SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14A-6e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-11(c) orss.240.14a-12
Netsmart Technologies, Inc.
(Name of Registrant as Specified In Its Charter)
N.A.
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
.................................................................
2) Aggregate number of securities to which transaction
applies:
.................................................................
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the
amount on which the filing fee is calculated and state how
it was determined):
.................................................................
4) Proposed maximum aggregate value of transaction:
.................................................................
5) Total fee paid:
.................................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid: .................................
2) Form, Schedule or Registration Statement No.: ...........
3) Filing Party: ...........................................
4) Date Filed: .............................................
Netsmart Technologies, Inc.
146 Nassau Avenue
Islip, New York 11751
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
December 21, 2000
NOTICE IS HEREBY GIVEN that the 2000 Annual Meeting of Stockholders of
Netsmart Technologies, Inc., a Delaware corporation (the "Company"), will be
held at the offices of the Company, 146 Nassau Avenue, Islip, New York 11751 on
Thursday, December 21, 2000, at 9:30 A.M. local time, for the purpose of
considering and acting upon the following matters:
(1) The election of five (5) directors to serve until the 2001 Annual
Meeting of Stockholders and until their successors shall be
elected and qualified;
(2) The approval of the 1999 Long-Term Incentive Plan;
(3) The approval of the 1999 Employee Stock Purchase Plan;
(4) The approval of Richard A. Eisner & Company, LLP as the Company's
independent certified public accountants for the year ended
December 31, 2000; and
(5) The transaction of such other and further business as may
properly come before the meeting.
The board of directors of the Company has fixed the close of business on
November 6, 2000 as the record date for the determination of stockholders
entitled to notice of and to vote at the annual meeting. A list of stockholders
eligible to vote at the annual meeting will be available for inspection during
normal business hours for purposes germane to the meeting during the ten days
prior to the meeting at the offices of the Company, 146 Nassau Avenue, Islip,
New York 11751.
The enclosed proxy statement contains information pertaining to the
matters to be voted on at the annual meeting. A copy of the Company's Annual
Report to Stockholders for 1999 is being mailed with this proxy statement.
By order of the Board of Directors
Anthony F. Grisanti
Secretary
Islip, New York
November 9, 2000
THE MATTERS BEING VOTED ON AT THE ANNUAL MEETING ARE IMPORTANT TO THE COMPANY.
IN ORDER THAT YOUR VOTE IS COUNTED AT THE ANNUAL MEETING, PLEASE EXECUTE, DATE
AND PROMPTLY MAIL THE ENCLOSED PROXY CARD IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. THE GIVING OF A PROXY WILL
NOT AFFECT YOUR RIGHT TO VOTE IN PERSON AT THE ANNUAL MEETING IF THE PROXY IS
REVOKED IN THE MANNER SET FORTH IN THE PROXY STATEMENT.
NETSMART TECHNOLOGIES, INC.
PROXY STATEMENT
2000 Annual Meeting of Stockholders
GENERAL INFORMATION
-------------------
The accompanying proxy and this proxy statement are furnished in
connection with the solicitation by the board of directors of Netsmart
Technologies, Inc., a Delaware corporation, of proxies for use at our 2000
annual meeting of stockholders to be held at our offices, 146 Nassau Avenue,
Islip, New York 11751, on Thursday, December 21, 2000 at 9:30 A.M. or at any
adjournment thereof. We are mailing this proxy statement, the related proxy and
the 1999 annual report to our stockholders on or about November 9, 2000.
At the annual meeting, you will be asked to (a) elect five (5) directors
to serve until the 2001 annual meeting of stockholders and until their
successors shall be elected and qualified, (b) approve our 1999 Long- Term
Incentive Plan, (c) approve our 1999 Employee Stock Purchase Plan; (d) approve
the appointment of Richard A. Eisner & Company, LLP as our independent certified
public accountants for 2000, and (e) transact such other and further business as
may properly come before the meeting. Our board of directors does not know of
any other matters which will be voted upon at the annual meeting.
We encourage you to review the detailed discussion presented in this
proxy statement and either return the completed and executed proxy or attend the
annual meeting.
Record Date; Outstanding Shares; Voting Rights and Proxies
Stockholders of record at the close of business on November 6, 2000,
which is the record date for the annual meeting, are entitled to notice and to
vote at the annual meeting. As of the close of business on the record date, we
had 3,490,331 shares of common stock outstanding. You are entitled to one vote
for each share you owned of record on the record date.
We require the presence in person or by proxy of holders of a majority
of the shares of common stock that were outstanding on the record date in order
to conduct the annual meeting. If you file a proxy or attend the annual meeting,
your shares are counted as being present at the annual meeting for purposes of
determining whether there is a quorum, even if you abstain from voting on all
matters. The vote required for the election of directors and approval of other
proposals is set forth in the discussion of each proposal.
You are requested to complete, sign, date and return the enclosed proxy
without delay in order to ensure that your shares are voted at the annual
meeting. If you return a signed proxy, you may still attend the annual meeting
and vote in person. If you give a proxy, you have the right to revoke it at any
time before it is exercised by executing and returning a proxy bearing a later
date, by giving us written notice that you have revoked y your proxy or by
attending the annual meeting and voting in person. There is no required form for
a proxy revocation. If you properly execute a proxy and do not revoke it, your
shares will be voted at the annual meeting in accordance with your instructions.
If you sign and return a proxy but do not specify how you want your
shares voted with respect to any or all of the proposals listed therein, the
shares represented by your proxy will be voted for all the proposals, including
the election of directors. Abstentions and broker non-votes are not counted as
votes "for" or "against" a proposal, but where the affirmative vote on the
subject matter is required for approval, abstentions and broker non-votes are
counted in determining the number of shares present or represented.
- 1 -
Cost of Solicitation
We will bear the costs of soliciting proxies. In addition to the
solicitation of proxies by mail, our directors, officers and employees, who will
receive no compensation in addition to their regular salary, may solicit proxies
by mail, telecopier, telephone or personal interview. We will request that
brokers and other custodians, nominees and fiduciaries forward proxy material to
the beneficial holders of the common stock held of record by such persons, where
appropriate, and will, upon request, reimburse such persons for their reasonable
out-of-pocket expenses incurred in connection therewith.
BENEFICIAL OWNERSHIP OF SECURITIES AND SECURITY HOLDINGS OF MANAGEMENT
----------------------------------------------------------------------
Set forth below is information as of September 30, 2000, as to each
person owning of record or known by us, based on information provided to us by
the persons named below, to own beneficially at least 5% of our common stock,
each director, each officer listed in the Summary Compensation Table and all
officers and directors as a group.
Percent of Outstanding
----------------------
Name and Address Shares Common Stock
- ---------------- ------ ------------
John F. Phillips 197,222 5.5%
146 Nassau Avenue
Islip, New York 11751
Edward D. Bright 169,422 4.8%
Gerald O. Koop 140,823 3.9%
Anthony F. Grisanti 101,421 2.9%
James L. Conway 98,000 2.8%
Joseph G. Sicinski 32,000 *
All directors and officers as a group
(six individuals) 728,888 17.5%
- ----------
* Less than 1%.
Except as set forth in the following paragraphs, each person has the
sole voting and sole investment power and direct beneficial ownership of the
shares. Each person is deemed to beneficially own shares of common stock
issuable upon exercise of options or warrants which are exercisable on or within
60 days after the date as of which the information is provided.
The number of shares owned by our directors and officers shown in the
table includes shares of common stock which are issuable upon exercise of
options and warrants that are exercisable at September 30, 2000 or will become
exercisable within 60 days after that date. Set forth below is the number of
shares issuable upon exercise of those options for each of our directors and the
officers named in the Summary Compensation Table.
Name Number
- ---- ------
John F. Phillips 89,000
Edward D. Bright 67,500
Gerald O. Koop 87,984
Anthony F. Grisanti 5,052
Joseph G. Sicinski -
All officers and directors as a group 249,536
- 2 -
ELECTION OF DIRECTORS
---------------------
Our directors are elected annually by the stockholders to serve until
the next annual meeting of stockholders and until their respective successors
are duly elected. Our bylaws provide that the number of directors comprising the
whole board shall be determined from time to time by the board of directors. The
board of directors has established the size of the board for the ensuing year at
five directors and is recommending that our five incumbent directors be
re-elected. If any nominee becomes unavailable for any reason, a situation which
is not anticipated, a substitute nominee may be proposed by the board of
directors, and any shares represented by proxy will be voted for any substitute
nominee, unless the Board reduces the number of directors.
The board of directors is presently comprised of five individuals,
Messrs. James L. Conway, Edward D. Bright, John F. Phillips, Gerald O. Koop and
Joseph G. Sicinski, all of whom were elected at the 1999 annual meeting of
stockholders, for which proxies were solicited.
The following table sets forth certain information concerning the
nominees for director:
Name Age Position with the Company Director Since
---- --- ------------------------- --------------
Edward D. Bright(1) 64 Chairman of the board and director 1998
James L. Conway 53 President, chief executive officer and director 1996
John F. Phillips 62 President of Creative Socio-Medics Corp. and vice 1994
president of Netsmart
Gerald O. Koop 62 Chief executive officer of Creative Socio-Medics 1998
Corp. and director
Joseph G. Sicinski1 69 Director 1998
- ----------
(1) Member of the audit and compensation committees.
Mr. Edward D. Bright has been our chairman of the board and a director
since April 1998. In April 1998, Mr. Bright was also elected as chairman,
secretary, treasurer and a director of Consolidated Technology Group Ltd., a
public company now known as The Sagemark Companies, Ltd., and chairman of the
board and a director of Trans Global Services, Inc., which provides temporary
technical staffing. From January 1996 until April 1998, Mr. Bright was an
executive officer of or advisor to Creative Socio Medics Corp., our wholly-owned
subsidiary. From June 1994 until January 1996, he was our chief executive
officer.
Mr. James L. Conway has been our president and a director since January
1996 and chief executive officer since April 1998. From 1993 until April 1998,
he was president of S-Tech, which, until April 1998, was a wholly-owned
subsidiary of Consolidated Technology which manufactures specialty vending
equipment for postal, telecommunication and other industries. From 1997 until
April 1998, Mr. Conway was also an officer of other subsidiaries of Consolidated
Technology engaged in manufacturing. Mr. Conway is also a director of Trans
Global.
Mr. John F. Phillips has been one of our directors and president of
Creative Socio-Medics since June 1994, when Creative Socio-Medics was acquired,
and our vice president -- marketing since 1996. He has also been our vice
president since June 1994.
Mr. Gerald O. Koop has been one of our directors since June 1998. He has
held management positions with Creative Socio-Medics for more than the past five
years, most recently as its chief executive officer, a position he has held
since 1996.
Mr. Joseph G. Sicinski has been one of our directors since June 1998. He
is president and a director of the Trans Global, a position he held with Trans
Global and its predecessor since September 1992. Since April 1998, he has also
been chief executive officer of Trans Global.
- 3 -
Directors are elected for a term of one year.
None of our officers and directors are related.
Our certificate of incorporation includes certain provisions, permitted
under Delaware law, which provide that our directors shall not be personally
liable to us or our stockholders for monetary damages for breach of fiduciary
duty as a director except for liability (i) for any breach of the director's
duty of loyalty to us or our stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for any transaction from which the director derived an improper
personal benefit, or (iv) for certain conduct prohibited by law. The Certificate
of Incorporation also contains broad indemnification provisions. These
provisions do not affect the liability of any director under Federal or
applicable state securities laws.
Approval Required
- -----------------
Provided that a quorum is present at the annual meeting, the five
directors receiving the most votes are elected as directors for a term of one
year and until their successors are elected and qualified.
The board of directors recommends a vote FOR the nominees listed above.
Meetings, Committees of the Board of Directors and Directors Compensation
- -------------------------------------------------------------------------
Our board of directors has two committees - the audit committee and the
compensation committee.
The audit committee is to consist of three independent directors. The
audit committee presently consists of Messrs. Edward D. Bright and Joseph G.
Sicinski, with one vacancy. The audit committee is charged with the following
responsibilities:
* Recommend to the board the selection of the independent accountants.
* Review the scope of the audit with the independent accountants.
* Review the annual and quarterly financial statements with the
independent accountants prior to the filing of the Form 10-K and
10-Q.
* Review any issues relating to the independence of the independent
accountants.
