mr.
Fuerst's options were immediately exercisable and will expire on October 17,
2006. To date, all of Mr. Fuerst's options remain unexercised.
The affirmative vote of the holders of at least a majority of the shares
entitled to vote at the Meeting is required for ratification of the previously
granted stock options in order that the grant transactions comply with the
provisions of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), to preserve their status as exempt under Section 16(b) of the 1934
Act. Mystique stockholders are being asked to ratify these stock option grants
in order to compensate Mystique officers and directors for their dedication and
time expended in the service of Mystique, and their efforts to enhance
stockholder value and realize opportunities.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AND IN FAVOR OF APPROVAL AND
RATIFICATION OF SUCH PREVIOUSLY GRANTED STOCK OPTIONS.
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
(PROPOSAL NO. 5)
Action is to be taken by the stockholders at the Meeting with respect to
the approval of the selection by the Company's Board of Directors of Coopers &
Lybrand L.L.P. to be the independent auditor for the current fiscal year.
Coopers & Lybrand L.L.P. has served as the Company's independent auditor since
1995. Coopers & Lybrand L.L.P. does not have and has not had at any time any
direct or indirect financial interest in the Company and does not have and has
not had at any time any connection with the Company in the capacity of promoter,
underwriter, voting trustee, director, officer or employee. Neither the Company,
nor any officer, director, or associate of the Company, has any interest in
Coopers & Lybrand L.L.P.
A representative of Coopers & Lybrand L.L.P. will be present at the Meeting
and will have the opportunity to make a statement if he or she so desires and
will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" AND IN FAVOR OF THE APPROVAL
OF SUCH APPOINTMENT.
APPROVAL OF THE AMENDMENT AND RESTATEMENT
OF THE COMPANY'S ARTICLES OF INCORPORATION
(PROPOSAL NO. 6)
Action is to be taken by the stockholders at the Meeting with respect to
the approval of an amendment and restatement of the Company's Articles of
Incorporation. The Amended and Restated Articles of Incorporation, attached
hereto as Appendix III, would restate the Company's Articles of Incorporation as
recently amended by the Board of Directors, to eliminate the initial members of
the Board and the initial registered agent. In addition, if approved at the
Meeting, the name of the Company would be changed from Mystique Developments,
Inc. to Colorado Wyoming Reserve Company, and the provisions permitting
cumulative voting in the election of directors would be deleted.
Under cumulative voting, each share of Common Stock carries the number of
votes equal to the number of directorship vacancies to be filled at the meeting.
Thus, each stockholder has a number of votes equal to the number of shares owned
multiplied by the number of directorship vacancies to be filled at the meeting.
The stockholder may distribute such votes as he wishes among the candidates for
each of the directorships (i.e. the stockholder may cast all such votes for a
single nominee or may distribute them among any two or more nominees). If a
quorum is present at a meeting of shareholders, the nominees who receive the
highest number of votes represented in person or
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by proxy at the meeting shall be the directors who will serve for the next year
and until their successors are elected and qualified.
STATEMENT BY THE BOARD OF DIRECTORS IN FAVOR OF THE PROPOSAL TO ELIMINATE
CUMULATIVE VOTING
Cumulative voting permits the election of one or more directors by a
relatively small group of shareholders. Directors so elected by a particular
group might represent the narrow, special interests of that group rather than
the interests of all shareholders. In addition, cumulative voting would
introduce the possibility of factionalism within the Board, impairing the
ability of Board members to work together effectively and discouraging qualified
individuals from serving as directors.
The Board believes that each director should represent the interests of all
of the Company's stockholders. This principle is best served under a system of
straight voting, which provides for the election of each director by a plurality
of the votes cast by the stockholders as a whole rather than by a vote of a
minority constituency.
The use of cumulative voting has declined significantly over the years.
Many companies have eliminated cumulative voting, and most states that once
mandated cumulative voting in corporate elections have repealed that
requirement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE
AMENDMENT AND RESTATEMENT OF THE ARTICLES OF INCORPORATION OF THE COMPANY.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and titles of the executive
officers and the members of the Board of Directors of the Company.
NAME AGE POSITION
Kim M. Fuerst........................... 46 President, Chief Executive Officer and
Director
Faisal Chaudhary........................ 24 Secretary and Director
J. Samuel Butler........................ 52 Director
David L. Milanesi....................... 50 Treasurer, Chief Financial and Accounting
Officer
KIM M. FUERST, 46, has been President, Chief Executive Officer and Director
since September 1996. From 1994 to 1996 he was a Vice President of Van Kasper
and Company, an investment banking firm. From 1989 to 1994 he served in various
capacities at Great Northern Gas Company including Vice President of Finance and
as a Director. From 1982 to 1990 he was President and Chief Operating Officer of
Karen Oil Company which, during this period, drilled over 100 wells and operated
those wells that were producing wells. Over the past 25 years he has worked in a
variety of energy related positions, both as an independent producer and as an
investment banker.
FAISAL CHAUDHARY, 24, has been Secretary and Director since September 1996.
He is a graduate of Chapman University with a degree in Commerce, and is working
on his degree in law on a part time basis.
J. SAMUEL BUTLER, 52, Director, formed Trinity Petroleum Management, LLC
and ST Oil Company in 1996 and serves as President and Chief Executive Officer
of both companies. From 1989 to 1994, he served as Director, President and Chief
Executive Officer of Sterling Energy Corp. and the Chief Executive Officer of
Sheffield Exploration Company, Inc. from September 1990 to May 1996. Also during
the period of September, 1989 to
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December, 1994, Mr. Butler was a founding principal in Petrie Parkman & Co., an
investment banking firm specializing in upstream energy financing. Previously,
he was President and Chief Operating Officer of Columbus Energy Corp. (Denver,
Colorado) from 1985 to 1989, and today, continues to serve as a director
Columbus. Mr. Butler joined the predecessor of Columbus, Consolidated Oil and
Gas, Inc., in 1974 and held the position of Vice President of Exploration,
Senior Vice President of Oil and Gas Operations and Executive Vice President and
Chief Operating Officer. After receiving a degree in Petroleum Engineering from
the Colorado School of Mines, Mr. Butler pursued graduate studies in the field
of Mineral Economics at that institution. He is a past Director of the
Independent Petroleum Association of America and past Director of the
Independent Petroleum Association of the Mountain States.
DAVID L. MILANESI, 50, has been Treasurer, Chief Financial and Accounting
Officer of the Company since July 15, 1997. Mr. Milanesi served as Treasurer and
Chief Financial Officer of Sheffield Exploration Company, Inc. (or its
predecessor, Knight Royalty Corporation) from December 1981 to June 1996, and as
Vice President from September 1990 to June 1996. He served as Controller from
December 1981 until September 1988 and as Secretary from January 1983 to
September 1988 and from March 1991 to June 1996. Mr. Milanesi is a Certified
Public Accountant and has a Masters Degree in Business Administration from
Northwestern University.
All directors of the Company serve one year terms and hold office until the
annual meeting in the year in which their respective terms expire or until their
respective successors are duly elected and qualified. There is no arrangement or
understanding between any director of the Company and any other person or
persons pursuant to which such director was or is to be selected as a director
or a nominee for director. All officers of the Company serve at the discretion
of the Board of Directors and until the next annual meeting of directors of the
Company. There are no family relationships between any director, officer or
person nominated or chosen to become a director or officer and any other such
persons.
COMMITTEES AND MEETINGS
During the fiscal year ended June 30, 1997, the Board of Directors held two
meetings. Faisal Chaudhary attended less than 75% of such meetings. The Board of
Directors of the Company has no established committees to which it has delegated
any authority.
DISCLOSURE OF FILINGS BY INSIDERS
The Company's directors, executive officers and persons who are beneficial
owners of more than 10% of the Company's Common Stock ("10% beneficial owners")
are required to file reports of their holdings and transactions in Common Stock
with the Commission and to furnish the Company with such reports. Based solely
upon its review of the copies the Company has received or upon written
representations it has obtained from certain of these persons, the Company
believes that, as of June 30, 1997, the following directors and/or executive
officers failed to timely file the following forms: Kim M. Fuerst - Form 3, Form
4 and Form 5 reflecting three transactions; J. Samuel Butler Form 3 and Form 5
reflecting two transactions; Faisal Chaudhary - Form 3, Form 4 and Form 5
reflecting three transactions.
CHANGE IN CONTROL
In a private transaction in September 1996, a change of control of the
Company occurred when Kim M. Fuerst and Faisal Chaudhary each purchased 112,500
shares of Common Stock from Mystique Resources Company, reducing the ownership
percentage of Mystique Resources Company from 46.6% to approximately 6%, and
increasing the respective ownership interests of Messrs. Fuerst and Chaudhary
from zero to approximately 20% each at such time.
Concurrently therewith, Dennis R. Staal, President of Mystique Resources
Company, resigned as a director and President of the Company, and Mr. Fuerst and
Mr. Chaudhary were installed as directors, with Mr. Fuerst being appointed
President and Mr. Chaudhary being appointed Secretary and Treasurer. As of
August 15, 1997, each of
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Messrs. Fuerst and Chaudhary beneficially own approximately 29% of the Company's
outstanding Common Stock as a result of stock options granted in October 1996,
subject to shareholder approval at the Meeting. Messrs. Fuerst and Chaudhary are
independent shareholders of the Company, and do not constitute members of a
"control group."
EXECUTIVE COMPENSATION
The following table sets forth the aggregate compensation paid by the
Company to the individuals serving as the Company's chief executive officers for
each of the Company's last three fiscal years:
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
NAME AND POSITION(1) YEAR SALARY($) BONUS($) OTHER($)
Kim M. Fuerst 1997 90,000(2) 0 0
President & CEO
Dennis R. Staal 1996 19,250 0 10,000(3)
former President 1995 21,200 0 0
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(1) No other executive officer of the Company received more than $100,000
during the fiscal year ended June 30, 1997.
(2) Represents payment for nine months of service.
(3) Represents 10,000 shares of Common Stock valued at $1.00 per share that
were issued in August 1996 for service by Mr. Staal to the Company.
OPTION GRANTS
The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended June 30, 1997 to the Company's
named executive officers:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
NUMBER OF
SECURITIES % OF TOTAL OPTIONS
UNDERLYING /SARS GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE EXPIRATION
NAME GRANTED #(1) FISCAL YEAR(2) PRICE($/SH) DATE
Kim M. Fuerst 500,000 50% 1.00 10-17-06
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(1) The options are fully vested and presently exercisable with a 10-year term.
(2) The Company granted options representing 1,000,000 shares to employees in
the fiscal year ended June 30, 1997.
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The following table shows the number of shares covered by all exercisable
and unexercisable stock options held by the named executive officers as of June
30, 1997, as well as the value of unexercised "in the money" options at such
date. No named executive officer exercised stock options during the last fiscal
year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of Securities
Shares Underlying Unexercised Value of Unexercised In the
Acquired Options/SARs at FY-End (#) Money Options/SARs at FY-End
Name on Exercise Exercisable/Unexercisable Exercisable/Unexercisable
Kim M. Fuerst -0- 500,000/0 $1,000,000/0*
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(*) Amount shown represents aggregated fair market value at the share price on
June 30, 1997 of $3.00 per share less aggregate exercise price of $1.00 per
share for the unexercised in-the-money options held. These values have not
been, and may never be, realized. Actual gains, if any, on exercise will
depend on the value of the Common Stock on the date of exercise.
