SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. __)
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, For Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-13
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BROOKE CORPORATION
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(Name of Registrant as Specified In Its Articles)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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):
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[ ] 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:
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4) Date Filed:
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NOTICE OF SPECIAL MEETING
AND PROXY STATEMENT
SPECIAL MEETING TO BE HELD
_________ __, 2001
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Dear Shareholder:
On behalf of our Board of Directors, I cordially invite you to attend the
Special Meeting of Shareholders of Brooke Corporation to be held at 10895
Grandview Drive, Suite 250, Overland Park, Kansas on _____________, _________
__, 2001 at _______ local time (the "Meeting"), for the following purposes:
The Notice of Special Meeting of Shareholders and the Proxy Statement that
follow describe the business to be conducted at the meeting.
Whether you own a few or many shares of stock of Brooke Corporation, it is
important that your shares of stock be represented. If you cannot personally
attend the meeting, we encourage you to make certain you are represented at the
meeting by signing and dating the accompanying proxy card and promptly returning
it in the enclosed envelope. Returning your proxy card will not prevent you from
voting in person, but will assure that your vote will be counted if you are
unable to attend the meeting.
Sincerely,
February __, 2001
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Michael Hess
President
TABLE OF CONTENTS
Page
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Notice of Special Meeting................................................ 1
General Information...................................................... 2
Question and Answer Summary: About the Meeting.......................... 2
Proposal No. 1 - Approval of the Brooke Corporation 2001 Compensatory
Stock Option Plan....................................... 5
Proposal No. 2 - Approval of an amendment to the Articles of Incorporation
of Brooke Corporation to provide the Board of Directors
with the authority to issue Preferred Stock............. 9
Proposal No. 3 - Approval of an amendment to the Articles of Incorporation
of Brooke Corporation to increase the number of authorized
shares of common stock from 1,485,000 to 9,500,000...... 10
Proposal No. 4 - Approval of an amendment to the Articles of Incorporation
of Brooke Corporation to authorize the creation of 499,000
shares of preferred stock............................... 12
Proposal No. 5 - Approval of an amendment to the Articles of Incorporation
of Brooke Corporation to decrease the number of authorized
shares of Convertible Preferred Stock from 15,000 to
1,000................................................... 15
Solicitation of Proxies.................................................. 16
Other Matters............................................................ 16
Voting Trustees and Their Nominees....................................... 16
Proxy/Voting Instruction Card
Appendix A - Brooke Corporation 2001 Compensatory Stock Option Plan
Appendix B - Amendment and Restatement to the Articles of Incorporation of
Brooke Corporation
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NOTICE OF 2001 SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ________________, 2001
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NOTICE IS HEREBY GIVEN that the Special Meeting of Shareholders (the
"Meeting") of Brooke Corporation, a Kansas corporation (the "Company"), will be
held on ________ _____ __, 2001 at ______ local time, at 10895 Grandview Drive,
Suite 250, Overland Park, Kansas for the following purposes:
1. To consider and vote on a proposal to approve the Brooke Corporation
2001 Compensatory Stock Option Plan (the "Plan");
2. To consider and vote on a proposal to amend the Articles of
Incorporation of the Company to provide the Board of Directors with
the authority to issue preferred stock;
3. To consider and vote on a proposal to amend the Articles of
Incorporation of the Company to increase the number of authorized
shares of common stock from 1,485,000 to 9,500,000;
4. To consider and vote on a proposal to amend the Articles of
Incorporation of the Company to authorize an additional 499,000 shares
of preferred stock;
5. To consider and vote on a proposal to amend the Articles of
Incorporation of the Company to decrease the number of authorized
shares of Convertible Preferred Stock from 15,000 to 1,000; and
6. To transact such other business as may properly come before the
Meeting and at any postponements or adjournments thereof.
Only shareholders of record at the close of business on _________ __, 2001
are entitled to notice of and to vote at the Meeting or at any postponements or
adjournments thereof.
You are cordially invited and urged to attend the Meeting. All
shareholders, whether or not they expect to attend the Meeting in person, are
requested to complete, date and sign the enclosed form of Proxy and return it
promptly in the postage-paid, return-addressed envelope provided for that
purpose. By returning your Proxy promptly you can help the Company avoid the
expense of follow-up mailings to ensure a quorum so that the Meeting can be
held. Shareholders who attend the Meeting may revoke a prior proxy and vote in
person as set forth in the proxy statement.
THE ENCLOSED PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS OF THE
COMPANY. THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE IN FAVOR OF THE
PROPOSED ITEMS. YOUR VOTE IS IMPORTANT.
By Order of the Board of Directors
Anita Larson
Secretary
Phillipsburg, Kansas
Dated: February __, 2001
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BROOKE CORPORATION
205 F. Street, 2nd Floor
Phillipsburg, Kansas 67661
(913) 661-0123
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PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD _______ __, 2001
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GENERAL INFORMATION
We are providing you with this proxy statement in connection with the
solicitation of proxies by and on behalf of the Board of Directors of Brooke
Corporation, a Kansas corporation (the "Company"), for use at the Special
Meeting of Shareholders to be held at ___________________, ________________,
Overland Park, Kansas on ________, ___________ __, 2001 at _____ local time, and
at any and all postponements or adjournments thereof (the "Meeting"). This proxy
statement, the accompanying form of proxy and the Notice of Special Meeting will
be first mailed or given to the Company's shareholders on or about February __,
2001.
Because many of the Company's shareholders may be unable to attend the
Meeting in person, our board of directors solicits proxies by mail to give each
shareholder an opportunity to vote on all matters presented at the Meeting.
Shareholders are urged to:
(1) read this Proxy Statement carefully;
(2) specify their choice in each matter by marking the appropriate box on
the enclosed Proxy; and
(3) sign, date and return the Proxy by mail in the postage-paid,
return-addressed envelope provided for that purpose.
QUESTION AND ANSWER SUMMARY: ABOUT THE MEETING
WHAT IS BEING VOTED ON AT THE MEETING?
The board of directors of the Company (the "Board of Directors") is asking
shareholders to consider and approve five items at this Special Meeting of
Shareholders:
* the Brooke Corporation 2001 Compensatory Stock Option Plan;
* the amendment of the Articles of Incorporation of the Company to
provide the Board of Directors with the authority to issue preferred
stock;
* the amendment of the Articles of Incorporation of the Company to
increase the number of authorized shares of common stock from
1,485,000 to 9,500,000;
* the amendment of the Articles of Incorporation of the Company to
authorize an additional 499,000 shares of preferred stock; and
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* the amendment of the Articles of Incorporation of the Company to
decrease the number of authorized shares of Convertible Preferred
Stock from 15,000 to 1,000.
WHO CAN VOTE AT THE MEETING?
The Board of Directors has set __________ __, 2001 as the record date for
the Meeting. Only persons holding shares of the Company's common stock, $1.00
par value ("Common Stock"), of record at the close of business on the record
date will be entitled to receive notice of and to vote at the Meeting. Each
holder of Common Stock will be entitled to one vote per share on each matter
properly submitted for vote to our shareholders at the Meeting. On the Record
Date there were [ ] shares of Common Stock outstanding held by a total of [ ]
shareholders of record. Therefore, there are a total of [ ] votes that will be
entitled to be cast at the Meeting.
WHAT CONSTITUTES A QUORUM FOR THE MEETING?
Quorum for the Meeting is based on the number of votes that can be cast
rather than the number of actual shares of stock that are represented because
each share of Common Stock has one vote per share. To have a quorum, we need
[____________] of the votes entitled to be cast to be present, in person or by
proxy, including votes as to which authority to vote on any proposal is
withheld, shares of stock abstaining as to any proposal, and broker non-votes
(where a broker submits a proxy but does not have authority to vote a customer's
shares of stock on one or more matters) on any proposal, will be considered
present at the Meeting for purposes of establishing a quorum for the transaction
of business at the meeting. Each will be tabulated separately.
HOW DO I VOTE?
If you complete and properly sign the accompanying proxy card and return it
to the Company, it will be voted as you direct, unless you later revoke the
proxy. Unless instructions to the contrary are marked, or if no instructions are
specified, shares of stock represented by a proxy will be voted for the
proposals set forth on the proxy, and in the discretion of the persons named as
proxies on such other matters as may properly come before the Meeting. If you
are a registered shareholder, that is, if you hold your shares of stock in
certificate form, and you attend the Meeting, you may deliver your completed
proxy card in person. If you hold your shares of stock in "street name," that
is, if you hold your shares of stock through a broker or other nominee, and you
wish to vote in person at the Meeting, you will need to obtain a proxy form from
the institution that holds your shares of stock.
CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?
Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Company's Secretary,
at the address indicated above, either a written notice of revocation, a duly
executed proxy bearing a later date, or if you vote in person at the Meeting.
The powers of the proxy holders will be suspended if you attend the Meeting in
person and so request. However, attendance at the Meeting will not by itself
revoke a previously granted proxy.
Any written notice of revocation sent to us must include the shareholder's
name and must be received prior to the Meeting to be effective.
WHAT VOTE IS REQUIRED TO APPROVE EACH ITEM?
THE BROOKE CORPORATION 2001 COMPENSATORY STOCK OPTION PLAN. The approval of
the Brooke Corporation 2001 Compensatory Stock Option Plan (Proposal No.1)
requires the affirmative vote
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of a majority of the outstanding shares of Common Stock present and entitled to
vote at the Meeting.
AMENDMENT OF THE COMPANY'S ARTICLES OF INCORPORATION.
(1) The approval of the amendment to the Articles of Incorporation of the
Company to provide the Board of Directors with the authority to issue preferred
stock (Proposal No. 2) requires the affirmative vote of a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting.
(2) The approval of the amendment to the Articles of Incorporation of the
Company to increase the number of authorized shares of Common Stock from
1,485,000 to 9,500,000 (Proposal No. 3) requires the affirmative vote of a
majority of the outstanding shares of Common Stock entitled to vote at the
Meeting.
(3) The approval of the amendment to the Articles of Incorporation of the
Company to authorize an additional 499,000 shares of preferred stock (Proposal
No. 4) requires the affirmative vote of a majority of the outstanding shares of
Common Stock entitled to vote at the Meeting.