* Review with the independent accountants and the board of directors
any matters raised in any
management letters issued by the independent accountants.
* Review any material transactions between us and any of its
officers and directors, other than employment agreements and
other matters which are subject to approval of the compensation
committee or any stock option committee.
The compensation committee serves as the stock option committee for our
stock option plans and will serve as the committee for the 1999 employee stock
purchase plan, and it reviews and approves any employment agreements with
management and changes in compensation for our executive officers.
Excluding actions by unanimous written consent, during 1999, the board
of directors held one meeting, the compensation committee held one meeting and
the audit committee held one meeting. The audit committee met with our
independent accountants and chief financial officer prior to filing of the Form
10-K for 1999 to review the 1999 audited financial statements with the
independent auditors. During 1999, all of our directors attended at least 80% of
the meetings of the board and any committee of which they are members.
We pay each director who is not employed by us a monthly fee of $750,
and we pay the chairman of the board a monthly fee of $1,500. In addition, in
1999, Mr. Edward D. Bright, chairman of the board, received a bonus of $66,000,
representing his participation in the bonus pool, and vacation pay of $24,000.
- 4 -
EXECUTIVE OFFICERS
Set forth below are our executive officers and information concerning
the one officer who is not also a director.
Name Position
---- --------
James L. Conway President and chief executive officer
Anthony F. Grisanti Chief financial officer, treasurer and secretary
John F. Phillips President of Creative Socio-Medics and vice
president of Netsmart
Gerald O. Koop Chief executive officer of Creative Socio-Medics
Mr. Anthony F. Grisanti has been our treasurer since June 1994,
secretary since February 1995 and chief financial officer since January 1996.
EXECUTIVE COMPENSATION
Set forth below is information with respect to compensation paid or
accrued by the Company for 1999, 1998 and 1997 to its chief executive officer
and to each other officer whose salary and bonus for 1999 exceeded $100,000.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term
------------------- ---------
Compensation (Awards)
--------------------
Options, SARs
Name and Principal Position Year Salary Bonus(1) (Number)(2)
- --------------------------- ---- ------ ------ -------------
James L. Conway, CEO and 1999 $160,000 $107,000 -
president 1998 161,563 27,000 90,000
1997 125,000 -- 89,582
Gerald O. Koop, chief 1999 140,000 172,169 -
executive officer of Creative 1998 92,700 126,305 80,000
Socio-Medics Corp. 1997 90,000 158,094 -
John F. Phillips, vice president 1999 140,000 64,000 -
- - marketing 1998 112,800 70,540 80,000
1997 109,500 89,657 -
Anthony F. Grisanti, chief 1999 120,000 100,000 -
financial officer 1998 91,240 56,967 80,000
1997 87,600 73,888 -
- ----------
The bonus for Mr. Koop includes accrued commissions of $100,169. These
commissions will be paid in installments through 2002.
In July 1998, we entered into five-year employment agreements with
Messrs. James L. Conway, John F. Phillips, Gerald O. Koop and Anthony F.
Grisanti. Pursuant to these agreements, these officers received the following
salaries in 1999: Mr. Conway - $160,000, Mr. Phillips - $140,000, Mr. Koop -
$140,000, and Mr. Grisanti - $120,000. The agreements provide for an annual cost
of living adjustment. For 2000, each of these officers received a 3.2% increase
in salary pursuant to the cost of living adjustment provisions. The agreements
provide that the executives are eligible to participate in a bonus pool to be
determined annually by the Compensation Committee. The agreements also provide
each of these officers with a $1,000 per month automobile allowance. In the
event of the officer's dismissal or resignation or a material change in his
duties or
- 5 -
in the event of a termination of employment by the executive or by us as a
result of a change of control, the officer may receive severance payments of
between 24 and 36 months' compensation. A month's compensation means the then
current monthly salary plus one-twelfth of the bonus for the prior year. In
October 2000, the agreements were amended to permit the executives to continue
as a consultant at a reduced salary at the end of or, under certain conditions,
prior to the end of, the contract term.
No options were granted during 1999 to any of our officers named in the
Summary Compensation Table.
Option Exercises and Outstanding Options
The following table sets forth information concerning the exercise of
options during the year ended December 31, 1999 and the year-end value of
options held by our officers named in the Summary Compensation Table. No stock
appreciation rights have been granted.
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
Number of
Securities
Underlying Value of
Unexercised Unexercised In-the-
Options at Fiscal Money Options at
Year End Fiscal Year End
Shares Acquired Value Exercisable/ Exercisable/
Name Upon Exercise Realized Unexercisable Unexercisable
---- ------------- --------- ------------- -------------
James L. Conway 20,000 $38,750 145,249/-- $376,375/--
Gerald O. Koop - - 87,984/-- 454,845/--
John F. Phillips 12,922 33,622 89,000/-- 458,875/--
Anthony F. Grisanti 10,821 28,609 85,000/-- 439,375/--
- ----------
The number of shares of Common Stock subject to options includes shares
of common stock issuable upon exercise of warrants.
The determination of "in the money" options at December 31, 1999, is
based on the closing price of the common stock on the Nasdaq SmallCap Market on
December 31, 1999, which was $6.375.
Information with respect to Mr. Conway includes warrants to purchase
23,916 shares of common stock held by Mr. Conway's wife, as to which he
disclaims beneficial ownership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In March 1999, we and members of our management, together with other
employees and non-affiliated investors, entered into an agreement with
Consolidated Technology, its subsidiary, SIS Capital Corp. and Mr. Anthony
Grisanti, as agent, pursuant to which:
* The purchasers bought an aggregate of 585,750 shares of our
common stock from SIS Capital for $2.015 per share in April 1999.
* The purchasers had the right to buy up to 206,874 additional
shares of the our common stock from SIS Capital at the same
purchase price per share.
- 6 -
* Consolidated Technology transferred to us shares of our preferred
stock (including the right to receive dividends thereon) and
warrants to purchase shares of our common stock, for which we
issued 100,000 shares of common stock to Consolidated Technology
in April 1999.
The following officers and directors purchased the following number of
shares of common stock from SIS Capital pursuant to this agreement:
Name Number of Shares Purchase Price
- ---- ---------------- --------------
John F. Phillips 75,000 $151,118
Edward D. Bright 62,500 125,931
Gerald O. Koop 34,600 69,716
James L. Conway 26,000 52,387
Anthony F. Grisanti 20,600 41,507
Joseph G. Sicinski 5,000 10,075
PERFORMANCE GRAPH
The following graph, based on data provided by the Center for Research
in Security Prices, shows changes in the value of $100 invested on August 14,
1996, when the trading in our common stock commenced following its initial
public offering, of: (a) shares of our common stock; (b) the Nasdaq stock index
(US companies); and (c) an SIC peer group consisting of Nasdaq listed companies
in SIC code 7370 through 7379, which computer and data processing companies. The
values of each investment at the end of each period are derived from compounded
daily returns that include all dividends. Total stockholder returns from each
investment can be calculated from the year-end investment values shown beneath
the graph provided below.
8/14/96 12/31/96 12/31/97 12/31/98 12/31/99
------- -------- -------- -------- --------
Netsmart Technologies, Inc. 100.0 32.5 8.4 8.2 20.4
Nasdaq Stock Market (US companies) 100.0 113.6 139.4 196.2 364.3
Nasdaq computer and data processing stocks 100.0 112.1 137.8 245.9 544.1
The index level for all indices was set at 100.0 on August 14, 1996,
when trading in our common stock commenced.
- 7 -
APPROVAL OF THE 1999 LONG-TERM INCENTIVE PLAN
---------------------------------------------
The board of directors believes that in order to attract and retain the
services of executive and other key employees, it is necessary for us to have
the ability and flexibility to provide a compensation package which compares
favorably with those offered by other companies. Accordingly, in November 1999,
the board of directors adopted, subject to stockholder approval, the 1999
Long-Term Incentive Plan, covering 150,000 shares of common stock. In October
2000, the board amended the 1999 plan to increase the number of shares of common
stock subject to the plan to 300,000, and approved the plan, subject to
stockholder approval.
We have two other stock option plans, the 1993 Long-Term Incentive Plan
and the 1998 Long-Term Incentive Plan. The 1993 plan was adopted by the board of
directors and stockholders in July 1993. It was amended in October 1993, April
1994, October 1994 and February 1996. We may grant options or other equity-
based incentives for 170,333 shares of common stock under the 1993 plan, which
does not have an expiration date. In November 1998, the board of directors
adopted, and in November 1999, the stockholders approved an amendment to the
1998 plan. We may grant options or other equity-based incentives for 780,000
shares of common stock under the 1998 plan.
As of September 30, 2000, under our 1993 and 1998 plans, we had issued a
total of 555,023 shares of common stock, 516,042 shares of common stock were
subject to outstanding options, and no shares of common stock were available for
grant, except to the extent of any shares which are subject to outstanding
options which expire unexercised.
Our stock option plans are administered by a committee of at least two
non-employee directors appointed by the board. The compensation committee serves
as the committee under all of our stock option plans. Any member or alternate
member of the committee is not eligible to receive options or stock under these
plans except for the annual option grant and certain options grants which were
approved by the stockholders in connection with the approval of the 1998 plan.
The committee has broad discretion in determining the persons to whom stock
options or other awards are to be granted and the terms and conditions of the
award, including the type of award, the exercise price and term and restrictions
and forfeiture conditions. If no committee is appointed, the functions of the
committee are performed by the board of directors. The compensation committee
consists of Messrs. Edward D. Bright and Joseph G. Sicinski.
Set forth below is a summary of the 1999 Plan, but this summary is
qualified in its entirety by reference to the full text of the 1999 plan, a copy
of which is included as Exhibit A to this proxy statement. The plan, which
expires in November 2009 unless terminated earlier by the board of directors,
gives the board of directors broad authority to modify the plan, and, in
particular, to eliminate any provisions which are not required in order to meet
the requirements of Rule 16b-3 of the Securities and Exchange Commission
pursuant with the Securities Exchange Act of 1934, as amended.
We may issue a maximum of 300,000 shares of common stock under the 1999
plan. If an option under the 1999 plan expires or terminates without being
exercised in full or if shares awarded under the plan are forfeited or otherwise
terminate without a payment being made to the participant in the form of stock,
such shares will again be available for future issuance under the plan. The plan
imposes no limit on the number of officers and other key employees to whom
awards may be made.
We may make awards under the 1999 plan to key employees, including
officers and directors of us and our subsidiaries, and consultants and others
who perform services for us and our subsidiaries, except that directors who are
not employed by us or our subsidiaries or are not otherwise engaged by us are
not eligible for options under the 1999 plan, except that the 1999 plan provides
for the automatic grant to each non-employee directors of a non-qualified option
to purchase 5,000 shares of common stock on April 1st of each year, commencing
April 1, 2000. The options to non-employee directors pursuant to the annual
grant have a term of five years from the date of grant and become exercisable as
to all of the shares of common stock subject to the option six months from the
date of grant, except that they become immediately exercisable if a change of
control,
- 8 -
as defined in the 1999 plan, should occur and terminate seven months after
termination of service if such termination is other than as a result of his or
her death or disability. Two directors, Messrs. Edward D. Bright and Joseph G.
Sicinski, qualified as non-employee directors on April 1, 2000. Because there
were no options available for grant under the present plans and the 1999 plan
had not been approved by the stockholders, there were no automatic option grants
on April 1, 2000. Instead the options will be granted on the date the 1999 plan
is approved by the stockholders and the exercise price will be the fair market
value on that date. No options were granted under the 1999 plan.
The committee has the authority to grant the following types of awards
under the 1999 plan: incentive or non-qualified stock options; stock
appreciation rights; restricted stock; deferred stock; stock purchase rights
and/or other stock-based awards. The 1999 plan is designed to provide us with
broad discretion to grant incentive stock-based rights.
