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Exhibit 10.2
PROPOSAL III
AMENDMENT TO INCREASE THE NUMBER OF SHARES AVAILABLE UNDER THE
1998 STOCK OPTION PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
IN FAVOR OF THIS PROPOSAL.
The 1998 Omnibus Stock Option Plan was authorized by our Board of
Directors on August 28, 1998, and was approved by our shareholders on December
9, 1999. We believe that the plan promotes our interests by enabling us to
provide our directors, officers, key employees and other consultants with a
stronger incentive to contribute to our continued success and growth through the
opportunity to acquire a proprietary interest in us. In addition, we believe
that the plan assists us in attracting and retaining the services of key
personnel of outstanding ability. As adopted, the plan authorized the issuance
of an aggregate of 236,000 shares of our common stock. As described below you
are being asked to increase the number of shares available for issuance under
the plan to 436,000. (For Plan Purpose, Definitions, Administration, and Amended
Shares Subject to the Plan, please see Exhibit A).
The plan is administered by the Compensation and Stock Option Committee
of our Board of Directors. The Committee has full power, subject to the
provisions of the plan, to grant options, construe and interpret the plan,
establish rules and regulations with respect to the plan and/or options granted
under the plan and perform all other acts, including the delegation of
administrative responsibilities, that it believes reasonable and necessary. The
Committee has the sole discretion, subject to the provisions of the plan, to
determine the participants eligible to receive options under the plan and the
amount, type, and terms of any options and the terms and conditions of option
agreements relating to any option.
The plan authorizes the issuance of stock options which consist of
either non-statutory stock options or incentive stock options within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended. The Committee
has the power to determine the vesting, exercisability, payment and other
restrictions applicable to any option (which may include, without limitation,
restrictions on transferability or provision for mandatory resale to us).
FEDERAL INCOME TAX CONSEQUENCES
INCENTIVE STOCK OPTIONS. The grant of an incentive stock option has no
immediate tax consequences to the optionee or to us. The exercise of an
incentive stock option generally has no immediate tax consequences to the
optionee (except to the extent it is an adjustment in computing alternative
minimum taxable income) or to us. If an optionee holds the shares acquired
pursuant to the exercise of an incentive stock option for the required holding
period, the optionee generally recognizes long-term capital gain or loss upon a
subsequent sale of the shares in the amount of the difference between the amount
realized upon the sale and the exercise price of the shares. In such a case, we
are not entitled to a deduction in connection with the grant or exercise of the
incentive stock option or the sale of shares acquired pursuant to such exercise.
If, however, an optionee disposes of the shares prior to the expiration of the
required holding period, the optionee recognizes ordinary income equal to the
excess of the fair market value of the shares on the date of exercise (or the
proceeds of disposition, if less) over the exercise price, and we are entitled
to a corresponding deduction if applicable withholding requirements are
satisfied. The required holding period is two years from the date of grant and
one year after the date the shares are issued.
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NON-QUALIFIED OPTIONS. The grant of a non-qualified stock option has no
immediate tax consequences to the optionee or us. Upon the exercise of a
non-qualified stock option, the optionee recognizes ordinary income in an amount
equal to the excess of the fair market value of the shares on the date of
exercise over the exercise price, and we are entitled to a corresponding
deduction if applicable withholding requirements are satisfied. The optionee's
tax basis in the shares is the exercise price plus the amount of ordinary income
recognized by the optionee, and the optionee's holding period will commence on
the date the shares are received. Upon a subsequent sale of the shares, any
difference between the optionee's tax basis in the shares and the amount
realized on the sale is treated as a long-term or a short-term capital gain or
loss, depending on the holding period of the shares and assuming the shares are
held as capital assets.
OPTIONS GRANTED UNDER THE PLAN
As of August 24, 1999 options to purchase 179,800 shares of our common
stock were outstanding and exercisable at an exercise price of $6.00 per share
(in each case equal to or in excess of the fair market value of our common stock
as of the dates of grant). 56,200 shares of our common stock are presently
available for grant under the plan. As of August 23, 1999, the last reported
sales price of our common stock on the Nasdaq Stock Market National Market
System was $6.00.
The table below indicates, as of August 24, 1999 the aggregate number of
options we have granted under the plan since its inception to the persons and
groups indicated, and the number of outstanding options held by such persons and
groups as of such date.
Name of Individual or Group Granted Outstanding
- --------------------------- ------- -----------
All Current Executive Officers -0- -0-
All Current Directors who are not Executive Officers -0- -0-
All Current Employees, other than Current Executive Officers 209,500 179,800
AMENDMENT TO THE PLAN
On September 24, 1999, our Board of Directors approved, subject to the
approval of our shareholders, to amend the plan to increase the number of shares
issuable pursuant to the plan from 236,000 shares to 436,000 shares. The purpose
of increasing the number of shares available for issuance under the plan is to
ensure that we will continue to be able to grant options as incentives to those
individuals upon whose efforts we rely for our continued success and
development.