U. S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File No. 0-25319
TRANSPORTATION LOGISTICS INT'L, INC.
(Name of Small Business Issuer in its Charter)
COLORADO 84-1191355
(State or Other Jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
136 Freeway Drive, East Orange, NJ 07018
(Address of Principal Executive Offices)
Issuer's Telephone Number: (973) 266-7020
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the Registrant's classes of common stock, as of the
latest practicable date:
January 19, 2000
Common Voting Stock: 20,615,000
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
PART 1 - FINANCIAL INFORMATION
TRANSPORTATION LOGISTICS INT'L, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
as of November 30, 2000
November 30, February 29,
2000 2000
(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 337,571 $ 224,540
Accounts Receivable, net of allowance
for doubtful account of $122,525 and
$44,900 respectively 2,845,942 1,105,681
Prepaid expenses - 110,464
Deferred income taxes 21,860 21,860
--------- ---------
Total Current Assets 3,205,373 1,462,545
--------- ---------
Property and Equipment, at cost, less
accumulated depreciation of $536,619 and
$138,915 respectively 337,186 438,051
Goodwill and Customer lists, net of
accumulated amortization of $30,615
and $53,467 respectively 200,800 182,586
Loan receivable stockholders 102,098 102,098
Security deposits and deferred lease payment 88,891 34,256
Deferred income taxes 405 405
Loan receivable affiliates 378,054 39,364
-------- --------
Total Other Assets 770,248 358,709
--------- ---------
TOTAL ASSETS $4,312,807 $2,259,305
========= =========
TRANSPORTATION LOGISTICS INT'L, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
as of November 30, 2000
November 30, February 29,
2000 2000
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $2,419,025 $ 853,844
Accrued Expenses 232,969 147,442
Note payable to bank 177,462 141,652
Income tax payable 1,052 1,052
Current portion of capitalized lease
obligations 9,340 15,008
Due to related party - 90,000
--------- ---------
Total Current Liabilities 2,839,848 1,248,998
--------- ---------
Capitalized lease obligations, net of
current portion 3,110 4,330
Deferred taxes 9,415 7,215
--------- ---------
TOTAL LIABILITIES 2,852,373 1,260,543
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, no par value; 5,000,000
shares authorized, and no shares issued - -
Common stock, no par value; 50,000,000
shares authorized, and 20,360,000 and
3,587,520 shares issued and outstanding
respectively 1,332,024 961,083
Accumulated other comprehensive income (21,001) 3,455
Retained Earnings 149,411 34,224
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 1,460,434 998,762
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $4,312,807 $2,259,305
========= =========
TRANSPORTATION LOGISTICS INT'L, INC AND SUBSIDIARIES
Consolidated Statement of Earnings
For the Nine (9) Months Ended November 30, 2000
Three Months Nine Months
Ended Ended
November 30, November 30,
2000 2000
(Unaudited) (Unaudited)
Operating Revenue $ 4,783,253 $ 11,486,017
Direct Operating Expenses 3,644,839 8,039,900
--------- ----------
Gross Profit 1,138,414 3,446,117
Operating Expenses
Selling, general and administrative 995,649 2,916,266
Depreciation and amortization 31,450 152,194
Start up costs (International Agency
Network) - 255,100
--------- ---------
Total Operating Expenses 1,027,099 3,323,560
Operating Income 111,315 122,557
Operating Expense:
Interest expense (1,724) (5,171)
-------- --------
Income before income taxes 109,592 117,387
Provision for income taxes - (2,200)
-------- --------
Net Income $ 109,592 $ 115,187
======== ========
Net income per share :
Basic and diluted $ 0.006 $ 0.007
======== ========
Weighted average shares
Basic and diluted 18,193,333 17,460,000
========== ==========
TRANSPORTATION LOGISTICS INT'L INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Nine (9) Months Ended November 30, 2000
Nine Months Ended
November 30,2000
(Unaudited)
Cash Flows From Operating Activities:
Net income (loss) $ 115,187
Bad debt expense 31,006
Depreciation and amortization 152,194
Gain on sale of fixed assets -
Deferred income tax 2,200
Adjustments to reconcile net loss to net cash
used in operating activities
Increase in accounts receivable (102,893)
Decrease in prepaid expenses 59,402
Decrease in prepaid income taxes 113,173
Increase in security deposits (40,738)
Increase in accounts payable and accrued
expenses 302,885
--------
Net cash provided by operating activities 632,416
--------
Cash Flows From Investing Activities :
Purchase of property and equipment (119,158)
Cash from Rewico acquisition 125,404
--------
Net cash provided by investing activities 6,246
--------
Cash Flows From Financing Activities:
Shareholder loans, net (83,504)
Repayment of capitalized leases (6,888)
Proceeds from bank loans 35,810
Loans to affiliates (471,049)
--------
Net cash used in financing activities (525,631)
--------
Net increase in cash and cash equivalents 113,031
Cash and cash equivalents-beginning of period 224,540
--------
Cash and cash equivalents-end of period $ 337,571
========
TRANSPORTATION LOGISTICS INT'L, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED NOVEMBER 30, 2000
NOTE 1 -Summary of Significant Accounting Policies
Interim Financial Information
The interim financial information for the nine months ended November 30, 2000
is unaudited. In the opinion of management, however, this information has been
prepared on the same basis as the annual financial statements and includes all
adjustments (consisting of normal recurring adjustments) that Transportation
Logistics Int'l, Inc., a Colorado corporation (the "Company") and subsidiaries
consider necessary for a fair presentation of its financial position at such
date and its operating results and cash flows for those periods. Results for
the interim period are not necessarily indicative of the results to be expected
for the entire year, or any future period.
Principles of Consolidation
The accompanying consolidated balance sheet includes the accounts of the
Company and of Transportation Logistics Int'l, Inc., a New York corporation
("TLI-NY"), as well as subsidiaries of TLI-NY. All material inter-company
accounts and transactions have been eliminated. The fiscal year of TLI-NY
ends on December 31. Accordingly, the Company's financial results for the
nine months ended November 30, 2000 have been consolidated with the financial
results of TLI-NY for the nine months ended September 30, 2000.