Tax consequences of awards provided under the 1999 plan are dependent
upon the type of award granted. The grant of an incentive or non-qualified stock
options does not result in any taxable income to the recipient or deduction to
us. Upon exercise of a non-qualified stock option, the recipient recognizes
income in the amount by which the fair market value on the date of exercise
exceeds the exercise price of the option, and we receive a corresponding tax
deduction. In the case of an incentive stock option, no income is recognized to
the employee, and no deduction is available to us, if the stock issued upon
exercise of the option is not transferred within two years from the date of
grant or one year from the date of exercise, whichever occurs later. However,
the exercise of an incentive stock option may result in additional taxes through
the application of the alternative minimum tax. In the event of a sale or other
disqualifying transfer of stock issued upon exercise of an incentive stock
option, the employee realizes income, and we receive a tax deduction, equal to
the amount by which the lesser of the fair market value at the date of exercise
or the proceeds from the sale exceeds the exercise price. The issuance of stock
pursuant to a stock grant results in taxable income to the recipient at the date
the rights to the stock become nonforfeitable, and we receive a deduction in
such amount. However, if the recipient of the award makes an election in
accordance with the Internal Revenue Code of 1986, as amended, the amount of his
or her income is based on the fair market value on the date of grant rather than
the fair market value on the date the rights become nonforfeitable. When
compensation is to be recognized by the employee, appropriate arrangements may
be required to be made with respect to the payment of withholding tax.
Option Grants
No options were granted to the officers named in the Summary
Compensation Table during 1999, and no options were granted under the 1999 plan.
Vote Required
- -------------
The proposal to approve the amendment to the 1999 plan requires the
approval of a majority of the shares of common stock present and voting,
provided that a quorum is present.
The board of directors recommends a vote FOR the proposal.
APPROVAL OF THE 1999 EMPLOYEE STOCK PURCHASE PLAN
-------------------------------------------------
Our board of directors believes that our growth and profitability
depends, in large part, upon our ability to maintain a competitive position in
attracting and retaining qualified personnel. Accordingly, in November 1999, the
board of directors adopted, subject to stockholder approval, the 1999 Employee
Stock Purchase Plan, a copy of which is attached as Exhibit B, which will permit
employees to purchase our common stock at discounts of up to 15%. The purchase
plan, if approved by the stockholders, will be an integral component of the
benefit package for all eligible employees. In October 2000, the board
re-adopted the purchase plan, subject to stockholder approval.
The following is a brief summary of the provisions of the purchase plan.
- 9 -
Our board of directors reserved 150,000 shares of common stock for
issuance under the purchase plan. The purchase plan provides eligible employees
with the opportunity to purchase shares of our common stock at a discounted
price through regular payroll deductions. The first offering shall begin on a
date determined at the discretion of the board of directors or the compensation
committee, which administers the purchase plan. Each successive offering shall
begin on the date selected by the board of directors or the compensation
committee.
Our employees and those of our eligible subsidiaries may participate in
the purchase plan provided that he or she has completed six consecutive months
of employment with us or one of our eligible subsidiaries. At present the only
eligible subsidiary is Creative Socio-Medics Corp. Employees who own or would
own common stock or options to purchase common stock representing 5% or more of
the common stock are not eligible to participate in the purchase plan.
An employee may elect to have between 1% and 5% of his or her
compensation withheld from his or her base pay for purposes of purchasing shares
under the purchase plan, except that an employee cannot purchase common stock at
a rate which exceeds $25,000 of market value per calender year. The price at
which shares may be purchased shall be 85% of the lower of (i) 90% of the fair
market value of the Common Stock on the date the offering commences or the
average of the prices of the stock on the last five days preceding the offering
on which trading occurred on the Nasdaq Stock Market, whichever is greater, or
(ii) 90% of the closing price on the date the offering terminates or the average
of the prices of the common stock on the last five days of the offering on which
trading occurred on the Nasdaq Stock Market, which ever is greater.
The purchase plan is administered by a committee consisting of at least
three non-employee directors. The committee will be appointed by the board of
directors and will have the authority to adopt rules and regulations for
administering the purchase plan, subject to the express provisions of the
purchase plan. The board of directors shall have complete power and authority to
terminate or amend the purchase plan, except that any change in the number of
shares of common stock issuable under the purchase plan or in the class of
employees eligible to participate in the purchase plan will require stockholder
approval.
As of August 1, 2000, approximately 130 employees would have been
eligible to participate in the purchase plan.
The purchase of shares under the purchase plan is discretionary, and we
cannot now determine the number of shares to be purchased in the future by any
particular employee or employees.
Tax Consequences to Participants. In general, a participant will not
recognize taxable income upon enrolling in the purchase plan or upon purchasing
shares of common stock pursuant to the purchase plan. Instead, if a participant
sells common stock acquired under the purchase plan at a sale price that exceeds
the price at which the participant purchased the common stock, then the
participant will recognize taxable income in an amount equal to the excess of
the sale price of the common stock over the price at which the participant
purchased the common stock. A portion of that taxable income will be ordinary
income, and a portion may be capital gain.
If the participant sells the common stock more than one year after
acquiring it and more than two years after the date on which the offering
commenced, then the participant will be taxed as follows. If the sale price of
the common stock is higher than the price at which the participant purchased the
common stock, then the participant will recognize ordinary compensation income
in the amount by which the lesser of the sale price or the fair market value on
the date on which the offering commenced exceeds the exercise price. Any further
income will be long-term capital gain. If the sale price of the common stock is
less than the price at which the participant purchased the common stock, then
the participant will recognize long-term capital loss in an amount equal to the
excess of the price at which the participant purchased the common stock over the
sale price of the common stock.
If the participant sells the common stock in a disqualifying
disposition, which includes a sale of the common stock purchased under the
purchase plan within one year after acquiring it or within two years after the
commencement of the offering, whichever is later, then the participant will
recognize ordinary compensation income
- 10 -
in an amount equal to the excess of the fair market value of the common stock on
the date that it was purchased over the price at which the participant purchased
the common stock. The participant will also recognize capital gain in an amount
equal to the excess of the sale price of the common stock over the fair market
value of the common stock on the date that it was purchased, or capital loss in
an amount equal to the excess of the fair market value of the common stock on
the date that it was purchased over the sale price of the common stock. This
capital gain or loss will be a long-term capital gain or loss if the participant
has held the common stock for more than one year prior to the date of the sale
and will be a short-term capital gain or loss if the participant has held the
common stock for a shorter period. Further, such gain may be subject to state
and local taxes.
Tax Consequences to us. The offering of common stock under the purchase
plan will have no tax consequences to us except that we will be entitled to a
deduction with respect to any ordinary compensation income recognized by a
participant upon making a disqualifying disposition.
Vote Required
- -------------
The adoption of the purchase plan requires the affirmative vote of the
holders of a majority of the shares of common stock voting at the annual
meeting.
The board of directors recommends a vote FOR the Purchase Plan.
SELECTION OF INDEPENDENT AUDITORS
---------------------------------
It is proposed that the stockholders approve the selection of Richard A.
Eisner & Company, LLP as our independent public accountant for the year ending
December 31, 1999. The board of directors has approved the selection of Richard
A. Eisner & Company, LLP as our independent public accountants. However, in the
event approval of the proposal is not obtained, the selection of the independent
auditors will be reconsidered by the board of directors.
Richard A. Eisner & Company, LLP was our independent certified public
accountants for the year ended December 31, 1999, and its report is included in
the annual report. At no time since their engagement have they had any direct or
indirect financial interest in or any connection with us or any of our
subsidiaries other than as independent accountants.
Representatives of Richard A. Eisner & Company, LLP are not expected to
be present at the annual meeting, but will be available by telephone to answer
any questions raised by stockholders at the meeting.
Our financial statements for the year ended December 31, 1997, of which
the statements of operations, cash flows and stockholders equity are included in
the annual report, were audited by Moore Stephens, P.C., whose report on such
financial statements did not include any qualification, disclaimer, modification
or explanatory paragraph. There were no disagreements with Moore Stephens, P.C.
during the year ended December 31, 1997 or during the period subsequent to
December 31, 1997 on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure. The decision to dismiss
Moore Stephens, P.C. and engage Richard A. Eisner & Company, LLP was made by our
board of directors on June 30, 1998.
Vote Required
The proposal to approve the selection of Richard A. Eisner & Company,
LLP as our independent accountant requires the approval of a majority of the
shares of common stock present and voting, provided that a quorum is present.
The board of directors recommends a vote FOR the proposal.
- 11 -
INCORPORATION BY REFERENCE
--------------------------
We incorporate into this proxy statement the audited financial
statements for the years ended December 31, 1999 and 1998 together with the
related Management's Discussion and Analysis of Financial Condition and Results
of Operations, which are included in the annual report, and unaudited financial
statements for the six months ended June 30, 2000, together with the related
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included in our Form 10-Q for the nine months ended
September 30, 2000. A copy of the annual report is being mailed to stockholders
of record on the record date concurrently with the mailing of this proxy
statement. Additional copies of the annual report and copies of the Form 10-Q
will be provided by us without charge upon request. Requests for copies of the
annual report or Form 10-Q should be made as provided under "Other Matters."
OTHER MATTERS
-------------
Any proposal which a stockholder wishes to present at the 2001 Annual
Meeting of Stockholders must be received by us at our executive offices at 146
Nassau Avenue, Islip, New York 11751, not later than January 31, 2001.
Copies of our Form 10-K for the year ended December 31, 1999 and Form
10-Q for the nine months ended September 30, 2000, without exhibits, may be
obtained without charge by writing to Mr. Anthony F. Grisanti, Chief Financial
Officer, Netsmart Technologies, Inc., 146 Nassau Avenue, Islip, New York 11751.
Exhibits will be furnished upon request and upon payment of a handling charge of
$.25 per page, which represents our reasonable cost on furnishing such exhibits.
The board of directors does not know of any other matters to be brought
before the meeting. If any other matters are properly brought before the
meeting, the persons named in the enclosed proxy intend to vote such proxy in
accordance with their best judgment on such matters.
By Order of the Board of Directors
James L. Conway
President
November 9, 2000
- 12 -
PROXY
NETSMART TECHNOLOGIES, INC.
2000 Annual Meeting of Stockholders -- December 21, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints James L. Conway, Edward D. Bright and
Anthony F. Grisanti or any of them acting in the absence of the others, with
full power of substitution or revocation, proxies for the undersigned, to vote
at the 2000 Annual Meeting of Stockholders of Netsmart Technologies, Inc. (the
"Company"), to be held at 9:30 a.m., local time, on Thursday, December 21, 2000,
at the offices of the Corporation at 146 Nassau Avenue, Islip, New York 11751,
and at any adjournment or adjournments thereof, according to the number of votes
the undersigned might cast and with all powers the undersigned would possess if
personally present.
(1) To elect the following five (5) directors:
James L. Conway, Edward D. Bright, John F. Phillips, Gerald O. Koop and
Joseph G. Sicinski
[ ] FOR all nominees listed above (except as marked to the contrary below).
[ ] Withhold authority to vote for all nominees listed above.
INSTRUCTION: To withhold authority to vote for any individual nominee, print
that nominee's name below.
- --------------------------------------------------------------------------------
(2) To approve the 1999 Long Term Incentive Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(3) To approve the 1999 Employee Stock Purchase Plan.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(4) To approve the selection of Richard A. Eisner & Company, LLP as the
Company's independent certified public accountants for the year ended
December 31, 2000
FOR [ ] AGAINST [ ] ABSTAIN [ ]
(5) In their discretion, upon the transaction of such other business as may
properly come before the meeting.
All of the above as set forth in the Proxy Statement, dated November 9, 2000.
- 13 -
The shares represented by this proxy will be voted on Items 1, 2, 3 and
4 as directed by the stockholder, but if no direction is indicated, will be
voted FOR Items 1, 2, 3 and 4.
If you plan to attend the meeting please indicate below:
I plan to attend the meeting [ ]
Dated: __________________________ , 2000
_______________________________
_______________________________
(Signature(s))
Please sign exactly as name(s) appear
hereon. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title as such.
Please date, sign and mail this proxy in
the enclosed envelope, which requires no
postage if mailed in the United States.
- 14 -
Exhibit A
NETSMART TECHNOLOGIES, INC.
--------------------------
1999 Long-Term Incentive Plan
1. Purpose; Definitions.
The purpose of the Netsmart Technologies, Inc. 1999 Long-Term Incentive
Plan (the "Plan") is to enable Netsmart Technologies, Inc. (the "Company") to
attract, retain and reward key employees of the Company and its Subsidiaries and
Affiliates, and others who provide services to the Company and its Subsidiaries
and Affiliates, and strengthen the mutuality of interests between such key
employees and such other persons and the Company's stockholders, by offering
such key employees and such other persons incentives and/or other equity
interests or equity-based incentives in the Company, as well as
performance-based incentives payable in cash.