(4) The approval of the amendment to the Articles of Incorporation of the
Company to decrease the number of authorized shares of Convertible Preferred
Stock from 15,000 to 1,000 (Proposal No. 5) requires the affirmative vote of a
majority of the outstanding shares of Common Stock entitled to vote at the
Meeting and a majority of the outstanding shares of Convertible Preferred Stock
entitled to vote on Proposal No.5 at the Meeting.
OTHER MATTERS. If you hold your shares of stock in "street name," your
broker or nominee may not be permitted to exercise voting discretion with
respect to some of the matters to be acted upon. Thus, if you do not give your
broker or nominee specific instructions, your shares of stock may not be voted
on those matters and will not be counted in determining the number of shares of
stock necessary for approval. Shares of stock represented by such "broker
non-votes" will, however, be counted in determining whether there is a quorum.
Abstentions are counted in tabulations of the votes cast on proposals
presented to shareholders, while, except for Proposal No. 2, Proposal No.3,
Proposal No.4 and Proposal No.5, broker non-votes are not counted for purposes
of determining whether a proposal has been approved. Therefore, for all matters
presented at the Meeting, abstentions will have the same effect as a vote
against the proposal and, for all matters presented at the Meeting except
Proposal No.2, Proposal No.3, Proposal No.4 and Proposal No.5, broker non-votes
will have no effect and for Proposal No. 2, Proposal No.3, Proposal No.4 and
Proposal No.5, broker non-votes will have the same effect as a vote against the
proposal.
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PROPOSAL NO. 1
APPROVAL OF THE BROOKE CORPORATION
2001 COMPENSATORY STOCK OPTION PLAN
The Board of Directors believes that it is in the best interest of the
Company and its shareholders to adopt the Plan. At the Meeting, the shareholders
will be asked to consider and vote to approve the Plan, substantially in the
form of Appendix A attached hereto and made a part hereof. If the Plan is
approved by the shareholders, the Plan will become effective as of the date that
the Board of Directors approves the Plan.
This section describes the material terms of the Plan. The Company urges
all of the Company's shareholders to read the Plan carefully for a more complete
description of its terms and conditions.
PURPOSE
The Purpose of the Plan is to promote the success of the Company by
providing increased incentive for key employees and other persons associated
with the Company to further the growth, development and financial success of the
Company by personally benefiting through the ownership of the Company's stock
rights which recognize such growth, development and financial success. The Plan
also will enable the Company to obtain and retain the services of key employees
and other persons associated with the Company considered essential to the
long-range success of the Company by offering them the opportunity to own stock
and/or stock rights in the Company. In the judgment of the Board of Directors,
an initial or increased grant under the Plan will be a valuable incentive and
will inure to the ultimate benefit of shareholders by aligning more closely the
interests of Plan participants with those of our shareholders. The Board of
Directors believes that stock-based compensation programs are a key element in
achieving the Company's anticipated financial and operational success.
ADMINISTRATION
The Plan is administered by the Compensation Committee, unless the Board of
Directors otherwise determines that it shall administer the Plan. The
Compensation Committee has the power to select Plan participants and to
determine the types of awards. The Compensation Committee also has the power to
interpret the Plan and the agreements pursuant to which options are granted or
awarded, and to adopt such rules for the administration, interpretation and
application of the Plan as are consistent therewith and to interpret, amend or
revoke any such rules.
OPTIONS
The Plan permits the granting of both (i) options to purchase shares of
Common Stock intended to qualify as incentive stock options under the Internal
Revenue Code and (ii) options to purchase shares of Common Stock that do not
qualify as incentive stock options under the Internal Revenue Code. Subject to
adjustments for such matters as re-capitalization, consolidation, merger, stock
split, reverse stock-split, dividends payable in capital stock,
re-incorporation, sale of substantially all of the corporate assets and other
change-in-control transactions, the Company will reserve 90,000 shares of Common
Stock for grant under the Plan.
A stock option entitles the employee or other persons associated with the
Company to purchase shares of Common Stock at the option price. The Committee
will fix the option price at the time the stock option is granted, but in the
case of an incentive stock option, the exercise price cannot be less than 100%
of the shares' fair market value on the date of grant or, in the case of an
incentive stock option granted to
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a 10% shareholder of the Company, 110% of the shares' fair market value on the
date of grant. Further, in the case of non-qualified stock options, the price
per share of the shares subject to each option cannot be less than the par value
of a share of the Company's common stock. The option price may be paid in cash,
by delivering shares of Common Stock, by surrendering shares of Common Stock
then issuable upon exercise of the option or by delivering property of any kind
which constitutes good and valuable consideration.
Stock options may be exercised at such times and subject to such conditions
as may be prescribed by the Compensation Committee; provided, however, that each
stock option may not exceed 10 years from the date of grant.
ELIGIBILITY
All officers, directors, or other employees of the Company are eligible to
be granted options under the Plan; however, under current law, incentive stock
options may only be granted to employees. As of ___________, 2001, approximately
____ persons would have been eligible to receive options under the Plan. The
granting of options under the Plan is discretionary, and the Company cannot now
determine the number or type of options to be granted in the future to any
particular person or group.
AMENDMENT OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board of
Directors. However, the Board of Directors may not take any action that would
otherwise require shareholder approval as a matter of applicable law, regulation
or rule.
TRANSFERABILITY
In general, options granted under the Plan may not be sold, transferred,
pledged or assigned other than by will or the laws of descent and distribution.
CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY
In the event that the outstanding shares of Common Stock are changed into
or exchanged for cash or a different number or kind of shares or other
securities of the Company, or of another corporation, by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock
splitup, stock dividend or combination of shares, appropriate adjustments will
be made by the Compensation Committee in the number and kind of shares for the
purchase of which options may be granted, including adjustments of the
limitation on the maximum number and kind of shares which may be issued.
In the event of such a change or exchange, other than for shares or
securities of another corporation or by reason of reorganization, the
Compensation Committee will also make appropriate adjustments in the number of
shares as to which all outstanding options shall be exercisable to preserve the
optionee's proportionate interest in the Company.
MERGER OF THE COMPANY
In the event of the merger or consolidation of the Company with or into
another corporation, the exchange of all or substantially all of the assets of
the Company for the securities of another corporation, the acquisition by
another corporation or person of all or substantially all of the Company's
assets or 80%
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or more of the Company's then outstanding voting stock, or the liquidation or
dissolution of the Company, pursuant to the terms of the option, all granted or
awarded options will immediately vest in the optionee, and for a specified
period of time prior to such event, such option shall be exercisable as to all
shares covered thereby.
OPTION GRANTS. The Company has not granted any options under the Brooke
Corporation 2001 Compensatory Stock Option Plan.
FEDERAL INCOME TAX CONSEQUENCES.
The following is a summary of the Unites States federal income tax
consequences that generally will arise with respect to options granted under the
Plan and with respect to the sale of the Company's common stock acquired under
the Plan.
INCENTIVE STOCK OPTIONS. Generally, the grant of an incentive stock option
will not be a taxable event for the optionee. An optionee will not recognize
taxable income upon the grant or exercise of an incentive stock option (except
that the alternative minimum tax may apply), and any gain realized upon a
disposition of Common Stock received pursuant to the exercise of an incentive
stock option will be taxed as a long-term capital gain if the optionee holds the
shares for at least two years after the date of grant and for one year after the
date of exercise (the "Holding Period Requirement"). The Company will not be
entitled to any business expense deduction with respect to the exercise of an
incentive stock option, except as discussed below.
For the exercise of an option to qualify for the foregoing tax treatment,
the optionee generally must be an employee of the Company or an employee of a
Company subsidiary from the date the option is granted through the date within
three months before the date of exercise of the option.
If all of the foregoing requirements are met except the Holding Period
Requirement, the optionee will recognize ordinary income upon the disposition of
Common Stock in an amount generally equal to the excess of the fair market value
of Common Stock at the time the option was exercised over the option exercise
price (but not in excess of the gain realized on the sale). The balance of the
realized gain, if any, will be capital gain. The Company will be allowed a
business expense deduction to the extent the optionee recognizes ordinary
income, subject to the Company's compliance with Section 162(m) of the Internal
Revenue Code and to certain reporting requirements.
NON-QUALIFIED STOCK OPTIONS. The grant of a non-qualified stock option will
not be a taxable event for the optionee or the Company. Upon exercising a
non-qualified option, an optionee will recognize ordinary income in an amount
equal to the difference between the exercise price and the fair market value of
the Common Stock on the date of exercise. Upon a subsequent sale or exchange of
shares acquired pursuant to the exercise of a non-qualified stock option, the
optionee will have taxable gain or loss, measured by the difference between the
amount realized on the disposition and the tax basis of the shares (generally,
the amount paid for the shares plus the amount treated as ordinary income at the
time the option was exercised).
If the Company complies with applicable reporting requirements and with the
restrictions of Section 162(m) of the Internal Revenue Code, the Company will be
entitled to a business expense deduction the same amount and generally at the
same time as the optionee recognizes ordinary income.
This summary of certain federal income tax consequences does not purport to
be complete. In addition, certain state and local income taxes may be applicable
to these items.
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VOTE REQUIRED
The affirmative vote of a majority of the outstanding shares of Common
Stock present and entitled to vote at the Meeting is required to approve
Proposal No.1.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL
NO. 1
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PROPOSAL NO.2
APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION
OF BROOKE CORPORATION TO PROVIDE THE BOARD OF DIRECTORS
WITH THE AUTHORITY TO ISSUE PREFERRED STOCK
At the Meeting, shareholders will be asked to consider and vote on a
proposed amendment to Article VII of the Articles of Incorporation of the
Company as set forth in the Company's Amendment and Restatement to the Articles
of Incorporation attached hereto as Appendix B and made a part hereof. The
amendment provides the Board of Directors with the authority, subject to the
limitations set forth by Kansas corporate law and the provisions of the Articles
of Incorporation of the Company, to establish from time to time, by resolution
or resolutions and filing of all required documents pursuant to the applicable
provisions of Kansas corporate law, for the issuance of preferred stock in
series, to establish from time to time the number of shares to be included in
each such series, and to fix the voting powers, designations, preferences and
relative, participating, optional or other rights, if any, or the
qualifications, limitations or restrictions thereof.
If this Proposal is approved by the shareholders, the Board of Directors
will have the authority to issue one or more series of preferred stock to those
persons and upon such terms and conditions as the Board of Directors may
determine in its discretion, without further action by the shareholders, except
such shareholder action as may be required by law or contractual arrangements.
