SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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
|X| Definitive proxy statement. permitted by Rule 14a-6(e)(2)).
| | Definitive additional materials.
| | Soliciting material pursuant to Rule 14a-12.
RICK'S CABARET INTERNATIONAL, INC.
(Name of Registrant as Specified in Its Charter)
Payment of filing fee: (check the appropriate box):
|X| No fee required.
| | Fee computed on table below per Exchange Act Rule 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: ___
(2) Aggregate number of securities to which transaction applies: ___
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): ___
(4) Proposed maximum aggregate value of transaction: ___
(5) Total fee paid: ___
| | Fee paid previously with preliminary materials: ___
| | Check box if any part of the fee is offset as provided by Exchange Act Rule
0-1(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 its filing.
(1) Amount Previously Paid: ___
(2) Form, Schedule or Registration Statement No.: ___
(3) Filing Party: ___
(4) Date Filed: ___
2
RICK'S CABARET INTERNATIONAL, INC.
505 NORTH BELT, SUITE 630
HOUSTON, TEXAS 77060
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 27, 2004
The Annual Meeting of Stockholders (the "Annual Meeting") of Rick's Cabaret
International, Inc. (the "Company") will be held at 410 N. Sam Houston Parkway
(Beltway 8 at Imperial Valley), Houston, Texas 77060, on August 27, 2004 at
10:00 AM (CST) for the following purposes:
(1) To elect five (5) directors.
(2) To approve the Amendment to the 1999 Stock Option Plan.
(3) To ratify the selection of Whitley Penn as the Company's independent
auditor for the fiscal year ending September 30, 2004.
(4) To act upon such other business as may properly come before the Annual
Meeting.
Only holders of common stock of record at the close of business on July 12,
2004 will be entitled to vote at the Annual Meeting or any adjournment thereof.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend the Annual Meeting, please sign, date and return your proxy to us
promptly. Your cooperation in signing and returning the proxy will help avoid
further solicitation expense.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ ERIC S. LANGAN
CHAIRMAN OF THE BOARD AND PRESIDENT
JULY 27, 2004
HOUSTON, TEXAS
3
RICK'S CABARET INTERNATIONAL, INC.
505 NORTH BELT, SUITE 630
HOUSTON, TEXAS 77060
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 27, 2004
This proxy statement (the "Proxy Statement") is being furnished to
stockholders (the "Stockholders") in connection with the solicitation of proxies
by the Board of Directors of Rick's Cabaret International, Inc., a Texas
corporation (the "Company") for their use at the Annual Meeting (the "Annual
Meeting") of Stockholders of the Company to be held at 410 N. Sam Houston
Parkway (Beltway 8 at Imperial Valley), Houston, Texas 77060, on August 27,
2004 at 10:00 AM (CST), and at any adjournments thereof, for the purpose of
considering and voting upon the matters set forth in the accompanying Notice of
Annual Meeting of Stockholders (the "Notice"). This Proxy Statement and the
accompanying form of proxy (the "Proxy") are first being mailed to Stockholders
on or about July 27, 2004. The cost of solicitation of proxies is being borne
by the Company.
The close of business on July 12, 2004 has been fixed as the record date
for the determination of Stockholders entitled to notice of and to vote at the
Annual Meeting and any adjournment thereof. As of the record date, there were
approximately 3,700,148 shares of the Company's common stock, par value $0.01
per share (the "Common Stock"), issued and outstanding. The presence, in person
or by proxy, of a majority of the outstanding shares of Common Stock on the
record date is necessary to constitute a quorum at the Annual Meeting. Each
share is entitled to one vote on all issues requiring a Stockholder vote at the
Annual Meeting. Each nominee for Director named in Proposal Number 1 must
receive a majority of the votes cast in person or by proxy in order to be
elected. Stockholders may not cumulate their votes for the election of
Directors. The affirmative vote of a majority of the shares of Common Stock
present or represented by proxy and entitled to vote at the Annual Meeting is
required for the ratification of Number 2 and Number 3 set forth in the
accompanying Notice.
All shares represented by properly executed proxies, unless such proxies
previously have been revoked, will be voted at the Annual Meeting in accordance
with the directions on the proxies. If no direction is indicated, the shares
will be voted (I) FOR THE ELECTION OF THE NOMINEES NAMED HEREIN, (II) FOR THE
APPROVAL OF THE AMENDMENT TO THE 1999 STOCK OPTION PLAN, AND (III) FOR THE
RATIFICATION OF WHITLEY PENN AS THE COMPANY'S INDEPENDENT AUDITOR FOR THE FISCAL
YEAR ENDING SEPTEMBER 30, 2004. The Board of Directors is not aware of any
other matters to be presented for action at the Annual Meeting. However, if any
other matter is properly presented at the Annual Meeting, it is the intention of
the persons named in the enclosed proxy to vote in accordance with their best
judgment on such matters.
4
The enclosed Proxy, even though executed and returned, may be revoked at
any time prior to the voting of the Proxy (a) by execution and submission of a
revised proxy, (b) by written notice to the Secretary of the Company, or (c) by
voting in person at the Annual Meeting.
___________________________________________________________________
(1) TO ELECT FIVE (5) DIRECTORS FOR THE ENSUING YEAR
___________________________________________________________________
NOMINEES FOR DIRECTORS
The persons named in the enclosed Proxy have been selected by the Board of
Directors to serve as proxies (the "Proxies") and will vote the shares
represented by valid proxies at the Annual Meeting of Stockholders and
adjournments thereof. They have indicated that, unless otherwise specified in
the Proxy, they intend to elect as Directors the nominees listed below. Each
duly elected Director will hold office until his successor shall have been
elected and qualified.
Unless otherwise instructed or unless authority to vote is withheld, the
enclosed Proxy will be voted for the election of the nominees listed below.
Although the Board of Directors of the Company does not contemplate that any of
the nominees will be unable to serve, if such a situation arises prior to the
Annual Meeting, the persons named in the enclosed Proxy will vote for the
election of such other person(s) as may be nominated by the Board of Directors.
The Board of Directors unanimously recommends a vote FOR the election of
each of the nominees listed below. All of the nominees are presently our
directors.
Eric S. Langan, age 36, has been a Director of the Company since 1998 and
the President of the Company since March 1999. Mr. Langan is also the Acting
Chief Financial Officer of the Company. He has been involved in the adult
entertainment business since 1989. Mr. Langan currently serves as a Director of
Taurus Entertainment Companies, Inc., which was a public subsidiary of the
Company until June 2003. From January 1997 through the present, he has held the
position of President with X.T.C. Cabaret, Inc. From November 1992 until
January 1997, Mr. Langan was the President of Bathing Beauties, Inc. Since
1989, Mr. Langan has exercised managerial control over the grand openings and
operations of more than twelve adult entertainment businesses. Through these
activities, Mr. Langan has acquired the knowledge and skills necessary to
successfully operate adult entertainment businesses.
Robert L. Watters, age 53, has been a director of the Company since 1986.
Mr. Watters was president and chief executive officer of the Company from 1991
until March 1999. He was also a founder in 1989 and operator until 1993 of the
Colorado Bar & Grill, an adult cabaret located in Houston, Texas and in 1988
performed site selection, negotiated the property purchase and oversaw the
design and permitting for the cabaret that became the Cabaret Royale, in Dallas,
Texas. Mr. Watters practiced law as a solicitor in London, England and is
qualified to practice law in New York state. Mr. Watters worked in the
international tax group of the accounting firm of Touche, Ross & Co. (now
succeeded by Deloitte & Touche) from 1979 to 1983 and was
5
engaged in the private practice of law in Houston, Texas from 1983 to 1986, when
he became involved in the full-time management of the Company. Mr. Watters
graduated from the London School of Economics and Political Science, University
of London, in 1973 with a Bachelor of Laws (Honours) degree and in 1975 with a
Master of Laws degree from Osgoode Hall Law School, York University. Since 1999,
Mr. Watters has operated a cabaret in New Orleans.
Alan Bergstrom, age 59, has been a director of the Company since 1999.
Since 1997, Mr. Bergstrom has been the Chief Operating Officer of Eagle
Securities which is an investment consulting firm. Mr. Bergstrom is also a
registered stockbroker with Choice Investments, Inc. From 1991 until 1997, Mr.
