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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
Emergent Information Technologies, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
N/A
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement If Other Than Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item
22(a)(2) of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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how it was determined.
[ ] 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
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EMERGENT INFORMATION TECHNOLOGIES, INC.
4695 MACARTHUR COURT, EIGHTH FLOOR
NEWPORT BEACH, CALIFORNIA 92660
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON WEDNESDAY, JUNE 6, 2001
---------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of the Shareholders of
Emergent Information Technologies, Inc., a California corporation (hereinafter,
the "Company"), will be held on Wednesday, June 6, 2001 at 10:00 a.m. (Pacific
Daylight Time), at the Sutton Place Hotel, at 4500 MacArthur Boulevard, Newport
Beach, California 92660, for the following purposes, as more fully described in
the accompanying Proxy Statement:
1. To approve an amendment to the Company's Bylaws to increase the
authorized number of directors to a minimum of five (5) and a maximum of nine
(9).
2. To elect five members of the Board of Directors to serve until the next
Annual Meeting of Shareholders.
3. To approve an amendment to the Company's Amended 1997 Stock Option Plan,
to enhance the Company's ability to provide competitive stock incentives by
taking advantage of certain technical amendments.
4. To approve an amendment to the Company's Amended and Restated Stock
Purchase Plan, to increase the number of shares of common stock available under
the Restated Stock Purchase Plan to 950,000 shares.
5. To transact such other business as may properly come before the meeting
or any adjournments and postponements thereof.
The Board of Directors has fixed the close of business on April 13, 2001 as
the record date for the determination of shareholders entitled to notice of and
to vote at the Annual Meeting. Only holders of the Company's common stock at the
close of business on the record date are entitled to vote at the Annual Meeting.
Shareholders attending the Annual Meeting whose shares are held in the name of a
broker or other nominee should bring with them a proxy or letter from that firm
confirming their ownership of shares.
Accompanying this Notice are a Proxy and Proxy Statement. IF YOU WILL NOT
BE ABLE TO ATTEND THE MEETING TO VOTE IN PERSON, PLEASE SIGN AND DATE THE
ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. The Proxy
may be revoked at any time prior to its exercise at the Annual Meeting.
By Order of the Board of Directors,
/s/ Cathy L. Wood, Secretary
----------------------------------
Newport Beach, California
April 30, 2001
YOUR VOTE IS IMPORTANT
You are cordially invited to attend the Annual Meeting. However, even if
you do plan to attend, please promptly complete, sign, date and mail the
enclosed Proxy in the envelope provided. Returning a signed Proxy will not
prevent you from voting in person at the Annual Meeting, if you so desire, but
will help the Company secure a quorum and reduce the expense of additional proxy
solicitation.
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EMERGENT INFORMATION TECHNOLOGIES, INC.
4695 MACARTHUR COURT, EIGHTH FLOOR
NEWPORT BEACH, CALIFORNIA 92660
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, JUNE 6, 2001
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PROXY STATEMENT
---------------
INTRODUCTION
This Proxy Statement is furnished to the shareholders of Emergent
Information Technologies, Inc., a California corporation (the "Company"), in
connection with the solicitation of proxies by and on behalf of the Board of
Directors of the Company. The proxies solicited hereby are to be voted at the
Annual Meeting of Shareholders of the Company to be held at 10:00 a.m. on June
6, 2001, at the Sutton Place Hotel, at 4500 MacArthur Boulevard, Newport Beach,
California 92660, and at any and all adjournments and postponements thereof (the
"Annual Meeting"). This Proxy Statement and the accompanying form of proxy are
being mailed to all shareholders on or about April 30, 2001.
A form of proxy is enclosed for your use. The shares represented by each
properly executed unrevoked proxy will be voted as directed by the shareholder
with respect to the matters described therein. If no direction is made, the
shares represented by each properly executed proxy will be voted FOR the
proposed amendment to the Company's Bylaws, FOR management's nominees for the
Board of Directors, FOR the proposed amendment to the Company's Amended 1997
Stock Option Plan, FOR the proposed amendment to the Company's Amended and
Restated Stock Purchase Plan, and as the proxy holders deem advisable on other
matters that may properly come before the Annual Meeting.
Any proxy given may be revoked at any time prior to the exercise thereof by
filing with the Secretary of the Company an instrument revoking such proxy or by
the filing of a duly executed proxy bearing a later date. Any shareholder
present at the Annual Meeting who has given a proxy may withdraw it and vote his
or her shares in person if such shareholder so desires.
It is contemplated that the solicitation of proxies will be made primarily
by mail. The Company will make arrangements with brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy material to the
beneficial owners of the shares and will reimburse them for their expenses in so
doing. Should it appear desirable to do so in order to ensure adequate
representation of shares at the Annual Meeting, officers, agents and employees
of the Company may communicate with shareholders, banks, brokerage houses and
others by telephone or in person to request that proxies be furnished. All
expenses incurred in connection with this solicitation will be borne by the
Company. The Company has no present plans to hire special employees or paid
solicitors to assist in obtaining proxies, but reserves the option of doing so
if it should appear that a quorum otherwise might not be obtained.
Only holders of record of the Company's common stock (the "Common Stock")
at the close of business on April 13, 2001, are entitled to notice of and vote
at the Annual Meeting. As of April 13, 2001, the Company had issued and
outstanding 18,947,710 shares of Common Stock. Each share of Common Stock issued
and outstanding on the record date of April 13, 2001 (the "Record Date") is
entitled to one vote at the Annual Meeting.
The holders of a majority of the shares of stock of the Company issued and
outstanding and entitled to vote at the Annual Meeting, present in person or
represented by proxy, shall constitute a quorum. The five nominees for director
having the highest number of votes will be elected. Except as otherwise provided
by statute, all other matters coming before the Annual Meeting shall be decided
by the vote of the holders of a majority of the stock
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present in person or represented by proxy at the Annual Meeting and entitled to
vote thereat. Votes cast at the Annual Meeting will be tabulated by the person
appointed by the Company to act as inspector of election for the Annual Meeting.
The inspector of election will treat shares of voting stock represented by
a properly signed and returned proxy as present at the Annual Meeting for
purposes of determining a quorum, without regard to whether the proxy is marked
as casting a vote or abstaining. Likewise, the inspector of election will treat
shares of voting stock represented by "broker non-votes" (i.e., shares of voting
stock held in record name by brokers and nominees concerning which (i)
instructions have not been received from the beneficial owners or persons
entitled to vote; (ii) the broker or nominee does not have discretionary voting
power under applicable rules or the instrument under which it serves in such
capacity; or (iii) the record holder has indicated on the proxy card or has
executed a proxy and otherwise notified the Company that it does not have
authority to vote such shares on that matter) as present for purposes of
determining a quorum. Abstentions or broker non-votes will have no effect on the
election of Directors. Except as otherwise provided by statute, all other
matters to come before the Annual Meeting require the approval of a majority of
the shares of voting stock represented and entitled to vote thereat. Therefore,
abstentions concerning a particular proposal will have the same effect as votes
against such proposal.
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PROPOSAL NO. 1
APPROVAL OF AMENDMENT TO BYLAWS
Section 2 of Article III of the Company's Amended and Restated Bylaws (the
"Bylaws") currently provides that the authorized number of directors shall be a
minimum of four (4) and a maximum of seven (7), with the exact number of
directors to be fixed from time to time within such range by the Board of
Directors or the shareholders. On April 27, 2001, the Board of Directors
unanimously approved, subject to shareholder approval, an amendment to the
Bylaws that would increase the specified limits of the authorized number of
directors to a minimum of five (5) and a maximum of nine (9), with the exact
number of directors to be fixed from time to time within such range by the Board
of Directors or the shareholders. The exact number of directors would initially
be set at five (5).
The Board of Directors believes that this proposed Bylaw amendment is
necessary to provide the Company with the ability to satisfy certain contingent
obligations created by the Company's December 29, 2000 refinancing of its
existing credit facility which in part may require the Company to grant two
seats on its Board of Directors upon the occurrence of certain events of
default.
If approved, Section 2 of Article III of the Bylaws would be amended to
read as follows:
"Section 2. Number of Directors. The authorized number of directors
shall be, until changed by amendment of the Articles or by a Bylaw duly
adopted by the shareholders, such number as may from time to time be
authorized by resolution of the Board of Directors or the shareholders,
provided that such number shall not be less than five (5) nor more than
nine (9)."
The affirmative vote of a majority of the outstanding voting shares of the
Company, together with the affirmative vote of a majority of the required
quorum, is required for approval of the proposed amendment to the Bylaws at the
Annual Meeting.
THE BOARD RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE APPROVAL OF
THE AMENDMENT TO THE COMPANY'S BYLAWS. PROXIES AND VOTING INSTRUCTIONS WILL
BE VOTED IN FAVOR OF THE AMENDMENT TO THE COMPANY'S BYLAWS UNLESS THE
SHAREHOLDER SPECIFIES OTHERWISE.
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PROPOSAL NO. 2
ELECTION OF DIRECTORS
Nominees
Directors are elected at each annual meeting of shareholders and hold
office until the next annual meeting of shareholders or until their respective
successors are elected and qualified. The Board of Directors is of the opinion
that the election to the Board of Directors of the persons identified below, all
of whom have consented to serve if elected, would be in the best interests of
the Company. The names of such nominees are as follows: Steven S. Myers, J.
Christopher Lewis, Luther J. Nussbaum, Albert S. Nagy and John R. Woodhull.
Management proxies will be voted FOR the election of the above-named
nominees unless the shareholders indicate that the proxy shall not be voted for
all or any one of the nominees. If for any reason a nominee should, prior to the
Annual Meeting, become unavailable for election as a Director, due to an event
not now anticipated, the proxies will be voted for such substitute nominee if
any, as may be recommended by the Board of Directors. In no event, however,
shall the proxies be voted for a greater number of persons than the number of
nominees named.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ELECTION OF EACH OF
THE NOMINEES LISTED ABOVE. PROXIES AND VOTING INSTRUCTIONS WILL BE VOTED IN
FAVOR OF THE ELECTION OF EACH OF THE NOMINEES LISTED ABOVE UNLESS THE
SHAREHOLDER SPECIFIES OTHERWISE.