The proposed amendment will also provide significantly greater flexibility to
the Board of Directors in structuring the terms of preferred stock that may be
issued by the Company. For example, the Board of Directors would be authorized
to determine, among other things, the dividend rate and preferences, the
cumulative or non-cumulative nature of dividends, the redemption provisions, the
sinking fund provisions and the conversion rights, the amounts payable and
preferences in the event of the voluntary or involuntary liquidation of the
Company.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote at the Meeting is required to approve Proposal No.2.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO.2
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PROPOSAL NO.3
APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION
OF BROOKE CORPORATION TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK FROM 1,485,000 TO 9,500,000
At the Meeting, the shareholders will be asked to consider and vote on a
proposed amendment to Article IV of the Articles of Incorporation of the Company
as set forth in the Company's Amendment and Restatement to the Articles of
Incorporation attached hereto as Appendix B and made a part hereof. The
amendment authorizes an increase in the number of shares of Common Stock from
1,485,000 to 9,500,000 and, as a result, increases the Company's total
authorized shares of capital stock from 1,500,000 shares to 10,000,000 shares,
assuming approval of Proposal No.4 and Proposal No. 5.
As of _____________ ___, 2001, ______________ shares of Common Stock were
outstanding and _________________ shares were held in treasury.
The Board of Directors believes that the proposed increase in the number of
shares of Common Stock is in the best interest of the Company and the
Shareholders and believes it is advisable to increase the number of shares of
Common Stock to have such shares available for, among other things, stock
splits, stock dividends, acquisitions, financing transactions, the Plan and
other corporate purposes as may arise. Having this authorized stock available
for issuance in the future will give the Company greater flexibility and will
allow additional shares of stock to be issued without the expense and delay of a
stockholders' meeting. This kind of delay might deny the Company the flexibility
the Board of Directors views as important in facilitating the effective use of
the Company's securities. The Company has no present commitments, agreements or
intent to issue additional shares of Common Stock.
If the shareholders approve this Proposal, the additional authorized shares
of Common Stock will be part of the existing class of Common Stock and will
increase the number of shares available for issuance by the Company. If and when
such Common Stock is issued, the proposed additional shares will have the same
rights and privileges as the shares of Common Stock currently outstanding.
The issuance of additional shares of Common Stock could reduce existing
shareholders' percentage ownership and voting power in the Company and,
depending on the transaction in which the shares are issued, could affect the
per share book value or other per share financial measures. In addition, the
additional shares of Common Stock of the Company that are the subject of this
Proposal could be used in an attempt to block an unsolicited acquisition through
the issuance of large blocks of stock to persons or entities considered by the
Company's officers and directors to be opposed to the acquisition, which might
be deemed to have an anti-takeover effect. In fact, the mere existence of a
block of authorized but unissued shares, and the ability of the Board of
Directors to issue such shares without shareholder approval, might deter a
bidder from seeking to acquire the Company's shares on an unfriendly basis.
However, the Board of Directors does not now intend or view the additional
shares of Common Stock as an anti-takeover measure, nor is the Board of
Directors aware of any proposed transactions of this type. The Company is not
submitting this Proposal to enable the Company to frustrate any efforts by
another party to acquire a controlling interest in the Company's shares or to
seek representation on the Board of Directors.
VOTE REQUIRED.
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The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote at the Meeting is required to approve Proposal No.3.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO.3
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PROPOSAL NO.4
APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION
OF BROOKE CORPORATION TO AUTHORIZE THE CREATION OF 499,000
SHARES OF PREFERRED STOCK
At the Meeting, the shareholders will be asked to consider and vote on a
proposed amendment to Article IV of the Articles of Incorporation of the Company
as set forth in the Company's Amendment and Restatement to the Articles of
Incorporation attached hereto as Appendix B and made a part hereof. The
amendment authorizes the creation of 499,000 shares of preferred stock and, as a
result, increases the Company's total authorized shares of capital stock from
1,500,000 shares to 10,000,000 shares, assuming approval of Proposal No.3 and
Proposal No.5. The authorized shares will consist of 100,000 shares of 2002
Convertible Preferred Stock and 399,000 shares of what is commonly known as
"undesignated" preferred stock. The Company currently is authorized to issue
15,000 shares of Convertible Preferred Stock (the "Convertible Preferred Stock")
of which 781 shares are currently issued and outstanding.
The Board of Directors believes that the proposed authorization of
additional preferred stock is in the best interest of the Company and its
shareholders and believes it is advisable to authorize such shares to have them
available for, among other things, pursuit of financing opportunities, future
investments, employee retention and other corporate purposes as may arise.
2002 CONVERTIBLE PREFERRED STOCK
If this Proposal is approved, the 2002 Convertible Preferred Stock class
will consist of 100,000 shares of capital stock, par value $25.00 per share,
which may be issued upon the following terms.
Dividend Rights. The holders of 2002 Convertible Preferred Stock will be
entitled to receive, out of funds at the time legally available for payments of
dividends under Kansas corporate law, a cumulative dividend in cash at the rate
of 10% of the liquidation value of such stock per share per annum payable, if as
and when determined by the Board of Directors, due and payable on March 31, June
30, September 30 and December 31 of each year, after any dividend shall be set
apart or paid on the Convertible Preferred Stock for the current fiscal year but
before any dividend shall be set apart or paid on the Common Stock in and for
any fiscal year of the Company.
Terms of Conversion. On or prior to April 1, 2002, the holders of 2002
Convertible Preferred Stock will have the right, at their option, to convert all
or part of their 2002 Convertible Preferred Stock holdings to Common Stock. In
the event that the holders of 2002 Convertible Preferred Stock elect to convert
their shares to Common Stock, one share of 2002 Convertible Preferred Stock will
be exchanged for one share of Common Stock. The conversion of shares shall occur
immediately upon written notice to the Company.
Redemption. After April 1, 2002, the 2002 Convertible Preferred Stock shall
be subject to redemption at the option of the Company at a redemption value of
$27.50 per share on any dividend payment date. The 2002 Convertible Preferred
Stock does not have any restriction on the repurchase or redemption of shares by
the registrant while there is any arrearage in the payment of dividends or
sinking fund installments.
Voting Rights. The 2002 Convertible Preferred Stock will have no voting
rights.
12
Liquidation Rights. In the case of liquidation or dissolution of the
Company, the holders of the 2002 Convertible Preferred Stock shall be entitled
to be paid in full the liquidation value, $25.00 per share, of their shares
after payment of full liquidation value to the holders of Convertible Preferred
Stock and before any amounts shall be paid to the holders of Common Stock.
Payment to the holders of 2002 Convertible Preferred Stock in the event of
liquidation or dissolution shall be subordinate to payments to the holders of
the Convertible Preferred Stock.
Distribution. The Company intends to distribute the 2002 Convertible
Preferred Stock in a public offering to Kansas residents. The 2002 Preferred
Convertible Stock will be offered on a "best efforts basis" by authorized
employees of the Company, in an offering exempt from registration under the
Securities Act of 1933, as amended (the "Act"), pursuant to Section 3(a)(11) of
the Act and Rule 147 promulgated by the Securities and Exchange Commission
thereunder. The per share price of the 2002 Convertible Preferred Stock will be
$25.00. Assuming the Company sells all 100,000 Shares of the 2002 Convertible
Preferred Stock, the net proceeds to the Company will be $2,200,000. Although
there is no commission payable in connection with this offering, the Company
anticipates $300,000 in offering expenses.
The Company plans to invest the proceeds of the offering in its
wholly-owned finance company subsidiary, Brooke Credit Corporation. Brooke
Credit Corporation will use the proceeds to increase its loan and commission
receivable balances by repurchasing certain of the loans previously made by it
and sold to participating lenders. In addition, the increased capital is
expected to improve Brooke Credit Corporation's creditworthiness. This will
allow Brooke Credit Corporation to increase its interest margins on loans
retained in its portfolio by selling bonds at a lesser interest rate and/or
increase its margins on loans sold to participating lenders.
UNDESIGNATED PREFERRED STOCK
If this Proposal is approved by the Shareholders, a new class of preferred
stock will be created which will consist of 399,000 shares of what is commonly
known as "undesignated" preferred stock (the "Undesignated Stock"). The term
"undesignated" preferred stock refers to stock for which the designations,
preferences, conversion rights, and cumulative, relative, participating,
optional or other rights, including voting rights, qualifications, limitations
or restrictions thereof, will be determined by the Board of Directors on some
future date. As such, the Board of Directors will, assuming the approval of this
Proposal, Proposal No.2 and Proposal No.5 by the Company's shareholders, be
entitled to authorize the creation and issuance of 399,000 shares of preferred
stock in series with such limitations and restrictions as may be determined in
the sole discretion of the Board of Directors, with no further authorization by
the Company's shareholders.
The Board of Directors believes that the Undesignated Stock will provide
the Company with increased flexibility in connection with future actions of the
Company, including financing transactions and other corporate purposes as may
arise. The Undesignated Stock will also allow additional shares of stock to be
issued without the expense and delay of a shareholders' meeting. This kind of
delay might deny the Company the flexibility the Board of Directors views as
important in facilitating the effective use of the Company's securities.
While the Company may consider issuing preferred stock in the future, the
Company does not have any current commitments, arrangements, understandings or
plans with respect to the issuance of shares of the Undesignated Stock;
therefore, the terms of any preferred stock subject to this proposal cannot be
stated or predicted with respect to any or all of the securities authorized.
13
It is not possible to determine the actual effect of the Undesignated Stock
on the rights of the Company's shareholders until the Board of Directors
determines the rights of the holders of a series of the Undesignated Stock.
However, such effects might include:
* restrictions on the payment of dividends to holders of the Common
Stock;
* dilution of voting power to the extent that the holders of shares of
Undesignated Stock are given voting rights and whether the
Undesignated Stock has disproportionate voting rights;
* dilution of the equity interests and voting power of the Common Stock
if the Undesignated Stock is convertible into Common Stock; and
* restrictions upon any distribution of assets to the holders of Common
Stock upon liquidation or dissolution and until the satisfaction of
any liquidation preferences granted to the holders of the Undesignated
Stock.