EMPLOYMENT CONTRACTS
The Company entered into an employment contract with Mr. Fuerst on October
1, 1996 pursuant to which Mr. Fuerst would receive a salary of $10,000 per month
and would be granted incentive stock options to purchase up to 500,000 shares of
the Company's common stock at an exercise price of $1.00 per share. The contract
is for an initial term of three years commencing October 1, 1996.
COMPENSATION OF DIRECTORS
The Directors of Mystique, who do not receive annual salaries from
Mystique, receive fees of $100 per Board Meeting attended in person, and
reimbursement for travel expenses. These fees may be increased or decreased from
time to time by a majority vote of the Board of Directors. Other than the fees
mentioned above, no consulting fees, finder's fees or commissions were paid to
Directors of the Company during the fiscal year ended June 30, 1997.
The Board of Directors has approved and is seeking adoption of the Equity
Incentive Plan (the "Plan") in which Directors will be eligible to participate
(see Proposal No. 2). A total of 2,500,000 shares of Common Stock have been
authorized and reserved for issuance under the Plan, subject to adjustments to
reflect changes in the Company's capitalization resulting from stock splits,
stock dividends and similar events, and subject to stockholder approval. The
Plan will be administered by the Board of Directors or an Incentive Plan
Committee appointed by the Board.
Options granted to directors under the Plan will expire ten years from the
date of grant. The option exercise price for non-statutory options will be
determined by the Board of Directors and may be paid in cash or by surrendering
to the Company outstanding Common Stock already owned by the optionee, valued at
fair market value, by delivering a promissory note, or by a combination of such
means of payment, as may be determined by the Board. Options granted pursuant to
the Plan may not be exercised more than three months after the option holder
ceases to be a director of the Company, except that in the event of the death or
permanent and total disability of the option holder, the option may be exercised
by the holder (or his estate, as the case may be), for a period of up to one
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year after the date of death or permanent or total disability. Options granted
to directors under the Plan will be treated as non-statutory stock options under
the Internal Revenue Code.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as to the number of
shares of Common Stock of the Company beneficially owned as of June 30, 1997, by
(i) each person who is known to the Company to be the beneficial owner of more
than 5% of the Common Stock of the Company; (ii) each of the Company's
directors; (iii) the five most highly compensated executive officers, including
the Chief Executive Officer; and (iv) all of the executive officers and
directors of the Company as a group. Except as otherwise indicated, the Company
believes that the beneficial owners of the Common Stock listed below, based on
information furnished by such holders, have sole investment and voting power
with respect to such shares, subject to community property laws, where
applicable.
PERCENTAGE
NUMBER OF BENEFICIALLY
NAME AND ADDRESS SHARES(a) OWNED(b)
Kim M. Fuerst.................................................... 612,500(c) 29%
1820 South Elena Avenue, Suite B
Redondo Beach, California 90277
Faisal Chaudhary................................................. 612,500(d) 29%
1101 Dove Street, Suite 230
Newport Beach, California 92660
J. Samuel Butler................................................. 300,000(e) 16%
1801 Broadway, Suite 600
Denver, Colorado 80202
All Officers and Directors as a Group (4 persons)................ 1,525,000 53%
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(a) All shares are owned both of record and beneficially unless otherwise
specified by footnote to this table.
(b) Based on 1,595,076 shares of Common Stock outstanding at June 30, 1997.
(c) Includes 500,000 shares issuable upon exercise of stock options granted
under an Incentive Stock Option Plan.
(d) Includes 500,000 shares issuable upon exercise of stock options granted
under a Director Stock Option Plan.
(e) Includes 200,000 shares issuable upon exercise of stock options granted
under a Director Stock Option Plan, and 100,000 shares issuable upon
exercise of a warrant granted to Trinity Petroleum Management LLC, in which
Mr. Butler holds a 99% ownership interest.
CERTAIN RELATIONSHIPS AND OTHER TRANSACTIONS
Set forth below is a description of transactions entered into between the
Company and certain of its officers, directors, and/or employees during the last
two fiscal years.
TRANSACTIONS WITH MANAGEMENT AND OTHERS. No Director or Officer of
Mystique, nominee for election as a Director, security holder who is known to
Mystique to own of record or beneficially more than 5%
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of any class of Company's voting securities, or any relative or spouse of any of
the foregoing persons, or any relative of such spouse, who has the same home as
such person or who is a director or officer of any parent or subsidiary of
Mystique, has had any transaction or series of transactions exceeding $60,000
during the last two fiscal years, or has any presently proposed transaction, to
which Mystique was or is to be a party, in which any of such persons had or is
to have any direct or indirect material interest, except the following:
During the fiscal year ended June 30, 1996, the Company received property
valued at $490,000 in exchange for a receivable from a company of which a former
president of the Company served as an officer. During the last fiscal year, the
Company recognized an impairment expense of $453,000 on such property.
On March 15, 1997, the Company entered into an Agreement for Administrative
Services (the "Trinity Agreement") with Trinity Petroleum Management LLC, a
Colorado limited liability company ("Trinity"). Pursuant to the terms of the
Trinity Agreement, Trinity will perform certain management functions for the
Company for a fee of $2000 per month and reimbursement of third party expenses.
The Trinity Agreement is for an initial term of six months, continuing
thereafter on a month-to-month basis, terminable upon 30 days written notice by
either party. The sole owner of Trinity, J. Samuel Butler, serves as a member on
the Board of Directors of the Company. The Agreement was approved by the Board
of Directors, with Mr. Butler abstaining from the vote. Also in connection with
the Agreement, the Company's Board of Directors, with Mr. Butler abstaining,
approved the issuance of a warrant to Trinity for the purchase of up to 100,000
shares of the Company's Common Stock at a price of $1.00 per share.
DATE OF RECEIPT OF STOCKHOLDER PROPOSALS
Stockholder proposals for inclusion in the Proxy Statement for the 1998
Annual Meeting of Stockholders must be received at the principal executive
offices of the Company on or before June 5, 1998.
ANNUAL REPORT ON FORM 10-KSB
1997 Annual Report to Stockholders. The Annual Report on Form 10-KSB for
the fiscal year ended June 30, 1997, is enclosed. The Company's Form 10-KSB,
which includes audited financial statements, does not form any part of the
materials for the solicitation of Proxies.
PLEASE DATE, SIGN AND RETURN THE ENCLOSED PROXY AT YOUR EARLIEST
CONVENIENCE IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED FOR MAILING IN THE
UNITED STATES. A PROMPT RETURN OF YOUR PROXY WILL BE APPRECIATED, AS IT WILL
SAVE THE EXPENSE OF FURTHER MAILING.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Faisal Chaudhary
Faisal Chaudhary
Secretary
October 3, 1997
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PROXY MYSTIQUE DEVELOPMENTS, INC.
PROXY
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The undersigned hereby appoints KIM M. FUERST and J. SAMUEL BUTLER, and
each of them, the proxies of the undersigned, with power of substitution, hereby
revoking any proxy heretofore given, to vote all shares which the undersigned is
entitled to vote at the 1997 Annual Meeting of Stockholders of MYSTIQUE
DEVELOPMENTS, INC. (the "Company") to be held at 1801 Broadway, Suite 600,
Denver, Colorado at 10:30 a.m. on Friday, October 17, 1997, and at any
adjournments thereof, with all powers the undersigned would possess if
personally present, and the undersigned authorizes and instructs said proxies to
vote in their discretion upon any other matters as may properly come before the
meeting, and specifically as follows:
1. - Election of Directors: Kim M. Fuerst, Faisal Chaudhary and J. Samuel
Butler. (To withhold authority to vote for any individual nominee, strike a line
through the nominee's name.) INSTRUCTION: Unless otherwise specified in the
space provided below, this proxy shall authorize the proxies named herein to
cumulate all votes which the undersigned is entitled to cast at the Meeting for,
and to allocate such votes among, one or more of the nominees listed for
election as director, as such proxies shall determine, in their sole and
absolute discretion, in order to maximize the number of such nominees elected to
the Company's Board of Directors. To specify a different method of cumulative
voting for directors, write 'Cumulative For' and the number of Shares and the
name(s) of the nominee(s) in the space provided below.
FOR / / AGAINST / / ABSTAIN / /
2. - To approve the Company's Equity Incentive Plan.
FOR / / AGAINST / / ABSTAIN / /
3. - To approve the Incentive Stock Option Plan.
FOR / / AGAINST / / ABSTAIN / /
4. - To ratify previously granted stock options.
FOR / / AGAINST / / ABSTAIN / /
5. - To approve the appointment of Coopers & Lybrand LLP as independent
auditors of the Company.
FOR / / AGAINST / / ABSTAIN / /
6. - To approve the amendment and restatement of the Company's Articles of
Incorporation to change the name of the Company to Colorado Wyoming Reserve
Company and to delete the provisions permitting cumulative voting in the
election of directors.
FOR / / AGAINST / / ABSTAIN / /
7.- To transact such other matters as may properly come before the meeting.
(CONTINUED ON REVERSE SIDE)
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Date
-----------------------
Signature
------------------
Signature
------------------
Please mark, date and sign as your name appears above and return in the enclosed
envelope. If acting as executor, administrator, trustee, guardian, etc., you
should so indicate when signing. If the signer is a corporation, please sign the
full corporate name by a duly authorized officer. If shares are held jointly,
each stockholder named should sign.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
STOCKHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE VOTED "FOR" THE
ELECTION AS DIRECTORS OF THE NOMINEES LISTED, AND "FOR" PROPOSALS 2 THROUGH 6.
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APPENDIX I
MYSTIQUE DEVELOPMENTS, INC.
EQUITY INCENTIVE PLAN
SECTION 1.
INTRODUCTION
1.1 Establishment. Mystique Developments, Inc., a Wyoming corporation
(hereinafter referred to, together with its Affiliated Corporations (as
defined in subsection 2.1(a)) as the "Company" except where the context
otherwise requires), hereby establishes the Mystique Developments, Inc.
Equity Incentive Plan (the "Plan") for certain key employees, directors and
consultants of the Company.
1.2 Purposes. The purposes of the Plan are to provide the key management
employees selected for participation in the Plan with added incentives to
continue in the long-term service of the Company and to create in such
employees a more direct interest in the future success of the operations of
the Company by relating incentive compensation to increases in stockholder
value, so that the income of the key management employees is more closely
aligned with the income of the Company's stockholders. The Plan is also
designed to attract key employees and directors and to retain and motivate
participating employees and directors by providing an opportunity for
investment in the Company.
SECTION 2.
DEFINITIONS
2.1 Definitions. The following terms shall have the meanings set forth below:
(a) "Affiliated Corporation" means any corporation or other entity
(including but not limited to a partnership) which is affiliated with
Mystique Developments, Inc. through stock ownership or otherwise and
is treated as a common employer under the provisions of Sections
414(b) and (c) of the Internal Revenue Code.
(b) "Award" means a grant made under this Plan in the form of Stock,
Options, Restricted Stock, Performance Shares, or Performance Units.
(c) "Board" means the Board of Directors of the Company.
(d) "Director" means an employee or non-employee member of the Board.
(e) "Effective Date" means the effective date of the Plan, April 5, 1997.