Property and Equipment
Property and equipment are valued at cost. Gains and losses on disposition
of property are reflected in income. Depreciation is computed using the
straight-line method over three to five year estimated useful lives of the
assets. Repairs and maintenance which do not extend the useful life of the
related assets are expensed as incurred. Depreciation expense charged to
operations during the three and nine months ended November 30, 2000 was
$31,450 and $152,194, respectively.
Acquisition of Rewico America, Inc.
On March 21,2000 the Company acquired all of the issued and outstanding
common stock of Rewico America, Inc., an international freight brokerage
company, through an acquisition through the issuance of 475,000 shares of
Transportation Logistics Int'l, Inc. common stock. The total value of the
acquisition is approximately $589,000 (exclusive of acquisition costs). The
effective date for the purchase was March 31, 2000. The acquisition was
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No.16. The excess (approximately $38,500) of the acquisition cost over
the recorded value of assets acquired was allocated to goodwill and is being
amortized over 15 years. The accompanying balance sheet includes the assets
and liabilities of Rewico America, Inc. at November 30, 2000.
Acquisition of TLI Bangladesh
On March 31, 2000 the Company acquired all of the issued and outstanding
common stock of TLI Bangladesh, an international freight brokerage company,
through an acquisition through the issuance of 7,290 shares of Transportation
Logistics Int'l, Inc. common stock. The total value of the acquisition is
approximately $9,000 (exclusive of acquisition costs) .The effective date for
the purchase was March 31, 2000. The acquisition was accounted for as a
purchase in accordance with Accounting Principles Board Opinion No.16. The
accompanying balance sheet includes the assets and liabilities of TLI
Bangladesh at November 30, 2000.
Advertising Costs
Advertising costs are charged to operations when incurred. Advertising costs
during the three and nine month periods ended November 30, 2000 amounted to
$0 and $0, respectively.
Comprehensive Income
For foreign operations outside the United States that prepare financial
statements in currencies other than the U.S. dollar, results of operations
and cash flows are translated at average exchange rates during the period and
assets and liabilities are translated at end-of-period exchange rates.
Translation adjustments are included as a separate component of accumulated
other comprehensive income (loss) in shareholders' equity. For the three and
nine month periods ended November 30, 2000, the foreign currency translation
was $0 and $0, respectively.
NOTE 2: Property and Equipment
The following is a summary of property and equipment-at cost, less accumulated
depreciation.
November 30, 2000
Furniture and fixtures $ 14,450
Equipment 795,537
Leasehold Improvements 63,818
-------
Less: accumulated depreciation (536,619)
-------
Net fixed assets $337,186
=======
NOTE 3: Accounts Payable and Accrued Expenses
Accrued expenses consist of the following:
November 30, 2000
Freight and Operating Expense Invoices $232,969
-------
$232,969
=======
NOTE 4: Transactions with Related Parties
Stockholder Loans
From time to time the Company has advanced loans to several of its
stockholders. At November 30, 2000, these loans amounted to $102,098. The
loans have no stated interest rate and no specific repayment terms.
NOTE 5: Notes Payable Bank
The Company's UK subsidiary has the following short term notes payable.
Note payable to bank $ 65,000
Overdraft facility 76,652
-------
$ 141,652
=======
The note payable to the bank and the overdraft facility bear interest at 3%
above the L.I.B.O.R. rate and are secured by substantially all of the Company's
assets, and are personally guaranteed by the subsidiary's president and the
parent company.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
Results of Operations
On November 15, 2000, Contex Enterprise Group, Inc., a Colorado corporation
which had no materials assets or liabilities, acquired all of the capital
stock of Transportation Logistics Int'l, Inc., a New York corporation, in a
share exchange. Subsequently, the name of the parent corporation was changed
to Transportation Logistics Int'l, Inc. ("TLI"). The operations that are
reported in this Quarterly Report and analyzed in this section are the
consolidated operations, which consist entirely of the operations that were
carried on by the New York corporation prior to the share exchange.
The fiscal year of the New York corporation ends on December 31, while the
fiscal year of TLI ends on February 28. Accordingly, the results of operations
of the New York corporation for the three and nine month periods ended
September 30, 2000 have been consolidated in this report with the results of
operations of TLI for the three and nine month periods ended November 30,
2000.
Revenue in the third quarter continued the pattern of growth that has
characterized our operations over the past eighteen months. Third quarter
revenue of $4,783,253 was equal to 71% of revenue for the first two quarters
of fiscal 2000 combined, and 69% of revenue for our last full fiscal year.
The growth in revenue is attributable entirely to our transportation logistics
business.
During the past eighteen months, we have incurred $711,225 in expenses
attributable to development of our Translogistics Network, including $255,100
in the first half of this year. (Minimal development expenses were incurred
in the third quarter, as the network is substantially developed.) Intra-
network operations have commenced, but do not yet include significant shipments
to and from the U.S. Accordingly, the revenue reported for the three and nine
months ended September 30, 2000 does not reflect any benefits from the
Translogistics Network. When the Network commences shipments to and from the
U.S., we expect that the rate of growth of our revenue will increase.
The primary reason that the Translogistics Network is not generating any U.S.
business is that we are still engaged in developing a domestic presence
sufficient to meet the needs of the Translogistics Network. Development of
that presence is being carried out through a program of acquisitions and
affiliations, and is expected to be completed by the end of calendar 2001.
Management is actively seeking additional capital resources, through sale of
equity or debt, and hope to increase our available resources in the very near
future. When the resources are available, we expect to be able to quickly
expand our international presence, and accelerate domestic transactions
through our Translogistics Network. That development will have a significant
positive effect on our revenue.