The Undesignated Stock could be used in an attempt to block an unsolicited
acquisition through the issuance of large blocks of stock to persons or entities
considered by the Company's officers and directors to be opposed to the
acquisition, which might be deemed to have an anti-takeover effect. In fact, the
mere existence of a block of authorized but unissued shares, and the ability of
the Board of Directors to issue such shares without shareholder approval, might
deter a bidder from seeking to acquire the Company's shares on an unfriendly
basis. However, the Board of Directors does not now intend or view the
Undesignated Stock as an anti-takover measure, nor is the Board of Directors
aware of any proposed transactions of this type. The Company is not submitting
this Proposal to enable the Company to frustrate any efforts by another party
acquire a controlling interest in the Company's shares or to seek representation
on the Board of Directors.
VOTE REQUIRED.
The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote at the Meeting is required to approve Proposal No.4.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO.4
14
PROPOSAL NO.5
APPROVAL OF AN AMENDMENT TO THE ARTICLES OF INCORPORATION
OF BROOKE CORPORATION TO DECREASE THE NUMBER OF AUTHORIZED
SHARES OF CONVERTIBLE PREFERRED STOCK FROM 15,000 TO 1,000
At the Meeting, the shareholders will be asked to consider and vote on a
proposed amendment to Article IV of the Articles of Incorporation of the Company
as set forth in the Company's Amendment and Restatement to the Articles of
Incorporation attached hereto as Appendix B and made a part hereof. The
amendment authorizes a decrease in the number of shares of Convertible Preferred
Stock from 15,000 to 1,000. As of __________________, 2001, 781 shares of
Convertible Preferred Stock were outstanding.
The Board of Directors believes that the proposed decrease in the number of
authorized shares of Convertible Preferred Stock is in the best interest of the
Company and the shareholders and believes it is advisable to decrease the number
of shares Convertible Preferred Stock to increase the marketability of the 2002
Convertible Preferred Stock. If the shareholders approve this Proposal,
prospective purchasers of the 2002 Convertible Preferred Stock will be assured
that the Company cannot issue, without the approval of the shareholders, more
than an additional 219 shares of Convertible Preferred Stock which have rights
superior to the 2002 Convertible Preferred Stock. The Board of Directors also
believes that there will be no effect on the outstanding shares of Convertible
Preferred Stock since this amendment will only eliminate unissued shares of
Convertible Preferred Stock.
VOTE REQUIRED
The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote at the Meeting and a majority of the outstanding shares
of Convertible Preferred Stock entitled to vote at the Meeting is required to
approve Proposal No.5.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" PROPOSAL NO.5
15
SOLICITATION OF PROXIES
This solicitation is being made by mail on behalf of the Board of
Directors, but may also be made without additional remuneration by officers or
employees of the Company by telephone, telegraph, facsimile transmission or
personal interview. The expense of the preparation, printing and mailing of this
Proxy Statement and the enclosed form of Proxy and Notice of Special Meeting,
and any additional material relating to the Meeting which may be furnished to
shareholders by the Board of Directors subsequent to the furnishing of this
Proxy Statement, has been or will be borne by the Company. The Company will
reimburse banks and brokers who hold the Common Stock in their name or custody,
or in the name of nominees for others, for their out-of-pocket expenses incurred
in forwarding copies of the proxy materials to those persons for whom they hold
Common Stock. To obtain the necessary representation of shareholders at the
Meeting, supplementary solicitations may be made by mail, telephone or interview
by officers of the Company or selected securities dealers. It is anticipated
that the cost of any other supplementary solicitations, if any, will not be
material.
OTHER MATTERS
The Board is not aware of any matters to come before the Meeting, other
than those specified in the Notice of Special Meeting. However, if any other
matter requiring a vote of the shareholders should arise at the Meeting, it is
the intention of the persons named in the accompanying Proxy to vote such Proxy
in accordance with their best judgment.
VOTING TRUSTEES AND THEIR NOMINEES
Please advise the Company whether other persons are the beneficial owners
of Common Stock for which proxies are being solicited from you, and, if so, the
number of copies of this Proxy Statement and other soliciting materials you wish
to receive in order to supply copies to the beneficial owners of the Common
Stock.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. SHAREHOLDERS, WHETHER OR
NOT THEY EXPECT TO ATTEND THE MEETING IN PERSON, ARE URGED TO COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE PROVIDED FOR
THAT PURPOSE. BY RETURNING YOUR PROXY CARD PROMPTLY YOU CAN HELP THE COMPANY
AVOID THE EXPENSE OF FOLLOW-UP MAILINGS TO ENSURE A QUORUM SO THAT THE MEETING
CAN BE HELD. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE A PRIOR PROXY AND
VOTE THEIR PROXY IN PERSON AS SET FORTH IN THIS PROXY STATEMENT.
By Order of the Board of Directors
Anita Larson
Secretary
Phillipsburg, Kansas
February __, 2001
16
PROXY/VOTING INSTRUCTION CARD
BROOKE CORPORATION
205 F. Street, 2nd Floor
Phillipsburg, Kansas 67661
(913) 661-0123
SPECIAL MEETING DATE: ________ __, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE COMPANY'S BOARD OF
DIRECTORS
The undersigned shareholder of Brooke Corporation (the "Company"), a Kansas
corporation, hereby constitutes and appoints [_______________________], and each
of them, proxies, with full power of substitution, for and on behalf of the
undersigned to vote, as designated below, according to the number of shares of
the Company's $1.00 par value common stock held of record by the undersigned on
___________ __, 2001, and as fully as the undersigned would be entitled to vote
if personally present, at the Special Meeting of Shareholders to be held at
10895 Grandview Drive, Suite 250, Overland Park, Kansas on _______________,
__________ __, 2001 at ____ a.m. [p.m.] local time, and at any postponements or
adjournments thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED. IF PROPERLY EXECUTED AND NO DIRECTION IS MADE, THIS PROXY WILL
BE VOTED IN FAVOR OF THE ELECTION OF ALL LISTED NOMINEES TO THE BOARD OF
DIRECTORS AND FOR EACH OF THE OTHER ITEMS SET FORTH ON THE PROXY.
Please mark boxes [X] in ink. Sign, date and return this Proxy promptly, using
the enclosed envelope.
1. Proposal to consider approval of the Brooke Corporation 2001 Compensatory
Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to consider amendment to the Articles of Incorporation of Brooke
Corporation to provide the Board of Directors with the authority to issue
preferred stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to consider amendment to the Articles of Incorporation of Brooke
Corporation to increase the number of authorized shares of common stock of
Brooke Corporation from 1,485,000 to 9,500,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Proposal to consider amendment to the Articles of Incorporation of Brooke
Corporation to authorize the creation of 499,000 additional shares of preferred
stock.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
5. Proposal to consider amendment to the Articles of Incorporation of Brooke
Corporation to decrease the number of authorized shares of Convertible Preferred
Stock of Brooke Corporation from 15,000 to 1,000.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
6. In the discretion of such proxy holders, upon such other business as may
properly come before the Meeting or any and all postponements or adjournments
thereof.
The undersigned hereby acknowledges receipt of the Notice of Special
Meeting of Shareholders, dated _______ __, 2001 and the Proxy Statement
furnished therewith.
Dated _____________________________ 2001
------------------------------------------
Authorized Signature
------------------------------------------
Title
------------------------------------------
Authorized Signature
------------------------------------------
Title
- --FOLD HERE
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. Executors, administrators, trustees and other
fiduciaries, and persons signing on behalf of corporations or partnerships,
should so indicate when signing.
TO SAVE THE COMPANY ADDITIONAL VOTE SOLICITATION EXPENSES, PLEASE SIGN, DATE AND
RETURN THIS PROXY PROMPTLY, USING THE ENCLOSED ENVELOPE.
NON-VOTING INSTRUCTIONS
[ ] SPECIAL MEETING. Please check here to indicate that you plan to
attend the Special Meeting of Shareholders on ________ __, 2001.
- --FOLD HERE
APPENDIX A
- --------------------------------------------------------------------------------
BROOKE CORPORATION
2001 COMPENSATORY STOCK OPTION PLAN
Adopted as of ___________, 2001
- --------------------------------------------------------------------------------
A-1
BROOKE CORPORATION
2001 COMPENSATORY STOCK OPTION PLAN
Brooke Corporation, a Kansas corporation (the "Company"), has adopted this
2001 Compensatory Stock Option Plan (the "Plan"), effective as of _________,
2001, for the benefit of its eligible Employees.
The purposes of this Plan are as follows:
(a) to provide increased incentive for key Employees and other persons
associated with the Company to further the growth, development and
financial success of the Company by personally benefiting through the
ownership of Company stock rights which recognize such growth, development
and financial success; and
(b) to enable the Company to obtain and retain the services of key
Employees and other persons associated with the Company considered
essential to the long-range success of the Company by offering them an
opportunity to own stock in the Company and/or rights which will reflect
the growth, development and financial success of the Company.
ARTICLE I
DEFINITIONS
Section 1.01. General. Wherever the following terms are used in this Plan
they shall have the meaning specified below, unless the context clearly
indicates otherwise.
"Articles of Incorporation" shall mean the Company's Articles of
Incorporation on file with the Kansas Secretary of State.
"Beneficiary" shall mean the person or persons properly designated by the
Optionee, including his spouse or heirs at law, to exercise such Optionee's
rights under this Plan in the event of the Optionee's death, or if the Optionee
has not designated such person or persons, or such person or persons shall have
pre-deceased the Optionee, the executor or administrator of the Optionee's
estate. Designation, revocation and redesignation of Beneficiaries must be made
in writing in accordance with the rules established by the Committee and shall
be effective upon delivery to the Committee.
"Board" shall mean the Board of Directors of the Company.
"Bylaws" shall mean the Bylaws of the Company, as amended from time to
time.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean a compensation committee of the Board, appointed as
provided in Section 2.01.
A-2
"Common Stock" shall mean the common stock of the Company, par value
$1.00 per share.
"Company" shall mean Brooke Corporation, a Kansas corporation, or any
parent or subsidiary of Brooke Corporation as described in Section 424(e) or
Section 424(f) of the Code.
"Director" shall mean a member of the Board.
"Employee" shall mean any officer, director, or other employee (as defined
in accordance with Section 3401(c) of the Code) of the Company and, to the
extent permitted by applicable law, any persons associated with the Company.