(f) "Eligible Employees" means full-time or part-time key employees
(including, without limitation, officers and directors who are also
employees) of the Company or any Affiliated Corporation or any
division thereof, upon whose judgment, initiative and efforts the
Company is, or will be, important to the successful conduct of its
business. (g) "FAIR MARKET VALUE" MEANS THE OFFICIALLY QUOTED CLOSING
PRICE OF THE STOCK ON THE NASD OTC BULLETIN BOARD SYSTEM ON A
PARTICULAR DATE. IF THERE ARE NO STOCK TRANSACTIONS ON SUCH DATE, THE
FAIR MARKET VALUE SHALL BE DETERMINED ON THE BASIS OF THE WEIGHTED
AVERAGE OF THE OFFICIALLY QUOTED CLOSING PRICE ON THE THREE
IMMEDIATELY PRECEDING DATES ON WHICH STOCK TRANSACTIONS OCCURRED. IF
THE STOCK IS NOT PUBLICLY TRADED OR IF THE INCENTIVE PLAN COMMITTEE
BELIEVES IN GOOD FAITH THAT THE CALCULATIONS PROVIDED FOR HEREIN DO
NOT ACCURATELY REFLECT THE FAIR MARKET VALUE OF THE STOCK, THE FAIR
MARKET VALUE OF THE STOCK ON ANY DATE SHALL BE DETERMINED IN GOOD
FAITH BY THE INCENTIVE PLAN COMMITTEE AFTER SUCH CONSULTATION WITH
OUTSIDE LEGAL, ACCOUNTING AND OTHER EXPERTS AS THE INCENTIVE PLAN
COMMITTEE MAY DEEM ADVISABLE, AND THE COMMITTEE SHALL MAINTAIN A
WRITTEN RECORD OF ITS METHOD OF DETERMINING SUCH VALUE.
(h) "Incentive Plan Committee" means a committee consisting of at least
two "non-employee" and "outside" members of the Board who are
empowered hereunder to take actions in the administration of the Plan.
The Incentive Plan Committee shall be so constituted at all times as
to permit the Plan to comply with Rule 16b-3 or any successor rule
promulgated under the Securities Exchange Act of 1934 (the "1934 Act")
andss.162(m) of the Internal Revenue Code. Members of the Incentive
Plan Committee shall be appointed from time to time by the Board,
shall serve at the pleasure of the Board, and may resign at any time
upon written notice to the Board.
(i) "Incentive Stock Option" means any Option designated as such and
granted in accordance with the requirements of Section 422 of the
Internal Revenue Code.
(j) "Internal Revenue Code" means the Internal Revenue Code of 1986, as it
may be amended from time to time.
(k) "Non-Statutory Option" means any Option other than an Incentive Stock
Option.
(l) "Option" means a right to purchase Stock at a stated price for a
specified period of time.
(m) "Option Price" means the price at which shares of Stock subject to an
Option may be purchased, determined in accordance with subsection
7.2(b).
I-2
(n) "Participant" means an Eligible Employee, Director or consultant to
the Company designated by the Incentive Plan Committee from time to
time during the term of the Plan to receive one or more Awards under
the Plan.
(o) "Performance Cycle" means the period of time as specified by the
Incentive Plan Committee over which Performance Share or Performance
Units are to be earned.
(p) "Performance Shares" means an Award made pursuant to Section 9 which
entitles a Participant to receive Shares, their cash equivalent or a
combination thereof based on the achievement of performance targets
during a Performance Cycle.
(q) "Performance Units" means an Award made pursuant to Section 9 which
entitles a Participant to receive cash, Stock or a combination thereof
based on the achievement of performance targets during a Performance
Cycle.
(r) "Plan Year" means each 12-month period beginning July 1 and ending the
following June 30, except that for the first year of the Plan it shall
begin on the Effective Date and extend to June 30 of the following
year.
(s) "Restricted Stock" Means Stock granted under Section 8 that is subject
to restrictions imposed pursuant to said Section.
(t) "Share" means a share of Stock.
(u) "Stock" means the common stock, $.01 par value, of the Company.
2.2 Gender and Number. Except when otherwise indicated by the context, the
masculine gender shall also include the feminine gender, and the definition
of any term herein in the singular shall also include the plural.
SECTION 3.
PLAN ADMINISTRATION
The Plan shall be administered by the Board or the Incentive Plan
Committee. If the Plan is administered by the Board all references herein to the
Incentive Plan Committee shall be deemed to refer to the Board. In accordance
with the provisions of the Plan, the Incentive Plan Committee shall, in its sole
discretion, and except as specifically set forth herein, select Participants
from among the Eligible Employees and Directors to whom Awards will be granted,
the form of each Award, the amount of each Award and any other terms and
conditions of each Award as the Incentive Plan Committee may deem necessary or
desirable and consistent with the terms of the Plan. The Incentive Plan
Committee shall determine the form or forms of the agreements with Participants
which shall evidence the particular provisions, terms, conditions, rights and
duties of the Company and the Participants with respect to Awards granted
pursuant to the Plan, which provisions need not be identical except as may be
provided herein. The Incentive Plan Committee may from time to time adopt such
rules and regulations for carrying out the purposes of the Plan as it may deem
proper
I-3
and in the best interests of the Company. The Incentive Plan Committee may
correct any defect, supply any omission or reconcile any inconsistency in the
Plan or in any agreement entered into hereunder in the manner and to the extent
it shall deem expedient and it shall be the sole and final judge of such
expediency. No member of the Incentive Plan Committee shall be liable for any
action or determination made in good faith, and all members of the Committee
shall, in addition to their rights as directors, be fully protected by the
Company with respect to any such action, determination or interpretation. The
determination, interpretations and other actions of the Incentive Plan Committee
pursuant to the provisions of the Plan shall be binding and conclusive for all
purposes and on all persons.
SECTION 4.
STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. Initially, 2,500,000 Shares are authorized for issuance
under the Plan in accordance with the provisions of the Plan and subject to
such restrictions or other provisions as the Incentive Plan Committee may
from time to time deem necessary. The Shares may be divided among the
various Plan components as the Incentive Plan Committee shall determine,
all of which shall be available for grant as Incentive Stock Options under
the Plan. Shares which may be issued upon the exercise of Options shall be
applied to reduce the maximum number of Shares remaining available for use
under the Plan. The Company shall at all times during the term of the Plan
and while any Options are outstanding retain as authorized and unissued
Stock, or as treasury Stock, at least the number of Shares from time to
time required under the provisions of the Plan, or otherwise assure itself
of its ability to perform its obligations hereunder.
4.2 Unused and Forfeited Stock. Any Shares that are subject to an Award under
this Plan which are not used because the terms and conditions of the Award
are not met, including any Shares that are subject to an Option which
expires or is terminated for any reason, any Shares which are used for full
or partial payment of the purchase price of Shares with respect to which an
Option is exercised and any Shares retained by the Company pursuant to
Section 15.2 shall automatically become available for use under the Plan.
4.3 Adjustments for Stock Split, Stock Dividend, Etc. If the Company shall at
any time increase or decrease the number of its outstanding Shares of Stock
or change in any way the rights and privileges of such Shares by means of
the payment of a stock dividend or any other distribution upon such Shares
payable in Stock, or through a stock split, subdivision, consolidation,
combination, reclassification or recapitalization involving the Stock, then
in relation to the Stock that is affected by one or more of the above
events, the numbers, rights and privileges of the following shall be
increased, decreased or changed in like manner as if they had been issued
and outstanding, fully paid and nonassessable at the time of such
occurrence: (i) the shares of Stock as to which Awards may be granted under
the Plan; and (ii) the Shares of Stock then included in each outstanding
Option, Performance Share or Performance Unit granted hereunder.
I-4
4.4 Dividend Payable in Stock of Another Corporation, Etc. If the Company shall
at any time pay or make any dividend or other distribution upon the Stock
payable in securities of another corporation or other property (except
money or Stock), a proportionate part of such securities or other property
shall be set aside and delivered to any Participant then holding an Award
for the particular type of Stock for which the dividend or other
distribution was made, upon exercise thereof in the case of Options, and
the vesting thereof in the case of other Awards. Prior to the time that any
such securities or other property are delivered to a Participant in
accordance with the foregoing, the Company shall be the owner of such
securities or other property and shall have the right to vote the
securities, receive any dividends payable on such securities, and in all
other respects shall be treated as the owner. If securities or other
property which have been set aside by the Company in accordance with this
Section are not delivered to a Participant because an Award is not
exercised or otherwise vested, then such securities or other property shall
remain the property of the Company and shall be dealt with by the Company
as it shall determine in its sole discretion.
4.5 Other Changes in Stock. In the event there shall be any change, other than
as specified in Sections 4.3 and 4.4, in the number or kind of outstanding
shares of Stock or of any stock or other securities into which the Stock
shall be changed or for which it shall have been exchanged, and if the
Incentive Plan Committee shall in its discretion determine that such change
equitably requires an adjustment in the number or kind of Shares subject to
outstanding Awards or which have been reserved for issuance pursuant to the
Plan but are not then subject to an Award, then such adjustments shall be
made by the Incentive Plan Committee and shall be effective for all
purposes of the Plan and on each outstanding Award that involves the
particular type of stock for which a change was effected.
4.6 Rights to Subscribe. If the Company shall at any time grant to the holders
of its Stock rights to subscribe pro rata for additional shares thereof or
for any other securities of the Company or of any other corporation, there
shall be reserved with respect to the Shares then subject to an Award held
by any Participant of the particular class of Stock involved, the Stock or
other securities which the Participant would have been entitled to
subscribe for if immediately prior to such grant the Participant had
exercised his entire Option, or otherwise vested in his entire Award. If,
upon exercise of any such Option or the vesting of any other Award, the
Participant subscribes for the additional Stock or other securities, the
Participant shall pay to the Company the price that is payable by the
Participant for such Stock or other securities.
4.7 General Adjustment Rules. If any adjustment or substitution provided for in
this Section 4 shall result in the creation of a fractional Share under any
Award, the Company shall, in lieu of selling or otherwise issuing such
fractional Share, pay to the Participant a cash sum in an amount equal to
the product of such fraction multiplied by the Fair Market Value of a Share
on the date the fractional Share would otherwise have been issued. In the
case of any such substitution or adjustment affecting an Option, the total
Option Price for the shares of Stock then subject to an
I-5
Option shall remain unchanged but the Option Price per share under each
such Option shall be equitably adjusted by the Incentive Plan Committee to
reflect the greater or lesser number of shares of Stock or other securities
into which the Stock subject to the Option may have been changed.
4.8 Determination by Incentive Plan Committee, Etc. Adjustments under this
Section 4 shall be made by the Incentive Plan Committee, whose
determinations with regard thereto shall be final and binding upon all
parties thereto.
SECTION 5.