Our gross margin for the third quarter was 24%, a reduction from the 34%
realized in the first half of the current fiscal year. The reduction in
gross margins reflects the fact that at the beginning of this year nearly
half of our revenue was attributable to our non-logistics businesses, which
produce higher gross margins than the transportation logistics business. As
transportation logistics comes to dominate our revenue, our gross margins
will more closely reflect the margins dictated by the shipping industry:
12%-18% for ocean freight and 25% for air freight.
Although the growth of our transportation logistics business will reduce our
gross margins, we expect it to have a positive effect on our bottom line.
The reason is that transportation logistics operations are efficient, relative
to bussing and driver placement operations, requiring little in the way of
hard, depreciable assets and a much more modest staff. This was evident in
the third quarter of the current fiscal year, in which indirect expenses were
equal to 21% of revenue, compared to 34% for the first six months of the
current year.
Selling, general and administrative expenses of $995,649 in the third quarter
of the current year were high relative to our business plan, equaling 21% of
revenue. The primary reasons for high S,G&A expenses in this period were
expenses attributable to the acquisition of the New York corporation by TLI,
as well as expenses attributable to our efforts to rapidly expand our U.S.
presence. We expect the ratio of S,G&A to revenue to be smaller in the future.
Liquidity and Capital Resources
Our working capital at November 30, 2000 was $365,525, which is sufficient to
sustain our operations at their current level for the next year. For the
nine months which ended on that date, our operations produced $632,416 in
cash. Our overall cash position in that same period increased by only
$113,031, however, as funds from operations were used to resolve obligations
that had been incurred during our start-up period. Having relieved ourselves
of those obligations, we have our cash flow generally stabilized at the current
level of operations, and even for a careful increase in operations. Indeed,
in the third quarter, when our revenues increased substantially from revenue
in the first two quarters of this year, our cash increased by $151,375.
Our greatest area of concern in connection with current working capital is the
difficulty in collecting accounts receivable that is endemic to the
international logistics industry. At November 30, 2000 our accounts receivable
exceeded our accounts payable by $426,917. This cushion will be sufficient if
we are able to collect our receivables at the same rate at which we are required
to pay our payables. The difficulty of collecting international receivables,
however, means that we must carefully conserve our cash by delaying payments
whenever possible. These delays, in turn, if not circumspect, can lead to
operating difficulties brought about by disgruntled vendors and agents.
During the next year we intend to make a concerted effort to reduce our
outstanding accounts receivable through collection efforts and up-front
payment arrangements. We also intend to alleviate this problem to some extent
by establishing a financial clearing house for our Translogistics Network and
by requiring network affiliates to post an indemnity bond.
At present, the only credit available to us is a limited overdraft privilege
granted to our U.K. subsidiary. Traditional receivables financing has to this
point not been available because of the international nature of our receivables
and their relative longevity. We hope that in the future, if we are able to
strengthen our receivables, we will be able to secure receivables financing.
While, as noted, our working capital position seems sufficient to sustain our
operations at their current levels, our business plan calls for dramatic growth,
primarily through the benefits of our Translogistics Network of affiliated
logistics agencies. To fund that growth, we will require additional capital
resources. Management, therefore, is actively engaged in exploring
opportunities for equity or debt financing, to obtain the funds needed for our
growth.
PART II - OTHER INFORMATION
Item 4.Submission of matters to a vote of security holders.
A special meeting of the Shareholders was held on December 11, 2000. At
the meeting, the following proposals were approved:
I. Proposal to approve an amendment to the Articles of Incorporation of
Contex Enterprise Group, Inc., which would have the effect of:
- changing the company's corporate name to "Transportation Logistics
Int'l, Inc.;
- eliminating the provisions of the Articles of Incorporation which
specify certain designations and rights for the holders of preferred
stock; and
- eliminating Article XV of the Articles of Incorporation which
imposes personal liability on the directors and officers of the
company if the name of the company is changed without notice to the
shareholders.
The Proposal was approved by a vote of 14,783,844 shares for, no shares
against, and no shares abstained.
II. Proposal to adopt the 2000 Stock and Stock Option Plan.
The Proposal was approved by a vote of 14,783,844 shares for, no shares
against, and no shares abstained.
Item 6. Exhibits and reports on Form 8-K.
Reports on Form 8-K:
November 15, 2000. Acquisition of Transportation Logistics Int'l.,
Inc., a New York corporation
November 17, 2000. Change in Registrant's Certifying Accountant
Exhibits
10. 2000 Stock and Stock Option Plan
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRANSPORTATION LOGISTICS INT'L, INC.
Date: 1/19/2001 By: /s/ Michael Margolies
-----------------------------------
Michael Margolies, Chief Executive
Officer, Chief Financial and Accounting Officer
* * * * * * * * * *
Exhibit 10
TRANSPORTATION LOGISTICS INT'L, INC.
2000 Stock and Stock Option Plan
Article 1. Establishment and Purpose
1.1 Establishment of the Plan. Transportation Logistics Int'l, Inc.,
a Colorado corporation (the "Company" or "TLI"), hereby establishes an
incentive compensation plan (the "Plan"), as set forth in this document.
1.2 Purpose of the Plan. The purpose of the Plan is to promote the
success and enhance the value of the Company by linking the personal interests
of Participants to those of the Company's shareholders, and by providing
Participants with an incentive for outstanding performance. The Plan is further
intended to attract and retain the services of Participants upon whose
judgment, interest, and special efforts the successful operation of TLI and
its subsidiaries is dependent.
1.3 Effective Date of the Plan. The Plan shall become effective on
November 15, 2000.
Article 2. Definitions
Whenever used in the Plan, the following terms shall have the meanings
set forth below and, when the meaning is intended, the initial letter of the
word is capitalized:
(a) "Award" means, individually or collectively, a grant under this
Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock,
or Performance Shares.
(b) "Award Agreement" means an agreement which may be entered into by
each Participant and the Company, setting forth the terms and provisions
applicable to Awards granted to Participants under this Plan.