For purposes of the Plan, the following terms shall be defined as set
forth below:
(a) "Affiliate" means any corporation, partnership, limited liability
company, joint venture or other entity, other than the Company and its
Subsidiaries, that is designated by the Board as a participating employer under
the Plan, provided that the Company directly or indirectly owns at least 20% of
the combined voting power of all classes of stock of such entity or at least 20%
of the ownership interests in such entity.
(b) "Board" means the Board of Directors of the Company.
(c) "Book Value" means, as of any given date, on a per share basis (i)
the stockholders' equity in the Company as of the last day of the immediately
preceding fiscal year as reflected in the Company's consolidated balance sheet,
subject to such adjustments as the Committee shall specify at or after grant,
divided by (ii) the number of then outstanding shares of Stock as of such
year-end date, as adjusted by the Committee for subsequent events.
(d) "Cause" means a felony conviction of a participant, or the failure
of a participant to contest prosecution for a felony, or a participant's willful
misconduct or dishonesty, or breach of trust or other action by which the
participant obtains personal gain at the expense of or to the detriment of the
Company or, if the participant has an employment agreement with the Company, a
Subsidiary or Affiliate, an event which constitutes "cause" as defined in such
employment agreement.
(e) "Code" means the Internal Revenue Code of 1986, as amended from time
to time, and any successor thereto.
(f) "Commission" means the Securities and Exchange Commission or any
successor thereto.
(g) "Committee" means the Committee referred to in Section 2 of the
Plan. If at any time no Committee shall be in office, then the functions of the
Committee specified in the Plan shall be exercised by the Board.
(h) "Company" means Netsmart Technologies, Inc., a Delaware
corporation, or any successor corporation.
(i) "Deferred Stock" means an award made pursuant to Section 8 of the
Plan of the right to receive Stock at the end of a specified deferral period.
A-1
(j) "Disability" means disability as determined under procedures
established by the Committee for purposes of the Plan.
(k) "Early Retirement" means retirement, with the express consent for
purposes of the Plan of the Company at or before the time of such retirement,
from active employment with the Company and any Subsidiary or Affiliate pursuant
to the early retirement provisions of the applicable pension plan of such
entity.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, from time to time, and any successor thereto.
(m) "Fair Market Value" means, as of any given date, the market price of
the Stock as determined by or in accordance with the policies established by the
Committee in good faith; provided, that, in the case of an Incentive Stock
Option, the Fair Market Value shall be determined in accordance with the Code
and the Treasury regulations under the Code.
(n) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422 of
the Code.
(o) "Non-Employee Director" shall have the meaning set forth in Rule
16b-3 of the Commission pursuant to the Exchange Act or any successor definition
adopted by the Commission; provided that in the event that said rule (or
successor rule) shall not have such a definition, the term Non-Employee Director
shall mean a director of the Company who is not otherwise employed by the
Company or any Subsidiary or Affiliate.
(p) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(q) "Normal Retirement" means retirement from active employment with the
Company and any Subsidiary or Affiliate on or after age 65.
(r) "Other Stock-Based Award" means an award under Section 10 of the
Plan that is valued in whole or in part by reference to, or is otherwise based
on, Stock.
(s) "Plan" means this Netsmart Technologies, Inc. 1999 Long-Term
Incentive Plan, as hereinafter amended from time to time.
(t) "Restricted Stock" means an award of shares of Stock that is subject
to restrictions under Section 7 of the Plan.
(u) "Retirement" means Normal Retirement or Early Retirement.
(v) "Stock" means the Common Stock, par value $.01 per share, of the
Company or any class of common stock into which such common stock may hereafter
be converted or for which such common stock may be exchanged pursuant to the
Company's certificate of incorporation or as part of a recapitalization,
reorganization or similar transaction.
(w) "Stock Appreciation Right" means the right pursuant to an award
granted under Section 6 of the Plan to surrender to the Company all (or a
portion) of a Stock Option in exchange for an amount equal to the difference
between (i) the Fair Market Value, as of the date such award or Stock Option (or
such portion thereof) is surrendered, of the shares of Stock covered by such
Stock Option (or such portion thereof), subject, where applicable, to the
pricing provisions in Paragraph 6(b)(ii) of the Plan and (ii) the aggregate
exercise price of such Stock Option or base price with respect to such award (or
the portion thereof which is surrendered).
(x) "Stock Option" or "Option" means any option to purchase shares of
Stock (including Restricted Stock and Deferred Stock, if the Committee so
determines) granted pursuant to Section 5 of the Plan.
A-2
(y) "Stock Purchase Right" means the right to purchase Stock pursuant to
Section 9 of the Plan.
(z) "Subsidiary" means any corporation or other business association,
including a partnership (other than the Company) in an unbroken chain of
corporations or other business associations beginning with the Company if each
of the corporations or other business associations (other than the last
corporation in the unbroken chain) owns equity interests (including stock or
partnership interests) possessing 50% or more of the total combined voting power
of all classes of equity in one of the other corporations or other business
associations in the chain.
In addition, the terms "Change in Control," "Potential Change in
Control" and "Change in Control Price" shall have meanings set forth,
respectively, in Paragraphs 11(b), (c) and (d) of the Plan.
2. Administration.
(a) The Plan shall be administered by a Committee of not less than two
Non-Employee Directors, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. If and to the extent that no Committee exists
which has the authority to so administer the Plan, the functions of the
Committee specified in the Plan shall be exercised by the Board. Notwithstanding
the foregoing, in the event that the Company is not subject to the Exchange Act
or in the event that the administration of the Plan by a Committee of
Non-Employee Directors is not required in order for the Plan to meet the test of
Rule 16b-3 of the Commission under the Exchange Act, or any subsequent rule,
then the Committee need not be composed of Non-Employee Directors.
(b) The Committee shall have full authority to grant, pursuant to the
terms of the Plan, to officers and other persons eligible under Section 4 of the
Plan: Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred
Stock, Stock Purchase Rights and/or Other Stock-Based Awards. In particular, the
Committee shall have the authority:
(i) to select the officers and other eligible persons to whom
Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock,
Stock Purchase Rights and/or Other Stock-Based Awards may from time to time be
granted pursuant to the Plan;
(ii) to determine whether and to what extent Incentive Stock
Options, Non-Qualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Deferred Stock, Stock Purchase Rights and/or Other Stock-Based Awards, or
any combination thereof, are to be granted pursuant to the Plan, to one or more
eligible persons;
(iii) to determine the number of shares to be covered by each
such award granted pursuant to the Plan;
(iv) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted under the Plan, including, but not
limited to, the share price or exercise price and any restriction or limitation,
or any vesting, acceleration or waiver of forfeiture restrictions regarding any
Stock Option or other award and/or the shares of Stock relating thereto, based
in each case on such factors as the Committee shall, in its sole discretion,
determine;
(v) to determine whether, to what extent and under what
circumstances a Stock Option may be settled in cash, Restricted Stock and/or
Deferred Stock under Paragraph 5(b)(x) or (xi) of the Plan, as applicable,
instead of Stock;
(vi) to determine whether, to what extent and under what
circumstances Option grants and/or other awards under the Plan and/or other cash
awards made by the Company are to be made, and operate, on a tandem basis with
other awards under the Plan and/or cash awards made outside of the Plan in a
manner whereby the exercise of one award precludes, in whole or in part, the
exercise of another award, or on an additive basis;
A-3
(vii) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award under
this Plan shall be deferred either automatically or at the election of the
participant, including any provision for any determination or method of
determination of the amount (if any) deemed be earned on any deferred amount
during any deferral period;
(viii) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Stock purchased by exercising such Rights; and
(ix) to determine an aggregate number of awards and the type of
awards to be granted to eligible persons employed or engaged by the Company
and/or any specific Subsidiary, Affiliate or division and grant to management
the authority to grant such awards, provided that no awards to any person
subject to the reporting and short-swing profit provisions of Section 16 of the
Exchange Act may be granted awards except by the Committee.
(c) The Committee shall have the authority to adopt, alter and repeal
such rules, guidelines and practices governing the Plan as it shall, from time
to time, deem advisable; to interpret the terms and provisions of the Plan and
any award issued under the Plan and any agreements relating thereto, and
otherwise to supervise the administration of the Plan.
(d) All decisions made by the Committee pursuant to the provisions of
the Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and Plan participants.
3. Stock Subject to Plan.
(a) The total number of shares of Stock reserved and available for
distribution under the Plan shall be three hundred thousand (300,000) shares of
Common Stock. In the event that awards are granted in tandem such that the
exercise of one award precludes the exercise of another award then, for the
purpose of determining the number of shares of Stock as to which awards shall
have been granted, the maximum number of shares of Stock issuable pursuant to
such tandem awards shall be used.
(b) Subject to Paragraph 6(b)(v) of the Plan, if any shares of Stock
that have been optioned cease to be subject to a Stock Option, or if any such
shares of Stock that are subject to any Restricted Stock or Deferred Stock
award, Stock Purchase Right or Other Stock-Based Award granted under the Plan
are forfeited or any such award otherwise terminates without a payment being
made to the participant in the form of Stock, such shares shall again be
available for distribution in connection with future awards under the Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, stock distribution, reverse
split, combination of shares or other change in corporate structure affecting
the Stock, such substitution or adjustment shall be made in the aggregate number
of shares reserved for issuance under the Plan, in the base number of shares, in
the number and option price of shares subject to outstanding Options granted
under the Plan, in the number and purchase price of shares subject to
outstanding Stock Purchase Rights under the Plan, and in the number of shares
subject to other outstanding awards granted under the Plan as may be determined
to be appropriate by the Committee, in its sole discretion, provided that the
number of shares subject to any award shall always be a whole number. Such
adjusted option price shall also be used to determine the amount payable by the
Company upon the exercise of any Stock Appreciation Right associated with any
Stock Option.
4. Eligibility.
(a) Officers and other key employees and directors of, and consultants
and independent contractors to, the Company and its Subsidiaries and Affiliates
(but excluding, except as to Paragraph 4(b) of the Plan, Non- Employee
A-4
Directors) who are responsible for or contribute to the management, growth
and/or profitability of the business of the Company and/or its Subsidiaries and
Affiliates are eligible to be granted awards under the Plan.
(b) On each April 1 of each year, commencing April 1, 2000, each person
who is a Non-Employee Director on such date shall automatically be granted a
Non-Qualified Stock Option to purchase five thousand (5,000) shares of Common
Stock (or such lesser number of shares of Common Stock as remain available for
grant at such date under the Plan, divided by the number of Non-Employee
Directors at such date); provided, however, that with respect to the automatic
grant on April 1, 2000, in the event that the Plan shall not have been approved
by stockholders on or prior to April 1, 2000, the automatic option grant in 2000
shall be granted on the date that the Plan is approved by stockholders. Such
Stock Options shall be exercisable at a price per share equal to the greater of
the Fair Market Value on the date of grant or the par value of one share of
Common Stock. The Non-Qualified Stock Options granted pursuant to this
Paragraphs 4(b) shall become exercisable as to all of the shares subject thereto
six (6) months from the date of grant, and shall expire on the earlier of (i)
five years from the date of grant, or (ii) seven (7) months from the date such
Non-Employee Director ceases to be a director if such Non-Employee Director
ceases to be a director other than as a result of his death or Disability. The
provisions of this Paragraph 4(b) may not be amended more than one (1) time in
any six (6) month period other than to comply with changes in the Code or the
Employee Retirement Income Security Act ("ERISA") or the rules thereunder.
5. Stock Options.
(a) Administration. Stock Options may be granted alone, in addition to
or in tandem with other awards granted under the Plan and/or cash awards made
outside of the Plan. Any Stock Option granted under the Plan shall be in such
form as the Committee may from time to time approve. Stock Options granted under
the Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified
Stock Options. The Committee shall have the authority to grant to any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights).
(b) Option Grants. Options granted under the Plan shall be subject to
the following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee, in
its sole discretion, shall deem desirable:
(i) Option Price. The option price per share of Stock
purchasable under a Stock Option shall be determined by the Committee at the
time of grant.
(ii) Option Term. The term of each Stock Option shall be fixed by
the Committee, but no Stock Option shall be exercisable more than ten (10) years
after the date the Option is granted.