REORGANIZATION OR LIQUIDATION
In the event that the Company is merged or consolidated with another
corporation (other than a merger or consolidation in which the Company is the
continuing corporation and which does not result in any reclassification or
change of outstanding Shares), or if all or substantially all of the assets or
more than 50% of the outstanding voting stock of the Company is acquired by any
other corporation, business entity or person (other than a sale or conveyance in
which the Company continues as a holding company of an entity or entities that
conduct the business or businesses formerly conducted by the Company), or in
case of a reorganization (other than a reorganization under the United States
Bankruptcy Code) or liquidation of the Company, and if the provisions of Section
10 do not apply, the Incentive Plan Committee, or the board of directors of any
corporation assuming the obligations of the Company, shall have the power and
discretion to prescribe the terms and conditions for the exercise of, or
modification of, any outstanding Awards granted hereunder. By way of
illustration, and not by way of limitation, the Incentive Plan Committee may
provide for the complete or partial acceleration of the dates of exercise of the
Options, or may provide that such Options will be exchanged or converted into
options to acquire securities of the surviving or acquiring corporation, or may
provide for a payment or distribution in respect of outstanding Options (or the
portion thereof that is currently exercisable) in cancellation thereof. The
Incentive Plan Committee may remove restrictions on Restricted Stock and may
modify the performance requirements for any other Awards. The Incentive Plan
Committee may provide that Stock or other Awards granted hereunder must be
exercised in connection with the closing of such transaction, and that if not so
exercised such Awards will expire. Any such determinations by the Incentive Plan
Committee may be made generally with respect to all Participants, or may be made
on a case-by-case basis with respect to particular Participants. The provisions
of this Section 5 shall not apply to any transaction undertaken for the purpose
of reincorporating the Company under the laws of another jurisdiction, if such
transaction does not materially affect the beneficial ownership of the Company's
capital stock. SECTION 6. PARTICIPATION
Participants in the Plan shall be those Eligible Employees, Directors or
consultants who, in the judgment of the Incentive Plan Committee, are
performing, or during the term of their incentive arrangement will perform,
important services in the management, operation and development of the Company,
and significantly contribute, or are expected to significantly contribute, to
the achievement of long-term corporate economic objectives. Participants may be
granted from time to
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time one or more Awards; provided, however, that the grant of each such Award
shall be separately approved by the Incentive Plan Committee, receipt of one
such Award shall not result in automatic receipt of any other Award, and written
notice shall be given to each such person, specifying the terms, conditions,
rights and duties related thereto; and further provided that Incentive Stock
Options shall not be granted to consultants or to Eligible Employees of any
partnership which is included within the definition of an Affiliated Corporation
but whose employees are not permitted to receive Incentive Stock Options under
the Internal Revenue Code. Each Participant shall enter into an agreement with
the Company, in such form as the Incentive Plan Committee shall determine and
which is consistent with the provisions of the Plan, specifying such terms,
conditions, rights and duties. Awards shall be deemed to be granted as of the
date specified in the grant resolution of the Incentive Plan Committee, which
date shall be the date of any related agreement with the Participant. In the
event of any inconsistency between the provisions of the Plan and any such
agreement entered into hereunder, the provisions of the Plan shall govern.
SECTION 7.
STOCK OPTIONS
7.1 Discretionary Grant of Options. Coincident with the following designation
for participation in the Plan, a Participant may be granted one or more
Options. The Incentive Plan Committee in its sole discretion shall
designate whether an Option is to be considered an Incentive Stock Option
or a Non-Statutory Option. The Incentive Plan Committee may grant both an
Incentive Stock Option and a Non-Statutory Option to the same Participant
at the same time or at different times. Incentive Stock Options and
Non-Statutory Options, whether granted at the same or different times,
shall be deemed to have been awarded in separate grants, shall be clearly
identified, and in no event shall the exercise of one Option affect the
right to exercise any other Option or affect the number of Shares for which
any other Option may be exercised.
7.2 Option Agreements. Each Option granted under the Plan shall be evidenced by
a written stock option agreement which shall be entered into by the Company
and the Participant to whom the Option is granted (the "Option Holder"),
and which shall contain the following terms and conditions, as well as such
other terms and conditions not inconsistent therewith, as the Incentive
Plan Committee may consider appropriate in each case.
(a) Number of Shares. Each stock option agreement shall state that it
covers a specified number of Shares, as determined by the Incentive
Plan Committee. Notwithstanding any other provision of the Plan, the
aggregate Fair Market Value of the Shares with respect to which
Incentive Stock Options are exercisable for the first time by an
Option Holder in any calendar year, under the Plan or otherwise, shall
not exceed $100,000. For this purpose, the Fair Market Value of the
Shares shall be determined as of the time an Option is granted.
(b) Price. The price at which each Share covered by an Option may be
purchased shall be determined in each case by the Incentive Plan
Committee
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and set forth in the stock option agreement, but in no event shall the
Option Price for each Share covered by an Incentive Stock Option be
less than the Fair Market Value of the Stock on the date the Option is
granted; provided that the Option Price for each Share covered by a
Non-Statutory Option may be granted at any price less than Fair Market
Value, in the sole discretion of the Incentive Plan Committee. In
addition, the Option Price for each Share covered by an Incentive
Stock Option granted to an Eligible Employee who then owns stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary
corporation of the Company must be at least 110% of the Fair Market
Value of the Stock subject to the Incentive Stock Option on the date
the Option is granted.
(c) Duration of Options. Each stock option agreement shall state the
period of time, determined by the Incentive Plan Committee, within
which the Option may be exercised by the Option Holder (the "Option
Period"). The Option Period must expire, in all cases, not more than
ten years from the date an Option is granted; provided, however, that
the Option Period of an Option granted to an Eligible Employee or
consultant who then owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any
parent or subsidiary corporation of the Company must expire not more
than five years from the date such an Option is granted. Each stock
option agreement shall also state the periods of time, if any, as
determined by the Incentive Plan Committee, when incremental portions
of each Option shall vest. Except as provided in Sections 5 and 10, no
portion of any Option shall vest before six months after the date of
grant of the Option.
(d) Termination of Employment, Death, Disability, Etc. Except as otherwise
determined by the Incentive Plan Committee, each stock option
agreement shall provide as follows with respect to the exercise of the
Option upon termination of the employment or the death of the Option
Holder:
(i) If the employment of the Option Holder is terminated within the
Option Period for cause, as determined by the Company, the Option
shall thereafter be void for all purposes. As used in this
subsection 7.2(d), "cause" shall mean a gross violation, as
determined by the Company, of the Company's established policies
and procedures. The effect of this subsection 7.2(d)(i) shall be
limited to determining the consequences of a termination, and
nothing in this subsection 7.2(d)(i) shall restrict or otherwise
interfere with the Company's discretion with respect to the
termination of any employee.
(ii) If the Option Holder terminates his employment with the Company
in a manner determined by the Board, in its sole discretion, to
constitute retirement (which determination shall be communicated
to
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the Option Holder within 10 days of such termination), the Option
may be exercised by the Option Holder, or in the case of death by
the persons specified in subsection (iii) of this subsection
7.2(d), within three months following his or her retirement if
the Option is an Incentive Stock Option or within twelve months
following his or her retirement if the Option is a Non-Statutory
Stock Option (provided in each case that such exercise must occur
within the Option Period), but not thereafter. In any such case,
the Option may be exercised only as to the Shares as to which the
Option had become exercisable on or before the date of the Option
Holder's termination of employment.
(iii) If the Option Holder dies, or if the Option Holder becomes
disabled (within the meaning of Section 22(e) of the Internal
Revenue Code), during the Option Period while still employed, or
within the three- month period referred to in (iv) below, or
within the three or twelve- month period referred to in (ii)
above, the Option may be exercised by those entitled to do so
under the Option Holder's will or by the laws of descent and
distribution within twelve months following the Option Holder's
death or disability, but not thereafter. In any such case, the
Option may be exercised only as to the Shares as to which the
Option had become exercisable on or before the date of the Option
Holder's death or disability.
(iv) If the employment of the Option Holder by the Company is
terminated (which for this purpose means that the Option Holder
is no longer employed by the Company or by an Affiliated
Corporation) within the Option Period for any reason other than
cause, retirement as provided in (ii) above, disability or the
Option Holder's death, the Option may be exercised by the Option
Holder within three months following the date of such termination
(provided that such exercise must occur within the Option
Period), but not thereafter. In any such case, the Option may be
exercised only as to the Shares as to which the Option had become
exercisable on or before the date of termination of employment.
(e) Transferability. Each stock option agreement shall provide that the
Option granted therein is not transferable by the Option Holder except
by will or pursuant to the laws of descent and distribution, and that
such Option is exercisable during the Option Holder's lifetime only by
him or her, or in the event of disability or incapacity, by his or her
guardian or legal representative.
(f) Exercise, Payments, Etc.
(i) Each stock option agreement shall provide that the method for
exercising the Option granted therein shall be by delivery to the
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Corporate Secretary of the Company of written notice specifying
the number of Shares with respect to which such Option is
exercised (which must be in an amount evenly divisible by 100)
and payment of the Option Price. Such notice shall be in a form
satisfactory to the Incentive Plan Committee and shall specify
the particular Option (or portion thereof) which is being
exercised and the number of Shares with respect to which the
Option is being exercised. The exercise of the Option shall be
deemed effective upon receipt of such notice by the Corporate
Secretary and payment to the Company. The purchase of such Stock
shall take place at the principal offices of the Company upon
delivery of such notice, at which time the purchase price of the
Stock shall be paid in full by any of the methods or any
combination of the methods set forth in (ii) below. A properly
executed certificate or certificates representing the Stock shall
be issued by the Company and delivered to the Option Holder. If
certificates representing Stock are used to pay all or part of
the Option Price, separate certificates for the same number of
shares of Stock shall be issued by the Company and delivered to
the Option Holder representing each certificate used to pay the
Option Price, and an additional certificate shall be issued by
the Company and delivered to the Option Holder representing the
additional shares, in excess of the Option Price, to which the
Option Holder is entitled as a result of the exercise of the
Option.
(ii) The exercise price shall be paid by any of the following methods
or any combination of the following methods:
(A) in cash;
(B) by cashier's check payable to the order of the Company;
(C) by delivery to the Company of certificates representing the
number of Shares then owned by the Option Holder, the Fair
Market Value of which equals the purchase price of the Stock
purchased pursuant to the Option, properly endorsed for
transfer to the Company; provided however, that Shares used
for this purpose must have been held by the Option Holder
for such minimum period of time as may be established from
time to time by the Incentive Plan Committee; for purposes
of this Plan, the Fair Market Value of any Shares delivered
in payment of the purchase price upon exercise of the Option
shall be the Fair Market Value as of the exercise date; the
exercise date shall be the day the delivery of the
certificates for the Stock used as payment of the Option
Price; or
(D) by delivery to the Company of a properly executed notice of
exercise together with irrevocable instructions to a broker
to deliver to the Company promptly the amount of the
proceeds of
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the sale of all or a portion of the Stock or of a loan from
the broker to the Option Holder necessary to pay the
exercise price.
(iii) In the discretion of the Incentive Plan Committee, the Company
may guaranty a third-party loan obtained by a Participant to pay
part or all of the Option Price of the Shares provided that such
loan or the Company's guaranty is secured by the Shares.
(g) Date of Grant. An option shall be considered as having been granted on
the date specified in the grant resolution of the Incentive Plan
Committee.
(h) Withholding.
(A) Non-Statutory Options. Each stock option agreement covering
Non-Statutory Options shall provide that, upon exercise of
the Option, the Option Holder shall make appropriate
arrangements with the Company to provide for the amount of
additional withholding required by applicable federal and
state income tax laws, including payment of such taxes
through delivery of Stock or by withholding Stock to be
issued under the Option, as provided in Section 15.
(B) Incentive Options. In the event that a Participant makes a
disposition (as defined in Section 424(c) of the Internal
Revenue Code) of any Stock acquired pursuant to the exercise
of an Incentive Stock Option prior to the expiration of two
years from the date on which the Incentive Stock Option was
granted or prior to the expiration of one year from the date
on which the Option was exercised, the Participant shall
send written notice to the Company at its principal office
in Redondo Beach, CA (Attention: Corporate Secretary) of the
date of such disposition, the number of shares disposed of,
the amount of proceeds received from such disposition, and
any other information relating to such disposition as the
Company may reasonably request. The Participant shall, in
the event of such a disposition, make appropriate
arrangements with the Company to provide for the amount of
additional withholding, if any, required by applicable
federal and state income tax laws.