(c) "Board" or "Board of Directors" means the TLI Board of Directors.
(d) "Cause" shall mean willful and gross misconduct on the part of an
Eligible Person that is materially and demonstrably detrimental to the
Company or any Subsidiary as determined by the Committee in its sole
discretion.
(e) "Change in Control" shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act), other than (A) a person who on November 15, 2000 was the beneficial
owner of more than 25% of the outstanding Shares, (B) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
(C) a corporation owned directly or indirectly by the shareholders of the
Company in substantially the same proportions as their ownership of stock of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under said Act), directly or indirectly, of securities of the Company
representing forty percent (40%) or more of the total voting power represented
by the Company's then outstanding voting securities, or (ii) during any
period of two (2) consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company and any new Director
whose election by the Board of Directors or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds (2/3)
of the Directors then still in office who either were Directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority
thereof, or (iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty-five percent (55%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation, or the
shareholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of all or
substantially all the Company's assets.
(f) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(g) "Committee" means the committee or committees, as specified in
Article 3, appointed by the Board to administer the Plan with respect to
grants of Awards.
(h) "Consultant" means a natural person under contract with the Company
to provide bona fide services to the Company which are not in connection with
the offer or sale of securities in a capital-raising transaction and do not
directly or indirectly promote or maintain a market for the Company's
securities.
(i) "Director" means any individual who is a member of the TLI Board
of Directors.
(j) "Disability" shall mean the Participant's inability to perform the
Participant's normal Employment functions due to any medically determinable
physical or mental disability, which can last or has lasted 12 months or is
expected to result in death.
(k) "Eligible Person" means an Employee, Director or Consultant.
(l) "Employee" means any officer or employee of the Company or of one
of the Company's Subsidiaries. Directors who are not otherwise employed by
the Company shall not be considered Employees under this Plan.
(m) "Employment," with reference to an Employee, means the condition
of being an officer or employee of the Company or one of its Subsidiaries.
"Employment," with reference to a Consultant, means the condition of being a
Consultant. "Employment," with reference to a Director, means the condition
of being a Director. The change in status of an Eligible Person among the
categories of Employee, Director and Consultant shall not be deemed a
termination of Employment.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, or any successor Act thereto.
(o) "Exercise Price" means the price at which a Share may be purchased
by a Participant pursuant to an Option, as determined by the Committee.
(p) "Fair Market Value" shall mean (i) at such time as there are
closing prices quoted for the Shares, the closing price of Shares on the
relevant date, or (if there were no sales on such date) the next preceding
trading date, all as reported on the principal market for the Shares, or (ii)
at such time as there is a public market quoted without closing prices, the
mean of the closing high bid and low asked on the relevant date, as reported
on the principal market for the Shares, or (iii) at such time as there is no
public market for the Shares, the value determined from time to time by the
Board of Directors.
(q) "Incentive Stock Option" or "ISO" means an option to purchase
Shares from TLI, granted under this Plan, which is designated as an Incentive
Stock Option and is intended to meet the requirements of Section 422 of the
Code.
(r) "Insider" shall mean an Eligible Person who is, on the relevant
date, an officer, director, or ten percent (10%) beneficial owner of the
Company, as those terms are defined under Section 16 of the Exchange Act.
(s) "Non-qualified Stock Option" or "NQSO" means the option to purchase
Shares from TLI, granted under this Plan, which is not intended to be an
Incentive Stock Option.
(t) "Option" or "Stock Option" shall mean an Incentive Stock Option or
a Nonqualified Stock Option.
(u) "Participant" means a person who holds an outstanding Award
granted under the Plan.
(v) "Performance Share" shall mean an Award granted to an Eligible
Person pursuant to Article 8 herein.
(w) "Plan" means this 2000 Stock and Stock Option Plan.
(x) "Restricted Stock" means an Award of Stock granted to an Eligible
Person pursuant to Article 7 herein.
(y) "Restriction Period" means the period during which Shares of
Restricted Stock are subject to restrictions or conditions under Article 7.
(z) "Shares" or "Stock" means the shares of common stock of the
Company.
(aa) "Subsidiary" shall mean any corporation in which the Company owns
directly, or indirectly through subsidiaries, more than fifty percent (50%)
of the total combined voting power of all classes of Stock, or any other
entity (including, but not limited to, partnerships and joint ventures) in
which the Company owns more than fifty percent (50%) of the combined equity
thereof.
Article 3. Administration
3.1 The Committee. The Plan and all Awards hereunder shall be
administered by one or more Committees of the Board as may be appointed by the
Board for this purpose. The Board may appoint a Committee specifically
responsible for Awards to Insiders (the "Disinterested Committee") where each
Director on such Disinterested Committee is a "Non-Employee Director" (or any
successor designation for determining who may administer plans, transactions
or awards exempt under Section 16(b) of the Exchange Act), as that term is
used in Rule 16b-3 under the Exchange Act, as that rule may be modified from
time to time. If no specific Committee is appointed by the Board, then the
Board in its entirety shall be the Committee. Any Committee may be replaced
by the Board at any time.
3.2 Authority of the Committee. The Committee shall have full power,
except as limited by law and subject to the provisions herein, to select the
recipients of Awards; to determine the size and types of Awards; to determine
the terms and conditions of such Awards in a manner consistent with the Plan;
to construe and interpret the Plan and any agreement or instrument entered
into under the Plan; to establish, amend, or waive rules and regulations for
the Plan's administration; and (subject to the provisions of Article 10
herein) to amend the terms and conditions of any outstanding Award to the
extent such terms and conditions are within the discretion of the Committee as
provided in the Plan. Further, the Committee shall make all other
determinations which may be necessary or advisable for the administration of
the Plan.
The Committee shall determine which Awards are made pursuant to Rule 701
under the Securities Act of 1933, as amended.
No Award may be made under the Plan after September 30, 2010.