Bergstrom was a vice president--investments with Principal Financial Securities,
Inc. Mr. Bergstrom holds a B.B.A. Degree in Finance (1967) from the University
of Texas.
Travis Reese, age 34, has been a director of the Company since 1999 and is
the Company's Director of Technology. From 1997 through 1999, Mr. Reese was a
senior network administrator at St. Vincent's Hospital in Santa Fe, New Mexico.
During 1997, Mr. Reese was a computer systems engineer with Deloitte & Touche.
From 1995 until 1997, Mr. Reese was a vice-president with Digital Publishing
Resources, Inc., an Internet Service Provider. From 1994 until 1995, Mr. Reese
was a pilot with Continental Airlines. From 1992 until 1994, Mr. Reese was a
pilot with Hang On, Inc., an airline company. Mr. Reese has an Associates
Degree in Aeronautical Science from Texas State Technical College.
Steven L. Jenkins, age 47, has been a director of the Company since 2001.
Mr. Jenkins has been a certified public accountant with Pringle Jenkins &
Associates, P.C., located in Houston, Texas. Mr. Jenkins is the President and
owner of Pringle Jenkins & Associates, P.C. Mr. Jenkins has a BBA Degree (1979)
from Texas A&M University. Mr. Jenkins is a member of the AICPA and the TSCPA.
OUR DIRECTORS AND EXECUTIVE OFFICERS
Our Directors are elected annually and hold office until the next annual
meeting of our stockholders or until their successors are elected and qualified.
Officers are elected annually and serve at the discretion of the Board of
Directors. There is no family relationship between or among any of our
directors and executive officers. Our Board of Directors consists of five
persons.
- ----------------------------------------------------------
NAME AGE POSITION
- ----------------- --- ----------------------------------
Director, CEO, President and Chief
Eric S. Langan 36 Financial Officer
- ----------------- --- ----------------------------------
Director and V.P.-Director of
Travis Reese 34 Technology
- ----------------- --- ----------------------------------
Robert L. Watters 53 Director
- ----------------- --- ----------------------------------
Alan Bergstrom 59 Director
- ----------------- --- ----------------------------------
Steven L. Jenkins 47 Director
- ----------------------------------------------------------
6
OUR OFFICERS
In addition to being Directors, Eric S. Langan is also our CEO, President
and Acting Chief Financial Officer, and Travis Reese is also our VP--Director of
Technology.
RELATED TRANSACTIONS
Our Board of Directors has adopted a policy that our business affairs will
be conducted in all respects by standards applicable to publicly held
corporations and that we will not enter into any future transactions and/or
loans between us and our officers, directors and 5% shareholders unless the
terms are no less favorable than could be obtained from independent, third
parties and will be approved by a majority of our independent and disinterested
directors. In our view, all of the transactions described below meet this
standard.
In May 2002, we loaned $100,000 to Eric Langan who is our Chief Executive
Officer. The promissory note is unsecured, bears interest at 11% and is
amortized over a period of ten years. The note contains a provision that in the
event Mr. Langan leaves the Company for any reason, the note immediately becomes
due and payable in full. The balance of the note was $92,626 as of September
30, 2003 and is included in other assets in our balance sheet.
INFORMATION CONCERNING THE BOARD OF DIRECTORS AND ITS COMMITTEES
We have no compensation committee. Decisions concerning executive officer
compensation for 2004 were made by the full Board of Directors. Eric S. Langan
and Travis Reese are the only directors of the Company who are also officers of
the Company.
The Company has an Audit Committee whose members are Robert L. Watters,
Alan Bergstrom and Steven L. Jenkins. Mr. Watters was our President until March
1999, and has not been an officer or employee since March 1999. Mr. Watters,
Mr. Bergstrom and Mr. Jenkins are independent Directors. The primary purpose of
the Audit Committee is to oversee the Company's financial reporting process on
behalf of the Board of Directors. The Audit Committee meets privately with our
Chief Accounting Officer and with our independent public accountants and
evaluates the responses by the Chief Accounting Officer both to the facts
presented and to the judgments made by our outside independent accountants. Our
Audit Committee has reviewed and discussed our audited financial statements for
the year ended September 30, 2002 with our management.
In May 2000, our Board adopted a Charter for the Audit Committee. The
Charter establishes the independence of our Audit Committee and sets forth the
scope of the Audit Committee's duties. The Purpose of the Audit Committee is to
conduct continuing oversight of our financial affairs. The Audit Committee
conducts an ongoing review of our financial reports and other financial
information prior to their being filed with the Securities and Exchange
Commission, or otherwise provided to the public. The Audit Committee also
reviews our systems, methods and procedures of internal controls in the areas
of: financial reporting, audits,
7
treasury operations, corporate finance, managerial, financial and SEC
accounting, compliance with law, and ethical conduct. A majority of the members
of the Audit Committee will be independent. The Audit Committee is objective,
and reviews and assesses the work of our independent accountants and our
internal audit department.
The Audit Committee reviewed and discussed the matters required by SAS 61
and our audited financial statements for the fiscal year ended September 30,
2003 with management and our independent auditors. The Audit Committee has
received the written disclosures and the letter from our independent accountants
required by Independence Standards Board No. 1, and the Audit Committee has
discussed with the independent accountant the independent accountant's
independence. The Audit Committee recommended to the Board of Directors that
the Company's audited financial statements for the fiscal year September 30,
2003 be included in our Annual Report on Form 10-KSB for the fiscal year ended
September 30, 2003.
The Company has a Nominating Committee whose members are Robert L. Watters,
Alan Bergstrom and Steven L. Jenkins. In July 2004, the Board unanimously
adopted a Charter with regard to the process to be used for identifying and
evaluating nominees for director. The Charter establishes the independence of
our Nominating Committee and sets forth the scope of the Nominating Committee's
duties. A majority of the members of the Nominating Committee will be
independent. A copy of the Nominating Committee's Charter can be found on the
Company's website at www.ricks.com.
-------------
The Board of Directors held six meetings during the fiscal year ended
September 30, 2003, two of which were held by unanimous written consent. The
Audit Committee held four meetings during the fiscal year ended September 30,
2003. All of our Directors attended at least 75% of our Board meetings. All of
our Audit Committee members attended at least 75% of our Audit Committee
meetings.
There is no family relationship between or among any of the directors and
executive officers of the Company.
DIRECTOR COMPENSATION
We do not currently pay any cash directors' fees, but we pay the expenses
of our directors in attending board meetings. In September 2003, we issued
10,000 options to each Director who is a member of our audit committee and 5,000
options to our other Directors. These options have a strike price of $1.40 per
share and expire in September 2008.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires our directors
and executive officers, and persons who own beneficially more than ten percent
of our common stock, to file reports of ownership and changes of ownership with
the Securities and Exchange Commission. Based solely on the reports we have
received and on written representations from certain
8
reporting persons, we believe that the directors, executive officers, and
greater than ten percent beneficial owners have complied with all applicable
filing requirements.
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to us
for the fiscal years ended September 30, 2003, 2002 and 2001 certain executive
officers. No other executive officer of ours received compensation that
exceeded $100,000 during fiscal 2003.
SUMMARY COMPENSATION TABLE
--------------------------
Long-Term Compensation
Annual Compensation Awards Payouts
- -------------------------------------------------------------------------------------------------------------
Other Restricted Securities All
Annual Stock Underlying LTIP Other
Name and Salary Compensation Awards Options/ Payouts Compen
Principal Position Year ($) Bonus ($) ($)(1) ($) SARs (#) ($) sation ($)
- ------------------ ---- --------- --------- ------------- ----------- ----------- -------- ----------
Eric Langan 2003 $ 260,000 -0- -0- -0- 5,000 -0- -0-
- ------------------ ---- --------- --------- ------------- ----------- ----------- -------- ----------
2002 $ 260,000 -0- -0- -0- -0- -0- -0-
- ------------------ ---- --------- --------- ------------- ----------- ----------- -------- ----------
2001 $ 239,600 -0- -0- -0- 5,000 -0- -0-
- ------------------ ---- --------- --------- ------------- ----------- ----------- -------- ----------
Travis Reese 2003 $ 158,855 -0- -0- -0- 5,000 -0- -0-
- ------------------ ---- --------- --------- ------------- ----------- ----------- -------- ----------
2002 $ 137,500 -0- -0- -0- -0- -0- -0-
- ------------------ ---- --------- --------- ------------- ----------- ----------- -------- ----------
2001 $ 102,000 -0- -0- -0- 5,000 -0- -0-
- -------------------------------------------------------------------------------------------------------------
<FN>
(1) We provide certain executive officers certain personal benefits. Since the value of such
benefits do not exceed the lesser of $50,000 or 10% of annual compensation, the amounts are omitted.