(iii) Exercisability. Stock Options shall be exercisable at such
time or times and subject to such terms and conditions as shall be determined by
the Committee at or after grant. If the Committee provides, in its sole
discretion, that any Stock Option is exercisable only in installments, the
Committee may waive such installment exercise provisions at any time at or after
grant in whole or in part, based on such factors as the Committee shall, in its
sole discretion, determine.
(iv) Method of Exercise.
------------------
(A) Subject to whatever installment exercise provisions
apply under Paragraph 5(b)(iii) of the Plan, Stock Options may be exercised
in whole or in part at any time during the option period, by giving written
notice of exercise to the Company specifying the number of shares to be
purchased. Such notice shall be accompanied by payment in full of the
purchase price, either by check, note or such other instrument, securities or
property as the Committee may accept. As and to the extent determined by the
Committee, in its sole discretion, at or after grant, payments in full or
in part may also be made in the form of Stock already owned by the optionee or,
in the case of the exercise of a Non-Qualified Stock Option, Restricted Stock or
Deferred Stock
A-5
subject to an award hereunder (based, in each case, on the Fair Market Value of
the Stock on the date the option is exercised, as determined by the Committee).
(B) If payment of the option exercise price of a
Non-Qualified Stock Option is made in whole or in part in the form of Restricted
Stock or Deferred Stock, the Stock issuable upon such exercise (and any
replacement shares relating thereto) shall remain (or be) restricted or
deferred, as the case may be, in accordance with the original terms of the
Restricted Stock award or Deferred Stock award in question, and any additional
Stock received upon the exercise shall be subject to the same forfeiture
restrictions or deferral limitations, unless otherwise determined by the
Committee, in its sole discretion, at or after grant.
(C) No shares of Stock shall be issued until full payment
therefor has been received by
the Company. In the event of any exercise by note or other instrument, the
shares of Stock shall not be issued until such note or other instrument shall
have been paid in full, and the exercising optionee shall have no rights as a
stockholder until such payment is made.
(D) Subject to Paragraph 5(b)(iv)(C) of the Plan, an
optionee shall generally have the rights to dividends or other rights of a
stockholder with respect to shares subject to the Option when the optionee has
given written notice of exercise, has paid in full for such shares, and,
if requested, has given the representation described in Paragraph 14(a) of
the Plan.
(v) Non-Transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(vi) Termination by Death. Subject to Paragraph 5(b)(ix) of the
Plan with respect to Incentive Stock Options, if an optionee's employment by the
Company and any Subsidiary or Affiliate terminates by reason of death, any Stock
Option held by such optionee may thereafter be exercised, to the extent such
option was exercisable at the time of death or on such accelerated basis as the
Committee may determine at or after grant (or as may be determined in accordance
with procedures established by the Committee), by the legal representative of
the estate or by the legatee of the optionee under the will of the optionee, for
a period of one year (or such other period as the Committee may specify at
grant) from the date of such death or until the expiration of the stated term of
such Stock Option, whichever period is the shorter.
(vii) Termination by Reason of Disability or Retirement. Subject
to Paragraph 5(b)(ix) of the Plan with respect to Incentive Stock Options, if an
optionee's employment by the Company and any Subsidiary or Affiliate terminates
by reason of a Disability or Normal or Early Retirement, any Stock Option held
by such optionee may thereafter be exercised by the optionee, to the extent it
was exercisable at the time of termination or on such accelerated basis as the
Committee may determine at or after grant (or as may be determined in accordance
with procedures established by the Committee), for a period of one year (or such
other period as the Committee may specify at grant) from the date of such
termination of employment or until the expiration of the stated term of such
Stock Option, whichever period is the shorter; provided, however, that, if the
optionee dies within such one-year period (or such other period as the Committee
shall specify at grant), any unexercised Stock Option held by such optionee
shall thereafter be exercisable to the extent to which it was exercisable at the
time of death for a period of one year from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of termination of employment by reason of Disability or
Normal or Early Retirement, if an Incentive Stock Option is exercised after the
expiration of the exercise periods that apply for purposes of Section 422 of the
Code, such Stock Option will thereafter be treated as a Non-Qualified Stock
Option.
(viii) Other Termination. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee) at or after
grant, if an optionee's employment by the Company and any Subsidiary or
Affiliate terminates for any reason other than death, Disability or Normal or
Early Retirement, the Stock Option shall thereupon terminate; provided, however,
that if the optionee is involuntarily terminated by the
A-6
Company or any Subsidiary or Affiliate without Cause, including a termination
resulting from the Subsidiary, Affiliate or division in which the optionee is
employed or engaged, ceasing, for any reason, to be a Subsidiary, Affiliate or
division of the Company, such Stock Option may be exercised, to the extent
otherwise exercisable on the date of termination, for a period of three months
(or seven months in the case of a person subject to the reporting and
short-swing profit provisions of Section 16 of the Exchange Act) from the date
of such termination or until the expiration of the stated term of such Stock
Option, whichever is shorter.
(ix) Incentive Stock Options.
-----------------------
(A) Anything in the Plan to the contrary notwithstanding,
no term of the Plan relating to Incentive Stock Options shall be interpreted,
amended or altered, nor shall any discretion or authority granted under the
Plan be so exercised, so as to disqualify the Plan under Section 422 of the
Code, or, without the consent of the optionee(s) affected, to disqualify
any Incentive Stock Option under such Section 422.
(B) To the extent required for "incentive stock option"
status under Section 422(d) of the Code (taking into account applicable
Treasury regulations and pronouncements), the Plan shall be deemed to provide
that the aggregate Fair Market Value (determined as of the time of grant) of
the Stock with respect to which Incentive Stock Options are exercisable for the
first time by the optionee during any calendar year under the Plan and/or any
other stock option plan of the Company or any Subsidiary or parent
corporation (within the meaning of Section 425 of the Code) shall not exceed
$100,000. If Section 422 is hereafter amended to delete the requirement now
in Section 422(d) that the plan text expressly provide for the $100,000
limitation set forth in Section 422(d), then this Paragraph 5(b)(ix)(B) shall
no longer be operative and the Committee may accelerate the dates on which the
incentive stock option may be exercised.
(C) To the extent permitted under Section 422 of the Code
or the applicable regulations thereunder or any applicable Internal Revenue
Service pronouncement:
If (x) a participant's employment is terminated
by reason of death, Disability or Retirement and (y) the portion of any
Incentive Stock Option that is otherwise exercisable during the
post-termination period specified under Paragraphs 5(b)(vi) and (vii) of
the Plan, applied without regard to the $100,000 limitation contained in
Section 422(d) of the Code, is greater than the portion of such option that is
immediately exercisable as an "incentive stock option" during such
post-termination period under Section 422, such excess shall be treated as a
Non-Qualified Stock Option; and
if the exercise of an Incentive Stock Option is
accelerated by reason of a Change in Control, any portion of such option that
is not exercisable as an Incentive Stock Option by reason of the $100,000
limitation contained in Section 422(d) of the Code shall be treated as a
Non-Qualified Stock Option.
(x) Buyout Provisions. The Committee may at any time offer to buy
out for a payment in cash, Stock, Deferred Stock or Restricted Stock an option
previously granted, based on such terms and conditions as the Committee shall
establish and communicate to the optionee at the time that such offer is made.
(xi) Settlement Provisions. If the option agreement so provides
at grant or is amended after grant and prior to exercise to so provide (with the
optionee's consent), the Committee may require that all or part of the shares to
be issued with respect to the spread value of an exercised Option take the form
of Deferred or Restricted Stock which shall be valued on the date of exercise on
the basis of the Fair Market Value (as determined by the Committee) of such
Deferred or Restricted Stock determined without regard to the deferral
limitations and/or forfeiture restrictions involved.
A-7
6. Stock Appreciation Rights.
(a) Grant and Exercise.
------------------
(i) Stock Appreciation Rights may be granted in conjunction with
all or part of any Stock Option granted under the Plan. In the case of a
Non-Qualified Stock Option, such rights may be granted either at or after the
time of the grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of such Stock
Option.
(ii) A Stock Appreciation Right or applicable portion thereof
granted with respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option,
subject to such provisions as the Committee may specify at grant where a Stock
Appreciation Right is granted with respect to less than the full number of
shares covered by a related Stock Option.
(iii) A Stock Appreciation Right may be exercised by an optionee,
subject to Paragraph 6(b) of the Plan, in accordance with the procedures
established by the Committee for such purpose. Upon such exercise, the optionee
shall be entitled to receive an amount determined in the manner prescribed in
said Paragraph 6(b). Stock Options relating to exercised Stock Appreciation
Rights shall no longer be exercisable to the extent that the related Stock
Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at such
time or times and to the extent that the Stock Options to which they relate
shall be exercisable in accordance with the provisions of this Section 6 and
Section 5 of the Plan; provided, however, that any Stock Appreciation Right
granted to an optionee subject to Section 16(b) of the Exchange Act subsequent
to the grant of the related Stock Option shall not be exercisable during the
first six months of its term, except that this special limitation shall not
apply in the event of death or Disability of the optionee prior to the
expiration of the six-month period. The exercise of Stock Appreciation Rights
held by optionees who are subject to Section 16(b) of the Exchange Act shall
comply with Rule 16b-3 thereunder to the extent applicable.
(ii) Upon the exercise of a Stock Appreciation Right, an optionee
shall be entitled to receive an amount in cash and/or shares of Stock equal in
value to the excess of the Fair Market Value of one share of Stock over the
option price per share specified in the related Stock Option multiplied by the
number of shares in respect of which the Stock Appreciation Right shall have
been exercised, with the Committee having the right to determine the form of
payment. When payment is to be made in shares of Stock, the number of shares to
be paid shall be calculated on the basis of the Fair Market Value of the shares
on the date of exercise. When payment is to be made in cash, such amount shall
be based upon the Fair Market Value of the Stock on the date of exercise,
determined in a manner not inconsistent with Section 16(b) of the Exchange Act
and the rules of the Commission thereunder.
(iii) Stock Appreciation Rights shall be transferable only when
and to the extent that the underlying Stock Option would be transferable under
Paragraph 5(b)(v) of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the Stock
Option or part thereof to which such Stock Appreciation Right is related shall
be deemed to have been exercised only to the extent of the number of shares
issued under the Stock Appreciation Right at the time of exercise based on the
value of the Stock Appreciation Right at such time.
(v) In its sole discretion, the Committee may grant Stock
Appreciation Rights that become exercisable only in the event of a Change in
Control and/or a Potential Change in Control, subject to such terms
A-8
and conditions as the Committee may specify at grant; provided that any such
Stock Appreciation Rights shall be settled solely in cash.
(vi) The Committee, in its sole discretion, may also provide
that, in the event of a Change in Control and/or a Potential Change in Control,
the amount to be paid upon the exercise of a Stock Appreciation Right shall be
based on the Change in Control Price, subject to such terms and conditions as
the Committee may specify at grant.
7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either
alone, in addition to or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. The Committee shall determine the
eligible persons to whom, and the time or times at which, grants of Restricted
Stock will be made, the number of shares to be awarded, the price (if any) to be
paid by the recipient of Restricted Stock, subject to Paragraph 7(b) of the
Plan, the time or times within which such awards may be subject to forfeiture,
and all other terms and conditions of the awards. The Committee may condition
the grant of Restricted Stock upon the attainment of specified performance goals
or such other factors as the Committee may, in its sole discretion, determine.
The provisions of Restricted Stock awards need not be the same with respect to
each recipient.
(b) Awards and Certificates.
-----------------------
(i) The prospective recipient of a Restricted Stock award shall
not have any rights with respect to such award unless and until such recipient
has executed an agreement evidencing the award and has delivered a fully
executed copy thereof to the Company, and has otherwise complied with the
applicable terms and conditions of such award.
(ii) The purchase price for shares of Restricted Stock may be
equal to or less than their par value and may be zero.
(iii) Awards of Restricted Stock must be accepted within a period
of 60 days (or such shorter period as the Committee may specify at grant) after
the award date, by executing a Restricted Stock Award Agreement and paying the
price, if any, required under Paragraph 7(b)(ii).
(iv) Each participant receiving a Restricted Stock award shall be
issued a stock certificate in respect of such shares of Restricted Stock. Such
certificate shall be registered in the name of such participant, and shall bear
an appropriate legend referring to the terms, conditions, and restrictions
applicable to such award.