(i) Adjustment of Options. Subject to the limitations contained in
Sections 7 and 14, the Incentive Plan Committee may make any
adjustment in the Option Price, the number of shares subject to, or
the terms of, an outstanding Option and a subsequent granting of an
Option by amendment or by substitution of an outstanding Option. Such
amendment, substitution, or re-grant may result in terms and
conditions (including Option Price, number of shares covered, vesting
schedule or exercise period) that differ from the terms and conditions
of the original Option. The Incentive Plan Committee may not, however,
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adversely affect the rights of any Participant to previously granted
Options without the consent of such Participant. If such action is
affected by amendment, the effective date of such amendment shall be
the date of the original grant.
7.3 Stockholder Privileges. No Option Holder shall have any rights as a
stockholder with respect to any Shares covered by an Option until the
Option Holder becomes the holder of record of such Stock, and no
adjustments shall be made for dividends or other distributions or other
rights as to which there is a record date preceding the date such Option
Holder becomes the holder of record of such Stock, except as provided in
Section 4.
SECTION 8.
RESTRICTED STOCK AWARDS
8.1 Awards Granted by Incentive Plan Committee. Coincident with or following
designation for participation in the Plan, a Participant may be granted one
or more Restricted Stock Awards consisting of Shares. The number of Shares
granted as a Restricted Stock Award shall be determined by the Incentive
Plan Committee.
8.2 Restrictions. A Participant's right to retain a Restricted Stock Award
granted to him under Section 8.1 shall be subject to such restrictions,
including but not limited to his continuous employment by the Company for a
restriction period specified by the Incentive Plan Committee, or the
attainment of specified performance goals and objectives, as may be
established by the Incentive Plan Committee with respect to such award. The
Incentive Plan Committee may in its sole discretion require different
periods of employment or different performance goals and objectives with
respect to different Participants, to different Restricted Stock Awards or
to separate, designated portions of the Shares constituting a Restricted
Stock Award.
8.3 Privileges of a Stockholder, Transferability. A Participant shall have all
voting, dividend, liquidation and other rights with respect to Stock in
accordance with its terms received by him as a Restricted Stock Award under
this Section 8 upon his becoming the holder of record of such Stock;
provided, however, that the Participant's right to sell, encumber or
otherwise transfer such Stock shall be subject to the limitations of
Section 11.2 hereof.
8.4 Enforcement of Restrictions. The Incentive Plan Committee may in its sole
discretion require one or more of the following methods of enforcing the
restrictions referred to in Section 8.2 and 8.3:
(a) Placing a legend on the stock certificates referring to the
restrictions;
(b) Requiring the Participant to keep the stock certificates, duly
endorsed, in the custody of the Company while the restrictions remain
in effect; or
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(c) Requiring that the stock certificates, duly endorsed, be held in the
custody of a third party while the restrictions remain in effect.
8.5 Termination of Employment, Death, Disability, Etc. In the event of the
death or disability (within the meaning of Section 22(e) of the Internal
Revenue Code) of a Participant, or the retirement of a Participant as
provided in Section 7.2(d)(ii), all employment period and other
restrictions applicable to Restricted Stock Awards then held by him shall
lapse, and such awards shall become fully nonforfeitable. Subject to
Sections 5 and 10, in the event of a Participant's termination of
employment for any other reason, any Restricted Stock Awards as to which
the employment period or other restrictions have not been satisfied shall
be forfeited.
SECTION 9.
PERFORMANCE SHARES AND PERFORMANCE UNITS
9.1 Awards Granted by Incentive Plan Committee. Coincident with or following
designation for participation in the Plan, a Participant may be granted
Performance Shares or Performance Units.
9.2 Amount of Award. The Incentive Plan Committee shall establish a maximum
amount of a Participant's Award, which amount shall be denominated in
Shares in the case of Performance Shares or in dollars in the case of
Performance Units.
9.3 Communication of Award. Written notice of the maximum amount of a
Participant's Award and the Performance Cycle determined by the Incentive
Plan Committee shall be given to a Participant as soon as practicable after
approval of the Award by the Incentive Plan Committee.
9.4 Amount of Award Payable. The Incentive Plan Committee shall establish
maximum and minimum performance targets to be achieved during the
applicable Performance Cycle. Performance targets established by the
Incentive Plan Committee shall relate to corporate, group, unit or
individual performance and may be established in terms of earnings, growth
in earnings, ratios of earnings to equity or assets, or such other measures
or standards determined by the Incentive Plan Committee. Multiple
performance targets may be used and the components of multiple performance
targets may be given the same or different weighting in determining the
amount of an Award earned, and may relate to absolute performance or
relative performance measured against other groups, units, individuals or
entities. Achievement of the maximum performance target shall entitle the
Participant to payment (subject to Section 9.6) at the full or maximum
amount specified with respect to the Award; provided, however, that
notwithstanding any other provisions of this Plan, in the case of an Award
of Performance Shares the Incentive Plan Committee in its discretion may
establish an upper limit on the amount payable (whether in cash or Stock)
as a result of the achievement of the maximum performance target. The
Incentive Plan Committee may also establish that a portion of a full or
maximum amount of a Participant's Award will be paid (subject to Section
9.6) for performance which
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exceeds the minimum performance target but falls below the maximum
performance target applicable to such Award.
9.5 Adjustments. At any time prior to payment of a Performance Share or
Performance Unit Award, the Incentive Plan Committee may adjust previously
established performance targets or other terms and conditions to reflect
events such as changes in laws, regulations, or accounting practice, or
mergers, acquisitions or divestitures.
9.6 Payments of Awards. Following the conclusion of each Performance Cycle, the
Incentive Plan Committee shall determine the extent to which performance
targets have been attained, and the satisfaction of any other terms and
conditions with respect to an Award relating to such Performance Cycle. The
Incentive Plan Committee shall determine what, if any, payment is due with
respect to an Award and whether such payment shall be made in cash, Stock
or some combination thereof. Payment shall be made in a lump sum or
installments, as determined by the Incentive Plan Committee, commencing as
promptly as practicable following the end of the applicable Performance
Cycle, subject to such terms and conditions and in such form as may be
prescribed by the Incentive Plan Committee.
9.7 Termination of Employment. If a Participant ceases to be an Eligible
Employee before the end of a Performance Cycle by reason of his death,
permanent disability or retirement as provided in Section 7.2(d)(ii), the
Performance Cycle for such Participant for the purpose of determining the
amount of the Award payable shall end at the end of the calendar quarter
immediately preceding the date on which such Participant ceased to be an
Eligible Employee. The amount of an Award payable to a Participant to whom
the preceding sentence is applicable shall be paid at the end of the
Performance Cycle and shall be that fraction of the Award computed pursuant
to the preceding sentence the numerator of which is the number of calendar
quarters during the Performance Cycle during all of which said Participant
was an Employee and the denominator of which is the number of full calendar
quarters in the Performance Cycle. Upon any other termination of employment
of a Participant during a Performance Cycle, participation in the Plan
shall cease and all outstanding Awards of Performance Shares or Performance
Units to such Participant shall be canceled.
SECTION 10.
CHANGE IN CONTROL
10.1 Options, Restricted Stock. In the event of a change in control of the
Company as defined in Section 10.3, then the Incentive Plan Committee may,
in its sole discretion, without obtaining stockholder approval, to the
extent permitted in Section 14, take any or all of the following actions:
(a) accelerate the exercise dates of any outstanding Options or make all
such Options fully vested and exercisable; (b) grant a cash bonus award to
any Option Holder in an amount necessary to pay the Option Price of all or
any portion of the Options then held by such Option Holder; (c) pay cash to
any or all Option Holders in exchange for the cancellation of their
outstanding Options in an amount equal to the different between the Option
Price of
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such Options and the greater of the tender offer price for the underlying
Stock or the Fair Market Value of the Stock on the date of the cancellation
of the Options; (d) make any other adjustments or amendments to the
outstanding Options and (e) eliminate all restrictions with respect to
Restricted Stock and deliver Shares free of restrictive legends to any
Participant.
10.2 Performance Shares and Performance Units. Under the circumstances described
in Section 10.1, the Incentive Plan Committee may, in its sole discretion,
and without obtaining stockholder approval, to the extent permitted in
Section 14, provide for payment of outstanding Performance Shares and
Performance Units at the maximum award level or any percentage thereof.
10.3 Definition. For purposes of the Plan, a "change in control" shall be deemed
to have occurred if (a) any "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the 1934 Act), other than a trustee or other
fiduciary holding securities under an employee benefit plan of the Company,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
1934 Act), directly or indirectly, of more than 33-1/3 percent of the then
outstanding voting stock of the Company; or (b) at any time during any
period of three consecutive years (not including any period prior to the
Effective Date), individuals who at the beginning of such period constitute
the Board (and any new director whose election by the Board or whose
nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority thereof; or (c) the stockholders of the Company
approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 80% of
the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation, or the stockholders approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets.
SECTION 11.
RIGHTS OF EMPLOYEES; PARTICIPANTS
11.1 Employment; Tenure. Nothing contained in the Plan or in any Award granted
under the Plan shall confer upon any Participant any right with respect to
the continuation of his or her employment by the Company or tenure as a
Director of the Company, or interfere in any way with the right of the
Company, subject to the terms of any separate employment agreement to the
contrary, at any time to terminate such employment or to increase or
decrease the compensation of the Participant from the rate in existence at
the time of the grant of an Award. Whether an authorized leave of absence,
or absence in military or government service, shall constitute a
termination of employment shall be determined by the Incentive Plan
Committee at
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the time. Nothing in this Plan shall interfere in any way with the right of
the stockholders of the Company to remove a Participant Director from the
Board pursuant to the Delaware General Corporation Law and the Company's
Certificate of Incorporation and Bylaws.
11.2 Nontransferability. No right or interest of any Participant in an Award
granted pursuant to the Plan shall be assignable or transferable during the
lifetime of the Participant, either voluntarily or involuntarily, or be
subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event or a Participant's death, a Participant's rights
and interests in Options shall, to the extent provided in Section 7, be
transferable by testamentary will or the laws of descent and distribution,
and payment of any amounts due under the Plan shall be made to, and
exercise of any Options may be made by, the Participant's legal
representatives, heirs or legatees. If in the opinion of the Incentive Plan
Committee a person entitled to payments or to exercise rights with respect
to the Plan is disabled from caring for his affairs because of mental
condition, physical condition or age, payment due such person may be made
to, and such rights shall be exercised by, such person's guardian,
conservator or other legal personal representative upon furnishing the
Incentive Plan Committee with evidence satisfactory to the Incentive Plan
Committee of such status.
SECTION 12.
GENERAL RESTRICTIONS
12.1 Investment Representations. The Company may require any person to whom an
Option or other Award is granted, as a condition of exercising such Option
or receiving Stock under the Award, to give written assurances in substance
and form satisfactory to the Company and its counsel to the effect that
such person is acquiring the Stock subject to the Option or the Award for
his own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as
the Company deems necessary or appropriate in order to comply with federal
and applicable state securities laws. Legends evidencing such restrictions
may be placed on the certificates evidencing the Stock.