Mr. Langan is Chairman, a Director, President and Acting Chief Financial
Officer. Mr. Reese is Director and V.P.-Director of Technology.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
-------------------------------------
(INDIVIDUAL GRANTS)
- --------------------------------------------------------------------------------------
Number of Percent of Total
Securities Options/SARs
Underlying Granted to
Options/SARS Employees in Fiscal Exercise of Base
Name Granted (#) Year (%) Price ($/Sh) Expiration Date
- ------------ ------------- -------------------- ------------------ ---------------
Eric Langan 5,000 (1) N/A $ 1.40 9/10/2008
- ------------ ------------- -------------------- ------------------ ---------------
Travis Reese 5,000 (1) N/A $ 1.40 9/10/2008
- --------------------------------------------------------------------------------------
<FN>
(1) These options were granted to Messrs. Langan and Reese for serving in their
capacity as Directors. There were no exercises of options by these persons during the
fiscal year ended September 30, 2003.
9
AGGREGATED OPTION/SAR EXERCISES IN
LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
---------------------------------------------
- ---------------------------------------------------------------------------------------------
Number of
Unexercised Value of Unexercised
Underlying In-The-Money
Options/SARs at FY Options/SARs at FY
end (#); end ($);
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized ($) Unexercisable Unexercisable
- ------------ ---------------- ------------------ ------------------ ---------------------
Eric Langan -0- (1) -0- 200,000 / -0- $ 1,750 / -0-
- ------------ ---------------- ------------------ ------------------ ---------------------
Travis Reese -0- (1) -0- 50,000 / -0- $ 1,750 / -0-
- ---------------------------------------------------------------------------------------------
<FN>
(1) These persons did not exercise of options during the fiscal year ended September 30, 2003.
EMPLOYEE STOCK OPTION PLANS
While we have been successful in attracting and retaining qualified
personnel, we believe that our future success will depend in part on our
continued ability to attract and retain highly qualified personnel. We pay wages
and salaries that we believe are competitive. We also believe that equity
ownership is an important factor in our ability to attract and retain skilled
personnel. We have adopted Stock Option Plans for employee and directors. The
purpose of the Plans is to further our interests, our subsidiaries and our
stockholders by providing incentives in the form of stock options to key
employees and directors who contribute materially to our success and
profitability. The grants recognize and reward outstanding individual
performances and contributions and will give such persons a proprietary interest
in the Company, thus enhancing their personal interest in our continued success
and progress. The Plans also assist the Company and our subsidiaries in
attracting and retaining key employees and directors. The Plans are administered
by the Board of Directors. The Board of Directors has the exclusive power to
select the participants in the Plans, to establish the terms of the options
granted to each participant, provided that all options granted shall be granted
at an exercise price equal to at least 85% of the fair market value of the
common stock covered by the option on the grant date and to make all
determinations necessary or advisable under the Plans.
In 1995 we adopted the 1995 Stock Option Plan. A total of 300,000 shares
may be granted and sold under the 1995 Plan. As of September 30, 2001, a total
of 167,500 stock options had been granted and are outstanding under the Plan,
none of which have been exercised. We do not plan to issue any additional
options under the 1995 Plan.
In August 1999, we adopted the 1999 Stock Option Plan (the "Plan"). Under
the Plan, a total of 500,000 shares may be optioned and sold. As of September
30, 2003, a total of 423,000 stock options had been granted and are outstanding
under the Plan, none of which have been exercised. As further discussed in Item
2 of this Proxy Statement, the Amendment to the Plan (attached hereto as Exhibit
"A") provides for the increase in the number of shares that may be optioned and
sold under the Plan from 500,000 to 1,000,000. This increase in the number of
shares from 500,000 to 1,000,000 is the only proposed change to the Plan; all
other terms of the Plan remain unchanged.
10
EQUITY COMPENSATION PLAN INFORMATION(1)
================================================================================================================================
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES TO BE FUTURE ISSUANCE UNDER EQUITY
ISSUED UPON EXERCISE OF WEIGHTED-AVERAGE EXERCISE COMPENSATION PLANS
OUTSTANDING OPTIONS, WARRANTS PRICE OF OUTSTANDING OPTIONS, (EXCLUDING SECURITIES REFLECTED
AND RIGHTS WARRANTS AND RIGHTS IN COLUMN (A))
PLAN CATEGORY (a) (b) (c)
============================= ============================== =============================== ================================
Equity compensation plans
approved by security holders 423,000 $ 2.44 77,000
============================= ============================== =============================== ================================
Equity compensation plans not
approved by security holders 75,000 $ 1.87 225,000
============================= ============================== =============================== ================================
TOTAL 498,000 $ 2.35 302,000
================================================================================================================================
<FN>
(1) As of September 30, 2003.
EMPLOYMENT AGREEMENTS
We have a one-year employment agreement with Eric S. Langan (the "Langan
Agreement"). The Langan Agreement extends through April 1, 2005 and provides
for an annual base salary of $325,000. The Langan Agreement also provides for
participation in all benefit plans maintained by us for salaried employees. The
Langan Agreement contains a confidentiality provision and an agreement by Mr.
Langan not to compete with us upon the expiration of the Langan Agreement. We
have not established long term incentive plans or defined benefit or actuarial
plans. Under the Langan Agreement, Mr. Langan received options to purchase
75,000 shares at an exercise price of $2.20 per share, which are fully vested in
and expire on December 31, 2009. Under a prior employment agreement, Mr. Langan
received options to purchase 125,000 shares at an exercise price of $1.87 per
share, which vested in August 1999.
We have a three-year employment agreement with Travis Reese (the "Reese
Agreement"). The Reese Agreement extends through February 1, 2007 and provides
for an annual base salary of $175,000. The Reese Agreement also provides for
participation in all benefit plans maintained by us for salaried employees. The
Reese Agreement contains a confidentiality provision and an agreement by Mr.
Reese not to compete with us upon the expiration of the Reese Agreement. We
have not established long term incentive plans or defined benefit or actuarial
plans.
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information at July 12, 2004, with
respect to the beneficial ownership of shares of Common Stock by (i) each person
known to us who owns beneficially more than 5% of the outstanding shares of
Common Stock, (ii) each of our directors, (iii) each of our executive officers
and (iv) all of our executive officers and directors as a group. Unless
otherwise indicated, each stockholder has sole voting and investment power with
respect
11
to the shares shown. As of July 12, 2004, there were 3,700,148 share of common
stock outstanding.
- --------------------------------------------------------------------------------
PERCENT OF
NAME/ADDRESS NUMBER OF SHARES TITLE OF CLASS CLASS (8)
- -------------------------------- ----------------- -------------- -----------
Eric S. Langan
505 North Belt, Suite 630
Houston, Texas 77060 1,021,200 (1) Common stock 26.1%
- -------------------------------- ----------------- -------------- -----------
Robert L. Watters
315 Bourbon Street
New Orleans, Louisiana 70130 35,000 (2) Common stock 0.9%
- -------------------------------- ----------------- -------------- -----------
Steven L. Jenkins
16815 Royal Crest Drive
Suite 160
Houston, Texas 77058 20,000 (3) Common stock 0.5%
- -------------------------------- ----------------- -------------- -----------
Travis Reese
505 North Belt, Suite 630
Houston, Texas 77060 55,405 (4) Common stock 1.4%
- -------------------------------- ----------------- -------------- -----------
Alan Bergstrom
707 Rio Grande, Suite 200
Austin, Texas 78701 35,000 (2) Common stock 0.9%
- -------------------------------- ----------------- -------------- -----------
E. S. Langan. L.P.
505 North Belt, Suite 630
Houston, Texas 77060 578,632 Common stock 15.6%
- -------------------------------- ----------------- -------------- -----------
Ralph McElroy
1211 Choquette
Austin, Texas, 78757 817,147(5) Common stock 21.4%
- -------------------------------- ----------------- -------------- -----------
William Friedrichs
16815 Royal Crest Dr., Suite 260
Houston, Texas 77058 401,850(6) Common stock 10.8%
- -------------------------------- ----------------- -------------- -----------
All of our Directors and
Officers as a
Group of five persons 1,166,605 (7) Common stock 28.8%
- --------------------------------------------------------------------------------
<FN>
_______________________________
(1) Mr. Langan has sole voting and investment power for 242,568 shares that he
owns directly. Mr. Langan has shared voting and investment power for 578,632
shares that he owns indirectly through E. S. Langan, L.P. Mr. Langan is the
general partner of E. S. Langan, L.P. This amount also includes options to
purchase up to 200,000 shares of common stock that are presently exercisable.