All determinations and decisions made by the Committee pursuant to the
provisions of the Plan and all related orders or resolutions of the Board
shall be final, conclusive, and binding on all persons, including the Company,
its stockholders, Eligible Persons, Participants, and their estates and
beneficiaries.
Subject to the terms of this Plan, the Committee is authorized, and
shall not be limited in its discretion, to use any of the Performance Criteria
specified herein in its determination of Awards under this Plan.
Article 4. Shares Subject to the Plan
4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
herein, the number of Shares available for grant under the Plan shall not
exceed two million (2,000,000) Shares. The Shares granted under this Plan may
be either authorized but unissued or reacquired Shares.
Without limiting the discretion of the Committee under this section,
unless otherwise provided by the Committee, the following rules will apply for
purposes of the determination of the number of Shares available for grant
under the Plan or compliance with the foregoing limits:
(a) The grant of a Stock Option or a Restricted Stock Award shall
reduce the Shares available for grant under the Plan by the number of Shares
subject to such Award. However, to the extent the Participant uses
previously owned Shares to pay the Exercise Price or any taxes, or Shares are
withheld to pay taxes, these Shares shall be available for regrant under the
Plan.
(b) With respect to Performance Shares, the number of Performance
Shares granted under the Plan shall be deducted from the number of Shares
available for grant under the Plan. The number of Performance Shares which
cannot be, or are not, converted into Shares and distributed to the
Participant (after any applicable tax withholding) following the end of the
Performance Period shall increase the number of Shares available for regrant
under the Plan by an equal amount.
4.2 Lapsed Awards. If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason, Shares subject to such Award
shall be again available for the grant of an Award under the Plan.
4.3 Adjustments in Authorized Plan Shares. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation,
Stock dividend, split-up, Share combination, or other change in the corporate
structure of the Company affecting the Shares, an adjustment shall be made in
the number and class of Shares which may be delivered under the Plan, and in
the number and class of and/or price of Shares subject to outstanding Awards
granted under the Plan, and/or the number of outstanding Options, Shares of
Restricted Stock, and Performance Shares constituting outstanding Awards, as
may be determined to be appropriate and equitable by the Committee, in its
sole discretion, to prevent dilution or enlargement of rights.
Article 5. Eligibility and Participation
5.1 Eligibility. All Eligible Persons are eligible to participate in
this Plan.
5.2 Actual Participation. Subject to the provisions of the Plan, the
Committee may, from time to time, select from all Eligible Persons, those to
whom Awards shall be granted and shall determine the nature and amount of each
Award. No Eligible Person is entitled to receive an Award unless selected by
the Committee.
Article 6. Stock Options
6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Eligible Persons at any time and from time to time,
and under such terms and conditions, as shall be determined by the Committee.
The Committee shall have discretion in determining the number of Shares
subject to Options granted to each Eligible Person. The Committee may grant
ISOs, NQSOs, or a combination thereof. ISOs, however, may be granted only to
Employees and only if this Plan is approved by the shareholders of the Company
within one year after it is adopted by the Board of Directors.
6.2 Form of Issuance. Each Option grant may be issued in the form of
an Award Agreement and/or may be recorded on the books and records of the
Company for the account of the Participant. If an Option is not issued in the
form of an Award Agreement, then the Option shall be deemed granted as
determined by the Committee. The terms and conditions of an Option shall be
set forth in the Award Agreement, in the notice of the issuance of the grant,
or in such other documents as the Committee shall determine. Such terms and
conditions shall include the Exercise Price, the duration of the Option, the
number of Shares to which an Option pertains (unless otherwise provided by the
Committee, each Option may be exercised to purchase one Share), and such other
provisions as the Committee shall determine, including, but not limited to
whether the Option is intended to be an ISO or a NQSO.
6.3 Exercise Price.
(a) Unless a greater Exercise Price is determined by the Committee, the
Exercise Price for each ISO awarded under this Plan shall be equal to one
hundred percent (100%) of the Fair Market Value of a Share on the date the
Option is granted. If, however, the Eligible Person owns stock possessing
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or of its parent or subsidiary corporations, then the
Exercise Price of an ISO shall be not less than one hundred ten percent (110%)
of the Fair Market Value of a Share on the date the Option is granted.
(b) The Exercise Price of a NQSO shall be determined by the Committee in
its sole discretion.
6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant (which duration may be extended
by the Committee); provided, however, that no Option shall be exercisable
later than the tenth (10th) anniversary date of its grant. If, however, the
Eligible Person owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of its parent
or subsidiary corporations, then no Option shall be exercisable later than the
fifth (5th) anniversary date of its grant.
6.5 Vesting of Options. Options shall vest at such times and under
such terms and conditions as determined by the Committee; provided, however,
unless a different vesting period is provided by the Committee at or before
the grant of an Option, the Options will vest on the first anniversary of
the grant.
6.6 Exercise of Options. Options granted under the Plan shall be
exercisable at such times and be subject to such restrictions and conditions
as the Committee shall in each instance approve, which need not be the same
for each grant or for each Participant.
Options shall be exercised by delivery of a written notice (including e-
mail and telecopies) to the Secretary of the Company (or, if so provided by
the Company, to its designated agent), which notice shall be irrevocable,
setting forth the exact number of Shares with respect to which the Option is
being exercised and including with such notice payment of the Exercise Price.
When Options have been transferred, the Company or its designated agent may
require appropriate documentation that the person or persons exercising the
Option, if other than the Participant, has the right to exercise the Option.
No Option may be exercised with respect to a fraction of a Share.
6.7 Payment. The Exercise Price shall be paid in full at the time of
exercise. No Shares shall be issued or transferred until full payment has
been received therefor.