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MANAGEMENT OF THE COMPANY
Set forth below is certain information with respect to the Company's
current executive officers and nominees of the Board of Directors of the
Company.
NAME AGE POSITION
- ---------------------------------------------------- ----- -------------------------------------------------------------
Steven S. Myers..................................... 54 Chairman of the Board of Directors, President and Chief
Executive Officer
Ajaykumar K. Patel.................................. 40 Executive Vice President and Chief Operating Officer
Cathy L. Wood(1).................................... 53 Chief Financial Officer and Secretary
Thomas J. Amrhein................................... 61 Group President and General Manager
Ronald S. Oxley..................................... 54 Group President and General Manager
J. Christopher Lewis(2)............................. 45 Director
Luther J. Nussbaum.................................. 53 Director
Albert S. Nagy(3)................................... 55 Director
John R. Woodhull.................................... 67 Director Nominee
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(1) Appointed interim Chief Financial Officer on August 31, 2000. Appointed as
Secretary on February 20, 2001.
(2) Member of the Audit Committee. Luther Nussbaum and Albert Nagy also served
as members of the Audit Committee during the fiscal year ended December 31,
2000. If elected to the Board of Directors, John R. Woodhull, Albert Nagy
and Luther Nussbaum will serve as members of the Audit Committee for the
fiscal year ending December 31, 2001.
(3) Member of the Compensation Committee. Vincent Smith and Joseph Fuller also
served as members of the Compensation Committee during the fiscal year
ended December 31, 2000. If elected to the Board of Directors, John
Woodhull, Albert Nagy and J. Christopher Lewis will serve as members of the
Compensation Committee for the fiscal year ending December 31, 2001.
Steven S. Myers founded the Company in 1982 and has served as its Chief
Executive Officer, President and Chairman of the Board for most of the Company's
existence since its incorporation in 1985. Prior to forming the Company, Mr.
Myers was Vice President of Marketing for Loral Data Systems and held several
other key management positions with Ball Aerospace Systems Division, Fairchild
Space and Electronics Company, and Watkins-Johnson Company. Mr. Myers holds a
B.S. in mathematics from Stanford University.
Ajaykumar K. Patel has served as the Company's Executive Vice President and
Chief Operating Officer since May 2000. From October 1998 to May 2000, Mr. Patel
served as Group President and General Manager. Mr. Patel joined the Company in
January 1994 as its Director of Marketing. From January 1995 to July 1996, Mr.
Patel was the Vice President for the Department of Energy and Environmental
Services, after which he became Vice President, Business Development from August
1996 to June 1997. From June 1997 until October 1998, Mr. Patel served as Vice
President, Operations. Mr. Patel holds a B.A. in physics from The Johns Hopkins
University and an M.B.A. in finance and strategic planning from the University
of Southern California.
Cathy L. Wood has served as the Company's Interim Chief Financial Officer
and consultant since August 2000. In February 2001, Ms. Wood in her consulting
capacity was named Corporate Secretary. Ms. Wood is also the President of
Financial Management Partners, a consulting firm that specializes in financial
consulting. From August 1997 to December 1999, Ms. Wood served as Executive Vice
President, Chief Financial Officer and Secretary for PIA Merchandising, Inc. Ms.
Wood served as Vice President and Chief Financial Officer of Giant Group, Ltd.,
a NYSE listed company specializing in acquisitions, from 1995 to 1997. From 1989
to 1995,
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Ms. Wood served in various capacities at Wherehouse Entertainment, Inc., a
specialty retail chain, prior to being named Sr. Vice President and Chief
Financial Officer in 1993. From 1972 to 1989, Ms. Wood served in various credit
and lending positions at Mellon Bank, N.A., including from 1982 to 1989, Vice
President of Consumer and Retail Credit Analysis and managed the credit
underwriting group for highly leveraged transactions.
Thomas J. Amrhein joined the Company in January 1995 and held the position
of Associate from January 1995 to January 1996 and Vice President from January
1996 to June 1998. After the Company's acquisition of Space Applications
Corporation ("SAC"), Mr. Amrhein was appointed President and General Manager of
SAC in June 1998 until the merger of SAC with Emergent Information
Technologies-East (formerly SM&A Corporation (East)) in December 1998. Mr.
Amrhein has served as a Group President and General Manager since November 1998.
Mr. Amrhein holds a B.S. in mechanical engineering from Virginia Polytechnic
Institute and an M.S. in industrial and systems engineering from the University
of Florida.
Ronald S. Oxley has served as a Group President and General Manager of
Emergent Information Technologies-East Company since May 2000. From March 1996
to April 2000, Mr. Oxley served as Senior Vice President of Litton PRC, a
systems integrator and provider of information technology and systems based
solutions. From October 1987 to March 1996, Mr. Oxley was a Senior Executive
with the Office of the Secretary of Defense. Mr. Oxley holds a B.S. in business
administration from California State University, Sacramento, and an M.S. in
systems management from the University of Southern California.
J. Christopher Lewis was elected a director of the Company in September
1996. Since 1981, Mr. Lewis has been a general partner of Riordan, Lewis &
Haden, equity investors in Southern California-based enterprises. Mr. Lewis also
serves as a director of California Beach Restaurants, Inc., Tetra Tech, Inc. and
several private companies. Mr. Lewis holds a B.S. in business administration and
finance and an M.B.A. in finance from the University of Southern California.
Luther J. Nussbaum was elected a director of the Company in June 2000.
Since October 1998 Mr. Nussbaum has served as the Chairman and Chief Executive
Officer of First Consulting Group, Inc., an information technology services firm
that provides consulting, systems integration and outsourcing to the healthcare
and life sciences industries. From 1995 to 1998, Mr. Nussbaum served as
Executive Vice President and member of the office of the president of First
Consulting Group, Inc. From 1993 to 1995, Mr. Nussbaum was the President of
Nussbaum & Associates, a strategic and information consulting firm. Mr. Nussbaum
received a B.A. from Rhodes College and an M.B.A. from Stanford University.
Albert S. Nagy was elected a director of the Company in June 2000. Mr. Nagy
has been the Chief Executive Officer of The Nagy Group since November 1991. Mr.
Nagy also serves as a director of several private companies. Mr. Nagy holds a
B.A. in political science from Denison University and an M.A. in international
relations from Claremont Graduate School.
John R. Woodhull was formerly a director, Chairman, President and Chief
Executive Officer of Logicon, Inc., a NYSE listed company from 1969 to 1997.
Logicon, an information technology company, was acquired by Northrop-Grumman in
August 1997 and Mr. Woodhull continued as President through December 1998. Mr.
Woodhull currently serves on the boards of directors of FirstFed Financial
Corporation, the Chief Executives Organization, and the Los Angeles Metropolitan
YMCA. Mr. Woodhull holds a B.S. in engineering physics and an M.S. in applied
mathematics from the University of Colorado at Boulder.
MEETINGS OF BOARD AND COMMITTEES
The Board of Directors held six meetings during the fiscal year ended
December 31, 2000, and has held one meeting since the end of such fiscal year.
Among the incumbent nominees for membership on the Board of Directors, none
attended fewer than 75% of the aggregate of the meetings of the Board of
Directors during the 2000 fiscal year.
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The Board of Directors established an Audit Committee and a Compensation
Committee. The Board does not have a Nominating Committee and, in practice, the
entire Board performs the function of such Committee.
Audit Committee
The Company has a standing Audit Committee (the"Audit Committee") of the
Board of Directors. In 2000, the Audit Committee consisted of J. Christopher
Lewis, Albert Nagy and Luther Nussbaum, who are independent (as defined in Rule
4200(a)(14) of the National Association of Securities Dealers' listing
standards). If elected to the Board of Directors, Albert Nagy, John Woodhull and
Luther Nussbaum will serve as members of the Audit Committee for the fiscal year
ending December 31, 2001. The Board of Directors has adopted a written Charter
for the Audit Committee that is attached as Exhibit A.
The Audit Committee held five meetings during the 2000 fiscal year. None of
the members of the Audit Committee attended fewer than 75% of the aggregate of
the meetings of the Audit Committee during the 2000 fiscal year.
Compensation Committee
During the fiscal year ended December 31, 2000, the Compensation Committee
consisted of Joseph Fuller, Albert Nagy and Vincent Smith. If elected to the
Board of Directors, John Woodhull, Albert Nagy and J. Christopher Lewis will
serve as members of the Compensation Committee for the fiscal year ending
December 31, 2001. The Compensation Committee establishes salaries and other
forms of compensation for officers and other key employees of the Company and
administers the Company's stock option plan.
During the fiscal year ended December 31, 2000, the Compensation Committee
held two meetings. None of the members of the Compensation Committee attended
fewer than 75% of the aggregate of the meetings of such Committee during the
2000 fiscal year.
Director Compensation
All Directors are elected annually and hold office until the next Annual
Meeting of Shareholders and until their successors are duly elected and
qualified.
The Company may periodically award options to its Directors under its
Amended 1997 Stock Option Plan. Options granted to non-employee Directors of the
Company under the Plan typically have a term not to exceed five years and an
exercise price in an amount determined by the Board of Directors or a committee
thereof administering the Plan. As of April 12, 2001, options to purchase an
aggregate of 1,413,000 shares of the Company's Common Stock had been issued
under the Plan to the Company's current directors and executive officers (of
which 160,000 have been relinquished), at exercise prices ranging from $1.521 to
$16.750 per share.
The Company's Amended and Restated Articles of Incorporation and the Bylaws
provide for indemnification of the Company's directors and executive officers to
the extent permissible under California law. The Company generally enters into
agreements to indemnify its directors and executive officers in addition to the
indemnification provided for in the Articles of Incorporation and Bylaws. Among
other things, these agreements provide that the Company will indemnify, subject
to certain requirements, the Company's directors and executive officers for
certain expenses (including attorneys' fees), judgments, fines and settlement
amounts incurred by such person in any action or proceeding, including any
action by or in the right of the Company, on account of services by such person
as a director or executive officer of the Company, or as a director or officer
of any other company or enterprise to which the person provides services at the
request of the Company.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 12, 2001,
regarding the beneficial ownership of the Company's Common Stock by: (i) all
persons known by the Company to beneficially own more than 5% of the Company's
Common Stock, (ii) each director, director nominee and Named Executive Officer
(as hereinafter defined) of the Company, and (iii) all directors and current
executive officers as a group.