(2) Includes options to purchase up to 25,000 shares of common stock that are
presently exercisable.
(3) Includes options to purchase up to 10,000 shares of common stock that are
presently exercisable.
(4) Includes options to purchase up to 45,000 shares of common stock that are
presently exercisable.
(5) Includes 66,545 shares of common stock that would be issuable upon
conversion of a convertible debenture held by Mr. McElroy. Also includes 52,135
shares of common stock that would be issuable upon conversion of a convertible
promissory note held by Mr. McElroy.
(6) Includes 170,000 shares owned by WMF Investments, Inc. Mr. Friedrichs is a
control person of WMF Investments, Inc.
12
(7) Includes options to purchase up to 350,000 shares of common stock that are
presently exercisable.
(8) These percentages exclude treasury shares in the calculation of percentage
of class.
We are not aware of any arrangements that could result in a change of
control.
___________________________________________________________________
(2)
AMENDMENT TO STOCK OPTION PLAN
___________________________________________________________________
The Board of Directors unanimously recommends a vote FOR the approval of
the Amendment to the 1999 Stock Option Plan (the "Amendment"). The Amendment
provides for the increase in the number of shares that may be optioned and sold
under the Plan from 500,000 to 1,000,000. This increase in the number of shares
from 500,000 to 1,000,000 is the only proposed change to the Plan; all other
terms of the Plan remain unchanged. The Amendment will become effective upon
shareholder approval. The affirmative vote of a majority of the shares of
Common Stock present or represented by proxy and entitled to vote at the Annual
Meeting is required for the approval of Proposal 2. Shareholder approval will
make the Plan a tax-qualified plan. The Amendment is attached hereto as
Attachment "A."
AMENDMENT TO 1999 STOCK OPTION PLAN
Pursuant to Section 16 of the Plan, the Board of Directors adopted the
Amendment for eligible employees and non-employee consultants of the Company and
its subsidiaries to increase the number of shares that may be optioned and sold
under the Plan from 500,000 to 1,000,000 on May 13, 2004. The purpose of the
Plan is to further our interests, our subsidiaries and our stockholders by
providing incentives in the form of stock options to key employees and
non-employee consultants who contribute materially to our success and
profitability. The grants recognize and reward outstanding individual
performances and contributions and will give such persons a proprietary interest
in us, thus enhancing their personal interest in our continued success and
progress. The Amendment also assists us and our subsidiaries in attracting and
retaining key employees and non-employee consultants.
The following sets forth certain terms and conditions of the Plan.
1. ADMINISTRATION.
--------------
(a) This Plan will be administered by the Committee (as defined in the
Plan). A majority of the full Committee constitutes a quorum for purposes
of administering the Plan, and all determinations of the Committee shall be
made by a majority of the members present at a meeting at which a quorum is
present or by the unanimous written consent of the Committee.
13
(b) If no Committee has been appointed, members of the Board may vote on
any matters affecting the administration of the Plan or the grant of any
Option pursuant to the Plan, except that no such member shall act on the
granting of an Option to himself, but such member may be counted in
determining the existence of a quorum at any meeting of the Board during
which action is taken with respect to the granting of Options to him.
Subject to the terms of this Plan, the Committee has the sole and exclusive
power to:
(i) select the participants in this Plan;
(ii) establish the terms of the Options granted to each participant
which may not be the same in each case;
(iii) determine the total number of options to grant to an Optionee,
which may not be the same in each case;
(iv) fix the Option period for any Option granted which may not be the
same in each case;
(v) make all other determinations necessary or advisable under the
Plan;
(vi) determine the minimum number of shares with respect to which
Options may be exercised in part at any time.
(c) The Committee has the sole and absolute discretion to determine whether
the performance of an eligible Employee warrants an award under this Plan,
and to determine the amount of the award.
(d) The Committee has full and exclusive power to construe and interpret
this Plan, to prescribe and rescind rules and regulations relating to this
Plan, and take all actions necessary or advisable for the Plan's
administration. Any such determination made by the Committee will be final
and binding on all persons.
A member of the Committee will not be liable for performing any act or
making any determination in good faith.
2. SHARES SUBJECT TO OPTION. Subject to the provisions of Paragraph 11 of
----------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan shall be increased from 500,000 to 1,000,000 upon
shareholder approval. Such shares may be authorized but unissued, or may be
treasury shares. If an Option shall expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares that
were subject to the Option shall, unless the Plan has then terminated, be
available for other Options under the Plan.
3. NONQUALIFIED AND INCENTIVE STOCK OPTIONS. Any Option not intended to
--------------------------------------------
qualify as an Incentive Stock Option shall be a Nonqualified Stock
14
Option. Nonqualified Stock Options shall satisfy each of the requirements
of the Plan. An Option intended to qualify as an Incentive Stock Option,
but which does not meet all the requirements of an Incentive Stock Option
shall be treated as a Nonqualified Stock Option.
________________________________________________________________________
(3) TO RATIFY THE SELECTION OF WHITLEY PENN
AS THE COMPANY'S INDEPENDENT AUDITOR
FOR THE FISCAL YEAR ENDING
SEPTEMBER 30, 2004
________________________________________________________________________
The Board of Directors has selected Whitley Penn as the Company's
independent auditor for the current fiscal year. Although not required by law
or otherwise, the selection is being submitted to the Stockholders of the
Company as a matter of corporate policy for their approval. The Board of
Directors wishes to obtain from the Stockholders a ratification of their action
in appointing their existing certified public accountant, Whitley Penn,
independent auditor of the Company for the fiscal year ending September 30,
2004. Such ratification requires the affirmative vote of a majority of the
shares of Common Stock present or represented by proxy and entitled to vote at
the Annual Meeting.
In the event the appointment of Whitley Penn as independent auditor is not
ratified by the Stockholders, the adverse vote will be considered as a direction
to the Board of Directors to select other independent auditors for the fiscal
year ending September 30, 2004. A representative of Whitley Penn is expected to
be present at the Annual Meeting with the opportunity to make a statement if he
so desires and to respond to appropriate questions. The Board of Directors
unanimously recommends a vote FOR the ratification of Whitley Penn as
independent auditor for fiscal year ending September 30, 2004.
The following table sets forth the approximate aggregate fees billed to us for
the years ended September 30, 2003 and 2002 by Whitley Penn:
2003 2002
------- -------
Audit fees (1) $76,600 $39,150
Audit-related fees (2) $ -- $ --
Tax Fees (3) $ -- $ --
All other fees (4) $ -- $ --_
------- -------
Total Fees $76,600 $39,150
(1) Audit Fees: This category consists of fees for the audit of our annual
financial statements, review of the financial statements included in our
quarterly reports on Form 10-QSB and services that are normally provided by the
independent auditors in connection with statutory and regulatory filings or
engagements for those fiscal years.
(2) Audit-Related Fees: This category consists of assurance and related
services by Whitely Penn that are reasonably related to the performance of the
audit or review of our financial statements and are not reported above under
"Audit Fees".
15
(3) Tax Fees: This category consists of professional services rendered by
Whitley Penn for tax compliance, tax advice and tax planning.
(4) All Other Fees: This category is not applicable at this time.
AUDITOR INDEPENDENCE
Our Audit Committee considered that the work done for us in fiscal 2003 by
Whitley Penn was compatible with maintaining Whitley Penn's independence.