"Expiration Date" shall mean the last day of the term of the Option as
established in Section 5.03.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fair Market Value" of a share of Common Stock as of a given date shall be
the average of the daily market price for the 10 consecutive trading days
immediately preceding the valuation date. The market price for each such trading
day shall be: (a) if the shares of Common Stock are listed or admitted to
trading on any securities exchange or the NASDAQ-National Market System, the
closing price, regular way, on such day, or if no such sale takes place on such
day, the average of the closing bid and asked prices on such day, (b) if the
shares of Common Stock are not listed or admitted to trading on any securities
exchange or the NASDAQ-National Market System, the last reported sale price on
such day or, if no sale takes place on such day, the average of the closing bid
and asked prices on such day, as reported by a reliable quotation source
designated by the Company, or (c) if the shares of Common Stock are not listed
or admitted to trading on any securities exchange or the NASDAQ-National Market
System and no such last reported sale price or closing bid and asked prices are
available, the average of the reported high bid and low asked prices on such
day, as reported by a reliable quotation source designated by the Company, or if
there shall be no bid and asked prices on such day, the average of the high bid
and low asked prices, as so reported, on the most recent day (not more than 10
days prior to the date in question) for which prices have been so reported;
provided (d) that if there are no bid and asked prices reported during the 10
days prior to the date in question, the Fair Market Value of the shares of
Common Stock shall be determined by the Committee acting in good faith on the
basis of such quotations and other information as it considers, in its absolute
discretion appropriate
"Incentive Stock Option" shall mean an option which conforms to the
applicable provisions of Section 422 of the Code and which is designated as an
Incentive Stock Option by the Committee.
"Non-Qualified Stock Option" shall mean an Option which is intended to be
an Option, but does not qualify as an Incentive Stock Option or which is not
designated as such by the Committee.
A-3
"Option" shall mean a stock option granted pursuant to this Plan. An option
granted under this Plan shall be either a Non-Qualified Stock Option or an
Incentive Stock Option.
"Option Agreement" shall mean the agreement between the Company and the
Optionee pursuant to which Options are issued.
"Optionee" shall mean an Employee or person associated with the Company and
who is granted an Option under this Plan.
"Plan" shall mean this Brooke Corporation 2001 Compensatory Stock Option
Plan.
"Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as
such Rule may be amended in the future.
"Stock Option Agreement" has the meaning specified in Section 5.01.
"Tax Date" has the meaning specified in Section 7.06.
"Termination of Employment" shall mean the time when the employee-employer
relationship between the Optionee and the Company is terminated for any reason,
including, but not by way of limitation, a termination by resignation,
discharge, death, permanent and total disability or retirement; but excluding
(a) terminations where there is a simultaneous reemployment or continuing
employment of an Optionee by the Company and (b) at the discretion of the
Committee, terminations which result in a temporary severance of the
employee-employer relationship that do not exceed one year. The Committee, in
its absolute discretion, shall determine the effect of all other matters and
questions relating to Termination of Employment, including, but not by way of
limitation, the question of whether a Termination of Employment resulted from a
discharge for good cause, and all questions of whether particular leaves of
absence constitute Terminations of Employment, provided, however, that, with
respect to Incentive Stock Options, a leave of absence shall constitute a
Termination of Employment if, and to the extent that, such leave of absence
interrupts employment for the purposes of Section 422(a)(2) of the Code and the
then applicable regulations and revenue rulings under said Section.
Notwithstanding any other provision of this Plan, the Company has an absolute
and unrestricted right to terminate an Employee's employment at any time for any
reason whatsoever, with or without cause, except to the extent expressly
provided in writing.
Section 1.02. Gender and Number. Wherever the masculine gender is used it
shall include the feminine and neuter, and wherever a singular pronoun is used
it shall include the plural, unless the context clearly indicates otherwise.
A-4
ARTICLE II
ADMINISTRATION
Section 2.01. Compensation Committee. This Plan shall be administered by
the Committee, unless the Board otherwise determines that it shall administer
this Plan. If the Board otherwise so determines, all references herein to the
Committee shall then be deemed to refer to the Board. The Committee shall
consist of two or more Directors who are "outside directors" as defined under
Section 162(m) of the Code and the regulations promulgated thereunder, appointed
by and holding office at the pleasure of the Board, each of whom is not then an
officer of the Company and each of whom is a "disinterested person" as defined
by Rule 16b-3. Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may be filled
by the Board.
Section 2.02. Duties and Powers of the Committee. It shall be the duty of
the Committee to conduct the general administration of this Plan in accordance
with its provisions. The Committee shall have the power to interpret this Plan
and the Options, and the agreements pursuant to which the Options are granted or
awarded, and to adopt such rules for the administration, interpretation and
application of this Plan as are consistent therewith and to interpret, amend or
revoke any such rules. Any such grant or award under this Plan need not be the
same with respect to each Optionee. Any such interpretations and rules with
respect to Incentive Stock Options shall be consistent with the provisions of
Section 422 of the Code. In its absolute discretion, the Board may at any time
and from time to time exercise any and all rights and duties of the Committee
under this Plan except with respect to matters which under Rule 16b-3 are
required to be determined in the sole discretion of the Committee.
Section 2.03. Majority Rule. The Committee shall act by a majority of its
members in attendance at a meeting, or to the extent permitted by law and the
Bylaws, by telephonic meeting, at which a quorum is present or by a memorandum
or other written instrument signed by all members of the Committee.
Section 2.04. Compensation; Professional Assistance; Good Faith Actions.
Members of the Committee shall receive such compensation, if any, for their
services as members as may be determined by the Board. All expenses and
liabilities which members of the Committee incur in connection with the
administration of this Plan shall be borne by the Company. The Committee may
employ, with the approval of the Board, attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee in good faith shall be
final and binding upon all Options, Optionees, the Company and all other
interested persons. No members of the Committee shall be personally liable for
any action, determination or interpretation made in good faith with respect to
this Plan or any Option,
A-5
and all members of the Committee shall be fully protected by the Company in
respect of any such action, determination or interpretation.
Section 2.05. No Liability. No member of the Board or the Committee, or
Director, officer or employee of the Company shall be liable, responsible or
accountable in damages or otherwise for any determination made or other action
taken or any failure to act by such person so long as such person is not
determined to be guilty by a final adjudication of willful misconduct with
respect to such determination, action or failure to act.
Section 2.06. Indemnification. To the fullest extent permitted by law, each
of the members of the Board and the Committee and each of the Directors,
officers and employees of the Company shall be held harmless and be indemnified
by the Company for any liability, loss (including amounts paid in settlement),
damages or expenses (including reasonable attorneys' fees) suffered by virtue of
any determinations, acts or failures to act, or alleged acts or failures to act,
in connection with the administration of this Plan so long as such person is not
determined by a final adjudication to be guilty of willful misconduct with
respect to such determination, action or failure to act.
ARTICLE III
SHARES SUBJECT TO PLAN
Section 3.01. Shares Subject to Plan. The shares subject to Options shall
be shares of the Company's Common Stock, and the aggregate number of such shares
which may issued upon exercise of such options shall not exceed 90,000 shares.
The shares of Common Stock issuable upon exercise or grant of an Option may be
either previously authorized but unissued shares or issued shares which have
been repurchased by the Company. In addition, any shares of Common Stock subject
to Option, which for any reason is terminated, unexercised or expires shall
again be available for issuance under the Plan.
ARTICLE IV
GRANTING OF OPTIONS
Section 4.01. Eligibility. Any Employee or person associated with the
Company and selected by the Committee pursuant to Section 4.04(a)(i) shall be
eligible to be granted an Option.
Section 4.02. Disqualification for Stock Ownership. No person may be
granted an Incentive Stock Option under this Plan if such person, at the time
the Incentive Stock Option is granted, owns stock possessing more than 10% of
the total combined voting power of all classes of stock of the Company unless
such Incentive Stock Option conforms to the applicable provisions of Section 422
of the Code. In particular, the term of such Incentive Stock Options shall not
exceed five years and shall satisfy the requirements of Section 5.04(c)
regarding sequential exercise.
A-6
Section 4.03. Qualification of Incentive Stock Options. No Incentive Stock
Option shall be granted unless such Option, when granted, qualifies as an
"incentive stock option" under Section 422 of the Code.
Section 4.04. Granting of Options.
(a) The Committee shall from time to time, in its absolute discretion:
(i) determine which Employees or persons associated with the
Company are key Employees and select from among the key Employees or
such persons (including Employees or persons to whom Options have
previously been granted) such of them as in its opinion should be
granted Options;
(ii) determine the number of shares to be subject to such Options
granted to the selected key Employees or such persons;
(iii) determine whether such Options are to be Incentive Stock
Options or Non-Qualified Stock Options; and
(iv) determine the terms and conditions of such Options,
consistent with this Plan.
(b) Upon the selection of a key Employee or persons associated with
the Company to be granted an Option, the Committee shall instruct the
Secretary of the Company to issue the Option and may impose such conditions
on the grant of the Option as it deems appropriate. Without limiting the
generality of the preceding sentence, the Committee may, in its discretion
and on such terms as it deems appropriate, require as a condition on the
grant of an Option to an Employee that the Employee surrender for
cancellation some or all of the unexercised Options which have been
previously granted to him under this Plan. An Option, the grant of which is
conditioned upon such surrender, may have an option price lower (or higher)
than the exercise price of such surrendered Option, may cover the same (or
a lesser or greater) number of shares as such surrendered right, may
contain such other terms as the Committee deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, exercise period or any other term or condition of such
surrendered right
(c) Any Incentive Stock Option granted under this Plan may be modified
by the Committee to disqualify such option from treatment as an "incentive
stock option" under Section 422 of the Code. Any Option granted hereunder
that fails to meet the requirements of an Incentive Stock Option shall be
considered a Non-Qualified Stock Option.
A-7
ARTICLE V
TERMS OF OPTIONS
Section 5.01. Option Agreement. Each Option shall be evidenced by a written
Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan. Stock
Option Agreements evidencing Incentive Stock Options shall contain such terms
and conditions as may be necessary to meet the applicable provisions of Section
422 of the Code.
Section 5.02. Option Price. The price per share of the shares subject to
each Option shall be set by the Committee; provided, however, that such price
shall be no less than the par value of a share of Common Stock and in the case
of Incentive Stock Options such price shall not be less than 100% of the Fair
Market Value of a share of Common Stock as of the date the Option is granted;
provided further, that in the case of Incentive Stock Options such price shall
be no less than 110% of the Fair Market Value of a share of Common Stock as of
the date the Option is granted if such Option is granted to a person who owns
10% or more of the total combined voting power of all classes of stock of the
Company.