Payment may be made:
(a) in cash, or
(b) unless otherwise provided by the Committee at any time, and subject
to such additional terms and conditions and/or modifications as the Committee
or the Company may impose from time to time, and further subject to
suspension or termination of this provision by the Committee or Company at
any time, by:
(i) delivery of Shares of Stock owned by the Participant in
partial (if in partial payment, then together with cash) or full payment (if
a fractional Share remains after payment of the Exercise Price in full by
previously owned Shares, then the fractional Share shall be withheld for
taxes); provided, however, as a condition to paying any part of the Exercise
Price in Stock, at the time of exercise of the Option, the Participant must
establish to the satisfaction of the Company that the Stock tendered to the
Company has been held by the Participant for a minimum of six (6) months
preceding the tender; or
(ii) if the Company has designated a stockbroker to act as the Company's
agent to process Option exercises, issuance of an exercise notice together
with instructions to such stockbroker irrevocably instructing the
stockbroker: (A) to immediately sell a sufficient portion of the Shares to
pay the Exercise Price of the Options being exercised and the required tax
withholding, and (B) to deliver on the settlement date the portion of the
proceeds of the sale equal to the Exercise Price and tax withholding to the
Company. In the event the stockbroker sells any Shares on behalf of a
Participant, the stockbroker shall be acting solely as the agent of the
Participant, and the Company disclaims any responsibility for the actions of
the stockbroker in making any such sales. No Stock shall be issued until the
settlement date and until the proceeds (equal to the Option Price and tax
withholding) are paid to the Company.
If payment is made by the delivery of Shares of Stock, the value of
the Shares delivered shall be equal to the Fair Market Value of the Shares on
the day preceding the date of exercise of the Option.
6.8 Termination of Employment. Unless otherwise provided by the
Committee, the following limitations on exercise of Options shall apply upon
termination of Employment:
(a) Termination by Death or Disability. In the event the Employment of
a Participant shall terminate by reason of death or Disability, all
outstanding Options granted to that Participant shall immediately vest as of
the date of termination of Employment and may be exercised, if at all, no
more than three (3) years from the date of the termination of Employment,
unless the Options, by their terms, expire earlier.
(b) Termination for Cause. If the Employment of a Participant shall be
terminated by the Company for Cause, all outstanding Options held by the
Participant shall immediately be forfeited to the Company and no additional
exercise period shall be allowed, regardless of the vested status of the
Options.
(c) Retirement or Other Termination of Employment. If the Employment
of a Participant shall terminate for any reason other than the reasons set
forth in (a) or (b) above, all outstanding Options which are vested as of the
effective date of termination of Employment may be exercised, if at all, no
more than thirty (30) days from the date of termination of Employment, unless
the Options, by their terms, expire earlier. In the event of the death of
the Participant after termination of Employment, this paragraph (c) shall
still apply and not paragraph (a), above.
(d) Options not Vested at Termination. Except as provided in
paragraph (a) above, all Options held by the Participant which are not vested
on or before the effective date of termination of Employment shall immediately
be forfeited to the Company (and shall once again become available for grant
under the Plan).
(e) Notwithstanding the foregoing, the Committee may, in its sole
discretion, establish different terms and conditions pertaining to the effect
of termination of Employment, but no such modification shall shorten the terms
of Options issued prior to such modification.
6.9 Restrictions on Exercise and Transfer of Options. Unless otherwise
provided by the Committee:
(a) During the Participant's lifetime, the Participant's Options shall
be exercisable only by the Participant or by the Participant's guardian or
legal representative. After the death of the Participant, an Option shall
only be exercised by the holder thereof (including, but not limited to, an
executor or administrator of a decedent's estate) or his guardian or legal
representative.
(b) No Option shall be transferable except: (i) in the case of the
Participant, only upon the Participant's death; and (ii) in the case of any
holder after the Participant's death, only by will or by the laws of descent
and distribution.
6.10 Competition. Notwithstanding anything in this Article 6 to the
contrary, in the event the Committee determines, in its sole discretion, that
a Participant is engaging in activity competitive with the Company, any
Subsidiary, or any business in which any of the foregoing have a substantial
interest (the "TLI Businesses"), the Committee may cancel any Option granted
to such Participant, whether or not vested, in whole or in part. Such
cancellation shall be effective as of the date specified by the Committee.
Competitive activity shall mean any business or activity if a substantially
similar business activity is being carried on by a TLI Business, including,
but not limited to, representing or providing consulting services to any
person or entity that is engaged in competition with a TLI Business or that
takes a position adverse to a TLI Business. However, competitive activity
shall not include, among other things, owning a nonsubstantial interest as a
shareholder in a competing business.
Article 7. Restricted Stock
7.1 Grant of Restricted Stock. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time, may grant Shares
of Restricted Stock to Eligible Persons in such amounts and upon such terms
and conditions as the Committee shall determine. In addition to any other
terms and conditions imposed by the Committee, vesting of Restricted Stock may
be conditioned upon the attainment of Performance Goals based on Performance
Criteria in the same manner as provided in Section 8.3, herein with respect to
Performance Shares.
7.2 Restricted Stock Agreement. The Committee may require, as a
condition to an Award, that a recipient of a Restricted Stock Award enter into
a Restricted Stock Award Agreement, setting forth the terms and conditions of
the Award. In lieu of a Restricted Stock Award Agreement, the Committee may
provide the terms and conditions of an Award in a notice to the Participant of
the Award, on the Stock certificate representing the Restricted Stock, in the
resolution approving the Award, or in such other manner as it deems
appropriate.
7.3 Transferability. Except as otherwise provided in this Article 7,
the Shares of Restricted Stock granted herein may not be sold, transferred,
pledged, assigned, or otherwise alienated or hypothecated until the end of the
applicable Restriction Period established by the Committee, if any.
7.4 Other Restrictions. The Committee may impose such other conditions
and/or restrictions on any Shares of Restricted Stock granted pursuant to the
Plan as it may deem advisable including, without limitation, a requirement
that Participants pay a stipulated purchase price for each Share of Restricted
Stock and/or restrictions under applicable Federal or state securities laws;
and may legend the certificates representing Restricted Stock to give
appropriate notice of such restrictions.