12.2 Compliance with Securities Laws. Each Award shall be subject to the
requirement that, if at any time counsel to the Company shall determine
that the listing, registration or qualification of the Shares subject to
such Award upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental or regulatory body, is
necessary as a condition of, or in connection with, the issuance or
purchase of Shares thereunder, such Award may not be accepted or exercised
in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained on conditions
acceptable to the Incentive Plan Committee. Nothing herein shall be deemed
to require the Company to apply for or to obtain such listing, registration
or qualification.
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12.3 Stock Restriction Agreement. The Incentive Plan Committee may provide that
shares of Stock issuable upon the exercise of an Option shall, under
certain conditions, be subject to restrictions whereby the Company has a
right of first refusal with respect to such shares or a right or obligation
to repurchase all or a portion of such shares, which restrictions may
survive a Participant's term of employment with the Company. The
acceleration of time or times at which an Option becomes exercisable may be
conditioned upon the Participant's agreement to such restrictions.
SECTION 13.
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a Participant as a
result of the exercise of an Option or the grant or vesting of any other Award
shall not constitute "earnings" with respect to which any other employee
benefits of such employee are determined, including without limitation benefits
under any pension, profit sharing, life insurance or salary continuation plan.
SECTION 14.
PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time-to-time may amend or
modify, the Plan provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the stockholders
if stockholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, or if the Company, on the advice of
counsel, determines that stockholder approval is otherwise necessary or
desirable.
No amendment, modification or termination of the Plan shall in any manner
adversely affect any Awards theretofore granted under the Plan, without the
consent of the Participant holding such Awards.
SECTION 15.
WITHHOLDING
15.1 Withholding Requirement. The Company's obligations to deliver Shares upon
the exercise of an Option, or upon the vesting of any other Award, shall be
subject to the Participant's satisfaction of all applicable federal, state
and local income and other tax withholding requirements.
15.2 Withholding With Stock. At the time the Incentive Plan Committee grants an
Award, it may, in its sole discretion, grant the Participant an election to
pay all such amounts of tax withholding, or any part thereof, by electing
to transfer to the Company, or to have the Company withhold from Shares
otherwise issuable to the Participant, Shares having a value equal to the
amount required to be withheld or such lesser amount as may be elected by
the Participant. All elections shall be subject to the approval or
disapproval of the Incentive Plan Committee. The value of Shares to be
withheld shall be based on the Fair Market Value of the Stock on the date
that the amount of tax to be withheld is to be determined (the "Tax Date").
Any such
I-17
elections by Participants to have Shares withheld for this purpose will be
subject to the following restrictions:
(a) All elections must be made prior to the Tax Date.
(b) All elections shall be irrevocable.
(c) If the Participant is an officer or director of the Company within the
meaning of Section 16 of the 1934 Act ("Section 16"), the Participant
must satisfy the requirements of such Section 16 and any applicable
rules thereunder with respect to the use of Stock to satisfy such tax
withholding obligation.
SECTION 16.
BROKERAGE ARRANGEMENTS
The Incentive Plan Committee, in its discretion, may enter into
arrangements with one or more banks, brokers or other financial institutions to
facilitate the disposition of shares acquired upon exercise of Stock Options,
including, without limitation, arrangements for the simultaneous exercise of
Stock Options and sale of the Shares acquired upon such exercise.
SECTION 17.
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to stockholders of the Company for approval shall be construed as creating
any limitations on the power or authority of the Board to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Board may deem necessary or desirable or preclude or limit the continuation
of any other plan, practice or arrangement for the payment of compensation or
fringe benefits to employees generally, or to any class or group of employees,
which the Company or any Affiliated Corporation now has lawfully put into
effect, including, without limitation, any retirement, pension, savings and
stock purchase plan, insurance, death and disability benefits and executive
short-term incentive plans.
SECTION 18.
REQUIREMENTS OF LAW
18.1 Requirements of Law. The issuance of stock and the payment of cash pursuant
to the Plan shall be subject to all applicable laws, rules and regulations.
18.2 Federal Securities Law Requirements. If a Participant is an officer or
director of the Company within the meaning of Section 16 of the 1934 Act,
Awards granted hereunder shall be subject to all conditions required under
Rule 16b-3, or any successor rule promulgated under the 1934 Act, to
qualify the Award for any exception from the provisions of Section 16(b) of
the 1934 Act available under that Rule. Such conditions are hereby
incorporated herein by reference and shall be set forth in the agreement
with the Participant which describes the Award.
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18.3 Governing Law. The Plan and all agreements hereunder shall be construed in
accordance with and governed by the laws of the State of Wyoming.
SECTION 19.
DURATION OF THE PLAN
The Plan shall terminate at such time as may be determined by the Board of
Directors, and no Award shall be granted after such termination. If not sooner
terminated under the preceding sentence, the Plan shall fully cease and expire
at midnight on April 4, 2007. Awards outstanding at the time of the Plan
termination may continue to be exercised or earned in accordance with their
terms.
Adopted: April 5, 1997.
MYSTIQUE DEVELOPMENTS, INC.
A Wyoming Corporation
By /s/ Kim M. Fuerst
--------------------------------
Kim M. Fuerst
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APPENDIX II
MYSTIQUE DEVELOPMENTS, INC.
INCENTIVE STOCK OPTION PLAN
SECTION 1.
INTRODUCTION
1.1 Establishment. Mystique Developments, Inc., a Wyoming corporation
(hereinafter referred to as the "Company" except where the context
otherwise requires), establishes the Mystique Developments, Inc. Incentive
Stock Option Plan (the "Plan") for a key employee as of the Effective Date.
1.2 Purposes. The purposes of the Plan are to provide the key employee with
added incentives to continue in the long-term service of the Company and to
create in the employee a more direct interest in the future success of the
operations of the Company by relating incentive compensation to increases
in stockholder value, so that the income of the key employee is more
closely aligned with the income of the Company's stockholders.
SECTION 2.
DEFINITIONS
2.1 Definitions. The following terms shall have the meanings set forth below:
(a) "Award" means a grant made under this Plan in the form of Incentive
Stock Options.
(b) "Board" means the Board of Directors of the Company.
(c) "Director" means a member of the Board.
(d) "Effective Date" means the effective date of the Plan, October 18,
1996.
(e) "Eligible Employee" means Kim M. Fuerst.
(f) "Fair Market Value" means the value of a Share determined by the Board
in good faith.
(g) "Incentive Stock Option" means any Option granted hereunder in
accordance with the requirements of Section 422 of the Internal
Revenue Code.
(h) "Internal Revenue Code" means the Internal Revenue Code of 1986, as it
may be amended from time to time.
(i) "Option" means a right to purchase Stock at a stated price for a
specified period of time.
(j) "Option Price" means the price at which shares of Stock subject to an
Incentive Stock Option may be purchased.
(k) "Participant" means Kim M. Fuerst.
(l) "Plan Year" means each 12-month period beginning July 1 and ending the
following June 30, except that for the first year of the Plan it shall
begin on the Effective Date and extend to June 30 of the following
year.
(m) "Share" means a share of Stock.
(n) "Stock" means the common stock, $.01 par value, of the Company.
2.2 Gender and Number. Except when otherwise indicated by the context, the
masculine gender shall also include the feminine gender, and the definition
of any term herein in the singular shall also include the plural.
SECTION 3.
PLAN ADMINISTRATION
The Plan shall be administered by the Board. The Board shall determine the
form or forms of the agreements with the Participant which shall evidence the
particular provisions, terms, conditions, rights and duties of the Company and
the Participant with respect to the Awards granted pursuant to the Plan, which
provisions need not be identical except as may be provided herein. The Board may
from time to time adopt such rules and regulations for carrying out the purposes
of the Plan as it may deem proper and in the best interests of the Company. The
Board may correct any defect, supply any omission or reconcile any inconsistency
in the Plan or in any agreement entered into hereunder in the manner and to the
extent it shall deem expedient and it shall be the sole and final judge of such
expediency. No member of the Board shall be liable for any action or
determination made in good faith, and all members of the Board shall, be fully
protected by the Company with respect to any such action, determination or
interpretation. The determination, interpretations and other actions of the
Board pursuant to the provisions of the Plan shall be binding and conclusive for
all purposes and on all persons.
SECTION 4.
STOCK SUBJECT TO THE PLAN
4.1 Number of Shares. There are 500,000 Shares authorized for issuance under
the Plan in accordance with the provisions of the Plan. Incentive Stock
Option rights to all 500,000 shares shall be granted to the Participant.
4.2 Unused and Forfeited Stock. Any Shares that are subject to an Award under
this Plan which are not used because they are Shares that are subject to an
Incentive Stock Option which expires or is terminated for any reason, any
Shares which are
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used for full or partial payment of the purchase price of Shares with
respect to which an Option is exercised and any Shares retained by the
Company for withholding tax purposes shall no longer be available for use
under the Plan.
4.3 Adjustments for Stock Split, Stock Dividend, Etc. If the Company shall at
any time change in any way the rights and privileges of such the incentive
stock options by or through a stock split, subdivision, consolidation,
combination, reclassification or recapitalization involving the Stock, then
in relation to the Stock that is affected by one or more of the above
events, the numbers, rights and privileges of the incentive stock option
shall be increased, decreased or changed in like manner as if the Stock had
been issued and outstanding, fully paid and nonassessable at the time of
such occurrence.
4.4 Other Changes in Stock. In the event there shall be any change, other than
as specified in Sections 4.2 and 4.3, in the kind of outstanding shares of
Stock or of any stock or other securities into which the Stock shall be
changed or for which it shall have been exchanged, and if the Board shall
in its discretion determine that such change equitably requires an
adjustment in the number or kind of Shares subject to outstanding incentive
stock options, then such adjustments shall be made by the Board and shall
be effective for all purposes of the Plan.
4.5 General Adjustment Rules. In the case of any such substitution or
adjustment affecting an incentive stock option, the total Option Price for
the shares of Stock then subject to an incentive stock option shall remain
unchanged but the Option Price per share under each such incentive stock
option shall be equitably adjusted by the Board to reflect the greater or
lesser number of shares of Stock or other securities into which the Stock
subject to the incentive stock option may have been changed.
4.6 Determination by Board, Etc. Adjustments under this Section 4 shall be made
by the Board whose determinations with regard thereto shall be final and
binding upon all parties thereto.
SECTION 5.
REORGANIZATION OR LIQUIDATION
In the event that the Company is merged or consolidated with another
corporation (other than a merger or consolidation in which the Company is the
continuing corporation and which does not result in any reclassification or
change of outstanding Shares), or if all or substantially all of the assets or
more than 50% of the outstanding voting stock of the Company is acquired by any
other corporation, business entity or person (other than a sale or conveyance in
which the Company continues as a holding company of an entity or entities that
conduct the business or businesses formerly conducted by the Company), or in
case of a reorganization (other than a reorganization under the United States
Bankruptcy Code) or liquidation of the Company, and if the provisions of Section
10 do not apply, the Board or the board of directors of any corporation assuming
the obligations of the Company, shall have the power and discretion to prescribe
the terms and conditions for the exercise of, or modification of, any
outstanding Awards granted hereunder not inconsistent with the terms of this
Agreement and the stock option agreement then outstanding with
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the Participant. By way of illustration, and not by way of limitation, the Board
may provide for the complete or partial acceleration of the dates of exercise of
the incentive stock options. The provisions of this Section 5 shall not apply to
any transaction undertaken for the purpose of reincorporating the Company under
the laws of another jurisdiction, if such transaction does not materially affect
the beneficial ownership of the Company's capital stock.