(v) The Committee shall require that (A) the stock certificates
evidencing shares of Restricted Stock be held in the custody of the Company
until the restrictions thereon shall have lapsed, and (B) as a condition of any
Restricted Stock award, the participant shall have delivered a stock power,
endorsed in blank, relating to the Restricted Stock covered by such award.
(c) Restrictions and Conditions. The shares of Restricted Stock awarded
pursuant to this Section 7 shall be subject to the following restrictions and
conditions:
(i) Subject to the provisions of the Plan and the award
agreement, during a period set by the Committee commencing with the date of such
award (the "Restriction Period"), the participant shall not be permitted to
sell, transfer, pledge or assign shares of Restricted Stock awarded under the
Plan. Within these limits, the Committee, in its sole discretion, may provide
for the lapse of such restrictions in installments and may accelerate or waive
such restrictions in whole or in part, based on service, performance and/or such
other factors or criteria as the Committee may determine, in its sole
discretion.
A-9
(ii) Except as provided in this paragraph 7(c)(ii) and Paragraph
7(c)(i) of the Plan, the participant shall have, with respect to the shares of
Restricted Stock, all of the rights of a stockholder of the Company, including
the right to vote the shares and the right to receive any regular cash dividends
paid out of current earnings. The Committee, in its sole discretion, as
determined at the time of award, may permit or require the payment of cash
dividends to be deferred and, if the Committee so determines, reinvested,
subject to Paragraph 14(e) of the Plan, in additional Restricted Stock to the
extent shares are available under Section 3 of the Plan, or otherwise
reinvested. Stock dividends, splits and distributions issued with respect to
Restricted Stock shall be treated as additional shares of Restricted Stock that
are subject to the same restrictions and other terms and conditions that apply
to the shares with respect to which such dividends are issued, and the Committee
may require the participant to deliver an additional stock power covering the
shares issuable pursuant to such stock dividend, split or distribution. Any
other dividends or property distributed with regard to Restricted Stock, other
than regular dividends payable and paid out of current earnings, shall be held
by the Company subject to the same restrictions as the Restricted Stock.
(iii) Subject to the applicable provisions of the award agreement
and this Section 7, upon termination of a participant's employment with the
Company and any Subsidiary or Affiliate for any reason during the Restriction
Period, all shares still subject to restriction will vest, or be forfeited, in
accordance with the terms and conditions established by the Committee at or
after grant.
(iv) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
certificates for an appropriate number of unrestricted shares, and other
property held by the Company with respect to such Restricted Shares, shall be
delivered to the participant promptly.
(d) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
Stock Option or performance-based or other award designed to guarantee a minimum
value, payable in cash or Stock to the recipient of a Restricted Stock award,
subject to such performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
8. Deferred Stock.
(a) Administration. Deferred Stock may be awarded either alone, in
addition to or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. The Committee shall determine the eligible
persons to whom and the time or times at which Deferred Stock shall be awarded,
the number of shares of Deferred Stock to be awarded to any person, the duration
of the period (the "Deferral Period") during which, and the conditions under
which, receipt of the Stock will be deferred, and the other terms and conditions
of the award in addition to those set forth in Paragraph 8(b). The Committee may
condition the grant of Deferred Stock upon the attainment of specified
performance goals or such other factors or criteria as the Committee shall, in
its sole discretion, determine. The provisions of Deferred Stock awards need not
be the same with respect to each recipient.
(b) Terms and Conditions. The shares of Deferred Stock awarded pursuant
to this Section 8 shall be subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and the award agreement
referred to in Paragraph 8(b)(vi) of the Plan, Deferred Stock awards may not be
sold, assigned, transferred, pledged or otherwise encumbered during the Deferral
Period. At the expiration of the Deferral Period (or the Elective Deferral
Period referred to in Paragraph 8(b)(v) of the Plan, where applicable), share
certificates representing the shares covered by the Deferred Stock award shall
be delivered to the participant or his legal representative.
(ii) Unless otherwise determined by the Committee at grant,
amounts equal to any dividends declared during the Deferral Period with respect
to the number of shares covered by a Deferred Stock award will
A-10
be paid to the participant currently, or deferred and deemed to be reinvested in
additional Deferred Stock, or otherwise reinvested, all as determined at or
after the time of the award by the Committee, in its sole discretion.
(iii) Subject to the provisions of the award agreement and this
Section 8, upon termination of a participant's employment with the Company and
any Subsidiary or Affiliate for any reason during the Deferral Period for a
given award, the Deferred Stock in question will vest, or be forfeited, in
accordance with the terms and conditions established by the Committee at or
after grant.
(iv) Based on service, performance and/or such other factors or
criteria as the Committee may determine, the Committee may, at or after grant,
accelerate the vesting of all or any part of any Deferred Stock award and/or
waive the deferral limitations for all or any part of such award.
(v) A participant may elect to further defer receipt of an award
(or an installment of an award) for a specified period or until a specified
event (the "Elective Deferral Period"), subject in each case to the Committee's
approval and to such terms as are determined by the Committee, all in its sole
discretion. Subject to any exceptions adopted by the Committee, such election
must generally be made at least twelve months prior to completion of the
Deferral Period for such Deferred Stock award (or such installment).
(vi) Each award shall be confirmed by, and subject to the terms
of, a Deferred Stock agreement executed by the Company and the participant.
(c) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
Stock Option or performance-based or other award designed to guarantee a minimum
value, payable in cash or Stock to the recipient of a deferred stock award,
subject to such performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
9. Stock Purchase Rights.
(a) Awards and Administration. The Committee may grant eligible
participants Stock Purchase Rights which shall enable such participants to
purchase Stock (including Deferred Stock and Restricted Stock):
(i) at its Fair Market Value on the date of grant;
(ii) at a percentage of such Fair Market Value on such date, such
percentage to be determined by the Committee in its sole discretion;
(iii) at an amount equal to Book Value on such date; or
(iv) at an amount equal to the par value of such Stock on such
date.
The Committee shall also impose such deferral, forfeiture and/or other
terms and conditions as it shall determine, in its sole discretion, on such
Stock Purchase Rights or the exercise thereof. The terms of Stock Purchase
Rights awards need not be the same with respect to each participant. Each Stock
Purchase Right award shall be confirmed by, and be subject to the terms of, a
Stock Purchase Rights Agreement.
(b) Exercisability. Stock Purchase Rights shall generally be exercisable
for such period after grant as is determined by the Committee not to exceed
sixty (60) days. However, the Committee may provide, in its sole discretion,
that the Stock Purchase Rights of persons potentially subject to Section 16(b)
of the Exchange Act shall not become exercisable until six months and one day
after the grant date, and shall then be exercisable for ten trading days at the
purchase price specified by the Committee in accordance with Paragraph 9(a) of
the Plan.
A-11
10. Other Stock-Based Awards.
(a) Administration.
--------------
(i) Other awards of Stock and other awards that are valued in
whole or in part by reference to, or are otherwise based on, Stock ("Other
Stock-Based Awards"), including, without limitation, performance shares,
convertible preferred stock (to the extent a series of preferred stock has been
or may be created by, or in accordance with a procedure set forth in, the
Company's certificate of incorporation), convertible debentures, warrants,
exchangeable securities and Stock awards or options valued by reference to Fair
Market Value, Book Value or performance of the Company or any Subsidiary,
Affiliate or division, may be granted either alone or in addition to or in
tandem with Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred
Stock or Stock Purchase Rights granted under the Plan and/or cash awards made
outside of the Plan.
(ii) Subject to the provisions of the Plan, the Committee shall
have authority to determine the persons to whom and the time or times at which
such award shall be made, the number of shares of Stock to be awarded pursuant
to such awards, and all other conditions of the awards. The Committee may also
provide for the grant of Stock upon the completion of a specified performance
period. The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant to this
Section 10 shall be subject to the following terms and conditions:
(i) Subject to the provisions of the Plan and the award agreement
referred to in Paragraph 10(b)(v) of the Plan, shares of Stock subject to awards
made under this Section 10 may not be sold, assigned, transferred, pledged or
otherwise encumbered prior to the date on which the shares are issued, or, if
later, the date on which any applicable restriction, performance or deferral
period lapses.
(ii) Subject to the provisions of the Plan and the award
agreement and unless otherwise determined by the Committee at grant, the
recipient of an award under this Section 10 shall be entitled to receive,
currently or on a deferred basis, interest or dividends or interest or dividend
equivalents with respect to the number of shares covered by the award, as
determined at the time of the award by the Committee, in its sole discretion,
and the Committee may provide that such amounts (if any) shall be deemed to have
been reinvested in additional Stock or otherwise reinvested.
(iii) Any award under Section 10 and any Stock covered by any
such award shall vest or be forfeited to the extent so provided in the award
agreement, as determined by the Committee, in its sole discretion.
(iv) In the event of the participant's Retirement, Disability or
death, or in cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the remaining limitations
(if any) imposed with respect to any or all of an award pursuant to this Section
10.
(v) Each award under this Section 10 shall be confirmed by, and
subject to the terms of, an agreement or other instrument by the Company and by
the participant.
(vi) Stock (including securities convertible into Stock) issued
on a bonus basis under this Section 10 may be issued for no cash consideration.
11. Change in Control Provisions.
(a) Impact of Event. In the event of a "Change in Control," as defined
in Paragraph 11(b) of the Plan, or a "Potential Change in Control," as defined
in Paragraph 11(c) of the Plan, except to the extent otherwise determined by the
Committee or the Board at or after grant (subject to any right of approval
expressly reserved
A-12
by the Committee or the Board at the time of such determination), the following
acceleration and valuation provisions shall apply:
(i) Any Stock Appreciation Rights outstanding for at least six
months and any Stock Options awarded under the Plan not previously exercisable
and vested shall become fully exercisable and vested, regardless of whether the
amendment to the Plan pursuant to which such Stock Options shall have been
granted shall have been approved by stockholders; provided, however, that if
such stockholder approval shall not have been obtained prior to a Change of
Control or a Potential Change of Control, any Incentive Stock Options may, with
the consent of the holders thereof, be treated as Non-Qualified Stock Options.
(ii) The restrictions and deferral limitations applicable to any
Restricted Stock, Deferred Stock, Stock Purchase rights and Other Stock-Based
Awards, in each case to the extent not already vested under the Plan, shall
lapse and such shares and awards shall be deemed fully vested, regardless of
whether the amendment to the Plan pursuant to which such Stock Options shall
have been granted shall have been approved by stockholders.
(iii) The value of all outstanding Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock, Stock Purchase Rights and
Other Stock-Based Awards, in each case to the extent vested (including such
rights which shall have become vested pursuant to Paragraphs 11(a)(i) and (ii)
of the Plan), shall be purchased by the Company ("cashout") in a manner
determined by the Committee, in its sole discretion, on the basis of the "Change
in Control Price" as defined in Paragraph 11(d) of the Plan as of the date such
Change in Control or such Potential Change in Control is determined to have
occurred or such other date as the Committee may determine prior to the Change
in Control, unless the Committee shall, contemporaneously with or prior to any
particular Change of Control or Potential Change of Control, determine that this
Paragraph 11(a)(iii) shall not be applicable to such Change in Control or
Potential Change in Control.
(b) Definition of "Change in Control." For purposes of Paragraph 11(a)
of the Plan, a "Change in Control" means the happening of any of the following:
(i) When any "person" (as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) of the Exchange Act,
including a "group" as defined in Section 13(d) of the Exchange Act, but
excluding the Company and any Subsidiary and any employee benefit plan sponsored
or maintained by the Company or any Subsidiary and any trustee of such plan
acting as trustee) directly or indirectly becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of
securities of the Company representing twenty-five percent or more of the
combined voting power of the Company's then outstanding securities; provided,
however, that a Change of Control shall not arise if such acquisition is
approved by the board of directors or if the board of directors or the Committee
determines that such acquisition is not a Change of Control or if the board of
directors authorizes the issuance of the shares of Common Stock (or securities
convertible into Common Stock or upon the exercise of which shares of Common
Stock may be issued) to such persons; or
(ii) When, during any period of twenty-four consecutive months
during the existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors") cease for any reason
other than death, Disability or Retirement to constitute at least a majority
thereof, provided, however, that a director who was not a director at the
beginning of such 24-month period shall be deemed to have satisfied such
24-month requirement (and be an Incumbent Director) if such director was elected
by, or on the recommendation of, or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either actually (because
they were directors at the beginning of such 24-month period) or by prior
operation of this Paragraph 11(b)(ii); or
(iii) The occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company
or a Subsidiary through purchase of assets, or by merger, or otherwise.