Section 5.03. Option Term. The term of an Option shall be set by the
Committee in its discretion; provided, however, that no such term shall exceed a
reasonable time period, and provided further that, in the case of Incentive
Stock Options, the term shall not be more than 10 years from the date the
Incentive Stock Option is granted. The last day of the term of the Option shall
be the Option's Expiration Date.
Section 5.04. Option Vesting.
(a) The period during which the right to exercise an Option in whole
or in part vests in the Optionee shall be set by the Committee, and the
Committee may determine that an Option may not be exercised in whole or in
part for a specified period after it is granted; provided, however, that no
Option shall be exercisable by any Optionee who is then subject to Section
16 of the Exchange Act within the period ending six months after the date
the Option is granted. At any time after grant of an Option, the Committee
may, in its sole discretion and subject to whatever terms and conditions it
selects, accelerate the period during which an Option vests.
(b) No portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable; provided, however, that
provision may be made that such Option shall become exercisable, with the
consent of the Committee, in the event of a Termination of Employment
because of the Optionee's normal retirement or permanent and total
disability (each as determined by the Committee in accordance with Company
policies), death or early retirement.
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(c) To the extent that the aggregate Fair Market Value of stock with
respect to which Incentive Stock Options (determined without regard to
Section 422(d) of the Code) are exercisable for the first time by an
Optionee during any calendar year (under the Plan and all other incentive
stock option plans of the Company or any Company Subsidiary) exceeds
$100,000, such Options shall be treated as Non-Qualified Options to the
extent required by Section 422 of the Code. The rule set forth in the
preceding sentence shall be applied by taking Options into account in the
order in which they were granted. For purposes of this Section 5.04(c), the
Fair Market Value of stock shall be determined as of the time the Option,
with respect to such stock, is granted.
Section 5.05. Exercise of Option After Termination of Employment. For those
Participants who are Employees, an Option is exercisable by an Optionee only
while he is an Employee. The preceding notwithstanding, an Option may be
exercised subsequent to an Optionee's Termination of Employment, subject to the
following limitations:
(a) If the Optionee dies while an Option is exercisable under the
terms of this Plan, the Optionee's Beneficiary may exercise such rights, to
the extent the Optionee could have done so immediately preceding his death.
Any such Option must be exercised within 12 months after the Optionee's
death, and the Committee may in its discretion extend the Expiration Date
of such Option to accommodate such exercise; provided, however, that the
term of an Incentive Stock Option may not be extended beyond 10 years from
the date of grant.
(b) If the Optionee's employment is terminated due to his permanent
and total disability, as defined in Section 22(e)(3) of the Code, the
Optionee may exercise his Option, to the extent exercisable as of his
Termination of Employment, within 12 months after termination, but no later
than the Option's Expiration Date.
(c) Except as provided in Section 5.05(d), if the Optionee's
employment is terminated for any reason other than those set forth in
subsection (a) or (b) above, the Optionee may exercise his Option, to the
extent exercisable as of his Termination of Employment, within three months
after Termination of Employment, but not later than the Option's Expiration
Date.
(d) If the Optionee's employment is terminated for good cause, as
determined by the Company, in its sole discretion, Options granted under
the Plan shall expire on the date of the Termination of Employment.
ARTICLE VI
EXERCISE OF OPTIONS
Section 6.01. Partial Exercise. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee may require that, by the terms of the
Option, a partial exercise be with respect to a minimum number of shares.
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Section 6.02. Manner of Exercise. All or a portion of an exercisable Option
shall be deemed exercised upon:
(a) Delivery of all of the following to the Secretary of the Company
or his office:
(i) a written notice complying with the applicable rules
established by the Committee or the Company stating that the Option,
or a portion thereof, is exercised. The notice shall be signed by the
Optionee or other person then entitled to exercise the Option or such
portion;
(ii) such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance
with all applicable provisions of the Securities Act of 1933, as
amended, and any other federal or state securities laws or
regulations. The Committee may, in its absolute discretion, also take
whatever additional actions it deems appropriate to effect such
compliance, including, without limitation, placing legends on share
certificates and issuing stop-transfer notices to agents and
registrars; and
(iii) in the event that the Option shall be exercised pursuant to
Section 5.05(a) by any person or persons other than the Optionee,
appropriate proof of the right of such person or persons to exercise
the Option; and
(b) Full cash payment to the Secretary of the Company for the shares
with respect to which the Option, or portion thereof, is exercised.
However, at the discretion of the Committee, the terms of the Option may
(i) allow a delay in payment up to 30 days from the date the Option, or
portion thereof, is exercised; (ii) allow payment, in whole or in part,
through the delivery of shares of Common Stock owned by the Optionee; (iii)
allow payment, in whole or in part, through the surrender of shares of
Common Stock then issuable upon exercise of the Option; or (iv) allow
payment, in whole or in part, through the delivery of property of any kind
which constitutes good and valuable consideration.
Section 6.03. Issuance of Shares. As soon as practicable after receipt by
the Company, pursuant to Section 6.02(b), of full cash payment for the shares
with respect to which an Option, or portion thereof, is exercised by an
Optionee, with respect to each such exercise, the Company shall transfer to the
Optionee the number of shares equal to the quotient of:
(a) the amount of the payment made by the Optionee to the Company
pursuant to Section 6.02(b); and
(b) the price per share of the shares subject to the Option as
determined pursuant to Section 5.02.
Section 6.04. Conditions to Issuance of Stock Certificates. The Company
shall not be required to issue or to deliver any certificate or certificates for
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
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(a) the admission of such shares to listing on all stock exchanges on
which such class of stock is then listed, if any;
(b) the completion of any registration or other qualification of such
shares under any state or federal law, or under the rulings or regulations
of the Securities and Exchange Commission or any other governmental
regulatory body which the Committee shall, in its absolute discretion, deem
necessary or advisable;
(c) obtaining any approval or other clearance from any state or
federal governmental agency which the Committee shall determine, in its
absolute discretion, to be necessary or advisable;
(d) the lapse of such reasonable period of time following the exercise
of the Option as the Committee may establish from time to time for reasons
of administrative convenience; and
(e) the receipt by the Company of full payment for such shares,
including payment of any applicable withholding tax.
Section 6.05. Rights as Stockholders. The holders of Options shall not be,
nor have any of the rights or privileges of, stockholders of the Company in
respect of any shares purchasable upon the exercise of any part of an Option
unless and until certificates representing such shares have been issued by the
Company to such holders.
Section 6.06. Transfer Restrictions. The Committee, in its absolute
discretion, may impose such additional restrictions on the transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Stock Option Agreement
and may be referred to on the certificates evidencing such shares. The Committee
will require the Employee to give the Company prompt notice of any disposition
of shares of Common Stock acquired by exercise of an Incentive Stock Option
within (a) two years from the date of granting such Option to such Employee or
(b) one year after the transfer of such shares to such Employee. The Committee
may direct that the certificates evidencing shares acquired by exercise of an
Option refer to such requirement to give prompt notice of disposition.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.01. Not Transferable. Options under this Plan may not be sold,
pledged, assigned or transferred in any manner other than by will or the laws of
descent and distribution; provided, however, that an Optionee may designate a
Beneficiary to exercise his Option or other rights under this Plan after his
death. No Option or interest or right therein shall be liable for the debts,
contracts or engagements of the Optionee, or his successors in interest or shall
be subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect;
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provided, however, that nothing in this Section 7.01 shall prevent transfers by
will or by the applicable laws of descent and distribution. An Option shall be
exercised during the Optionee's lifetime only by the Optionee or his guardian or
legal representative.
Section 7.02. Amendment, Suspension or Termination of this Plan. This Plan
may be wholly or partially amended or otherwise modified, suspended or
terminated at any time or from time to time by the Board. However, without
approval of the Company's stockholders given within twelve months before or
after the action by the Board or the Committee, no action of the Committee or
Board, except as provided in Section 7.03, may increase the limits imposed in
Section 3.01 on the maximum number of shares which may be issued under this
Plan, and no action of the Committee or Board may be taken that would otherwise
require stockholder approval as a matter of applicable law, regulation or rule.
No amendment, suspension or termination of this Plan, without the consent of the
holder of an Option, shall alter or impair any rights or obligations under any
Option theretofore granted or awarded. No Option may be granted or awarded
during any period of suspension nor after termination of this Plan, and in no
event may any Incentive Stock Option be granted under this Plan after the first
to occur of the following events:
(a) the expiration of ten years from the date the Plan is adopted by
the Board; or
(b) the expiration of ten years from the date the Plan is approved by
the Company's stockholders under Section 7.05.
Section 7.03. Changes in Common Stock or Assets of the Company. In the
event that the outstanding shares of Common Stock are hereafter changed into or
exchanged for cash or a different number or kind of shares or other securities
of the Company, or of another corporation, by reason of reorganization, merger,
consolidation, recapitalization, reclassification, stock splitup, stock dividend
or combination of shares, appropriate adjustments shall be made by the Committee
in the number and kind of shares for the purchase of which Options may be
granted, including adjustments of the limitation in Section 3.01 on the maximum
number and kind of shares which may be issued.
In the event of such a change or exchange, other than for shares or
securities of another corporation or by reason of reorganization, the Committee
shall also make an appropriate and equitable adjustment in the number and kind
of shares as to which all outstanding Options or Performance Awards, or portions
thereof then unexercised, shall be exercisable. Such adjustment shall be made
with the intent that after the change or exchange of shares, each Optionee's
proportionate interest shall be maintained as before the occurrence of such
event. Such adjustment in an outstanding Option may include a necessary or
appropriate corresponding adjustment in the Option exercise price, but shall be
made without change in the total price applicable to the Option, or the
unexercised portion thereof (except for any change in the aggregate price
resulting from rounding off of share quantities or prices).
Where an adjustment of the type described above is made to an Incentive
Stock Option under this Section, the adjustment will be made in a manner which
will not be considered a "modification" under the provisions of subsection
424(h)(3) of the Code.
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In the event of a "spin-off" or other substantial distribution of assets of
the Company which has a material diminutive effect upon the Fair Market Value of
the Company's Common Stock, the Committee may in its discretion make an
appropriate and equitable adjustment to the Option exercise price to reflect
such diminution.