AMOUNT AND
NATURE OF PERCENTAGE OF
BENEFICIAL COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP STOCK
- -------------------------------------------------------------------------- --------------------- ---------------
Steven S. Myers........................................................... 7,416,838 38.6%
Trustee of the Steven Myers Revocable Trust, dated December 1,
2000(1)
Paula K. Mathis(2)........................................................ 3,598,029 18.7%
Trustee of the Paula K. Mathis Trust, dated November 17, 2000
Jess M. Ravich and James B. Upchurch(3)................................... 1,800,000 9.36%
Richard J. Riordan(4)..................................................... 1,283,892 6.7%
Michael A. Piraino........................................................ 0 *
Thomas F. Heinsheimer..................................................... 0 *
Ajaykumar K. Patel and Elizabeth Ann Stillman(5).......................... 130,635 *
Cathy L. Wood(6).......................................................... 118,750 *
Thomas J. Amrhein(7)...................................................... 76,586 *
Ronald S. Oxley........................................................... 0 *
Robert E. Casner(8)....................................................... 37,000 *
J. Christopher Lewis(9)................................................... 292,142 1.5%
Vincent C. Smith.......................................................... 600,000 3.1%
Joseph B. Fuller.......................................................... 0 *
Luther J. Nussbaum........................................................ 0 *
Albert S. Nagy(10)........................................................ 12,800 *
John R. Woodhull.......................................................... 0 *
All current directors and current executive officers as a group
(10 persons)........................................................... 8,647,751 44.99%
- ---------------
* Less than 1%
(1) Includes 3,598,029 shares held directly by the Paula K. Mathis Trust which
Mr. Myers holds sole voting power over pursuant to a marital settlement
agreement. Includes 178,800 shares owned directly by SummitJets, Inc., the
sole shareholder of which is Mr. Myers. Address is c/o Emergent Information
Technologies, Inc., 4695 MacArthur Court, Eighth Floor, Newport Beach,
California 92660.
(2) Mr. Myers holds the right to vote the indicated shares directly pursuant to
a marital settlement agreement. The right of disposition of the indicated
shares is held by Paula K. Mathis as trustee of the Paula K. Mathis Trust.
Address is c/o Steven S. Myers, Emergent Information Technologies, Inc.,
4695 MacArthur Court, Eighth Floor, Newport Beach, California 92660.
(3) Based upon information contained in Schedule 13D filed with the SEC on
January 8, 2001. Mssrs. Ravich and Upchurch are reported as the beneficial
owners of shares of the Company's common stock held directly by
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each of (i) Libra Mezzanine Partners, L.P., (ii) Libra Mezzanine Partners
II, L.P., (iii) Libra Mezzanine Partners II-A, L.P., and (iv) Libra Capital
Partners, L.P. The mailing address for Jess M. Ravich and James B. Upchurch
is 11766 Wilshire Boulevard, Suite 850, Los Angeles, California 90025.
(4) Address is c/o Riordan, Lewis & Haden, 300 S. Grand Avenue, 29th Floor, Los
Angeles, California 90071.
(5) Includes 68,000 shares issuable upon the exercise of options which are
exercisable as of, or will become exercisable within 60 days of, April 12,
2001.
(6) Comprised entirely of shares issuable upon the exercise of options which
are exercisable as of, or will become exercisable within 60 days of, April
12, 2001.
(7) Includes 29,750 shares issuable upon the exercise of options which are
exercisable as of, or will become exercisable within 60 days of, April 12,
2001.
(8) Includes 30,750 shares issuable upon the exercise of options which are
exercisable as of, or will become exercisable within 60 days of, April 12,
2001.
(9) Includes 15,750 shares issuable upon the exercise of options which are
exercisable as of, or will become exercisable within 60 days of, April 12,
2001.
(10) Includes 12,500 shares issuable upon the exercise of options which are
exercisable as of, or will become exercisable within 60 days of, April 12,
2001.
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EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information concerning compensation paid to
the Company's Chief Executive Officer and each of the six other executive
officers of the Company who earned, or would have earned, salary and bonus in
excess of $100,000 for services rendered to the Company for each of the fiscal
years in the three-year period ended December 31, 2000 (the "Named Executive
Officers").
LONG TERM
ANNUAL COMPENSATION
COMPENSATION(1) AWARDS
----------------------- -------------------
SECURITIES ALL OTHER
UNDERLYING COMPENSA-
SALARY BONUS STOCK OPTIONS TION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
- --------------------------------------------- ------- ---------- --------- ------------------- -------------
Steven S. Myers.................................. 2000 525,784 -- -- --
Chairman of the Board, Chief Executive 1999 550,000 -- 60,000(8) --
Officer and President 1998 707,675 -- 100,000(9) --
Michael A. Piraino(2)............................ 2000 418,697 25,000 600,000(3) --
Former President, Chief Operating Officer, 1999 300,000 100,000 60,000(10) --
Acting Chief Financial Officer, Secretary 1998 -- -- 300,000(11) --
Cathy L. Wood(4)................................. 2000 123,799(5) -- 250,000 --
Chief Financial Officer and Secretary
Thomas F. Heinsheimer(7)......................... 2000 340,670 61,017 -- --
Former Senior Vice President and Chief 1999 375,148(12) -- 54,800 17,158(13)
Technology Officer 1998 268,340 80,000 32,000 23,294(16)
Ajaykumar K. Patel............................... 2000 298,461 43,525 350,000 --
Group President and General Manager 1999 215,402 93,332 79,000 --
1998 200,000 46,381 26,000 --
Thomas J. Amrhein................................ 2000 231,145 154,198 50,000 --
Group President and General Manager 1999 200,000 62,000 57,000 6,100(14)
1998 269,188 72,203 20,000 24,574(15)
Robert E. Casner(6).............................. 2000 191,346 89,585 30,000 --
Former Group President and General 1999 178,319 76,284 73,000 --
Manager 1998 81,778 850 25,000 --
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(1) Excludes perquisites and other personal benefits that, in the aggregate,
do not exceed the lesser of either $50,000 or 10% of the total annual
salary and bonus reported for the Named Executive Officer.
(2) Mr. Piraino's position as the Company's President, Chief Operating
Officer, Acting Chief Financial Officer and Secretary was terminated
effective August 30, 2000. Mr. Piraino's employment with the Company was
terminated by mutual agreement and consent of Mr. Piraino and the Company
on September 30, 2000. The terms of Mr. Piraino's employment agreement
entitle him to full compensation through September 30, 2001.
(3) These options terminated on December 30, 2000, pursuant to termination of
Mr. Piraino's employment with the Company. All unexercised options held by
Mr. Piraino reverted back into the Plan reserve account.
(4) Ms. Wood became the Company's interim Chief Financial Officer effective
August 31, 2000. Ms. Wood entered into a consulting agreement dated
September 25, 2000.
(5) This represents the aggregate amount of all bi-weekly payments made to Ms.
Wood pursuant to her consulting agreement with the Company for fiscal year
2000.
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(6) Effective January 1, 2001, Mr. Casner ceased serving as the Company's Group
President and General Manager.
(7) Mr. Heinsheimer resigned as the Company's Senior Vice President and Chief
Technology Officer effective May 3, 2000.
(8) In July 1999, Mr. Myers was granted 60,000 stock options in his capacity as
Chairman and Chief Executive Officer of the Company pursuant to the
Company's Amended 1997 Stock Option Plan. Mr. Myers relinquished all of
these options in October 1999.
(9) In December 1998, Mr. Myers was granted 100,000 stock options in his
capacity as Chairman and Chief Executive Officer of the Company pursuant to
the Company's 1997 Stock Option Plan. Mr. Myers relinquished all of these
options in October 1999.
(10) In July 1999, Mr. Piraino was granted 60,000 stock options in his capacity
as a Director, President and Chief Operating Officer of the Company. Mr.
Piraino relinquished all of these options in October 1999.
(11) In December 1998, Mr. Piraino was granted 300,000 stock options. Mr.
Piraino relinquished all of these options in October 1999.
(12) This amount represents hourly compensation paid to Dr. Heinsheimer.
(13) This amount represents commissions paid to Dr. Heinsheimer.
(14) This amount represents premiums paid by the Company in connection with Mr.
Amrhein's life insurance policy and premiums paid by the Company under the
Company's health insurance plan.
(15) This amount represents $15,227 in commissions paid to Mr. Amrhein; $5,686
in relocation expenses; premiums paid by the Company in connection with Mr.
Amrhein's life insurance policy; and premiums paid by the Company under the
Company's health insurance plan.
(16) This amount represents commissions paid to Dr. Heinsheimer during 1998.
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Options Granted in Last Fiscal Year
The following table provides certain information concerning stock options
granted to the Named Executive Officers during the fiscal year ended December
31, 2000. This information includes hypothetical potential gains from stock
options granted in the 2000 fiscal year. These hypothetical gains are based
solely on assumed annual growth rates of 5% and 10% in the value of the
Company's Common Stock price over the five-year life of the stock options
granted in 2000. These assumed rates of growth were selected by the Securities
and Exchange Commission for illustration purposes only, and are not intended to
predict future stock prices, which will depend upon market conditions and the
Company's future performance and prospects.