SECTION 6.
GRANT OF INCENTIVE STOCK OPTIONS
6.1 Grant of Options. Coincident with the adoption of the Plan, the Participant
shall be granted all of the Incentive Stock Options.
6.2 Option Agreement. The Incentive Stock Options granted under the Plan shall
be evidenced by a written stock option agreement which shall be entered
into by the Company and the Participant, and which shall contain the
following terms and conditions, as well as such other terms and conditions
not inconsistent therewith, as the Board may consider appropriate in each
case.
(a) Number of Shares. Each stock option agreement shall state that it
covers a specified number of Shares. The aggregate Fair Market Value
of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by an Participant in any calendar year,
under the Plan or otherwise, shall not exceed $100,000. For this
purpose, the Fair Market Value of the Shares shall be determined as of
the time an Option is granted.
(b) Option Price. The price at which each Share covered by an Incentive
Stock Option may be purchased shall be the fair market value of the
Share at the date of grant of the Incentive Stock Option. In addition,
the Option Price for each Share covered by an Incentive Stock Option
granted to the Participant when he then owns stock possessing more
than 10% of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary corporation of the Company
must be at least 110% of the Fair Market Value of the Stock subject to
the Incentive Stock Option on the date the Option is granted.
(c) Duration of Options. Each stock option agreement shall state the
period of time, determined by the Board, within which the Option may
be exercised by the Participant (the "Option Period"). The Option
Period must expire, in all cases, not more than ten years from the
date an Option is granted; provided, however, that the Option Period
of an Option granted to the Participant when he then owns stock
possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any parent or subsidiary
corporation of the Company must expire not more than five years from
the date such an Option is granted.
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(d) Termination of Employment, Death, Disability, Etc. Except as otherwise
determined by the Board, each stock option agreement shall provide as
follows with respect to the exercise of the Option upon termination of
the employment or the death of the Participant:
(i) If the Participant terminates his employment with the Company in
a manner determined by the Board, in its sole discretion, to
constitute retirement (which determination shall be communicated
to the Participant within 10 days of such termination), the
Option may be exercised by the Participant, or in the case of
death by the persons specified in subsection (iii) of this
subsection 7.3(d), within three months following his or her
retirement. In any such case, the Option may be exercised only as
to the Shares as to which the Option had become exercisable on or
before the date of the Participant's termination of employment.
(ii) If the Participant dies, or if the Participant becomes disabled
(within the meaning of Section 22(e) of the Internal Revenue
Code), during the Option Period while still employed, or within
the three-month period referred to in (iv) below, or within the
three or twelve-month period referred to in (ii) above, the
Option may be exercised by those entitled to do so under the
Participant's will or by the laws of descent and distribution
within twelve months following the Participant's death or
disability, but not thereafter. In any such case, the Option may
be exercised only as to the Shares as to which the Option had
become exercisable on or before the date of the Participant's
death or disability.
(iii) If the employment of the Participant by the Company is
terminated (which for this purpose means that the Participant is
no longer employed by the Company or by an Affiliated
Corporation) within the Option Period for any reason other than
cause, retirement as provided in (ii) above, disability or the
Participant's death, the Option may be exercised by the
Participant within three months following the date of such
termination (provided that such exercise must occur within the
Option Period), but not thereafter. In any such case, the Option
may be exercised only as to the Shares as to which the Option had
become exercisable on or before the date of termination of
employment.
(e) Transferability. Each stock option agreement shall provide that the
Option granted therein is not transferable by the Participant except
by will or pursuant to the laws of descent and distribution, and that
such Option is exercisable during the Participant's lifetime only by
him or her, or in the event of disability or incapacity, by his or her
guardian or legal representative.
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(f) Exercise, Payments, Etc.
(i) Each stock option agreement shall provide that the method for
exercising the Option granted therein shall be by delivery to the
Corporate Secretary of the Company of written notice specifying
the number of Shares with respect to which such Option is
exercised (which must be in an amount evenly divisible by 100)
and payment of the Option Price. Such notice shall be in a form
satisfactory to the Board and shall specify the particular Option
(or portion thereof) which is being exercised and the number of
Shares with respect to which the Option is being exercised. The
exercise of the Option shall be deemed effective upon receipt of
such notice by the Corporate Secretary and payment to the
Company. The purchase of such Stock shall take place at the
principal offices of the Company upon delivery of such notice, at
which time the purchase price of the Stock shall be paid in full
by any of the methods or any combination of the methods set forth
in (ii) below. A properly executed certificate or certificates
representing the Stock shall be issued by the Company and
delivered to the Participant. If certificates representing Stock
are used to pay all or part of the Option Price, separate
certificates for the same number of shares of Stock shall be
issued by the Company and delivered to the Participant
representing each certificate used to pay the Option Price, and
an additional certificate shall be issued by the Company and
delivered to the Participant representing the additional shares,
in excess of the Option Price, to which the Participant is
entitled as a result of the exercise of the Option.
(ii) The exercise price shall be paid by any of the following methods
or any combination of the following methods:
(A) in cash;
(B) by cashier's check payable to the order of the Company;
(C) by delivery to the Company of certificates representing the
number of Shares then owned by the Participant, the Fair
Market Value of which equals the purchase price of the Stock
purchased pursuant to the Option, properly endorsed for
transfer to the Company; provided however, that Shares used
for this purpose must have been held by the Participant for
such minimum period of time as may be established from time
to time by the Board; for purposes of this Plan, the Fair
Market Value of any Shares delivered in payment of the
purchase price upon exercise of the Option shall be the Fair
Market Value as of the exercise date; the exercise date
shall be the day the delivery of the certificates for the
Stock used as payment of the Option Price; or
II-6
(D) by delivery to the Company of a properly executed notice of
exercise together with irrevocable instructions to a broker
to deliver to the Company promptly the amount of the
proceeds of the sale of all or a portion of the Stock or of
a loan from the broker to the Participant necessary to pay
the exercise price.
(g) Date of Grant. An option shall be considered as having been granted on
the date specified in the grant resolution of the Board.
(h) Withholding. In the event that a Participant makes a disposition (as
defined in Section 424(c) of the Internal Revenue Code) of any Stock
acquired pursuant to the exercise of an incentive stock option prior
to the expiration of two years from the date on which the incentive
stock option was granted or prior to the expiration of one year from
the date on which the Option was exercised, the Participant shall send
written notice to the Company at its principal office (Attention:
Corporate Secretary) of the date of such disposition, the number of
shares disposed of, the amount of proceeds received from such
disposition, and any other information relating to such disposition as
the Company may reasonably request. The Participant shall, in the
event of such a disposition, make appropriate arrangements with the
Company to provide for the amount of additional withholding, if any,
required by applicable federal and state income tax laws.
6.3 Stockholder Privileges. No Participant shall have any rights as a
stockholder with respect to any Shares covered by an Option until the
Participant becomes the holder of record of such Stock, and no adjustments
shall be made for dividends or other distributions or other rights as to
which there is a record date preceding the date such Participant becomes
the holder of record of such Stock, except as provided in Section 4.
SECTION 7.
CHANGE IN CONTROL
7.1 Options, Restricted Stock. In the event of a change in control of the
Company, then the Board may, in its sole discretion, without obtaining
stockholder approval, take any or all of the following actions: (a)
accelerate the exercise dates of any outstanding Options or make all such
Options fully vested and exercisable; (b) grant a cash bonus award to any
Participant in an amount necessary to pay the Option Price of all or any
portion of the Options then held by such Participant; (c) pay cash to any
or all Participants in exchange for the cancellation of their outstanding
Options in an amount equal to the difference between the Option Price of
such Options and the greater of the tender offer price for the underlying
Stock or the Fair Market Value of the Stock on the date of the cancellation
of the Options; and (d) make any other adjustments or amendments to the
outstanding Options.
7.2 Definition. For purposes of the Plan, a "change in control" shall be deemed
to have occurred if (a) any "person" or "group" (within the meaning of
Sections 13(d) and
II-7
14(d)(2) of the 1934 Act), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the 1934 Act), directly
or indirectly, of more than 33-1/3 percent of the then outstanding voting
stock of the Company; or (b) at any time during any period of three
consecutive years (not including any period prior to the Effective Date),
individuals who at the beginning of such period constitute the Board (and
any new director whose election by the Board or whose nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors
at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority thereof; or (c) the stockholders of the Company approve a merger
or consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 80% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the
stockholders approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
SECTION 8.
RIGHTS OF PARTICIPANT
8.1 Employment; Tenure. Nothing contained in the Plan or in any Award granted
under the Plan shall confer upon the Participant any right with respect to
the continuation of his employment by the Company or tenure as a Director
of the Company, or interfere in any way with the right of the Company,
subject to the terms of any separate employment agreement to the contrary,
at any time to terminate such employment or to increase or decrease the
compensation of the Participant from the rate in existence at the time of
the grant of an Award. Whether an authorized leave of absence, or absence
in military or government service, shall constitute a termination of
employment shall be determined by the Board at the time. Nothing in this
Plan shall interfere in any way with the right of the stockholders of the
Company to remove a Participant Director from the Board pursuant to law and
the Company's Certificate of Incorporation and Bylaws.
8.2 Nontransferability. No right or interest of the Participant in an Award
granted pursuant to the Plan shall be assignable or transferable during the
lifetime of the Participant, either voluntarily or involuntarily, or be
subjected to any lien, directly or indirectly, by operation of law, or
otherwise, including execution, levy, garnishment, attachment, pledge or
bankruptcy. In the event of the Participant's death, a Participant's rights
and interests in Options shall be transferable by testamentary will or the
laws of descent and distribution, and payment of any amounts due under the
Plan shall be made to, and exercise of any Options may be made by, the
Participant's legal representatives, heirs or legatees. If in the opinion
of the Board a person entitled to payments or to exercise rights with
respect to the
II-8
Plan is disabled from caring for his affairs because of mental condition,
physical condition or age, payment due such person may be made to, and such
rights shall be exercised by, such person's guardian, conservator or other
legal personal representative upon furnishing the Board with evidence
satisfactory to the Board of such status.
SECTION 9.
GENERAL RESTRICTIONS
9.1 Investment Representations. The Company may require the Participant, as a
condition of exercising an Option, to give written assurances in substance
and form satisfactory to the Company and its counsel to the effect that
such person is acquiring the Stock subject to the Option for his own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company
deems necessary or appropriate in order to comply with federal and
applicable state securities laws. Legends evidencing such restrictions may
be placed on the certificates evidencing the Stock.
9.2 Compliance with Securities Laws. Each Award shall be subject to the
requirement that, if at any time counsel to the Company shall determine
that the listing, registration or qualification of the Shares subject to
such Award upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental or regulatory body, is
necessary as a condition of, or in connection with, the issuance or
purchase of Shares thereunder, such Award may not be accepted or exercised
in whole or in part unless such listing, registration, qualification,
consent or approval shall have been effected or obtained on conditions
acceptable to the Board. Nothing herein shall be deemed to require the
Company to apply for or to obtain such listing, registration or
qualification.