AUDITOR'S TIME ON TASK
All of the work expended by Whitley Penn on our fiscal 2003 audit was
attributed to work performed by Whitley Penn's full-time, permanent employees.
___________________________________________________________________
(4)
OTHER MATTERS
___________________________________________________________________
The Board of Directors is not aware of any other matters to be presented
for action at the Annual Meeting. However, if any other matter is properly
presented at the Annual Meeting, it is the intention of the persons named in the
enclosed proxy to vote in accordance with their best judgment on such matters.
FUTURE PROPOSALS OF STOCKHOLDERS
The deadline for stockholders to submit proposals to be considered for
inclusion in the Proxy Statement for the 2004 Annual Meeting of Stockholders is
January 15, 2005.
BY ORDER OF THE BOARD OF DIRECTORS
/S/ ERIC S. LANGAN
CHAIRMAN OF THE BOARD AND PRESIDENT
JULY 27, 2004
HOUSTON, TEXAS
16
PROXY
RICK'S CABARET INTERNATIONAL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS FOR THE
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON AUGUST 27, 2004
The undersigned hereby appoints Eric S. Langan and Travis Reese, and each
of them as the true and lawful attorneys, agents and proxies of the undersigned,
with full power of substitution, to represent and to vote all shares of Common
Stock of Rick's Cabaret International, Inc. held of record by the undersigned on
July 12, 2004, at the Annual Meeting of Stockholders to be held on August 27,
2004, at 10:00 AM (CST) at 410 N. Sam Houston Parkway (Beltway 8 at Imperial
Valley), Houston, Texas 77060, and at any adjournments thereof. Any and all
proxies heretofore given are hereby revoked.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS DESIGNATED BY THE
UNDERSIGNED. IF NO CHOICE IS SPECIFIED, THE PROXY WILL BE VOTED FOR THE
NOMINEES LISTED IN NUMBER 1 AND FOR THE RATIFICATION IN NUMBER 2 AND NUMBER 3.
1. ELECTION OF DIRECTORS OF THE COMPANY. (INSTRUCTION: TO WITHHOLD AUTHORITY
TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE THROUGH, OR OTHERWISE
STRIKE, THAT NOMINEE'S NAME IN THE LIST BELOW.)
[ ] FOR all nominees listed [ ] WITHHOLD authority to
below except as marked vote for all nominees
to the contrary. below.
Eric S. Langan Robert L. Watters Steven L. Jenkins
Alan Bergstrom Travis Reese
2. PROPOSAL TO AMEND THE 1999 STOCK OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. PROPOSAL TO RATIFY THE SELECTION OF WHITLEY PENN AS THE COMPANY'S
INDEPENDENT AUDITOR FOR THE FISCAL YEAR ENDING SEPTEMBER 30, 2004.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
17
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Please sign exactly as name appears below. When shares are held by joint
tenants, both should sign. When signing as attorney, as executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
NUMBER OF
SHARES OWNED
_________________ ____________________________________
SIGNATURE
____________________________________
(TYPED OR PRINTED NAME)
____________________________________
SIGNATURE IF HELD JOINTLY
____________________________________
(TYPED OR PRINTED NAME)
DATED: ____________________________
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS VOTED AT THE MEETING. PLEASE
MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
18
EXHIBIT "A"
AMENDMENT TO
RICKS CABARET INTERNATIONAL, INC.
1999 STOCK OPTION PLAN
1. PURPOSE. The purpose of the Ricks Cabaret International, Inc. 1999 Stock
-------
Option Plan ("the Plan") is to promote the financial interests of the
Company, its subsidiaries and its shareholders by providing incentives in
the form of stock options to key employees and directors who contribute
materially to the success and profitability of the Company. The grants will
recognize and reward outstanding individual performances and contributions
and will give such persons a proprietary interest in the Company, thus
enhancing their personal interest in the Company's continued success and
progress. This Plan will also assist the Company and its subsidiaries in
attracting, retaining and motivating key employees and directors. The
options granted under this Plan may be either Incentive Stock Options, as
that term is defined in Section 422 of the Internal Revenue Code of 1986,
as amended, or Nonqualified options taxed under Section 83 of the Internal
Revenue Code of 1986, as amended.
RULE 16B-3 PLAN. The Company is subject to the reporting requirements of
-----------------
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
therefore the Plan is intended to comply with all applicable conditions of
Rule 16b-3 (and all subsequent revisions thereof) promulgated under the
Exchange Act. To the extent any provision of the Plan or action by the
Committee or the Board of Directors or Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee. In addition, the Committee or the Board of
Directors may amend the Plan from time to time as it deems necessary in
order to meet the requirements of any amendments to Rule 16b-3 without the
consent of the shareholders of the Company.
EFFECTIVE DATE OF PLAN. The effective date of this Amendment shall be
-------------------------
August 27, 2004 (the Effective Date) upon shareholder approval. The Board
of Directors shall, within one year of the Effective Date, submit the
Amendment to the shareholders of the Company for approval. The Amendment
shall be approved by at least a majority of shareholders voting in person
or by proxy at a duly held shareholders' meeting, or if the provisions of
the corporate charter, by-laws or applicable state law prescribes a greater
degree of shareholder approval for this action, the approval by the holders
of that percentage, at a duly held meeting of shareholders. No Incentive
Option or Nonqualified Stock Option shall be granted pursuant to the Plan
ten years after the Effective Date. In the event that the Amendment is not
approved by the shareholders of the Company, the Amendment shall be deemed
to be a non-qualified stock option plan.
2. DEFINITIONS. The following definitions shall apply to this Plan:
-----------
(a) "Affiliate" means any parent corporation and any subsidiary
corporation. The term "parent corporation" means any corporation
(other than the Company) in an unbroken
chain of corporations ending with the Company if, at the time of the
action or transaction, each of the corporations other than the Company
owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in the chain.
The term "subsidiary corporation" means any corporation (other than
the Company) in an unbroken chain of corporations beginning with the
Company if, at the time of the action or transaction, each of the
corporations other than the last corporation in the unbroken chain
owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in the chain.
(b) Agreement" means, individually or collectively, any agreement entered
into pursuant to the Plan pursuant to which Options are granted to a
participant.
(c) "Award" means each of the following granted under this Plan: Incentive
Stock Options or Non-qualified Stock Options.
(d) "Board" means the board of directors of the Company.
(e) "Cause" shall mean, for purposes of whether and when a participant has
incurred a Termination of Employment for Cause: (i) any act or
omission which permits the Company to terminate the written agreement
or arrangement between the participant and the Company or a Subsidiary
or Parent for Cause as defined in such agreement or arrangement; or
(ii) in the event there is no such agreement or arrangement or the
agreement or arrangement does not define the term "cause," then Cause
shall mean an act or acts of dishonesty by the participant resulting
or intending to result directly or indirectly in gain to or personal
enrichment of the participant at the Company's expense and/or gross
negligence or willful misconduct on the part of the participant.
(f) "Change in Control" means, for purposes of this Plan:
i. there shall be consummated (i) any consolidation or merger of the
Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's common
stock would be converted into cash, securities or other property,
other than a merger of the Company in which the holders of the
Company's common stock immediately prior to the merger have
substantially the same proportionate ownership of common stock of
the surviving corporation immediately after the merger; or (ii)
any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all or substantially all
of the assets of the Company; or
ii. the shareholders of the Company shall approve any plan or
proposal for the liquidation or dissolution of the Company; or
i.
Amendment to 1999 Stock Option Plan - Page 2
(g) "Code" means the Internal Revenue Code of 1986, as amended, final
Treasury Regulations thereunder and any subsequent Internal
Revenue Code.
(h) Committee means the Compensation Committee of the Board of
Directors or such other committee designated by the Board of
Directors. The Committee shall be comprised solely of at least
two members who are both Disinterested Persons and Outside
Directors.
(i) "Common Stock" means the Common Stock, par value per share of the
Company whether presently or hereafter issued, or such other
class of shares or securities as to which the Plan may be
applicable, pursuant to Section 11 herein.