The Company shall also have the right to retain the certificates
representing Shares of Restricted Stock in the Company's possession until such
time as all conditions and/or restrictions applicable to such Shares have been
satisfied.
7.5 Removal of Restrictions. Except as otherwise provided in this
Article 7, Shares of Restricted Stock covered by each Restricted Stock grant
made under the Plan shall become freely transferable by the Participant after
the last day of the Restriction Period and completion of all conditions to
vesting, if any. However, unless otherwise provided by the Committee, the
Committee, in its sole discretion, shall have the right to immediately waive
all or part of the restrictions and conditions with regard to all or part of
the Shares held by any Participant at any time.
7.6 Voting Rights, Dividends and Other Distributions. During the
Restriction Period, Participants holding Shares of Restricted Stock granted
hereunder may exercise full voting rights and shall receive all regular cash
dividends paid with respect to such Shares. Except as provided in the
following sentence, in the sole discretion of the Committee, other cash
dividends and other distributions paid to Participants with respect to Shares
of Restricted Stock may be subject to the same restrictions and conditions as
the Shares of Restricted Stock with respect to which they were paid. If any
such dividends or distributions are paid in Shares, the Shares shall be
subject to the same restrictions and conditions as the Shares of Restricted
Stock with respect to which they were paid.
7.7 Termination of Employment Due to Death or Disability. In the event
the Employment of a Participant shall terminate by reason of death or
Disability, unless otherwise provided by the Committee prior to or at the time
of the Award, all Restriction Periods and all restrictions imposed on
outstanding Shares of Restricted Stock held by the Participant shall
immediately lapse and the Restricted Stock shall immediately become fully
vested as of the date of termination of Employment.
7.8 Termination of Employment for Other Reasons. If the Employment of
a Participant shall terminate for any reason other than those specifically set
forth in Section 7.7 herein, all Shares of Restricted Stock held by the
Participant which are not vested as of the effective date of termination of
Employment immediately shall be forfeited and returned to the Company.
Article 8. Performance Shares
8.1 Grants of Performance Shares. A Performance Share is equivalent
in value to a Share of Stock. Subject to the terms of the Plan, Performance
Shares may be granted to Eligible Persons at any time and from time to time,
as determined by the Committee. The Committee shall have complete discretion
in determining the number of Performance Shares awarded to each Participant.
8.2 Performance Period. The Performance Period for Performance Shares
is the period over which the Performance Goals are measured. The Performance
Period is set by the Committee for each Award; however, in no event shall an
Award have a Performance Period of less than six months.
8.3 Performance Goals. For each Award of Performance Shares, the
Committee shall establish performance objectives ("Performance Goals") for the
Company, its Subsidiaries, and/or divisions of any of foregoing, based on the
Performance Criteria and other factors set forth below. Performance Goals
shall include payout tables, formulas or other standards to be used in
determining the extent to which the Performance Goals are met, and, if met,
the number of Performance Shares distributed to Participants in accordance
with Section 8.5. All Performance Shares which may not be converted under the
Performance Goals or which are reduced by the Committee under Section 8.5 or
which may not be converted for any other reason after the end of the
Performance Period shall be canceled at the time they would otherwise be
distributable. When the Committee desires an Award to qualify under Section
162(m) of the Code, as amended, the Committee shall establish the Performance
Goals for the respective Performance Shares prior to or within 90 days of the
beginning of the service relating to such Performance Goal, and not later than
after 25% of such period of service has elapsed. For all other Awards, the
Performance Goals must be established before the end of the respective
Performance Period.
(a) The Performance Criteria which the Committee is authorized to use,
in its sole discretion, are any of the following criteria or any combination
thereof:
(1) Financial performance of the Company (on a consolidated basis), of
one or more of its Subsidiaries, and/or a division of any of the
foregoing. Such financial performance may be based on net income
and/or Value Added (after-tax cash operating profit less
depreciation and less a capital charge).
(2) Service performance of the Company (on a consolidated basis), of
one or more of its Subsidiaries, and/or of a division of any of
the foregoing. Such service performance may be based upon
measured customer perceptions of service quality.
(3) The Company's Stock price; return on shareholders' equity; total
shareholder return (Stock price appreciation plus dividends,
assuming the reinvestment of dividends); and/or earnings per
share.
(4) With respect to the Company (on a consolidated basis), to one or
more of its Subsidiaries, and/or to a division of any of the
foregoing: sales, costs, market share of a product or service,
return on net assets, return on assets, return on capital, profit
margin, and/or operating revenues, expenses or earnings.
(5) Completion of a marketing or development project as defined in the
Award Agreement.
(b) Except to the extent otherwise provided by the Committee in full
or in part, if any of the following events occur during a Performance Period
and would directly affect the determination of whether or the extent to which
Performance Goals are met, they shall be disregarded in any such computation:
changes in accounting principles; extraordinary items; changes in tax laws
affecting net income and/or Value Added; natural disasters, including
floods, hurricanes, and earthquakes; and intentionally inflicted damage to
property which directly or indirectly damages the property of the Company or
its Subsidiaries. No such adjustment shall be made to the extent such
adjustment would cause the Performance Shares to fail to satisfy the
performance-based exemption of Section 162(m) of the Code.
8.4 Dividend Equivalents on Performance Shares. Unless reduced or
eliminated by the Committee, a cash payment in an amount equal to the dividend
payable on one Share will be made to each Participant for each Performance
Share which on the record date for the dividend had been awarded to the
Participant and not converted, distributed or canceled.