A-13
(c) Definition of Potential Change in Control. For purposes of
Paragraph 11(a) of the Plan, a "Potential Change in Control" means the happening
of any one of the following:
(i) The approval by stockholders of an agreement by the Company,
the consummation of which would result in a Change in Control of the Company as
defined in Section 11(b) of the Plan; or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or a
Subsidiary or any Company employee benefit plan or any trustee of such plan
acting as such trustee) of securities of the Company representing five percent
or more of the combined voting power of the Company's outstanding securities and
the adoption by the Board of Directors of a resolution to the effect that a
Potential Change in Control of the Company has occurred for purposes of the
Plan.
(d) Change in Control Price. For purposes of this Section 11, "Change in
Control Price" means the highest price per share paid in any transaction
reported on the principal stock exchange on which the Stock is traded or the
average of the highest bid and asked prices as reported by NASDAQ, or paid or
offered in any bona fide transaction related to a potential or actual Change in
Control of the Company at any time during the sixty-day period immediately
preceding the occurrence of the Change in Control (or, where applicable, the
occurrence of the Potential Change in Control event), in each case as determined
by the Committee except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the optionee exercises
such Stock Appreciation Rights or, where applicable, the date on which a cashout
occurs under Paragraph 11(a)(iii).
12. Amendments and Termination.
(a) The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would impair the
rights of an optionee or participant under a Stock Option, Stock Appreciation
Right (or Limited Stock Appreciation Right), Restricted or Deferred Stock award,
Stock Purchase Right or Other Stock-Based Award theretofore granted, without the
optionee's or participant's consent, and no amendment will be made without
approval of the stockholders if such amendment requires stockholder approval
under state law or if stockholder approval is necessary in order that the Plan
comply with Rule 16b-3 of the Commission under the Exchange Act or any
substitute or successor rule or if stockholder approval is necessary in order to
enable the grant pursuant to the Plan of options or other awards intended to
confer tax benefits upon the recipients thereof.
(b) The Committee may amend the terms of any Stock Option or other award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights or any holder without the holder's consent. The Committee may
also substitute new Stock Options for previously granted Stock Options (on a one
for one or other basis), including previously granted Stock Options having
higher option exercise prices.
(c) Subject to the provisions of Paragraphs 12(a) and (b) of the Plan,
the Board shall have broad authority to amend the Plan to take into account
changes in applicable securities and tax laws and accounting rules, as well as
other developments, and, in particular, without limiting in any way the
generality of the foregoing, to eliminate any provisions which are not required
to included as a result of any amendment to Rule 16b-3 of the Commission
pursuant to the Exchange Act.
13. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained in this Plan shall
give any such participant or optionee any rights that are greater than those of
a general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards under this Plan; provided, however, that, unless the Committee
otherwise determines with the consent of the
A-14
affected participant, the existence of such trusts or other arrangements shall
be consistent with the "unfunded" status of the Plan.
14. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to
a Stock Option or other award under the Plan to represent to and agree with the
Company in writing that the optionee or participant is acquiring the shares
without a view to distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer. All certificates or shares of Stock or other
securities delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Commission, any stock exchange
upon which the Stock is then listed, and any applicable Federal or state
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board from adopting
other or additional compensation arrangements, subject to stockholder approval
if such approval is required; and such arrangements may be either generally
applicable or applicable only in specific cases.
(c) Neither the adoption of the Plan nor the grant of any award pursuant
to the Plan shall confer upon any employee of the Company or any Subsidiary or
Affiliate any right to continued employment with the Company or a Subsidiary or
Affiliate, as the case may be, nor shall it interfere in any way with the right
of the Company or a Subsidiary or Affiliate to terminate the employment of any
of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Committee regarding the
payment of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations may be settled with Stock, including Stock
that is part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company and its Subsidiaries or Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or in Deferred Stock or other types
of Plan awards) at the time of any dividend payment shall only be permissible if
sufficient shares of Stock are available under Section 3 of the Plan for such
reinvestment (taking into account then outstanding Stock Options, Stock Purchase
Rights and other Plan awards).
15. Effective Date of Plan.
The Plan shall be effective as of the date the Plan is approved by the
Board, subject to the approval of the Plan by a majority of the votes cast by
the holders of the Company's Common Stock at the next annual or special meeting
of stockholders. Any grants made under the Plan prior to such approval shall be
effective when made (unless otherwise specified by the Committee at the time of
grant), but shall be conditioned on, and subject to, such approval of the Plan
by such stockholders.
A-15
16. Term of Plan.
Stock Option, Stock Appreciation Right, Restricted Stock award, Deferred
Stock award, Stock Purchase Right or Other Stock-Based Award may be granted
pursuant to the Plan, until ten (10) years from the date the Plan was approved
by the Board, unless the Plan shall be terminated by the Board, in its
discretion, prior to such date, but awards granted prior to such termination may
extend beyond that date.
A-16
Exhibit B
NETSMART TECHNOLOGIES, INC.
1999 Employee Stock Purchase Plan
17. Introduction.
(a) Purpose. The Netsmart Technologies, Inc. Employee Stock Purchase
Plan (the "Plan") is intended to provide a method whereby employees of Netsmart
Technologies, Inc. (the "Company") and its Participating Subsidiaries (as
defined below) will have an opportunity to acquire a proprietary interest in the
Company through the purchase of shares of the Common Stock of the Company.
(b) Rules of Interpretation. It is the intention of the Company to have
the Plan qualify as an "employee stock purchase plan" under Section 423 of the
Code (as defined below), although the Company makes no undertaking nor
representation to maintain such qualification. The provisions of the Plan shall
be construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
18. Definitions.
(a) "Board" shall mean the board of directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the committee appointed by the Board of
Directors in accordance with Paragraph 11(a) of the Plan.
(d) "Company" shall mean Netsmart Technologies, Inc., a Delaware
corporation.
(e) "Compensation" shall mean the gross cash compensation (including,
wage, salary and overtime earnings) paid by the Company or any Participating
Subsidiary to a participant in accordance with the terms of employment, but
excluding all bonus payments, expense allowances and compensation paid in a form
other than cash.
(f) "Common Stock" shall mean the Company's common stock, par value $.01
per share or any class of common stock into which such common stock may
hereafter be converted or for which such common stock may be exchanged pursuant
to the Company's certificate of incorporation or as part of a recapitalization,
reorganization or similar transaction.
(g) "Employee" shall mean any person who is classified as an employee
(within the meaning of Section 3401(c)of the Code) by the Company or any
Participating Subsidiary on the Company's payroll records during the relevant
participation period.
(h) "Offering," "Offering Commencement Date" and "Offering Termination
Date" shall have the meanings set forth in Paragraph 4(b) of the Plan.
(i) "Participant" shall mean a participant in the Plan as described
in Paragraph 4 of the Plan.
(j) "Participating Subsidiary" shall mean a Subsidiary of the Company
whose employees are entitled to participate in the Plan. The Committee shall
have the power and authority to determine which Subsidiaries shall be
Participating Subsidiaries.
B-1
(k) "Plan" shall mean the Netsmart Technologies, Inc. 1999 Employee
Stock Purchase Plan.
(l) "Plan Representative" shall mean any person designated from time to
time by the Committee to receive certain notices and take certain other
administrative actions relating to participation in the Plan.
(m) "Principal Market" shall mean the principal stock exchange or market
on which the Common Stock is traded. As of the date the Plan was adopted by the
Board, the Principal Market was the Nasdaq SmallCap Market.
(n) "Subsidiary" shall mean any corporation or other business
association (other than the Company or any partnership, limited liability
company or other entity which is treated as a partnership for federal income tax
purposes) in an unbroken chain of corporations or other business associations
beginning with the Company if each of the corporations or other business
associations (other than the last corporation in the unbroken chain) owns equity
interests (including stock) possessing 50% or more of the total combined voting
power of all classes of equity in one of the other corporations or other
business associations in the chain.
19. Eligibility and Participation.
(a) Initial Eligibility. Each Employee who shall have completed six
consecutive months of employment with the Company or any Participating
Subsidiary and shall be employed by the Company or any Participating Subsidiary
on the date his or her participation in the Plan is to become effective shall be
eligible to participate in Offerings (as defined below) under the Plan which
commence after such six-month period has concluded. Persons who are not
Employees shall not be eligible to participate in the Plan. All Employees who
participate in the Plan shall have the same rights and privileges under the Plan
except for differences which are consistent with Section 423(b)(5) of the Code
and the regulations thereunder.
(b) Restrictions on Participation. Notwithstanding any provision of the
Plan to the contrary, no Employee shall be granted an option to purchase shares
of Common Stock under the Plan:
(i) if, immediately after the grant, such Employee would own
stock and/or hold outstanding options to purchase stock possessing 5% or more of
the total combined voting power or value of all classes of stock of the Company
or of any of its Subsidiary Corporations (for purposes of this paragraph, the
rules of Section 424(d) of the Code shall apply in determining stock ownership
of any Employee); or
(ii) which permits such Employee's rights to purchase stock under
all Employee stock purchase plans of the Company or any of its Subsidiaries to
accrue at a rate which exceeds $25,000 of fair market value of the stock
(determined at the time such option is granted) for each calendar year in which
such option is outstanding at any time.
(c) Commencement of Participation. An eligible Employee may become a
participant by completing an authorization for payroll deductions on the form
provided by the Company and filing the completed form with the Plan
Representative on or before the filing date set therefor by the Committee, which
date shall be at least 30 days prior to the Offering Commencement Date for the
next following Offering. Payroll deductions for a participant shall commence on
the next following Offering Commencement Date after the Employee's authorization
for payroll deductions becomes effective and shall continue until termination of
the Plan or the participant's earlier termination of participation in the Plan.
Each participant in the Plan shall be deemed to continue participation until
termination of the Plan or such participant's earlier termination of
participation in the Plan pursuant to Paragraph 8 of the Plan.
20. Stock Subject to the Plan and Offerings.
B-2
(a) Stock Subject to the Plan. Subject to the provisions of Paragraph
12(d) of the Plan, the Board shall reserve for issuance under the Plan an
aggregate of one hundred fifty thousand (150,000) shares of Common Stock, which
shares shall be authorized but unissued shares of Common Stock or shares of
Common Stock held as treasury stock. The Board may, subject to stockholder
approval, from time to time reserve additional shares of Common Stock for
issuance pursuant to the Plan; provided, however, that at no time shall the
number of shares of Common Stock reserved be greater than permitted by
applicable law.
(b) Offerings. The Plan will be implemented by successive offerings of
the Company's Common Stock (the "Offerings"), which shall be for a period of
three, six or twelve months, as the Committee shall determine.. The first
Offering shall begin on a date determined at the discretion of the Committee.
Each successive Offering shall begin on a date determined at the discretion of
the Committee. The first day of each Offering shall be deemed the "Offering
Commencement Date" and the last day the "Offering Termination Date" for such
Offering. The Offering Commencement Date for any Offering shall not be earlier
than the Offering Termination Date of the preceding Offering.
21. Payroll Deductions.
(a) Amount of Deduction. A Participant may elect payroll deductions of
any whole or half percentage from one percent (1 %) through five percent (5%) of
such Participant's Compensation for each pay period during an Offering.
(b) Participant's Account. All payroll deductions made for a participant
shall be credited to an account established for such participant under the Plan.
A participant may not make any separate cash payment into such account.
(c) Changes in Payroll Deductions. A participant may reduce or increase
future payroll deductions (within the limits described in Paragraph 5(a) of the
Plan) by filing with the Plan Representative a form provided by the Company for
such purpose. The effective date of any increase or reduction in future payroll
deductions will be the first day of the next pay period succeeding processing of
the change form.