(j) "Company" means Ricks Cabaret International, Inc., a Texas
Corporation and includes any successor or assignee company
corporations into which the Company may be merged, changed or
consolidated; any company for whose securities the securities of
the Company shall be exchanged; and any assignee of or successor
to substantially all of the assets of the Company.
(k) "Continuous Service" means the absence of any interruption or
termination of employment with or service to the Company or any
Parent or Subsidiary of the Company that now exists or hereafter
is organized or acquired by or acquires the Company. Continuous
Service shall not be considered interrupted in the case of sick
leave, military leave, or any other bona fide leave of absence of
less than ninety (90) days (unless the participants right to
reemployment is guaranteed by statute or by contract) or in the
case of transfers between locations of the Company or between the
Company, its Parent, its Subsidiaries or its successors
(l) Date of Grant means the date on which the Committee grants an
Option.
(m) "Director" means any member of the Board of Directors of the
Company or any Parent or subsidiary of the Company that now
exists or hereafter is organized or acquired by or acquires the
Company.
(n) Non Employee Director means a Non Employee Director as that term
is defined in Rule 16b-3 under the Exchange Act.
(o) "Eligible Persons" shall mean, with respect to the Plan, those
persons who, at the time that an Award is granted, are (i)
officers, directors or employees of the Company or Affiliate or
(ii) consultants or subcontractors of the Company or affiliate.
(p) "Employee" means any person employed on an hourly or salaried
basis by the Company or any Parent or Subsidiary of the Company
that now exists or hereafter is organized or acquired by or
acquires the Company.
Amendment to 1999 Stock Option Plan - Page 3
(q) "Exchange Act" means the Securities Exchange Act of 1934, as
amended and the rules and regulations promulgated thereunder.
(r) "Fair Market Value" means (i) if the Common Stock is not listed
or admitted to trade on a national securities exchange and if bid
and ask prices for the Common Stock are not furnished through
NASDAQ or a similar organization, the value established by the
Committee, in its sole discretion, for purposes of the Plan; (ii)
if the Common Stock is listed or admitted to trade on a national
securities exchange or a national market system, the closing
price of the Common Stock, as published in the Wall Street
-----------
Journal, so listed or admitted to trade on such date or, if there
-------
is no trading of the Common Stock on such date, then the closing
price of the Common Stock on the next preceding day on which
there was trading in such shares; or (iii) if the Common Stock is
not listed or admitted to trade on a national securities exchange
or a national market system, the mean between the bid and ask
price for the Common Stock on such date, as furnished by the
National Association of Securities Dealers, Inc. through NASDAQ
or a similar organization if NASDAQ is no longer reporting such
information. If trading in the stock or a price quotation does
not occur on the Date of Grant, the next preceding date on which
the stock was traded or a price was quoted will determine the
fair market value.
(s) "Incentive Stock Option" means a stock option, granted pursuant
to either this Plan or any other plan of the Company, that
satisfies the requirements of Section 422 of the Code and that
entitles the Optionee to purchase stock of the Company or in a
corporation that at the time of grant of the option was a Parent
or subsidiary of the Company or a predecessor company of any such
company.
(t) "Nonqualified Stock Option" means an Option to purchase Common
Stock in the Company granted under the Plan other than an
Incentive Stock Option within the meaning of Section 422 of the
Code.
(u) "Option" means a stock option granted pursuant to the Plan.
(v) "Option Period" means the period beginning on the Date of Grant
and ending on the day prior to the tenth anniversary of the Date
of Grant or such shorter termination date as set by the
Committee.
(w) "Optionee" means an Employee (or Director or subcontractor) who
receives an Option.
(x) "Parent" means any corporation which owns 50% or more of the
voting securities of the Company.
(y) Plan" means this Stock Option Plan as may be amended from time to
time.
Amendment to 1999 Stock Option Plan - Page 4
(z) Share" means the Common Stock, as adjusted in accordance with
Paragraph 11 of the Plan.
(aa) "Ten Percent Shareholder" means an individual who, at the time
the Option is granted, owns Stock possessing more than 10% of the
total combined voting power of all classes of stock of the
Company or of any Affiliate. An individual shall be considered as
owning the Stock owned, directly or indirectly, by or for his
brothers and sisters (whether by the whole or half blood),
spouse, ancestors, and lineal descendants; and Stock owned,
directly or indirectly, by or for a corporation, partnership,
estate, or trust, shall be considered as being owned
proportionately by or for its shareholders, partners, or
beneficiaries.
(bb) Termination or Termination of Employment means the occurrence of
any act or event whether pursuant to an employment agreement or
otherwise that actually or effectively causes or results in the
person's ceasing, for whatever reason, to be an officer or
employee of the Company or of any Subsidiary or Parent including,
without limitation, death, disability, dismissal, severance at
the election of the participant, retirement, or severance as a
result of the discontinuance, liquidation, sale or transfer by
the Company or its Subsidiaries or Parent of all businesses owned
or operated by the Company or its Subsidiaries. A Termination of
Employment shall occur to an employee who is employed by a
Subsidiary if the Subsidiary shall cease to be a Subsidiary and
the participant shall not immediately thereafter become an
employee of the Company or a Subsidiary.
(cc) Subsidiary means any corporation 50% or more of the voting
securities of which are owned directly or indirectly by the
Company at any time during the existence of this Plan.
In addition, certain other terms used in this Plan shall have the
definitions given to them in the first place in which they are used.
3. ADMINISTRATION.
--------------
(a) This Plan will be administered by the Committee. A majority of the
full Committee constitutes a quorum for purposes of administering the
Plan, and all determinations of the Committee shall be made by a
majority of the members present at a meeting at which a quorum is
present or by the unanimous written consent of the Committee.
(b) If no Committee has been appointed, members of the Board may vote on
any matters affecting the administration of the Plan or the grant of
any Option pursuant to the Plan, except that no such member shall act
on the granting of an Option to himself, but such member may be
counted in determining the existence of a quorum at any meeting of the
Board during which action is taken with respect to the granting of
Options to him.
Amendment to 1999 Stock Option Plan - Page 5
(c) Subject to the terms of this Plan, the Committee has the sole and
exclusive power to:
i. select the participants in this Plan;
ii. establish the terms of the Options granted to each participant
which may not be the same in each case;
iii. determine the total number of options to grant to an Optionee,
which may not be the same in each case;
iv. fix the Option period for any Option granted which may not be the
same in each case; and
v. make all other determinations necessary or advisable under the
Plan.
vi. determine the minimum number of shares with respect to which
Options may be exercised in part at any time.
vii. The Committee has the sole and absolute discretion to determine
whether the performance of an eligible Employee warrants an award
under this Plan, and to determine the amount of the award.
viii. The Committee has full and exclusive power to construe and
interpret this Plan, to prescribe and rescind rules and
regulations relating to this Plan, and take all actions necessary
or advisable for the Plan's administration. Any such
determination made by the Committee will be final and binding on
all persons.
(d) A member of the Committee will not be liable for performing any act or
making any determination in good faith.
4. SHARES SUBJECT TO OPTION. Subject to the provisions of Paragraph 11 of
----------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan shall be 1,000,000. Such shares may be authorized but
unissued, or may be treasury shares. If an Option shall expire or become
unexercisable for any reason without having been exercised in full, the
unpurchased Shares that were subject to the Option shall, unless the Plan
has then terminated, be available for other Options under the Plan.
(a) Eligible Persons. Every Eligible Person, as the Committee in its sole
-----------------
discretion designates, is eligible to participate in this Plan.
Directors who are not employees of the Company or any subsidiary or
Parent shall only be eligible to receive Incentive Stock Options if
and as permitted be applicable law and regulations. The Committee's
award of an Option to a participant in any year does not require the
Committee to award an Option to that participant in any other year.
Furthermore, the Committee may award different Options to different
participants. The Committee
Amendment to 1999 Stock Option Plan - Page 6
may consider such factors as it deems pertinent in selecting
participants and in determining the amount of their Option, including,
without limitation;
(i) the financial condition of the Company or its Subsidiaries;
(ii) expected profits for the current or future years;
(iii) the contributions of a prospective participant to the
profitability and success of the Company or its Subsidiaries; and
(iv) the adequacy of the prospective participant's other compensation.