8.5 Form and Timing of Payment of Performance Shares. As soon as
practicable after the applicable Performance Period has ended and all other
conditions (other than Committee actions) to conversion and distribution of a
Performance Share Award have been satisfied (or, if applicable, at such other
time determined by the Committee at or before the establishment of the
Performance Goals for such Performance Period), the Committee shall determine
whether and the extent to which the Performance Goals were met for the
applicable Performance Shares. If Performance Goals have been met, then the
number of Performance Shares to be converted into Stock and distributed to the
Participants shall be determined in accordance with the Performance Goals for
such Awards, subject to any limits imposed by the Committee. Conversion of
Performance Shares shall occur as soon as reasonably administratively possible
following the determination of the number of Shares to which the Participant
is entitled. At any time prior to the distribution of the Performance Shares,
unless otherwise provided by the Committee, the Committee shall have the
authority to reduce or eliminate the number of Performance Shares to be
converted.
8.6 Termination of Employment Due to Death or Disability. Unless
otherwise provided by the Committee prior to or at the time of an Award, if
the Employment of a Participant shall terminate by reason of death or
Disability, the Participant shall receive a distribution of all outstanding
Performance Shares calculated as if all unfinished Performance Periods had
ended with 100% of the Performance Goals achieved, payable in the year
following the date of termination of Employment.
8.7 Termination of Employment for Other Reasons. If the Employment of
a Participant shall terminate for other than a reason set forth in Section 8.6
(and other than for Cause), the number of Performance Shares to be converted
and distributed shall be converted and distributed based upon the achievement
of the Performance Goals and in accordance with all other terms of the Award
and the Plan; however, the Participant may receive no more than a prorated
payout of all Performance Shares, based on the portions of the respective
Performance Periods that have been completed.
8.8 Termination of Employment for Cause. In the event that a
Participant's Employment shall be terminated by the Company for Cause, all
Performance Shares shall be forfeited by the Participant to the Company.
8.9 Nontransferability. Performance Shares may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or laws of intestacy.
Article 9. Employee Matters
9.1 Employment Not Guaranteed. Nothing in the Plan shall interfere
with or limit in any way the right of the Company or any Subsidiary to
terminate any Participant's Employment at any time, nor confer upon any
Participant any right to continue in the employ of the Company or one of its
Subsidiaries.
9.2 Participation. No Eligible Person shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to
be selected to receive a future Award.
9.3 Claims and Appeals. Any claim under the Plan by a Participant or
anyone claiming through a Participant shall be presented to the Committee. Any
person whose claim under the Plan has been denied may, within sixty (60) days
after receipt of notice of denial, submit to the Committee a written request
for review of the decision denying the claim. The Committee shall determine
conclusively for all parties all questions arising in the administration of
the Plan.
Article 10. Amendment, Modification, and Termination
10.1 Amendment, Modification, and Termination. The Board of Directors
alone shall have the right to alter, amend or revoke the Plan or any part
thereof at any time and from time to time, provided, however, that the Board
of Directors may not, without the approval of the holders of a majority of the
voting Shares, make any alteration or amendment to the Plan which changes the
aggregate number of shares of Common Stock which may be issued under the Plan,
extend the term of the Plan, or change the employees or class of employees
eligible to receive Awards thereunder. The Board may at any time suspend or
terminate the Plan in whole or in part.
10.2 Awards Previously Granted. No termination, amendment, or
modification of the Plan shall adversely affect in any material way any Award
previously granted under the Plan, without the written consent of the
Participant holding such Award.
Article 11. Change in Control
Upon the occurrence of a Change in Control:
(a) Any and all Options granted hereunder immediately shall become
vested and exercisable;
(b) Any Restriction Periods and all restrictions imposed on Restricted
Shares shall lapse and they shall immediately become fully vested;
(c) The 100% Performance Goal for all Performance Shares relating to
incomplete Performance Periods shall be deemed to have been fully achieved
and shall be converted and distributed in accordance with all other terms of
the Award and this Plan; provided, however, notwithstanding anything to the
contrary in this Plan, no outstanding Performance Share may be reduced.
Article 12. Withholding
12.1 Tax Withholding. The Company shall deduct or withhold an amount
sufficient to satisfy Federal, state, and local taxes (including the
Participant's employment tax obligations) required by law to be withheld with
respect to any taxable event arising or as a result of this Plan ("Withholding
Taxes").
12.2 Share Withholding. With respect to withholding required upon the
exercise of Options, upon the lapse of restrictions on Restricted Stock, upon
the distribution of Performance Shares in the form of Stock, or upon any other
taxable event hereunder involving the transfer of Stock to a Participant, the
Company shall withhold Stock having a Fair Market Value on the date the tax is
to be determined in an amount equal to the Withholding Taxes on such Stock.
Any fractional Share remaining after the withholding shall be withheld as
additional Federal withholding.
Unless otherwise determined by the Committee, when the method of payment
for the Exercise Price is from the sale by a stockbroker, pursuant to Section
6.7(b)(ii), herein, of the Stock acquired through the Option exercise, then
the tax withholding shall be satisfied out of the proceeds. For
administrative purposes in determining the amount of taxes due, the sale price
of such Stock shall be deemed to be the Fair Market Value of the Stock.
Prior to the end of any Performance Period a Participant may elect to
have a greater amount of Stock withheld from the distribution of Performance
Shares to pay withholding taxes; provided, however, the Committee may prohibit
or limit any individual election or all such elections at any time.
12.3 Payment In Lieu of Share Withholding. In any situation in which
the Company would be required to withhold Stock pursuant to Sec 12.2 above, the
Participant may, in lieu of all or part of such withholding, remit to the
Company an amount in cash sufficient to satisfy the federal, state and local
withholding tax requirements or may direct the Company to withhold from other
amounts payable to the Participant, including salary.
Article 13. Successors
All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether
the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business and/or assets of the Company.
Article 14. Legal Construction
14.1 Severability. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall not
affect the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
14.2 Requirements of Law. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
14.3 Securities Law Compliance. With respect to Insiders, transactions
under this Plan 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 comply with a condition of
Rule 16b-3 or its successors, it shall not apply to the Insiders or
transactions thereby.
14.4 Governing Law. To the extent not preempted by Federal law, the
Plan, and all agreements hereunder, shall be construed in accordance with and
governed by the laws of the State of Colorado.