22. Granting of Option.
(a) Number of Option Shares. On the Commencement Date of each Offering,
each participating Employee shall be deemed to have been granted an option to
purchase a maximum number of shares of Common Stock equal to (i) the sum of (x)
that percentage of the Employee's Compensation which the Employee has elected to
have withheld (but not in any case in excess of 5%) multiplied by the Employee's
Compensation during the Offering and (y) the amount of any accumulated payroll
deductions from a prior Offering held for the purchase of Common Stock pursuant
to Paragraph 7(c) of the Plan divided by (ii) the applicable Offering Price
determined as provided in Paragraph 6(b) of the Plan. Such number of shares
shall be finally determined at such time as the Offering Price is determined.
(b) Offering Price. The price of stock purchased with payroll deductions
(the "Offering Price") made during the initial Offering and any subsequent
Offerings shall be 85% of the lower of:
(i) the greater of (x) 90% of the closing price of the stock on
the Offering Commencement Date for such Offering or the nearest prior business
day on which trading occurred on the Principal Market, or (y) the average of the
closing prices of the Common Stock on the last five days preceding the Offering
Commencement Date on which trading occurred on the Principal Market; or
(ii) the greater of (x) 90% of the closing price on the Offering
Termination Date for such Offering or the nearest prior business day on which
trading occurred on the Principal Market, or (y) the average of the prices of
the stock on the last five days of the Offering on which trading occurred on the
Principal Market.
B-3
For purposes of determining the average of the prices of stock over a five-day
period, the price of the Common Stock for any day shall be the closing price of
the Common Stock on the Principal Market on that day.
23. Exercise of Option.
(a) Automatic Exercise. Each Participant's option to purchase Common
Stock with payroll deductions made during any Offering will be deemed to have
been exercised automatically on the applicable Offering Termination Date for the
purchase of the number of full shares of Common Stock which the accumulated
payroll deductions in the Participant's account at the time will purchase at the
applicable Offering Price. Notwithstanding the foregoing, in the event that the
number of shares to be purchased by all participants exceeds the maximum number
of shares which may be issued pursuant to the Plan, the number of shares to be
purchased by all participants shall be reduced proportionately, except that no
participant shall purchase less than one share of Common Stock.
(b) Withdrawal of Account. No Participant shall be entitled to withdraw
any amount from the accumulated payroll deductions in his or her account;
provided, however, that a participant's accumulated payroll deductions shall be
refunded to the Participant as and to the extent specified in Paragraph 8(a) of
the Plan upon termination of such Participant's participation in the Offering.
(c) Fractional Shares. Fractional shares of Common Stock will not be
issued under the Plan. Any accumulated payroll deductions which would have been
used to purchase fractional shares, unless refunded pursuant to Paragraph 7(b)
of the Plan, will be held for the purchase of Common Stock in the next following
Offering, without interest; provided, however, that the Committee may elect to
refund to the Participants all cash held in lieu of issuing fractional shares.
(d) Exercise of Options. During a Participant's lifetime, options held
by a Participant shall be exercisable only by such Participant.
(e) Delivery of Stock. As promptly as practicable after the Offering
Termination Date of each Offering, the Company will deliver to each Participant
in such Offering a certificate for the shares of Common Stock purchased in the
Offering upon exercise of the Participant's option.
(f) Benefits of Section 423 of the Code. The Plan is intended to satisfy
the requirements of Section 423 of the Code. A Participant will not obtain the
benefits of this provision if such participant disposes of shares of Common
Stock acquired pursuant to the Plan within two (2) years from the Offering
Commencement Date of the Offering for which the options to purchase shares were
granted or within one (1) year from the date such Common Stock is purchased by
the participant, whichever is later.
24. Withdrawal.
(a) In General. A Participant may stop participating in the Plan at any
time by giving written notice to the Plan Representative. Upon processing of any
such written notice, no further payroll deductions will be made from the
Participant's Compensation during such Offering or thereafter, unless and until
such Participant elects to resume participation in the Plan by providing written
notice to the Plan Representative pursuant to Paragraph 3(c) of the Plan. Such
Participant's payroll deductions accumulated prior to processing of such notice
shall be applied toward purchasing full shares of Common Stock in the
then-current Offering as provided in Paragraph 7(a) of the Plan. Any cash
balance remaining after the purchase of shares in such Offering shall be
refunded promptly to such Participant.
(b) Effect on Subsequent Participation. A Participant's withdrawal from
any Offering will not have any effect upon such participant's eligibility to
participate in any succeeding Offering or in any similar plan which may
hereafter be adopted by the Company and for which such Participant is otherwise
eligible.
B-4
(c) Termination of Employment. Upon termination of a Participant's
employment with the Company or any Participating Subsidiary (as the case may be)
for any reason, including retirement or death, the participant's payroll
deductions accumulated prior to such termination, if any, shall be applied
toward purchasing full shares of Common Stock in the then-current Offering, and
any cash balance remaining after the purchase of shares in such Offering shall
be refunded to the Participant or, in the case of the Participant's death, to
the person or persons entitled thereto under Paragraph 12(a) of the Plan, and
the Participant's participation in the Plan shall be deemed to be terminated. In
the event that a Participant is employed by a Subsidiary which, during the term
of an Offering, ceases to be a Subsidiary, the Participant's employment shall be
deemed to have been terminated as of the date such entity ceased to be a
Subsidiary.
25. Interest.
(a) Payment of Interest. No interest will be paid or allowed on any
money paid into the Plan or credited to the account of or distributed to any
Participant.
26. Stock.
(a) Participant's Interest in Option Stock. No Participant will have any
interest in shares of Common Stock covered by any option held by such
Participant until such option has been exercised as provided in Paragraph 7(a)
of the Plan.
(b) Registration of Stock. Shares of Common Stock purchased by a
Participant under the Plan will be registered in the name of the Participant,
or, if the Participant so directs by written notice to the Plan Representative
prior to the Offering Termination Date applicable thereto, in the names of the
Participant and one such other person as may be designated by the Participant,
as joint tenants with rights of survivorship or as tenants by the entireties, to
the extent permitted by applicable law.
27. Administration.
(a) Appointment of Committee. The Board shall appoint a committee (the
"Committee") to administer the Plan, which shall consist solely of no fewer than
three "nonemployee directors" (as defined in Rule 16b-3(a)(3) promulgated under
the Securities Act of 1933, as amended). If no committee is appointed by the
Board of Directors, then the Board shall serve as the Committee.
(b) Authority of Committee. Subject to the express provisions of the
Plan, the Committee shall have plenary authority in its discretion to interpret
and construe any and all provision of the Plan, to adopt rules and regulations
for administering the Plan, and to make all other determinations deemed
necessary or advisable for administering the Plan. The Committee's determination
of the foregoing matters shall be conclusive.
(c) Rules Governing the Administration of the Committee. The Board may
from time to time appoint members of the Committee in substitution for or in
addition to members previously appointed and may fill vacancies, however caused,
in the Committee. The Committee may select one of its members as its chairman,
shall hold its meetings at such times and places as it shall deem advisable, and
may hold telephonic meetings. All determinations of the Committee shall be made
by a majority of its members. A decision or determination reduced to writing and
signed by a majority of the members of the Committee shall be as fully effective
as if it had been made by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary and shall make such rules and regulations for
the conduct of its business as it shall deem advisable.
28. Miscellaneous.
(a) Designation of Beneficiary. A Participant may file with the Plan
Representative a written designation of a beneficiary who is to receive any
shares of Common Stock and/or cash under the Plan upon the Participant's death.
Such designation of beneficiary may be changed by the Participant at any time by
written
B-5
notice to the Plan Representative. Upon the death of a Participant and receipt
by the Company of proof of identity and existence at the Participant's death of
a beneficiary validly designated by the participant under the Plan, and subject
to Paragraph 8 of the Plan above concerning withdrawal from the Plan, the
Company shall deliver such shares of Common Stock and/or cash to such
beneficiary. In the event of the death of a Participant lacking a beneficiary
validly designated under the Plan who is living at the time of such
Participant's death, the Company shall deliver such shares of Common Stock
and/or cash to the executor or administrator of the estate of the Participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares of Common
Stock and/or cash to the spouse or to any one or more dependents of the
Participant, in each case without any further liability of the Company
whatsoever under or relating to the Plan. No beneficiary shall, prior to the
death of the Participant by whom he or she has been designated, acquire any
interest in the shares of Common Stock and/or cash credited to the Participant
under the Plan.
(b) Transferability. Neither payroll deductions credited to any
Participant's account nor any option or rights with regard to the exercise of an
option or to receive Common Stock under the Plan may be assigned, transferred,
pledged, or otherwise disposed of in any way by the Participant other than by
will or the laws of descent and distribution. Any such attempted assignment,
transfer, pledge or other disposition shall be without effect, except that the
Company may, in its discretion, treat such act as an election to withdraw from
participation in the Plan in accordance with Paragraph 8(a) of the Plan.
(c) Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose. The Company
shall not be obligated to segregate such payroll deductions.
(d) Adjustment Upon Changes in Capitalization.
-----------------------------------------
(i) If, while any options are outstanding under the Plan, the
outstanding shares of Common Stock of the Company have increased, decreased,
changed into, or been exchanged for a different number or kind of shares or
securities of the Company through any reorganization, merger, recapitalization,
reclassification, stock split, reverse stock split or similar transaction,
appropriate and proportionate adjustments may be made by the Committee in the
number and/or kind of shares which are subject to purchase under outstanding
options and in the Offering Price or Prices applicable to such outstanding
options. In addition, in any such event, the number and/or kind of shares which
may be offered in the Offerings described in Paragraph 4 of the Plan shall also
be proportionately adjusted.
(ii) Upon the dissolution or liquidation of the Company, or upon
a reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all of the property or capital stock of the
Company to another corporation, the holder of each option then outstanding under
the Plan will thereafter be entitled to receive at the next Offering Termination
Date, upon the exercise of such option, for each share as to which such option
shall be exercised, as nearly as reasonably may be determined, the cash,
securities and/or property which a holder of one share of the Common Stock was
entitled to receive upon and at the time of such transaction. The Board shall
take such steps in connection with such transactions as the Board shall deem
necessary to assure that the provisions of this Paragraph 12(d) shall thereafter
be applicable, as nearly as reasonably may be determined, in relation to the
said cash, securities and/or property as to which each such holder of any such
option might hereafter be entitled to receive.
(e) Amendment and Termination. The Board shall have complete power and
authority to terminate or amend the Plan; provided, however, that the Board
shall not, without the approval of the stockholders of the Company, alter (i)
the aggregate number of shares of Common Stock which may be issued under the
Plan (except pursuant to Paragraph 12(d) of the Plan) or (ii) the class of
employees eligible to receive options under the Plan, other than to designate
additional Subsidiaries as Participating Subsidiarys, and provided further,
however, that no termination, modification, or amendment of the Plan may,
without the consent of an Employee then having an
B-6
option under the Plan to purchase shares of Common Stock, adversely affect the
rights of such Employee under such option.
(f) Effective Date. The Plan shall become effective as of November 18,
1999, subject to approval by the holders of a majority of the shares of Common
Stock present and represented at any special or annual meeting of the
stockholders of the Company duly held within twelve months after adoption of the
Plan. If the Plan is not so approved, the Plan shall not become effective.
(g) No Employment Rights. The Plan does not, directly or indirectly,
create in any person any right with respect to continuation of employment by the
Company or any Subsidiary, and it shall not be deemed to interfere in any way
with the Company's or any Subsidiary's right to terminate, or otherwise modify,
any employee's employment at any time.
(h) Effect of Plan. The provisions of the Plan shall, in accordance with
its terms, be binding upon, and inure to the benefit of, all successors of each
Employee participating in the Plan, including, without limitation, such
Employee's estate and the executors, administrators or trustees thereof, heirs
and legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such Employee.
(i) Governing Law. The law of the State of New York will govern all
matters relating to this Plan except to the extent superseded by the federal
laws of the United States.
(j) Committee Rules for Foreign Jurisdictions. The Committee may adopt
rules or procedures relating to the operation and administration of the Plan to
accommodate the specific requirements of local laws and procedures; provided,
however, that any such rules or procedures do not result in an Offering Price
which is less than the lesser of an amount equal to 85% of the fair market value
of the stock on the Offering Commencement Date or 85% of the fair market value
of the stock on the Offering Termination Date. Without limiting the generality
of the foregoing, the Committee is specifically authorized to adopt rules and
procedures regarding handling of payroll deductions, payment of interest,
conversion of local currency, payroll tax, withholding procedures and handling
of stock certificates which vary with local requirements.
B-7