NUMBER OF PERCENT OF
SHARES OF TOTAL POTENTIAL REALIZABLE
COMMON OPTIONS VALUE AT ASSUMED
STOCK GRANTED TO EXERCISE ANNUAL RATES OF
UNDERLYING EMPLOYEES OR BASE STOCK PRICE
OPTIONS DURING PRICE PER EXPIRATION APPRECIATION FOR
NAME GRANTED FISCAL YEAR SHARE(1) DATE OPTION TERM (2)
- ---------------------------- -------------- ------------- ------------ ------------- ------------------------
5% ($) 10% ($)
--------- ----------
Steven S. Myers ............ -- -- -- -- -- --
Michael A. Piraino(3) ...... 80,004 3.87% $ 2.500 12/30/00 10,001 20,001
519,996 25.15% $ 2.500 12/30/00 65,000 129,999
Ajaykumar K. Patel ......... 24,495 1.18% $ 1.531 9/30/05 10,369 22,905
225,505 10.91% $ 1.531 9/30/05 95,458 210,868
25,012 1.21% $ 2.500 6/21/05 17,276 38,175
74,988 3.63% $ 2.500 6/21/05 51,795 114,452
Cathy L. Wood .............. 250,000 12.09% $ 1.531 9/30/10 240,811 610,167
Thomas F. Heinsheimer ...... -- -- -- -- -- --
Thomas J. Amrhein .......... 7,505 .36% $ 2.500 6/21/05 5,184 11,455
5,000 .24% $ 2.500 6/21/05 3,454 7,631
22,495 1.09% $ 2.500 6/21/05 15,537 34,334
15,000 .73% $ 2.500 6/21/05 10,361 22,894
Robert E. Casner ........... 3,752 .18% $ 1.531 9/25/05 1,588 3,508
11,248 .54% $ 1.531 9/25/05 4,761 10,518
3,762 .18% $ 2.500 6/21/05 2,598 5,742
11,238 .54% $ 2.500 6/21/05 7,762 17,152
- ---------------
(1) The options were granted at an exercise price equal to the fair market
value of the Common Stock on the date of grant. The exercise price may be
paid by delivery of cash or already owned shares, subject to certain
conditions. As of April 16, 2001, the last sale price of the Company's
Common Stock as quoted on the Nasdaq Stock Market was $1.50.
(2) Pursuant to applicable regulations, these amounts represent certain assumed
rates of appreciation only. Actual gain, if any, on stock option exercises
are dependent on the future performance of the Common Stock and overall
stock market conditions. The amounts reflected in this table may not
necessarily be achieved.
(3) These options terminated on December 30, 2000, pursuant to the termination
of Mr. Piraino's employment with the Company.
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Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides certain information regarding stock options
exercised by the Named Executive Officers during the fiscal year ended December
31, 2000, as well as the number of exercisable and unexercisable in- the-money
stock options and their values at fiscal year-end. An option is in- the-money if
the fair market value for the underlying securities exceeds the exercise price
of the option.
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY
AT OPTIONS AT
SHARES DECEMBER 31, 2000 DECEMBER 31, 2000(1)
ACQUIRED ------------------------ ------------------------
ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
- ------------------------------------ ---------- ---------- ------------------------ ------------------------
Steven S. Myers..................... -- -- -- / -- -- / --
Michael A. Piraino.................. -- -- -- / -- -- / --
Ajaykumar K. Patel.................. -- -- 32,750/ 422,250 -- / --
Cathy L. Wood....................... -- -- -- / 250,000 -- / --
Thomas F. Heinsheimer............... -- -- -- / -- -- / --
Thomas J. Amrhein................... -- -- 24,250/ 102,750 -- / --
Robert E. Casner.................... -- -- 30,750/ 97,250 -- / --
- ---------------
(1) Calculated on the basis of $0.87, the closing price of the Company's Common
Stock on December 31, 2000, minus the exercise price of the option,
multiplied by the number of shares subject to the option.
Employment Agreements and Termination of Employment Arrangements
The Company entered into an Employment Agreement with Ajay Patel effective
May 1, 2000. This Employment Agreement provides for a term that begins on the
effective date and continues until January 31, 2003. The Employment Agreement
provides for an annual base salary equal to $270,000. In addition, Mr. Patel is
eligible to receive an incentive bonus of up to $230,000, as determined by the
Board of Directors with the recommendation of the Compensation Committee. The
Employment Agreement also provides that, upon the Company's termination of the
employee without "cause", as defined therein, the Company will continue to pay
the employee his base salary and certain benefits until the earlier to occur of
(i) the last day of the term of the agreement, (ii) the expiration of twelve
(12) months after the effective date of termination, (iii) the date upon which
the employee becomes employed on a full-time basis, or (iv) the date on which
the employee violates certain non-competition and non-disclosure provisions of
the agreement.
The Company entered into an Employment Agreement with Thomas Amrhein
effective May 1, 2000. This Employment Agreement provides for a two-year term
and a base salary equal to $240,000. In addition, Mr. Amrhein is eligible to
receive an incentive bonus of up to $200,000, as determined by the Board of
Directors with the recommendation of the Chief Executive Officer. The Employment
Agreement also provides that, upon the Company's termination of the employee
without "cause", as defined therein, the Company will continue to pay the
employee his base salary and certain benefits until the earlier to occur of (i)
the last day of the term of the agreement, (ii) the expiration of twelve (12)
months after the effective date of termination, (iii) the date upon which the
employee becomes employed on a full-time basis, or (iv) the date on which the
employee violates certain non-competition and non-disclosure provisions of the
agreement.
The Company, through its SM&A subsidiary, entered into an Employment
Agreement with Ronald Oxley effective April 3, 2000. This Employment Agreement
provides for a three-year term and a base salary equal to $200,000. In addition,
Mr. Oxley is eligible to receive an incentive bonus of up to $200,000, as
determined by the
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Board of Directors with the recommendation of the Chief Executive Officer. The
Employment Agreement also provides that, upon the Company's termination of the
employee without "cause", as defined therein, the Company will continue to pay
the employee his base salary and certain benefits until the earlier to occur of
(i) the last day of the term of the agreement, (ii) the expiration of six (6)
months after the effective date of termination, (iii) the date upon which the
employee becomes employed on a full-time basis, or (iv) the date on which the
employee violates certain non-competition and non-disclosure provisions of the
agreement.
The Company entered into an Employment Agreement with Mr. Myers effective
February 2000 which was subsequently amended on December 29, 2000. This Amended
Employment Agreement provides for a three-year term and a base salary equal to
$400,000. In addition, Mr. Myers is eligible to receive an incentive bonus of up
to $400,000, as determined by the Board of Directors with the recommendation of
the Compensation Committee. The Employment Agreement also provides that, upon
the Company's termination of the employee without "cause", as defined therein,
the Company will continue to pay the employee his base salary and certain
benefits until the earlier to occur of (i) the last day of the term of the
agreement, (ii) the expiration of twelve (12) months after the effective date of
termination, (iii) the date upon which the employee becomes employed on a
full-time basis, or (iv) the date on which the employee violates certain
non-competition and non-disclosure provisions of the agreement. See "Board
Compensation Committee Report on Executive Compensation."
The Company entered into an Employment Agreement with Mr. Piraino effective
February 2000. Mr. Piraino's employment with the Company was terminated by
mutual agreement and consent of Mr. Piraino and the Company on September 30,
2000. This Employment Agreement provided for a three-year term and an annual
base salary equal to $400,000. In addition, Mr. Piraino was eligible to receive
an incentive bonus of up to $300,000, as determined by the Board of Directors
with the recommendation of the Compensation Committee. Under the Employment
Agreement, the Company will continue to pay Mr. Piraino his base salary and
certain benefits subsequent to his termination until the earlier to occur of (i)
the last day of the term of the agreement, (ii) the expiration of twelve (12)
months after the effective date of termination, (iii) the date upon which the
employee becomes employed on a full-time basis, or (iv) the date on which the
employee violates certain non-competition and non-disclosure provisions of the
agreement. The Company See "Board Compensation Committee Report on Executive
Compensation."
Certain Relationships and Related Transactions
On September 25, 2000 the Company entered into a Consulting Agreement with
Financial Management Partners whereby Cathy L. Wood is to perform the duties of
the Company's Interim Chief Financial Officer. Ms. Wood is the President of
Financial Management Partners. The Consulting Agreement provides for the payment
to Financial Management Partners for Ms. Wood's consulting services at a
bi-weekly rate initially equal to $17,500, with a reduction in the bi-weekly
rate to $14,000 upon the completion of the Company's fiscal year 2000 debt
restructuring. Ms. Wood was also granted an option to purchase 250,000 shares of
the Company's Common Stock at an exercise price of $1.53 under the Consulting
Agreement. The exercise price of the option was equal to the final price at
which the Company's Common Stock was traded at the time of the agreement. The
Company considers the fees paid for the consulting services of Ms. Wood to be
competitive with those paid for persons providing similar executive experience
and service in the context of non-employee consulting.
On August 31, 2000 the Company entered into a Consulting Services Agreement
with The Nagy Group for the provision of services related to assisting the
Company in pursuing and evaluating certain restructuring transactions. Albert S.
Nagy, a director of the Company during fiscal year 2000 and a director nominee
for fiscal year 2001 is the Managing Director of The Nagy Group. The Consulting
Services Agreement provides for monthly compensation of $15,000 per month to The
Nagy Group. These monthly fees and terms are considered by the Company to be
competitive with the rates and terms provided by unaffiliated third parties for
similar consulting services.
In September 1998, Space Applications Corporation ("SAC"), then a wholly-
owned subsidiary of the Company, entered into a Common Stock Purchase Agreement
(the "Purchase Agreement") with SummitJets, Inc., (formerly known as Summit
Aviation, Inc.) ("Summit"), a company wholly owned by Steven S. Myers, the
Company's Chief Executive Officer at such
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time, pursuant to which Summit purchased from SAC 4,500 shares of common stock
of Savant Corporation ("Savant"), for an aggregate purchase price of $2,000,000,
of which $200,000 was paid in cash and the remaining $1,800,000 was paid by a
promissory note guaranteed by Mr. Myers (the "Note"). The original Note provided
for interest at a rate of nine percent (9%) per annum, and was payable in thirty
(30) equal monthly installments of $30,000 each, commencing October 31, 1998,
with a final balloon payment of all outstanding principal and interest owing due
and payable on March 31, 2001. The terms of the Note were renegotiated in March
1999 to provide for monthly interest payments of thirty day LIBOR until March
31, 2001, with a balloon payment of all outstanding principal and interest owing
due and payable on March 31, 2001. The largest aggregate amount of indebtedness
outstanding at any time since the beginning of the Company's 1999 fiscal year in
connection with this transaction was $1,700,000.