9.3 Stock Restriction Agreement. The Board may provide that shares of Stock
issuable upon the exercise of an Option shall, under certain conditions, be
subject to restrictions whereby the Company has a right of first refusal
with respect to such shares or a right or obligation to repurchase all or a
portion of such shares, which restrictions may survive a Participant's term
of employment with the Company. The acceleration of time or times at which
an Option becomes exercisable may be conditioned upon the Participant's
agreement to such restrictions.
SECTION 10.
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a Participant as a
result of the exercise of an Option or the failure to meet holding period
requirements shall not constitute "earnings" with respect to which any other
employee benefits of such employee are determined, including without limitation,
benefits under any pension, profit sharing, life insurance or salary
continuation plan.
II-9
SECTION 11.
PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time-to-time may amend or
modify, the Plan provided, however, that no amendment or modification may become
effective without approval of the amendment or modification by the stockholders
if stockholder approval is required to enable the Plan to satisfy any applicable
statutory or regulatory requirements, or if the Company, on the advice of
counsel, determines that stockholder approval is otherwise necessary or
desirable.
No amendment, modification or termination of the Plan shall in any manner
adversely affect any Awards theretofore granted under the Plan, without the
consent of the Participant holding such Awards.
SECTION 12.
WITHHOLDING
12.1 Withholding Requirement. The Company's obligations to deliver Shares upon
the exercise of an Option shall be subject to the Participant's
satisfaction of all applicable federal, state and local income and other
tax withholding requirements.
12.2 Withholding With Stock. The Board may, in its sole discretion, grant the
Participant an election to pay all amounts of tax withholding, or any part
thereof, by electing to transfer to the Company, or to have the Company
withhold from Shares otherwise issuable to the Participant, Shares having a
value equal to the amount required to be withheld or such lesser amount as
may be elected by the Participant. All elections shall be subject to the
approval or disapproval of the Board. The value of Shares to be withheld
shall be based on the Fair Market Value of the Stock on the date that the
amount of tax to be withheld is to be determined (the "Tax Date"). Any such
elections by Participants to have Shares withheld for this purpose will be
subject to the following restrictions:
(a) All elections must be made prior to the Tax Date.
(b) All elections shall be irrevocable.
(c) If the Participant is an officer or director of the Company within the
meaning of Section 16 of the 1934 Act ("Section 16"), the Participant
must satisfy the requirements of such Section 16 and any applicable
rules thereunder with respect to the use of Stock to satisfy such tax
withholding obligation.
SECTION 13.
BROKERAGE ARRANGEMENTS
The Board, in its discretion, may enter into arrangements with one or more
banks, brokers or other financial institutions to facilitate the disposition of
shares acquired upon exercise of Options, including, without limitation,
arrangements for the simultaneous exercise of Options and sale of the Shares
acquired upon such exercise.
II-10
SECTION 14.
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of the
Plan to stockholders of the Company for approval shall be construed as creating
any limitations on the power or authority of the Board to adopt such other or
additional incentive or other compensation arrangements of whatever nature as
the Board may deem necessary or desirable or preclude or limit the continuation
of any other plan, practice or arrangement for the payment of compensation or
fringe benefits to employees generally, or to any class or group of employees,
which the Company or any Affiliated Corporation now has lawfully put into
effect, including, without limitation, any retirement, pension, savings and
stock purchase plan, insurance, death and disability benefits and executive
short-term incentive plans.
SECTION 15.
REQUIREMENTS OF LAW
15.1 Requirements of Law. The issuance of stock and the payment of cash pursuant
to the Plan shall be subject to all applicable laws, rules and regulations.
15.2 Federal Securities Law Requirements. If a Participant is an officer or
director of the Company within the meaning of Section 16 of the 1934 Act,
Awards granted hereunder shall be subject to all conditions required under
Rule 16b-3, or any successor rule promulgated under the 1934 Act, to
qualify the Award for any exception from the provisions of Section 16(b) of
the 1934 Act available under that Rule. Such conditions are hereby
incorporated herein by reference and shall be set forth in the agreement
with the Participant which describes the Award.
15.3 Governing Law. The Plan and all agreements hereunder shall be construed in
accordance with and governed by the laws of the State of Wyoming.
SECTION 16.
DURATION OF THE PLAN
The Plan shall terminate at such time as may be determined by the Board of
Directors, and no Award shall be granted after such termination. If not sooner
terminated under the preceding sentence, the Plan shall fully cease and expire
at midnight on October 17, 2006.
Adopted: October 18, 1996.
MYSTIQUE DEVELOPMENTS, INC.
A Wyoming Corporation
By /s/ Kim M. Fuerst
-------------------------------
Kim M. Fuerst
President
II-11
APPENDIX III
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
of
COLORADO WYOMING RESERVE COMPANY
ARTICLE I
NAME
The name of the corporation shall be: Colorado Wyoming Reserve Company.
ARTICLE II
PERIOD OF DURATION
The corporation shall exist in perpetuity, from and after the date of
filing these Articles of Incorporation with the Secretary of State of the State
of Wyoming unless dissolved according to law.
ARTICLE III
PURPOSES AND POWERS
1. PURPOSES. Except as restricted by the Articles of Incorporation, the
corporation is organized for the purpose of transacting all lawful business for
which corporations may be incorporated pursuant to the Wyoming Business
Corporation Act.
2. GENERAL POWERS. Except as restricted by the Articles of Incorporation,
the corporation may exercise all powers which a corporation may exercise legally
pursuant to the Wyoming Business Corporation Act.
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ARTICLE IV
CAPITAL STOCK
The aggregate number of shares which this corporation shall have authority
to issue is seventy-five million (75,000,000) shares of a par value of one cent
($0.01) each, which shares shall be designated "Common Stock."
1. DIVIDENDS. Dividends in cash, property or shares of the corporation may
be paid upon the Common Stock, as and when declared by the board of directors,
out of funds of the corporation to the extent and in the manner permitted by
law.
2. DISTRIBUTION IN LIQUIDATION. Upon any liquidation, dissolution or
winding up of the corporation, and after paying or adequately providing for the
payment of all its obligations, the remainder of the assets of the corporation
shall be distributed, either in cash or in kind, pro rata to the holders of the
Common Stock.
3. VOTING RIGHTS; CUMULATIVE VOTING. Each outstanding share of Common Stock
shall be entitled to one vote and each fractional share of Common Stock shall be
entitled to a corresponding fractional vote on each matter submitted to a vote
of shareholders. Cumulative voting shall not be allowed in the election of
directors of the corporation.
4. DENIAL OF PREEMPTIVE RIGHTS. No holder of any shares of the corporation,
whether now or hereafter authorized, shall have any preemptive or preferential
right to acquire any shares or securities of the corporation, including shares
or securities held in the treasury of the corporation.
ARTICLE V
RIGHT OF DIRECTORS TO CONTRACT WITH CORPORATION
No contract or other transaction between the corporation and one or more of
its directors or any other corporation, firm, association, or entity in which
one or more of its directors are directors or officers or are financially
interested shall be either void or voidable solely because of such relationship
or interest or solely because such directors are present at the meeting of the
board of directors or a committee thereof which authorizes, approves, or
ratifies such contract or transaction or solely because their votes are counted
for such purpose if:
(a) The fact of such relationship or interest is disclosed or known to the
board of directors or committee which authorizes, approves, or ratifies the
contract or transaction by a vote or consent sufficient for the purpose without
counting the votes or consents of such interested directors; or
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(b) The fact of such relationship or interest is disclosed or known to the
shareholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent; or
(c) The contract or transaction is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the board of directors or a committee thereof which
authorizes, approves, or ratifies such contract or transaction.
ARTICLE VI
CORPORATE OPPORTUNITY
The officers, directors and other members of management of this corporation
shall be subject to the doctrine of "corporate opportunities" only insofar as it
applies to business opportunities in which this corporation has expressed an
interest as determined from time to time by this corporation's board of
directors as evidenced by resolutions appearing in the corporation's minutes.
Once such areas of interest are delineated, all such business opportunities
within such areas of interest which come to the attention of the officers,
directors, and other members of management of this corporation shall be
disclosed promptly to this corporation and made available to it. The board of
directors may reject any business opportunity presented to it, and thereafter
any officer, director or other member of management may avail himself of such
opportunity. Until such time as this corporation through its board of directors,
has designated an area of interest, the officers, directors and other members of
management of this corporation shall be free to engage in such areas of interest
on their own and this doctrine shall not limit the rights of any officer,
director or other member of management of this corporation to continue a
business existing prior to the time that such area of interest is designated by
the corporation. This provision shall not be construed to release any employee
of this corporation (other than an officer, director or member of management)
from any duties which he may have to this corporation.
ARTICLE VII
INDEMNIFICATION
DIRECTORS AND OTHERS
1. The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action,
suit, or proceeding, whether civil, criminal, administrative, or investigative
(other than an action by or in the right of the corporation), by reason of the
fact that he is or was a director, officer, employee, or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise, against
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expenses (including attorneys' fees), judgments, fines, and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit, or proceeding by
judgment, order, settlement, or conviction or upon a plea of nolo contendere or
its equivalent shall not of itself create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in the best
interests of the corporation and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
2. The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending, or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee, or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee, or agent of another corporation, partnership, joint
venture, trust, or other enterprise against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in the best interests of the corporation; but no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person has been adjudged to be liable for negligence or misconduct in
the performance of his duty to the corporation unless and only to the extent
that the court in which such action or suit was brought determines upon
application that, despite the adjudication of liability, but in view of all
circumstances of the case, such person is fairly and reasonably entitled to
indemnification for such expenses which such court deems proper.
3. To the extent that a director, officer, employee, or agent of the
corporation has been successful on the merits in defense of any action, suit, or
proceeding referred to in this article or in defense of any claim, issue, or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.
4. Any indemnification under paragraph 1 or 2 of this article (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee, or agent is proper in the circumstances because he has met
the applicable standard of conduct set forth in said paragraphs 1 or 2. Such
determination shall be made by the board of directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit, or
proceeding, or, if such a quorum is not obtainable or even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or by the shareholders.
5. Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit, or proceeding may be paid by the corporation in advance
of the final disposition of
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such action, suit, or proceeding as authorized in paragraph 4 of this article
upon receipt of an undertaking by or on behalf of the director, officer,
employee, or agent to repay such amount unless it is ultimately determined that
he is entitled to be indemnified by the corporation as authorized in this
article.
6. The indemnification provided by this article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
the Articles of Incorporation, any bylaw, agreement, vote of shareholders or
disinterested directors, or otherwise, and any procedure provided for by any of
the foregoing, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee, or agent and shall inure to
the benefit of heirs, executors, and administrators of such a person.
7. The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, or agent of the corporation
or who is or was serving at the request of the corporation as a director,
officer, employee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise against any liability asserted against him and
incurred by him in any such capacity or arising out of his status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this article.
8. A unanimous vote of each class of shares entitled to vote shall be
required to amend this article.
ARTICLE VIII
SHAREHOLDER VOTING
A majority of the shares entitled to vote, represented in person or by
proxy, shall constitute a quorum at a meeting of shareholders.
ARTICLE IX
ADOPTION AND AMENDMENT OF BYLAWS
The initial Bylaws of the corporation shall be adopted by its board of
directors. The power to alter or amend or repeal the Bylaws or adopt new Bylaws
shall be vested in the board of directors, but the holders of common stock may
also alter, amend or repeal the Bylaws or adopt new Bylaws. The Bylaws may
contain any provisions for the regulation and management of the affairs of the
corporation not inconsistent with law or these Articles of Incorporation.
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