Participants may include persons to whom stock, stock options, or
other benefits previously were granted under this or another plan of
the Company or any Subsidiary, whether or not the previously granted
benefits have been fully exercised.
(b) No Right of Employment. An Optionee's right, if any, to continue to
-------------------------
serve the Company and its Subsidiaries as an Employee will not be
enlarged or otherwise affected by his designation as a participant
under this Plan, and such designation will not in any way restrict the
right of the Company or any Subsidiary, as the case may be, to
terminate at any time the employment of any Employee.
5. REQUIREMENTS OF OPTION GRANTS. Each Option granted under this Plan shall
-----------------------------
satisfy the following requirements.
(a) Written Option. An Option shall be evidenced by a written Agreement
---------------
specifying (i) the number of Shares that may be purchased by its
exercise, (ii) the intent of the Committee as to whether the Option is
be an Incentive Stock Option or a Non-qualified Stock Option, (iii)
the Option period for any Option granted and (iv) such terms and
conditions consistent with the Plan as the Committee shall determine,
all of which may differ between various Optionees and various
Agreements.
(b) Duration of Option. Each Option may be exercised only during the
--------------------
Option Period designated for the Option by the Committee. At the end
of the Option Period the Option shall expire.
(c) Option Exercisability. The Committee, on the grant of an Option, each
----------------------
Option shall be exercisable only in accordance with its terms.
(d) Acceleration of Vesting. Subject to the provisions of Section 5(b),
-------------------------
the Committee may, it its sole discretion, provide for the exercise of
Options either as to an increased percentage of shares per year or as
to all remaining shares. Such acceleration of vesting may be declared
by the Committee at any time before the end of the Option Period,
including, if applicable, after termination of the Optionee's
Continuous
<PGE>
Service by reason of death, disability, retirement or termination of
employment.
(e) Option Price. Except as provided in Section 6(a) the Option price of
-------------
each Share subject to the Option shall equal the Fair Market Value of
the Share on the Option's Date of Grant.
(f) Termination of Employment Any Option which has not vested at the time
--------------------------
the Optionee ceases Continuous Service for any reason other than
death, disability or retirement shall terminate upon the last day that
the Optionee is employed by the Company. Incentive Stock Options must
be exercised within three months of cessation of Continuous Service
for reasons other death, disability or retirement in order to qualify
for Incentive Stock Option tax treatment. Nonqualified Options may be
exercised any time during the Option Period regardless of employment
status.
(g) Death. In the case of death of the Optionee, the beneficiaries
-----
designated by the Optionee shall have one year from the Optionee's
demise or to the end of the Option Period, whichever is earlier, to
exercise the Option, provided, however, the Option may be exercised
only for the number of Shares for which it could have been exercised
at the time the Optionee died, subject to any adjustment under
Sections 5(d) and 11.
(h) Retirement. Any Option which has not vested at the time the Optionee
----------
ceases Continuous Service due to retirement shall terminate upon the
last day that the Optionee is employed by the Company. Upon retirement
Incentive Stock Options must be exercised within three months of
cessation of Continuous Service in order to qualify for Incentive
Stock Option tax treatment. Nonqualified Options may be exercised any
time during the Option Period regardless of employment status.
(i) Disability. In the event of termination of Continuous Service due to
----------
total and permanent disability (within the meaning of Section 422 of
the Code), the Option shall lapse at the earlier of the end of the
Option Period or twelve months after the date of such termination,
provided, however, the Option can be exercised at the time the
Optionee became disabled, subject to any adjustment under Sections
5(d) and 11.
Amendment to 1999 Stock Option Plan - Page 7
6. INCENTIVE STOCK OPTIONS. Any Options intended to qualify as an Incentive
-----------------------
Stock Option shall satisfy the following requirements in addition to the
other requirements of the Plan:
(a) Ten Percent Shareholders. An Option intended to qualify as an
--------------------------
Incentive Stock Option granted to an individual who, on the Date of
Grant, owns stock possessing more than ten (10) percent of the total
combined voting power of all classes of stock of either the Company or
any Parent or Subsidiary, shall be granted at a price of 110 percent
of Fair Market Value on the Date of Grant and shall be exercised only
during the five-year period immediately following the Date of Grant.
In calculating stock ownership of any person, the attribution rules of
Section 425(d) of the Code will
Amendment to 1999 Stock Option Plan - Page 8
apply. Furthermore, in calculating stock ownership, any stock that the
individual may purchase under outstanding options will not be
considered.
(b) Limitation on Incentive Stock Options. The aggregate Fair Market
-----------------------------------------
Value, determined on the date of Grant, of stock in the Company
exercisable for the first time by any Optionee during any calendar
year, under the Plan and all other plans of the Company or its Parent
or Subsidiaries (within the meaning of Subsection (d) of Section 422
of the Code) in any calendar year shall not exceed $100,000.00.
(c) Exercise of Incentive Stock Options. No disposition of the shares
---------------------------------------
underlying an Incentive Stock Option may be made within two years from
the Date of Grant nor within one year after the exercise of such
incentive Stock Option.
(d) Approval of Amendment. No Option shall qualify as an Incentive Stock
-----------------------
Option unless this Amendment is approved by the shareholders within
one year of the Plans adoption by the Board.
7. NONQUALIFIED AND INCENTIVE STOCK OPTIONS. Any Option not intended to
--------------------------------------------
qualify as an Incentive Stock Option shall be a Nonqualified Stock Option.
Nonqualified Stock Options shall satisfy each of the requirements of
Section 5 of the Plan. An Option intended to qualify as an Incentive Stock
Option, but which does not meet all the requirements of an Incentive Stock
Option shall be treated as a Nonqualified Stock Option.
8. METHOD OF EXERCISE. An Option granted under this Plan shall be deemed
------------------
exercised when the person entitled to exercise the Option (i) delivers
written notice to the President of the Company of the decision to exercise,
(ii) concurrently tenders to the Company full payment for the Shares to be
purchased pursuant to the exercise, and (iii) complies with such other
reasonable requirements as the Committee establishes pursuant to Section 3
of the Plan. During the lifetime of the Employee to whom an Option is
granted, such Option may be exercised only by him. Payment for Shares with
respect to which an Option is exercised may be in cash, or by certified
check, or wholly or partially in the form of Common Stock of the Company
having a fair market value equal to the Option Price. No person will have
the rights of a shareholder with respect to Shares subject to an Option
granted under this Plan until a certificate or certificates for the Shares
have been delivered to him.
An Option granted under this Plan may be exercised in increments of not
less than 10% of the full number of Shares as to which it can be exercised.
A partial exercise of an Option will not affect the holder's right to
exercise the Option from time to time in accordance with this Plan as to
the remaining Shares subject to the Option.
9. TAXES. COMPLIANCE WITH LAW: APPROVAL OF REGULATORY BODIES. The Company,
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if necessary or desirable, may pay or withhold the amount of any tax
attributable to any Shares deliverable or amounts payable under this Plan,
and the Company may defer making delivery or payment until it is
indemnified to its satisfaction for the tax. Options are exercisable, and
Amendment to 1999 Stock Option Plan - Page 9
Shares can be delivered and payments made under this Plan, only in
compliance with all applicable federal and state laws and regulations,
including, without limitation, state and federal securities laws, and the
rules of all stock exchanges on which the Company's stock is listed at any
time. An Option is exercisable only if either (i) a registration statement
pertaining to the Shares to be issued upon exercise of the Option has been
flied with and declared effective by the Securities and Exchange Commission
and remains effective on the date of exercise, or (ii) an exemption from
the registration requirements of applicable securities laws is available.
This plan does not require the Company, however, to file such registration
statement or to assure the availability of such exemptions. Any certificate
issued to evidence Shares issued under the Plan may bear such legends and
statements, and shall be subject to such transfer restrictions, as the
Committee deems advisable to assure compliance with federal and state laws
and regulations and with the requirements of this Section 9 of the Plan. No
Option may be exercised, and no Shares may be issued under this Plan, until
the Company has obtained the consent or approval of every regulatory body,
federal or state, having jurisdiction over such matter as the Committee
deems advisable.
Each Person who acquires the right to exercise an Option by bequest or
inheritance may be required by the Committee to furnish reasonable evidence
of ownership of the Option as a condition to his exercise of the Option. In
addition, the Committee may require such consents and release of taxing
authorities as the Committee deems advisable.