The Agreement provides that, if substantially all of the assets of Savant
are sold, or if 50% or more of the common stock purchased in the transaction is
sold or exchanged in a merger or other reorganization (a "Sale Transaction"),
within six months of the date of the Agreement, Mr. Myers would pay to SAC an
amount equal to 50% of any amount in excess of $2,000,000 ("Excess Proceeds")
payable to Mr. Myers in connection with the Sale Transaction. If the Sale
Transaction occurred after six months but within twelve months of the date of
the Agreement, Mr. Myers would be required to pay to SAC an amount equal to 25%
of any Excess Proceeds. The Note would become payable upon the Sale Transaction
if such sale resulted in a payment obligation to Mr. Myers equal to or greater
in value than the original principal balance of the Note. The terms of the
Agreement were approved by the Company's Board of Directors and considered to be
as favorable as would have been obtained from an unaffiliated third party. In
December 1998, SAC merged into Emergent Information Technologies (East),
formerly known as SM&A Corporation (East), a wholly-owned subsidiary of the
Company. On September 22, 2000 the outstanding balance under the Note was paid
and all obligations under the Purchase Agreement were terminated.
In June 1998, the Company sold its Turbo Commander aircraft to Summit for
$880,000 represented by a promissory note secured by a first priority security
interest on the aircraft. The note bears interest at a rate of 8.5% per annum,
and was due and payable in full no later than June 25, 1999. The largest
aggregate amount of indebtedness outstanding at any time since the beginning of
the Company's 1999 fiscal year in connection with this transaction was $880,000.
The entire amount of the indebtedness was repaid in April 1999. The terms of
such sale were considered by the Company's Board of Directors to be as favorable
as would have been obtained from an unaffiliated third party.
The Company charters aircraft from time to time through Summit, an air
service chartering company controlled by Steven S. Myers, the Company's
principal shareholder. The terms of use and charter rates paid by the Company
are established by Summit, and are considered by the Company to be competitive
with charter rates and on terms as favorable as those from unaffiliated third
parties for similar aircraft. Charter fees amounted to approximately $148,700
for the fiscal year ended December 31, 2000.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 2000, the members of the
Compensation Committee were Joseph Fuller, Albert Nagy and Vincent Smith, all of
whom were non-employee directors of the Company. None of the members of the
Compensation Committee was, at any time during fiscal 2000 or at any other time,
an officer or employee of the Company. There are no Compensation Committee
interlocks between the Company and other entities involving the Company's
executive officers and Board members who serve as executive officers or Board
members of such other entities.
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BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (the "Committee") of the Board of Directors
hereby submits its report concerning the compensation policies of the Company.
The Committee oversees the general compensation plan of the Company, sets the
specific compensation of the Company's Chief Executive Officer and Chief
Operating Officer (the "Senior Executives"), reviews the Chief Executive
Officer's recommendations for compensation levels for other executive officers,
and oversees the Company's stock incentive plans. During the fiscal year ending
December 31, 2000 the Committee was comprised of two non-employee directors who
have no interlocking relationships as defined by the Securities and Exchange
Commission.
Compensation Policy and Philosophy
The Company's executive compensation program is designed to align executive
compensation with the Company's business strategy and performance. The goals of
the executive compensation program are: (i) to attract and retain key executives
critical to the success of the Company; (ii) to provide levels of compensation
which are competitive with other companies of similar size and service
offerings; and (iii) to motivate executives to enhance long-term shareholder
value by building appropriate ownership in the Company.
Executive Compensation Components
The Company's executive compensation package is comprised of three
components: base salary, annual incentive bonuses and stock options.
Base salaries are the fixed component of the executive officers'
compensation package. For fiscal 2000, the Compensation Committee approved the
base salaries of the Senior Executives based on (i) salaries paid to executive
officers with comparable responsibilities and employed by companies with
comparable businesses, (ii) performance and profitability of the Company in
fiscal 1999, and (iii) individual performance in fiscal 1998 or, in the case of
new hires, market conditions. The Compensation Committee reviews Senior
Executives' salaries annually and exercised its judgment based on all of the
factors described above in making its decisions. For all other executives, the
Committee reviews the Chief Executive Officer's recommendations for base
salaries and attempts to establish levels that are consistent with similar
companies. No specific formula is applied to determine the weight of each
criteria.
The award of any bonuses to Senior Executives by the Committee is based
upon the audited financial results of the Company as compared to the financial
goals set by the Company. Additionally, the Committee reviews bonuses for other
executives, which are recommended by the Chief Executive Officer and are based
on the individual's contribution to the Company.
A portion of the compensation of executive officers may from time to time
be based upon the award of stock options which rely on increases in the value of
the Company's Common Stock. In such cases, the issuance of options is intended
to encourage such employees to establish a meaningful, long-term ownership
interest in the Company consistent with the interests of the Company's
shareholders. Under the Company's stock option plan, options are granted from
time to time to certain officers, directors and key employees of the Company and
its subsidiaries at the fair market value of the Company's Common Stock at the
time of grant. Because the compensation element of options is dependent on
increases over time in the market value of such shares, the use of stock options
represents compensation that is tied to the Company's long-term performance.
Stock options covering 1,280,000 shares of the Company's Common Stock were
granted to the Company's executive officers and stock options covering 787,300
shares of the Company's Common Stock were granted to other employees or
directors of the Company during fiscal 2000 under the Company's Amended Stock
Option Plan. The number of options granted to each executive officer or employee
was based primarily on the executive's or employee's ability to influence the
Company's long-term growth and profitability. The Compensation Committee
believes that option grants afford a desirable long-term compensation method
because they closely ally the interests
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of management with shareholder value and motivate executive officers to improve
long-term stock market performance.
Compensation of Senior Executives
In November 1997, the Company entered into a two-year employment agreement
with Steven S. Myers, the Company's Chief Executive Officer at such time, which
provided for an annual base salary of $900,000. In addition, Mr. Myers was
eligible to receive, at the discretion of the Compensation Committee, a bonus
not to exceed $900,000, and the grant of stock options pursuant to the Company's
Amended Stock Option Plan. During 1998, the Committee adjusted Mr. Myers' salary
to $550,000. This salary level is more consistent with compensation levels of
similar companies, and the adjustment permitted the Company to add to its senior
management team without incurring increased compensation expense. In 1999, Mr.
Myers did not receive a bonus. In addition to his base salary, Mr. Myers
received options to purchase 60,000 shares of the Company's Common Stock, at the
closing price of the Company's Common Stock on the date of grant, subject to a
four-year vesting schedule. Mr. Myers relinquished these options in October
1999. The Company entered into a new Employment Agreement with Mr. Myers, the
Company's current Chief Executive Officer, effective February 2000, which as
amended provides for a six-year term and an annual base salary of $400,000. Mr.
Myers is also eligible to receive a bonus, to be determined by the Board of
Directors and the Compensation Committee, not to exceed $400,000. In 2000, Mr.
Myers did not receive a bonus or any options to purchase shares of the Company's
Common Stock.
In December 1998, the Company entered into a three-year employment
agreement with Michael A. Piraino, the Company's President and Chief Operating
Officer at such time, which provided for an annual base salary of $300,000. In
addition, Mr. Piraino was eligible to receive, at the discretion of the
Compensation Committee, a bonus not to exceed $300,000, and the grant of stock
options pursuant to the Company's Amended 1997 Stock Option Plan. Mr. Piraino
received options to purchase 300,000 shares of the Company's Common Stock in
December 1998, at the closing price of the Common Stock on the date of grant. In
1999, Mr. Piraino received a contractually guaranteed minimum bonus in the
amount of $100,000. In addition to his base salary, Mr. Piraino received options
to purchase 60,000 shares of the Company's common Stock, at the closing price of
the Company's Common Stock on the date of grant, subject to a four-year vesting
schedule. Mr. Piraino relinquished all of his options in October 1999. The
Company entered into a new Employment Agreement with Mr. Piraino effective
February 2000 which was terminated on September 30, 2000, which provided for a
three-year term and an annual base salary of $400,000. Mr. Piraino was also
eligible to receive a bonus, to be determined by the Board of Directors and the
Compensation Committee, not to exceed $300,000. Under the terms of Mr. Piraino's
2000 employment contract he is entitled to continued salary payments until the
sooner of (i) twelve months from the date of his termination, (ii) the time at
which he obtains new full-time employment, or (iii) upon the violation of
certain non-disclosure or non-competition provisions. In 2000, Mr. Piraino
received a $25,000 bonus and an option to purchase 600,000 shares of the
Company's Common Stock, which terminated on December 30, 2000 pursuant to the
termination of his employment with the Company. As of April 20, 2001 Mr. Piraino
has received $97,116 in compensation for fiscal year 2001.
The Company entered into an Employment Agreement with Ajay Patel, the
Company's current Chief Operating Officer, effective May 1, 2000. This
Employment Agreement provides for a term that begins on the effective date and
continues until January 31, 2003. The Employment Agreement provides for an
annual base salary equal to $270,000. In addition, Mr. Patel is eligible to
receive an incentive bonus of up to $230,000, as determined by the Board of
Directors with the recommendation of the Compensation Committee. The Employment
Agreement also provides that, upon the Company's termination of the employee
without "cause", as defined therein, the Company will continue to pay the
employee his base salary and certain benefits until the earlier to occur of (i)
the last day of the term of the agreement, (ii) the expiration of twelve (12)
months after the effective date of termination, (iii) the date upon which the
employee becomes employed on a full-time basis, or (iv) the date on which the
employee violates certain non-competition and non-disclosure provisions of the
agreement. In 2000, Mr. Patel received a $43,525 bonus and options to purchase
350,000 shares of the Company's Common Stock.
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COMPENSATION COMMITTEE:
Joseph Fuller
Albert Nagy
Vincent Smith
Interests of Certain Persons in Matter to be Acted Upon
All Directors and executive officers of the Company are eligible to
participate in the Company's Amended 1997 Stock Option Plan and to receive
option grants thereunder and, as of April 12, 2001, the following individuals,
each of whom has been a Director or executive officer of the Company at some
time since the beginning of the last fiscal year, have received options to
purchase shares of the Company's Common Stock pursuant to the Plan: Steven S.
Myers, Michael A. Piraino, Ajaykumar K. Patel, Cathy L. Wood, Thomas F.
Heinsheimer, Thomas J. Amrhein, Gary Markle, William A. Alberts, Ronald S.