Section 7.04. Merger of the Company. In the event of the merger or
consolidation of the Company with or into another corporation, the exchange of
all or substantially all of the assets of the Company for the securities of
another corporation, the acquisition by another corporation or person of all or
substantially all of the Company's assets or 80% or more of the Company's then
outstanding voting stock, or the liquidation or dissolution of the Company:
(a) Pursuant to the terms of the Option, all granted or awarded
Options will immediately vest in the Optionee, and for a specified period
of time prior to such event, such Option shall be exercisable as to all
shares covered thereby, notwithstanding anything to the contrary in (i)
Section 5.04 or (ii) the provisions of such Option.
Section 7.05. Approval of Plan by Stockholders. This Plan will be submitted
for the approval of the Company's stockholders within twelve months after the
date of the Board's initial adoption of this Plan. Options may be granted prior
to such stockholder approval; provided that such Options shall not be
exercisable prior to the time when this Plan is approved by the stockholders;
and provided further that if such approval has not been obtained at the end of
said twelve-month period, all Options previously granted under this Plan shall
thereupon be considered Non-Qualified Stock Options. The Company shall take such
actions with respect to the Plan as may be necessary to satisfy the requirements
of Rule 16b-3.
Section 7.06. Tax Withholding. The Company shall be entitled to require
payment or deduction from other compensation payable to each Optionee of any
sums required by federal, state or local tax law to be withheld with respect to
any Option. The Committee may in its discretion allow such Optionee to elect to
have the Company withhold shares of Common Stock (or allow the return of shares
of Common Stock) having a Fair Market Value equal to the sums required to be
withheld. If the Optionee elects to advance such sums directly, written notice
of that election shall be delivered on or prior to such exercise and, whether
pursuant to such election or pursuant to a requirement imposed by the Company
payment in cash or by check of such sums for taxes shall be delivered within two
days after the date of exercise. If, as allowed by the Committee, the Optionee
elects to have the Company withhold shares of Common Stock (or allow the return
of shares of Common Stock) having a Fair Market Value equal to the sums required
to be withheld, the value of the shares of Common Stock to be withheld (or
returned as the case may be) will be equal to the Fair Market Value of such
shares as of the date that the amount of tax to be withheld is to be determined
(the "Tax Date"). Elections by such persons to have shares of Common Stock
withheld for this purpose will be subject to the following restrictions: (a) the
election must be made on or prior to the Tax Date, (b) the election must be
irrevocable, (c) the election shall be subject to the disapproval of the
Committee, and (d) if the person is an officer of the Company within the meaning
of Section 16 of the Exchange Act, the election shall be subject to such
additional restrictions as the Committee may impose in an effort to secure the
benefits of any regulations thereunder. The Committee shall not be obligated to
issue shares and/or distribute cash to any person upon exercise of any right
until such payment has been received or shares have been so withheld, unless
withholding (or offset against a cash
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payment) as of or prior to the date of such exercise is sufficient to cover all
such sums due or which may be due with respect to such exercise.
Section 7.07. Limitations Applicable to Section 16 Persons.
(a) Notwithstanding any other provision of this Plan, any Option
granted to a key Employee who is then subject to Section 16 of the Exchange
Act is subject to the following additional limitations:
(i) the Option agreement may provide for the issuance of shares
of Common Stock as a stock bonus for no consideration other than
services rendered; and
(ii) in the event of an Option under which shares of Common Stock
are or in the future may be issued for any type of consideration other
than services rendered, the amount of such consideration shall be
equal to the minimum amount (such as the par value of such shares)
required to be received by the Company to comply with applicable state
law.
(b) Notwithstanding any other provision of this Plan, this Plan, and
any Option to a key Employee who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in
any applicable exemptive rule under Section 16 of the Exchange Act
(including any amendment to Rule 16b-3 of the Exchange Act) that are
requirements for the application of such exemptive rule. Any such
additional limitation shall be set forth in an annex to this Plan, such
annex to be incorporated herein by this reference and made part of this
Plan.
(c) With respect to persons subject to Section 16 of the Exchange Act,
transactions under this Plan, other than the issuance of Non-Qualified
Stock Options, are intended to comply with all applicable conditions of
Rule 16b-3 or its successors under the Exchange Act. To the extent any
provision of the Plan or action by the Committee fails to so comply, it
shall be deemed null and void, to the extent permitted by law and deemed
advisable by the Committee. Moreover, in the event the Plan does not
include a provision required by Rule 16b-3 to be stated therein, such
provision (other than one relating to eligibility requirements, or the
price and amount of awards) shall be deemed automatically to be
incorporated by reference into the Plan insofar as participants subject to
Section 16 are concerned.
Section 7.08. Plan Designation and Status. Notwithstanding the designation
of this document as a Plan for convenience of reference and to standardize
certain provisions applicable to all types of Options, each Option shall be
deemed to be a separate "plan" for purposes of Section 16 of the Exchange Act
and any applicable state securities laws.
Section 7.09. Release of Restrictions. Any or all of the foregoing
limitations in Sections 7.07 and 7.08 on Options granted to key Employees shall
be suspended if, to the extent, as to such persons, and for so long as the
Securities and Exchange Commission by regulation or official staff
interpretation or a no-action letter issued to the Company determines that such
limitation is not necessary to secure the benefits otherwise available with
respect to a "plan" or
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particular award, as the case may be, under any applicable exemptive rule under
Section 16 of the Exchange Act.
Section 7.10. Effect of Plan Upon Options and Compensation Plans. The
adoption of this Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Company Subsidiary. Nothing in this Plan shall
be construed to limit the right of the Company (a) to establish any other forms
of incentives or compensation for employees of the Company or any Company
Subsidiary or (b) to grant or assume options or other rights otherwise than
under this Plan in connection with any proper corporate or partnership purpose
including but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, partnership,
firm or association or the performance of services for the benefit of the
Company.
Section 7.11. Compliance with Laws. This Plan, the granting and vesting of
Options under this Plan and the issuance and delivery of shares of Common Stock
and the payment of money under this Plan or under Options granted hereunder are
subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law and
federal margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Company, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan shall be subject to such restrictions, and the person acquiring such
securities shall, if requested by the Company, provide such assurances and
representations to the Company as the Company may deem necessary or desirable to
assure compliance with all applicable legal requirements. To the extent
permitted by applicable law, the Plan, or Options awarded hereunder, shall be
deemed amended to the extent necessary to conform to such laws, rules and
regulations.
Section 7.12. Titles. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this Plan.
Section 7.13. Governing Law. This Plan and any agreements hereunder shall
be administered, interpreted and enforced under the internal laws of the State
of Kansas without regard to conflicts of laws thereof.
Section 7.14. Continued Employment. Nothing in the Plan or in any Option
Agreement shall confer upon any Participant the right to continue in the
employment of the Company or affect any right which the Company may have to
terminate the employment of such participant.
Section 7.15. Severability. If any portion of this Plan is declared by a
court of competent jurisdiction to be invalid or unenforceable after all appeals
have either been exhausted or the time for any appeals to be taken has expired,
the remainder of the terms, provisions, covenants and restrictions of this Plan
shall remain in full force and effect and in no way be affected, impaired or
invalidated.
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CERTIFICATION
-------------
The undersigned, being the duly appointed and acting Secretary of the
Company, hereby certifies that the foregoing 2001 Compensatory Stock Option Plan
was adopted by the Company's Board of Directors on ___________, 2001, and
approved by the Company's shareholders on ____________, 2001.
------------------------------
By_______________________________________
_________________, Secretary
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APPENDIX B
AMENDMENT AND RESTATEMENT
TO THE
ARTICLES OF INCORPORATION
BROOKE CORPORATION
ARTICLE I
The name of this corporation is BROOKE CORPORATION.
ARTICLE II
The registered office of the Corporation in the State of Kansas, county of
Harvey, is at 414 Main, P.O. Box 627, Newton, Kansas 67114. The resident agent
at that address is Leland G. Orr.
ARTICLE III
This Corporation is organized for profit and the nature of its business or
purposes to be conducted or promoted are:
1. To engage in the business of purchasing, acquiring, soliciting, selling,
negotiating and otherwise dealing in the business of insurance through the
use of agents employed by said corporation, which agents are lawfully
licensed and authorized to transact insurance business within the state of
Kansas.
2. To engage in any lawful conduct or activity for which corporations may be
organized under the Kansas Corporation Code.
ARTICLE IV
The aggregate shares of which the Corporation shall have authority to issue
shall be ten million (10,000,000) and said shares shall be divided into nine
million five hundred thousand (9,500,000) shares of Common Stock, one thousand
(1,000) shares of Convertible Preferred Stock, one hundred thousand (100,000)
shares of 2002 Convertible Preferred Stock and three hundred ninety-nine
thousand (399,000) shares of Undesignated Preferred Stock.
1. The Common Stock shall consist of nine million five hundred thousand
(9,500,000) shares of par value of One and No/100 dollars ($1.00) per share. The
preferences, qualifications, limitations and special or relative rights in
respect to shares of Common Stock are as follows:
(a) Subject to the rights provided in this Article IV to holders of
Convertible Preferred Stock, 2002 Convertible Preferred Stock and
Undesignated Preferred Stock (as such rights may be determined by the Board
of Directors in its sole discretion), the Common Stock shall possess all
rights and privileges afforded to capital stock by applicable law in the
absence of any express grant of rights or privileges in the Corporation's
Articles of Incorporation.
2. The Convertible Preferred Stock shall consist of one thousand (1,000) shares
of par value of Seventy-Five and No/100 Dollars ($75.00) per share. The
preferences, qualifications, limitations and special or relative rights in
respect to shares of Convertible Preferred Stock are as follows:
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(a) Except as this paragraph otherwise provides, the Convertible Preferred
Stock will have no voting rights. As long as any shares of the Convertible
Preferred Stock are outstanding, the Corporation shall not without the
consent of a majority of the holders of the Convertible Preferred Stock
then outstanding: (i) create or authorize any shares or series of shares
ranking prior to or on a parity with the Convertible Preferred Stock; (ii)
amend, alter or repeal any of the express terms of the Convertible
Preferred Stock.
(b) The holders of Convertible Preferred Stock shall be entitled to
receive, out of funds at the time legally available for payments of
dividends under the General Business Corporation Act of Kansas, a non
cumulative dividend in cash at the rate of Nine Percent (9%) of the
liquidation value of such stock per share per annum payable, if as and when
determined by the Board of Directors, due and payable on March 31, June 30,
September 30 and December 31 of each year, before any dividend shall be set
apart or paid on the Common Stock in any fiscal year of the Corporation.