10. ASSIGNABILITY. An Option granted under this Plan is not transferable
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except by will or the laws of descent and distribution. The Option may be
exercised only by the Optionee during the life of the Optionee. More
particularly, but without limitation of the foregoing, the Option may be
not be assigned or transferred except as provided above and shall not be
assignable by operation of law and shall not be subject to execution,
attachment or similar process. Any attempted assignment, transfer or
distribution contrary to the provisions hereof shall be null and void and
without effect.
11. ADJUSTMENT UPON CHANGE OF SHARES. If a reorganization, merger,
------------------------------------
consolidation, reclassification, recapitalization, combination or exchange
of shares, stock split, stock dividend, rights offering, or other expansion
or contraction of the Common Stock of the Company occurs, the number and
class of Shares for which Options are authorized to be granted under this
Plan, the number and class of Shares then subject to Options previously
granted under this Plan, and the price per Share payable upon exercise of
each Option outstanding under this Plan shall be equitably adjusted by the
Committee to reflect such changes. To the extent deemed equitable and
appropriate by the Committee or the Board, subject to any required action
by shareholders, in any merger, consolidation, reorganization, liquidation
or dissolution, any Option granted under the Plan shall pertain to the
securities and other property to which a holder of the number of Shares of
stock covered by the Option would have been entitled to receive in
connection with such event.
12. ACCELERATIONS OF OPTIONS UPON CHANGE IN CONTROL. In the event that a
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Change of Control has occurred with respect to the Company, any and all
Options will become fully vested and
Amendment to 1999 Stock Option Plan - Page 10
immediately exercisable with such acceleration to occur without the
requirement of any further act by either the Company or the participant,
subject to Section 9 hereof.
13. LIABILITY OF THE COMPANY. The Company, its Parent and any Subsidiary
---------------------------
that is in existence or hereafter comes into existence shall not be liable
to any person for any tax consequences expected but not realized by an
Optionee or other person due to the exercise of an Option.
14. EXPENSES OF PLAN. The Company shall bear the expenses of administering
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the Plan.
15. DURATION OF PLAN. Options may be granted under this Plan only within 10
-----------------
years from the original effective date of the Plan.
16. AMENDMENT, SUSPENSION OR TERMINATION OF PLAN. The Board of Directors of
--------------------------------------------
the Company may amend, terminate or suspend this Plan at any time, in its
sole and absolute discretion; provided, however, that to the extent
required to qualify this Plan under Rule 16b-3 promulgated under Section 16
of the Exchange Act, no amendment that would (a) materially increase the
number of shares of Stock that may be issued under this Plan, (b)
materially modify the requirements as to eligibility for participation in
this Plan, or (c) otherwise materially increase the benefits accruing to
participants under this Plan, shall be made without the approval of the
Company's shareholders; provided further, however, that to the extent
required to maintain the status of any Incentive Option under the Code, no
amendment that would (a) change the aggregate number of shares of Stock
which may be issued under Incentive Options, (b) change the class of
employees eligible to receive Incentive Options, or (c) decrease the Option
price for Incentive Options below the Fair Market Value of the Stock at the
time it is granted, shall be made without the approval of the Company's
shareholders. Subject to the preceding sentence, the Board of Directors
shall have the power to make any changes in the Plan and in the regulations
and administrative provisions under it or in any outstanding Incentive
Option as in the opinion of counsel for the Company may be necessary or
appropriate from time to time to enable any Incentive Option granted under
this Plan to continue to qualify as an incentive stock option or such other
stock option as may be defined under the Code so as to receive preferential
federal income tax treatment. Notwithstanding the foregoing, no amendment,
suspension or termination of the Plan shall act to impair or extinguish
rights in Options already granted at the date of such amendment, suspension
or termination.
17. FORFEITURE. Notwithstanding any other provisions of this Plan, if the
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Committee finds by a majority vote after full consideration of the facts
that an Eligible Person, before or after termination of his employment with
the Company or an Affiliate for any reason (a) committed or engaged in
fraud, embezzlement, theft, commission of a felony, or proven dishonesty in
the course of his employment by the Company or an Affiliate, which conduct
damaged the Company or Affiliate, or disclosed trade secrets of the Company
or an Affiliate, or (b) participated, engaged in or had a material,
financial or other interest, whether as an employee, officer, director,
consultant, contractor, shareholder, owner, or otherwise, in any commercial
endeavor anywhere which is competitive with the business of the Company or
an
Amendment to 1999 Stock Option Plan - Page 11
Affiliate without the written consent of the Company or Affiliate, the
Eligible Person shall forfeit all outstanding Options, including all
exercised Options and other situations pursuant to which the Company has
not yet delivered a stock certificate. Clause (b) shall not be deemed to
have been violated solely by reason of the Eligible Persons ownership of
stock or securities of any publicly owned corporation, if that ownership
does not result in effective control of the corporation.
The decision of the Committee as to the cause of an Employee's discharge,
the damage done to the Company or an Affiliate, and the extent of an
Eligible Persons competitive activity shall be final. No decision of the
Committee, however, shall affect the finality of the discharge of the
Employee by the Company or an Affiliate in any manner.
18. INDEMNIFICATION OF THE COMMITTEE AND THE BOARD OF DIRECTORS. With
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respect to administration of this Plan, the Company shall indemnify each
present and future member of the Committee and the Board of Directors
against, and each member of the Committee and the Board of Directors shall
be entitled without further act on his part to indemnity from the Company
for, all expenses (including attorney's fees, the amount of judgments and
the amount of approved settlements made with a view to the curtailment of
costs of litigation, other than amounts paid to the Company itself)
reasonably incurred by him in connection with or arising out of any action,
suit, or proceeding in which he may be involved by reason of his being or
having been a member of the Committee and/or the Board of Directors,
whether or not he continues to be a member of the Committee and/or the
Board of Directors at the time of incurring the expenses, including,
without limitation, matters as to which he shall be finally adjudged in any
action, suit or proceeding to have been found to have been negligent in the
performance of his duty as a member of the Committee or the Board of
Directors. However, this indemnity shall not include any expenses incurred
by any member of the Committee and/or the Board of Directors in respect of
matters as to which he shall be finally adjudged in any action, suit or
proceeding to have been guilty of gross negligence or willful misconduct in
the performance of his duty as a member of the Committee and the Board of
Directors. In addition, no right of indemnification under this Plan shall
be available to or enforceable by any member of the Committee and the Board
of Directors unless, within 60 days after institution of any action, suit
or proceeding, he shall have offered the Company the opportunity to handle
and defend same at its own expense. The failure to notify the Company
within 60 days shall only affect a Director or committee members right to
indemnification if said failure to notify results in an impairment of the
Companys rights or is detrimental to the Company. This right of
indemnification shall inure to the benefit of the heirs, executors or
administrators of each member of the Committee and the Board of Directors
and shall be in addition to all other rights to which a member of the
Committee and the Board of Directors may be entitled as a matter of law,
contract, or otherwise.
19. GENDER. If the context requires, words of one gender when used in this
------
Plan shall include the others and words used in the singular or plural
shall include the other.
Amendment to 1999 Stock Option Plan - Page 12
20. HEADINGS. Headings of Articles and Sections are included for
--------
convenience of reference only and do not constitute part of the Plan and
shall not be used in construing the terms of the Plan.
21. OTHER COMPENSATION PLANS. The adoption of this Plan or any Amendments
--------------------------
shall not affect any other stock option, incentive or other compensation or
benefit plans in effect for the Company or any Affiliate, nor shall the
Plan preclude the Company from establishing any other forms of incentive or
other compensation for employees of the Company or any Affiliate.
22. OTHER OPTIONS OR AWARDS. The grant of an Option or Awards shall not
--------------------------
confer upon the Eligible Person the right to receive any future or other
Options or Awards under this Plan, whether or not Options or Awards may be
granted to similarly situated Eligible Persons, or the right to receive
future Options or Awards upon the same terms or conditions as previously
granted.
23 GOVERNING LAW. The provisions of this Plan shall be construed,
---------------
administered, and governed under the laws of the State of Texas.
Amendment to 1999 Stock Option Plan - Page 13