Oxley, Robert E. Casner, J. Christopher Lewis, Albert S. Nagy, Vincent C. Smith,
Joseph B. Fuller and Luther J. Nussbaum.
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on its market price, with the
cumulative total return of companies on The Nasdaq Stock Market (U.S. common
stocks), and companies with the same Standard Industrial Classification Code
("SIC Code"), assuming reinvestment of dividends, for the period beginning
January 29, 1998 through the Company's fiscal year ended December 31, 2000. The
Company's Common Stock was initially offered to the public on January 29, 1998.
This graph assumes that the value of the investment in the Company's Common
Stock and each of the comparison groups was $100 on January 30, 1998.
[PERFORMANCE GRAPH]
1/29/98 12/31/98 12/31/99 12/31/00
EMERGENT INFORMATION TECHNOLOGIES, INC. 100.00 158.33 51.04 7.29
SIC CODE INDEX 100.00 221.88 505.60 248.55
NASDAQ MARKET INDEX 100.00 135.48 238.95 150.19
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PROPOSAL NO. 3
APPROVAL OF AMENDMENT TO THE 1997 STOCK OPTION PLAN
On March 21, 2001, the Board of Directors approved, subject to the approval
of the shareholders, an amendment and restatement of the Company's Amended 1997
Stock Option Plan (the "Option Plan"). The Board of Directors has determined
that the interests of the Company and its shareholders can be better served by
amending and restating the Option Plan to adopt technical amendments that
enhance the Company's efforts to continue providing competitive stock incentives
that attract and retain key personnel. The number of shares issuable upon
exercise of options is not affected by these amendments.
The amendment and restatement of the Option Plan also is intended to
preserve the Company's ability to claim tax deductions related to options
granted under the Option Plan in accordance with Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code") and related regulations. Under
Section 162(m) of the Code, the Company is not entitled to a federal income tax
deduction for compensation paid to certain covered employees (generally, the
Chief Executive Officer and the four other most highly compensated officers) in
excess of $1 million unless the compensation satisfies certain exceptions.
Compensation that is "performance-based" is an exception to this limit. Certain
of the amendments to the Option Plan are intended to allow options granted under
the Option Plan to continue to qualify as "performance-based" compensation. One
of the conditions of this exception is that the shareholders approve the
material terms of the Option Plan, as amended.
The Option Plan was originally adopted on November 19, 1997 and has been
subsequently amended several times. The original and continuing purpose of the
Option Plan is to attract, retain and provide incentives to key personnel upon
whose efforts the Company's success and future growth depends.
Summary of Amendments to the Option Plan. The Option Plan Amendment changes
the Option Plan in the following principal respects:
- As amended, the Option Plan will provide that no person can be granted
options to purchase more than 500,000 shares of Common Stock
thereunder.
- As amended, the Option Plan will require that all incentive stock
options have an exercise price per share of Common Stock that is no
less than the 100% of fair market value per share on the date of
grant. In addition, except in the case of the Chief Executive Officer
and the Company's other four most highly compensated officers, the
amended Option Plan will require that Nonstatutory Stock Options have
an exercise price per share of Common Stock that is no less than 85%
of the fair market value per share on the date of grant. In the case
of the Chief Executive Officer and the Company's other four most
highly compensated officers, the amended Option Plan will require that
Nonstatutory Stock Options have an exercise price per share of Common
Stock that is no less than 100% of the fair market value per share on
the date of grant. Fair market value is generally determined based on
the closing price of the Common Stock on any national securities
exchange to which the Common Stock is admitted for the last trading
date preceding the date of grant.
The following is a general summary of the Option Plan which is qualified in
its entirety by reference to the full text of the Option Plan as proposed to be
amended, attached to this Proxy Statement as Exhibit B.
Shares Subject to the Option Plan
The stock available for issuance under the Option Plan consists of shares
of the Company's authorized but unissued Common Stock. The Board of Directors
originally reserved an aggregate of 1,500,000 shares of Common Stock for
issuance under the Option Plan. Subsequent amendments to the Option Plan
increased the number of shares that may be granted under the Option Plan to
4,000,000 shares. If any previously granted option expires or otherwise
terminates, in whole or in part, without having been exercised in full, the
stock not issued under such option will revert to and again become available for
issuance under the Option Plan. The number of shares
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issuable pursuant to the Option Plan, and the exercise price of such options, is
subject to proportional adjustment to reflect stock splits, stock dividends,
mergers, consolidations, and similar events. The amendments do not affect the
number of shares that may be granted.
Eligibility for Participation
Options granted under the Option Plan may be either "incentive stock
options" (which qualify for special tax treatment under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code")) or nonstatutory stock
options. Employees, including officers and directors who are employees, of the
Company and its subsidiaries (an "Eligible Employee"), may be granted either
incentive or nonstatutory stock options. However, members of the Board of
Directors who are not officers or employees of the Company or its subsidiaries,
and consultants to the Company and its subsidiaries (together, an "Eligible
Director or Consultant"), may only be granted nonstatutory stock options.
As of March 31, 2001, approximately 597 persons were eligible to
participate in the Option Plan, and 2,705,806 shares were subject to outstanding
options.
Administration
The Option Plan is administered by the Board of Directors or by a committee
of non-employee directors designated by the Board of Directors. Subject to the
terms of the Option Plan, the Board of Directors determines the persons who are
to receive awards, the number of shares subject to each such award, and the
terms and conditions of such awards.
Exercise of Options
The Board of Directors or committee thereof may provide that the total
number of shares of stock subject to an option may vest and become exercisable
in periodic installments.
The exercise price of any incentive stock option granted under the Option
Plan may not be less than the fair market value of the shares of Common Stock
underlying such option, determined as of the date of grant. If an Eligible
Employee possesses at least 10% of the total combined voting power of all
classes of the Company's stock at the time of grant of an incentive stock option
(a "10% Eligible Employee"), the exercise price may not be less than 110% of the
fair market value of the Common Stock underlying the option, determined as of
the date of grant. The exercise price of nonstatutory stock options may not be
less than 85% of the fair market value of the underlying Common Stock as of the
date of grant. The exercise price of an option may be paid in cash or, at the
discretion of the Board of Directors or committee, through the delivery of other
shares of Common Stock of the Company or delivery to the Company of all or part
of an option granted under the Option Plan for cashless exercise. The Board of
Directors or committee may provide for other methods of payment upon the
exercise of an option.
As of March 31, 2001, the aggregate fair market value of shares of Common
Stock subject to outstanding options under the Option Plan was $3,544,606 based
upon the closing sale price of $1.31 on The Nasdaq SmallCap Market on such date.
Expiration of Options
No option granted under the Option Plan may be made exercisable after the
expiration of ten years from the date such option is granted. In addition, any
option granted to a 10% Eligible Employee may not be made exercisable after the
expiration of five years from the date the option is granted.
Termination of Employment. Before the expiration date of an option, such
option is exercisable by an Eligible Employee or Eligible Director or Consultant
while such person continues to be employed by, or is performing services for,
the Company or its subsidiaries. Upon the termination of an Eligible Employee's
employment or the
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termination of an Eligible Director or Consultant's relationship with the
Company or its subsidiaries (other than termination by death or disability), an
option may be exercised (to the extent exercisable at the date of termination)
within the earlier of ninety (90) days after such termination of employment or
relationship, or the expiration date of the option as provided in the option
agreement.
Death or Disability. In the event an Eligible Employee's employment or
Eligible Director or Consultant's relationship with the Company or its
subsidiaries terminates by reason of disability, the option may be exercised (to
the extent exercisable at the date of termination) within the earlier of six (6)
months following such termination or the expiration date of the option as
provided in the option agreement. Following the death of an Eligible Employee or
Eligible Director or Consultant, the option may be exercised (to the extent
exercisable at the date of death) by the optionee's estate on the earlier of
twelve (12) months from the date of death or the expiration date of such option
as provided in the option agreement.
Options which are not exercisable by an Eligible Employee or Eligible
Director or Consultant at the time of termination of employment or termination
of relationship with the Company or its subsidiaries will terminate as of the
date of termination of employment or relationship, and will not be exercisable.
Corporate Change
Upon a dissolution, a liquidation or a sale of substantially all of the
assets of the Company, a merger or consolidation in which the Company is not the
surviving entity, or a reverse merger in which the Company is the surviving
entity but the shares of Common Stock of the Company are converted into other
property (collectively, a "Corporate Change"), the surviving entity must assume
any outstanding options under the Option Plan or substitute similar options for
such options, or the options will remain in full force and effect. If the
surviving entity refuses to continue such options or substitute similar options,
then the time in which such options are exercisable will be accelerated and the
options will terminate to the extent not exercised prior to the occurrence of a
Corporation Change.
Amendments
The Board of Directors may at any time amend, suspend or terminate the
Option Plan, subject to the following: (i) no amendment or termination may,
without the consent of an optionee, adversely affect the rights of the optionee
under any option then outstanding, and (ii) approval by the Company's
shareholders is required for an amendment increasing the maximum number of
shares of Common Stock that may be issued under the Option Plan.
Term of Option Plan
Unless terminated earlier as provided in the Option Plan, the Option Plan
will terminate on October 1, 2007, which is ten years from the date the Option
Plan was first adopted by the Board.
Federal Income Tax Information
Incentive stock options. An optionee will not recognize taxable income upon
the grant or the exercise of an incentive stock option, and the Company will not
be entitled to an income tax deduction as the result of the grant or exercise of
an incentive stock option. Any gain or loss resulting from the subsequent sale
of shares of Common Stock acquired upon exercise of an incentive stock option
will be long-term capital gain or loss if the sale is made after the later of
(a) two years from the date of grant of the option or (b) one year from the date
of exercise of the option.
If an optionee sells Common Stock acquired upon the exercise of an
incentive stock option prior to the expiration of both of the periods described
in (a) and (b) above, the sale will be a "disqualifying disposition" under the
federal tax laws. The optionee will generally recognize ordinary income in the
year of the disqualifying disposition in an amount equal to the difference
between the exercise price of the incentive stock option and the
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fair market value of the shares of the Company's Common Stock on the date of
exercise of the incentive stock option. However, the amount of ordinary income
recognized by the optionee generally will not exceed the difference between the
amount realized on the sale and the exercise price. The Company will be entitled
to an income tax deduction equal to the amount taxable to the optionee. Any
additional gain recognized by the optionee upon the disqualifying disposition
will be taxable as long-term capital gain if the shares of Common Stock have
been held for more than one year before the disqualifying disposition or
short-term capital gain if the shares of Common Stock have been held for less
than one year before the disqualifying disposition.