(c) The holders of Convertible Preferred Stock shall have the right, at
their option, to convert all or part of their Convertible Preferred Stock
holdings to Common Stock. In the event that the holders of Convertible
Preferred Stock elect to convert their shares to Common Stock, one share of
Convertible Preferred Stock shall be exchanged for Thirteen (13) shares of
Common Stock. The conversion of shares shall occur immediately upon written
notice to the Corporation.
(d) Upon the occurrence of: (i) the issuance of Common Stock for a price
per share less than the current fair market value of such shares; (ii) the
issuance of rights or options to purchase Common Stock or issuance of
securities convertible into Common Stock where the exercise or conversion
price is less then the fair market value of such shares; (iii) stock
dividends; (iv) stock splits, the Corporation shall appoint a firm of
independent certified public accountants, which shall give their opinion
upon the adjustment, if any, which must be made in the number of shares of
Common Stock for which Convertible Preferred Stock shall be convertible,
necessary to preserve, without dilution, the conversion right of the
holders of Convertible Preferred Stock. Upon receipt of such opinion, the
Corporation shall forthwith make the adjustments described therein.
(e) The Convertible Preferred Stock shall be subject to redemption at the
option of the Corporation at a liquidation value of Seventy-Five and No/100
Dollars ($75.00) per share upon thirty (30) days proper written notice to
the holders of Convertible Preferred Stock. Notice of redemption shall not
preclude the holders of Convertible Preferred Stock from exercising their
right to convert Convertible Preferred Stock to Common Stock prior to the
end of such 30-day period.
(f) In the case of liquidation or dissolution of the Corporation, the
holders of the Convertible Preferred Stock shall be entitled to be paid in
full the liquidation value (Seventy-Five and No/100 (75.00) per share) of
their shares before any amounts shall be paid to the holders of the 2002
Convertible Preferred Stock, Undesignated Preferred Stock and/or Common
Stock, but on any such liquidation or dissolution after the payment to the
holders of the Convertible Preferred Stock of the liquidation value
thereof, the remaining assets of the Corporation shall be divided and paid
to the holders of the 2002 Convertible Preferred Stock, Undesignated
Preferred Stock and Common Stock according to their respective interests
set forth herein, or with respect to the Undesignated Preferred Stock, as
the Board of Directors may determine in its sole discretion.
3. The 2002 Convertible Preferred Stock, shall consist of One Hundred Thousand
(100,000) shares of par value of Twenty-five and No/100 Dollars ($25.00) per
share. The preferences, qualifications, limitations and special or relative
rights in respect to shares of 2002 Convertible Preferred Stock are as follows:
(a) Except as this paragraph otherwise provides, the 2002 Convertible
Preferred Stock will have no voting rights. As long as any shares of the
2002 Convertible Preferred Stock are outstanding, the Corporation shall
not, without the consent of a majority of the holders of the 2002
Convertible Preferred Stock then outstanding, (i) create or authorize any
additional shares or additional series
B-2
of shares ranking prior to or on a parity with the 2002 Convertible
Preferred Stock; (ii) amend, alter or repeal any of the express terms of
the 2002 Convertible Preferred Stock.
(b) The rights of the holders of 2002 Convertible Preferred Stock are
subordinate to the rights of the holders of Convertible Preferred Stock
except to the extent that holders of 2002 Convertible Preferred Stock are
entitled to cumulative dividends and the holders of Convertible Preferred
Stock are not entitled to cumulative dividends.
(c) The holders of 2002 Convertible Preferred Stock shall be entitled to
receive, out of funds at the time legally available for payments of
dividends under the General Business Corporation Act of Kansas, a
cumulative dividend in cash at the rate of Ten Percent (10%) of the
liquidation value of such stock per share per annum payable, if as and when
determined by the Board of Directors, due and payable on March 31, June 30,
September 30, and December 31 of each year, after any dividend shall be set
apart or paid on the Convertible Preferred Stock for the current fiscal
year but before any dividend shall be set apart or paid on 2003 Convertible
Preferred Stock or the Common Stock in and for any fiscal year of the
Corporation.
(d) On or prior to April 1, 2002, the holders of 2002 Convertible Preferred
Stock shall have the right, at their option, to convert all or part of
their 2002 Convertible Preferred Stock holdings to Common Stock. In the
event that the holders of 2002 Convertible Preferred Stock elect to convert
their shares to Common Stock, one share of 2002 Convertible Preferred Stock
shall be exchanged for one share of Common Stock. The conversion of shares
shall occur immediately upon written notice to the Corporation.
(e) On or prior to April 1, 2002 and upon the occurrence of: (i) the
issuance of Common Stock for a price per share less than the current fair
market value of such shares; (ii) the issuance of rights or options to
purchase Common Stock or issuance of securities convertible into Common
Stock where the exercise or conversion price is less then the fair market
value of such shares; (iii) stock dividends; (iv) stock splits, the
Corporation shall appoint a firm of independent certified public
accountants, which shall give their opinion upon the adjustment, if any,
which must be made in the number of shares of Common Stock for which 2002
Convertible Preferred Stock shall be convertible, necessary to preserve,
without dilution, the conversion rights of the holders of 2002 Convertible
Preferred Stock. Upon receipt of such opinion, the Corporation shall
forthwith make the adjustments described therein.
(f) After April 1, 2002, the 2002 Convertible Preferred Stock shall be
subject to redemption at the option of the Corporation at a redemption
value of Twenty Seven and 50\100 Dollars ($27.50) per share on any dividend
payment date.
(g) In the case of liquidation or dissolution of the Corporation, the
holders of the 2002 Convertible Preferred Stock shall be entitled to be
paid in full the liquidation value (Twenty-five and No/100 ($25.00) per
share) of their shares after payment of full liquidation value to the
holders of Convertible Preferred Stock and before any amounts shall be paid
to the holders of the Undesignated Preferred Stock and/or Common Stock, but
on any such liquidation or dissolution after the payment to the holders of
Convertible Preferred Stock and 2002 Convertible Preferred Stock of the
liquidation value thereof, the remaining assets of the Corporation shall be
divided and paid to the holders of Undesignated Preferred Stock and the
Common Stock according to their respective interests set forth herein, or
with respect to the Undesignated Preferred Stock, as the Board of Directors
may determine in its sole discretion.
4. The Undesignated Preferred Stock, shall consist of three hundred ninety-nine
thousand (399,000) shares for which the designations, preferences, conversion
rights, and cumulative, relative, participating, optional or other rights,
including voting rights, qualifications, limitations or restrictions thereof,
may be determined by the Board Of Directors on some future date without any
further authorization by the Corporation's shareholders.
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The only other preferences, qualification, limitations, restrictions and special
relative rights with respect to the Corporation's shares shall be as provided in
this Article IV hereof and such restrictions on transferability as are provided
in the By-Laws of the Corporation or by agreement of the shareholders.
ARTICLE V
The power to adopt, repeal and amend the bylaws of this Corporation shall reside
in the Board of Directors of the Corporation.
ARTICLE VI
The stockholders of this Corporation shall not be personally liable for the
payment of the Corporation's debts, except as they may be liable for the reason
of their own conduct or acts.
ARTICLE VII
1. The Corporation reserves the right to make any amendment of the articles, now
or hereafter authorized by law, including any amendment which alters the
contract rights, as expressly set forth in the articles, of any shares of
outstanding stock.
2. Authority is hereby expressly granted to and vested in the board of directors
to establish from time to time, by resolution or resolutions and filing of all
required documents pursuant to the applicable provisions of Kansas corporate
law, for the issuance of preferred stock in series, to establish from time to
time the number of shares to be included in each such series, and to fix the
voting, powers, designations, preferences and relative, participating, optional
or other rights, if any or the qualifications, limitations or restrictions
thereof.
3. The board of directors of the corporation may, by articles supplementary,
classify or reclassify any unissued stock from time to time by setting or
changing the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends qualifications, or terms or conditions
of redemption of the stock.
ARTICLE VIII
1. The Corporation will indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding whether civil, criminal, administrative or investigative,
other than an action by or in the right of the Corporation, by reason of the
fact that he is or was a Director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another Corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorney's fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interest of the Corporation and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit, or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best interest
of the Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
2. The Corporation will indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a Director, officer, employee or agent of
the
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Corporation, or is or was serving at the request of the Corporation as a
Director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against expenses, including attorney's fees,
actually and reasonably incurred by him in connection with the defense or
settlement of the action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interest of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which the action or
suit was brought determines upon application that, despite the adjudication of
liability and in view of all the circumstances of the case, the person is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper.
3. To the extent that a Director, officer, employee or agent of the Corporation
has been successful on the merits or otherwise in defense of any action, suit or
proceedings referred to in subsections 1 and 2 of this section, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
with the action, suit or proceeding.
4. Any indemnification under subsections 1 and 2 of this section, unless ordered
by a court, shall be made by the Corporation only as authorized in the specific
case upon a determination that indemnification of the Director, officer,
employee or agent is proper in the circumstances because he has made the
applicable standard of conduct set forth in this section. The determination
shall be made by the Board of Directors of the Corporation by a majority vote of
a quorum consisting of Directors who were not parties to the action, suit or
proceeding, or, if such a quorum is not obtainable, or, even if obtainable, if a
quorum of disinterested Directors so directs, by legal counsel in a written
opinion, or by the Stockholders of the Corporation.
5. Expenses incurred in defending a civil or criminal action, suit or proceeding
may be paid by the Corporation in advance of the final disposition of the
action, suit or proceeding as authorized by the Board of Directors in the
specific case upon receipt of an undertaking by or on behalf of the Director,
officer, employee or agent to repay such amount unless it shall ultimately be
determined that he is entitled to be indemnified by the Corporation as
authorized in this section.
6. The indemnification provided in this section shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled under
any By-Law, agreement, vote of Stockholders or disinterested Directors or
otherwise; both as to action in his official capacity and as to action in
another capacity while holding such office; and shall continue as to a person
who has ceased to be a Director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
7. The Corporation may purchase and maintain insurance on behalf of any person
who is or was a Director, officer, employee or agent of the Corporation, or is
or was serving at the request of the Corporation as a Director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this section.
8. In no event shall, the Corporation indemnify any person against expenses,
penalties, or other payments incurred in an administrative proceeding or action
that results in a final order assessing civil money penalties or requiring
affirmative action by such individual or individuals in the form of payments to
the corporation.
ARTICLE IX
The term for which this corporation is to exist is perpetual.
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