The amount by which the fair market value, determined on the date of
exercise, of the shares of Common Stock purchased upon exercise of an incentive
stock option exceeds the exercise price is also an item of tax preference that
may be subject to alternative minimum tax in the year that the incentive stock
option is exercised.
Nonstatutory stock options. As with an incentive stock option, an optionee
will not recognize taxable income on the grant of a nonstatutory stock option,
and the Company will not be entitled to an income tax deduction as the result of
the grant of a nonstatutory stock option. Unlike an incentive stock option,
however, upon the exercise of a nonstatutory stock option, the optionee
generally will recognize ordinary income, and the Company will be entitled to an
income tax deduction, in the amount by which the fair market value of the shares
of Common Stock purchased upon exercise, determined as of the date of exercise,
exceeds the exercise price. This income is part of the optionee's "wages" for
which the Company is required to withhold federal and state income as well as
employment taxes.
Upon the sale of shares of Common Stock acquired upon the exercise of a
nonstatutory stock option, the optionee will recognize capital gain or loss in
an amount equal to the difference between the proceeds received upon sale and
the fair market value of the shares on the date of exercise. If the optionee has
held the shares for more than one year at the time of the sale, the capital gain
or loss will be long-term, otherwise the capital gain will be short-term.
New Plan Benefits
The following table sets forth information concerning stock options granted
pursuant to the Option Plan from January 1, 2000 through December 31, 2000 to
(i) the Named Executive Officers, (ii) all current executive officers as a
group, (iii) all current directors who are not executive officers as a group,
and (iv) all employees, including all current officers who are not executive
officers, as a group.
AVERAGE
NO. OF SHARES EXERCISE
SUBJECT TO PRICE
OPTIONS GRANTED PER SHARE
NAME TITLE (#) ($)
- --------------------------- ------------------------------------------- --------------- ---------
Steven S. Myers............. Chairman of the Board of Directors, -- --
President and Chief Executive Officer
Michael A. Piraino(1)....... Former Chief Executive Officer, President, 600,000 2.50
Acting Chief Financial Officer, Secretary,
Director
Thomas F. Heinsheimer(2).... Former Senior Vice President, Chief -- --
Technology Officer
Ajaykumar K. Patel.......... Executive Vice President and Chief 350,000 1.81
Operating Officer
Cathy L. Wood(3)............ Chief Financial Officer and 250,000 1.53
Secretary
Thomas J. Amrhein........... Group President and General Manager 50,000 2.50
Ronald S. Oxley............. Group President and General Manager 50,000 2.50
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Robert E. Casner............ Former Group President and General Manager 30,000 2.02
All current executive officers as group
(5 persons)............................................................. 700,000 1.81
All current directors (other than executive
officers) as a group (5 persons)........................................ 350,000 2.08
All employees (including all current officers who
are not executive officers) as a group
(approximately 182 persons)............................................. 387,300 3.47
- ---------------
(1) Mr. Piraino resigned as Chief Executive Officer, President, Acting Chief
Financial Officer, Secretary and Director of the Company in August 2000.
(2) Mr. Heinsheimer resigned as Senior Vice President and Chief Technology
Officer as of May 3, 2000.
(3) Ms. Wood became the Company's Interim Chief Financial Officer on August 31,
2000.
No person other than those individuals set forth above was granted five
percent or more of the total amount of options granted under the Plan during
that period.
Required Vote of Shareholders
The affirmative vote of a majority of the shares of Common Stock present in
person or by proxy at the Annual Meeting and entitled to vote is required to
approve amendment of the Option Plan.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
AMENDMENT AND RESTATEMENT OF THE OPTION PLAN. PROXIES AND VOTING
INSTRUCTIONS WILL BE VOTED IN FAVOR OF THE APPROVAL OF THE AMENDMENT OF THE
OPTION PLAN UNLESS THE SHAREHOLDER SPECIFIES OTHERWISE.
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PROPOSAL NO. 4
APPROVAL OF AMENDMENT TO THE AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
On March 21, 2001 the Board of Directors approved an amendment to the
Company's Amended and Restated Employee Stock Purchase Plan (the "Amended
ESPP"). The amendment increases the number of shares of Common Stock that may be
issued under the Amended ESPP from 750,000 to 950,000 and is subject to
shareholder approval. This amendment to the Amended ESPP is being proposed to
allow future grants to employees. No other amendments to the Amended ESPP are
proposed for shareholder approval.
The Board of Directors originally approved an Employee Stock Purchase Plan
(the "Original ESPP") on January 22, 1999, authorizing the issuance of up to
250,000 shares of the Company's Common Stock pursuant to the Original ESPP. The
shareholders of the Company approved the Original ESPP at the Annual Meeting of
Shareholders held on May 18, 1999. On August 2, 2000, the Board of Directors of
the Company approved, subject to shareholder approval, the Amended ESPP which,
among other things, permits the purchase of fractional shares. The Amended ESPP
was approved by the holders of an aggregate of approximately fifty-three percent
(53%) of the Company's Common Stock by written consent as of September 19, 2000.
In accordance with the 1934 Act, the Amended ESPP became effective twenty (20)
days after an Information Statement, filed pursuant to Section 14c of the 1934
Act, was prepared and mailed to the Company's shareholders.
As of March 31, 2001, 169,755 shares remained available for purchase under
the ESPP. Unless additional shares are approved for issuance under the Amended
ESPP, it is possible that there will not be sufficient approved shares available
for the scheduled purchase by ESPP participants on June 30, 2001.
The ESPP was adopted by the Board of Directors to provide a means by which
employees of the Company and its subsidiaries will be given an opportunity to
purchase stock in the Company at a discount from the market price, to attract
and retain employees, and to increase employee morale.
The ESPP permits participants to purchase shares of the Company's Common
Stock directly from the Company by authorizing payroll withholdings over a
predetermined period (each, an "Offering Period"), and purchase such shares at
the end of each Offering Period with the payroll amounts withheld. Such purchase
rights are granted solely to eligible employees of the Company and its
subsidiaries. The Amended ESPP is intended to be an "employee stock purchase
plan" as defined in Section 423 of the Internal Revenue Code of 1986, as amended
(the "Code").
The following is a general summary of the Amended ESPP, which is qualified
in its entirety by reference to the full text of the Amended ESPP, attached to
this Proxy Statement as Exhibit C.
Administration
The Amended ESPP is administered by the Board of Directors, or a committee
thereof, which has the final power to construe and interpret the Amended ESPP
and the rights granted under it. The Board of Directors has the power, subject
to the provisions of the Amended ESPP, to interpret and apply the Amended ESPP
and to establish rules and procedures for the administration of its
responsibilities under the Amended ESPP.
Shares Subject to the Amended ESPP
Subject to approval by the Company's shareholders, the maximum number of
shares of Common Stock available for sale under the Amended ESPP is 950,000,
which number is subject to proportional adjustment to reflect stock splits,
stock dividends, mergers, consolidations, and similar events. The shares to be
sold to the Participants (as defined herein) will be issued by the Company. In
the event that insufficient shares of Common Stock are available under the
Amended ESPP for a full allocation of shares to all Participants on a Purchase
Date (as defined herein), the Company will make a pro rata allocation of the
shares remaining available for issuance, and return to each Participant any
unused payroll deductions.
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Eligibility
Any person currently employed by the Company or any of its designated
subsidiaries for a minimum of ninety (90) days whose income is subject to
withholding of income tax or for whom Social Security retirement contributions
are made by the Company or any of its designated subsidiaries, excluding any
persons employed by the Company or any of its designated subsidiaries on a
part-time or temporary basis, (an "Employee") may participate in the Amended
ESPP.
Notwithstanding the foregoing, no Employee is eligible for the grant of any
rights under the Amended ESPP if, immediately after such grant, such Employee
would own, directly or indirectly, stock possessing five percent (5%) or more of
the total combined voting power or value of all classes of stock of the Company
or its subsidiaries (including any stock which such Employee may purchase under
all outstanding rights and options). In addition, no Employee may be granted
rights that would permit such Employee to buy more than $21,250 worth of Common
Stock (determined at the fair market value of the Common Stock on the first day
of an Offering Period) under all employee stock purchase plans of the Company in
any calendar year, and no Employee may purchase more than 5,000 shares of Common
Stock on each Purchase Date under the Amended ESPP.
As of March 31, 2001, approximately 457 of the Company's employees were
eligible to participate in the Amended ESPP.
Participation In The Amended ESPP
An Employee who has satisfied the eligibility requirements may participate
in the Amended ESPP (a "Participant") by delivering an election notice form to
the Company, authorizing payroll deductions and designating the amount of
payroll deductions to be made from the Participant's paycheck. The amount of
payroll deductions must be in whole percentages, not to exceed fifteen percent
(15%). Payroll deductions will begin on the first day of each Offering Period
(January 1 and July 1) (an "Enrollment Date") following the filing of an
election notice form with the Company.
The Company will establish and maintain a separate account for each
Participant (the "Account"), and all payroll deductions made for a Participant
will be credited to such Participant's Account and deposited with the general
funds of the Company. No interest will be paid or allowed on amounts credited to
a Participant's Account, and a Participant may not make any additional payments
to such account.
On the last day of each Offering Period (June 30 and December 31) (a
"Purchase Date"), each Participant will have the right to purchase from the
Company, at the purchase price discussed below, that number of shares of Common
Stock (including fractional shares) that can be purchased or issued by the
Company with the amounts held in such Participant's Account.
Purchase of Shares Under the Amended ESPP
A Participant who does not, prior to a Purchase Date, notify the Company
that such Participant does not want to purchase any shares of Common Stock
pursuant to the Amended ESPP or that such Participant wants to purchase fewer
than the maximum number of shares available for purchase, will be deemed to
elect to purchase the maximum number of shares of Common Stock (including
fractional shares) purchasable with the amounts held in such Participant's
Account. Any amounts in an Account not used on a Purchase Date will remain in
such Account and be eligible to purchase Common Stock on a subsequent Purchase
Date.
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Purchase Price
The purchase price for the Common Stock purchased pursuant to the Amended
ESPP (the "Purchase Price") shall be the lesser of (i) 85% of the Fair Market
Value of the Common Stock on the Enrollment Date, or (ii) 85% of the Fair Market
Value of the Common Stock on the Purchase Date.
The "Fair Market Value" means the value of the Common Stock determined as
follows:
(a) If the Common Stock is listed or admitted to trading on the Nasdaq
Small Cap Market or a stock exchange which reports closing sale prices, the Fair
Market Value shall be the closing sale price for such stock on the date of
valuation on the Nasdaq Small Cap Market or principal stock exchange on which
the Common Stock is then listed or admitted to trading, or, if no closing sale
price is quoted or no sale takes place on such day, then the Fair Market Value
shall be the closing sale price of the Common Stock on the Nasdaq Small Cap
Market or such exchange on the next preceding day on which a sale occurred.
(b) If the Common Stock is not then listed or admitted to trading on the
Nasdaq Small Cap Market or a stock exchange which reports closing sale prices,
the Fair Market Value shall be the average of the closing bid and asked prices
of the Common Stock in the over-the-counter market on the date of valuation.
(c) If neither (a) nor (b) is applicable as of the date of valuation, then
the Fair Market Value shall be determined by the administrator in good faith
using any reasonable method of valuation, which determination shall be
conclusive and binding.
As of March 31, 2001, the closing price of the Company's Common Stock on
the Nasdaq Small Cap Market was $1.31 per share.
Delivery of Stock
Shares of the Company's Common Stock acquired under the Amended ESPP are
issued directly to a contract administrator ("Administrator") engaged by the
Company to administer the Amended ESPP, and are held in the name of the
Administrator for the benefit of the Amended ESPP. Only whole shares of the
Company's Common Stock are issuable to a Participant upon a share withdrawal. A
payment will be made to the Participant for any fractional shares of the
Company's Common Stock owned by the Participant. The payment is computed using
the Fair Market Value of a share of the Company's Common Stock on the date the
withdrawal is processed by the Company. For shares of the Company's Common Stock
sold by a Participant from his or her account maintained by the Administrator,
the Participant will receive credit for all whole and fractional shares at the
actual price for which the shares were sold.
Withdrawal
A Participant may withdraw the amounts held in such Participant's Account
at any time prior to the Purchase Date of an Offering Period by delivering a
written notice of withdrawal to the Company. The entire balance of the Account
will be paid to the Participant, and the Participant will cease to participate
in the Amended ESPP for the remainder of the Offering Period in which the
withdrawal notice was given. An Employee who has withdrawn at least thirty (30)
days prior to the Purchase Date of an Offering Period shall be excluded from
participation in the Amended ESPP for the remainder of the Offering Period, but
may then be reinstated as a Participant for a subsequent Offering Period by
executing and delivering a new election notice form to the Company. An Employee
who has withdrawn less than thirty (30) days prior to the Purchase Date of an
Offering Period shall be excluded from participation in the Amended ESPP for the
remainder of the Offering Period and for one (1) subsequent Offering Period, but
may thereafter be reinstated as a Participant for a subsequent Offering Period
by executing and delivering a new election notice form to the Company.
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Expiration of Rights
A Participant's participation in the Amended ESPP terminates upon
termination of such Participant's employment with the Company or its
subsidiaries for any reason. Upon such termination, the entire balance of such
Participant's Account will be paid to the Participant or his or her beneficiary,
without interest.
A Participant may designate a beneficiary who is to receive any shares of
Common Stock purchased under the Amended ESPP or any cash from the Participant's
Account in the event of such Participant's death. If no beneficiary is
designated, any cash or shares will be delivered to the executor or
administrator of the Participant's estate.
Corporate Change
Upon a merger or consolidation in which the Company is not the surviving
entity, or the sale of substantially all of the assets of the Company or a
reverse merger in which the Company is the surviving entity (a "Corporate
Change"), either (i) the surviving corporation shall assume the rights
previously granted pursuant to the Amended ESPP or substitute new rights
covering the shares of the successor corporation, with appropriate adjustments
to the number and kind of shares and prices, or (ii) the Amended ESPP and rights
previously granted pursuant to the Amended ESPP will continue in full force. If
a surviving corporation refuses to assume or continue the Amended ESPP, or to
substitute similar options, then any rights outstanding will be exercised
automatically as if the effective date of the Corporate Change were a Purchase
Date, unless a Participant withdraws from the Amended ESPP prior to such
effective date.
Amendments and Termination
The Company may amend, modify or terminate the Amended ESPP at any time.
Unless terminated earlier pursuant to the terms of the Amended ESPP, the Amended
ESPP will terminate on December 31, 2008. Upon termination of the Amended ESPP,
all benefits will become payable immediately.
The Company may make the following amendments to the Amended ESPP, provided
that the Company obtain the prior approval of the Company's shareholders:
(a) Amendments that increase the number of shares of Common Stock that may
be issued under the Amended ESPP;
(b) Amendments that materially modify the eligibility requirements for
participation in the Amended ESPP; and
(c) Amendments that increase the benefits that accrue to Participants under
the Amended ESPP.
Restrictions on Transfer
Rights granted under the Amended ESPP are not transferable other than by
will or the laws of descent and distribution, and during an Employee's lifetime,
may be exercised only by the Employee to whom such rights are granted.
Federal Income Tax Information
The Amended ESPP is intended to qualify as an "employee stock purchase
plan" within the meaning of Section 423 of the Code. Under the Code, no income
will be taxable to a Participant at the time the shares of Common Stock are
purchased from the Company pursuant to the Amended ESPP, and no income will be
taxable to a Participant until disposition of the shares acquired. The method of
taxation upon disposition will depend upon the holding period of the purchased
shares.
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If the Common Stock is disposed of at least two (2) years after the
Enrollment Date and at least one (1) year after the Purchase Date, or in the
event of a Participant's death while owning such shares, then the lesser of (a)
the fifteen percent (15%) excess of the Fair Market Value of the Common Stock at
the time the option was granted over the Purchase Price, or (b) the excess of
the Fair Market Value of the Common Stock at the time of the disposition over
the Purchase Price, will be treated as ordinary income. Any further gain or any
loss will be taxed as capital gain or loss.
If the Common Stock is disposed of before the expiration of either of the
holding periods described above (a "Disqualifying Disposition"), then the entire
excess of the Fair Market Value of the stock on the Purchase Date over the
Purchase Price will be treated as ordinary income at the time of such
disposition. The balance of any gain will be treated as capital gain. Even if
the Common Stock is disposed of for less than the Fair Market Value on the
Purchase Date, the same amount of ordinary income is attributed to the
Participant, and a capital loss is recognized equal to the difference between
the sale price and the Fair Market Value of the stock on the Purchase Date.
There are no federal income tax consequences to the Company by reason of
the grant or purchase of rights under the Amended ESPP. The Company will be
entitled to a deduction, however, to the extent that a Participant recognizes
ordinary income on a Disqualifying Disposition of the shares.
New ESPP Benefits
Participation in the Amended ESPP is voluntary and is dependent upon each
eligible Employee's election to participate and his or her determination as to
the level of payroll deductions. Accordingly, future purchases under the Amended
ESPP are not determinable.
Required Vote of Shareholders
The approval of a majority of the shares of Common Stock is required to
approve the proposed amendment to the Amended ESPP increasing the number of
shares available for issuance thereunder.
THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF
AMENDMENT OF THE AMENDED ESPP. PROXIES AND VOTING INSTRUCTIONS WILL BE
VOTED IN FAVOR OF THE APPROVAL OF THE AMENDMENT OF THE AMENDED ESPP UNLESS
THE SHAREHOLDER SPECIFIES OTHERWISE.
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SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, and the regulations
thereunder, requires the Company's directors, executive officers and persons who
own more than ten percent (10%) of a registered class of the Company's equity
securities ("Reporting Persons"), to file reports of securities ownership and
changes in such ownership with the Securities and Exchange Commission (the
"SEC"). Such persons are also required by rules promulgated by the SEC to
furnish the Company with copies of all Section 16(a) forms they file with the
SEC.
To the Company's knowledge, based solely on a review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during its fiscal year ended December 31, 2000, all
Reporting Persons complied with all applicable filing requirements.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed the Company's audited statements for the
year ended December 31, 2000. In conjunction with its review, the Audit
Committee has met with the management of the Company to discuss the audited
financial statements. In addition, the Audit Committee has discussed with the
Company's independent auditors, KPMG LLP ("KPMG"), the matters required pursuant
to Statement on Accounting Standards No. 61 and has received the written
disclosures and the letter from KPMG required by the Independence Standards
Board No. 1. The Audit Committee has also discussed with KPMG its independence
from management and the Company. KPMG has full and free access to the Audit
Committee.
Based on this review and discussion, the Audit Committee recommended to the
Board of Directors that the audited financial statements be included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000
for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE:
J. Christopher Lewis
Albert Nagy
Luther Nussbaum
INDEPENDENT ACCOUNTANTS
The Audit Committee is strongly considering appointing a new accounting
firm to serve as the Company's independent auditors for its 2001 fiscal year and
is actively seeking proposals to that effect. As of April 30, 2001 KPMG, the
Company's independent auditors for fiscal year 2000, remains as the Company's
independent auditors and is being considered for fiscal 2001 services. The Audit
Committee is also soliciting proposals from certain large firms at this time,
but no firm has been chosen to date. A member of KPMG is not expected to be
present at the Annual Meeting, but if such a member is present that member will
have an opportunity to make a statement if so desired, and should be available
to respond to appropriate questions regarding KPMG's audit of the Company's 2000
financial statements.
Audit Fees
The aggregate fees billed for the professional services rendered by KPMG
for the audit of the Company's annual financial statements for fiscal year 2000
and the reviews of the Company's financial statements included in the Company's
Forms 10-Q for fiscal year 2000 totaled $343,000.
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Financial Information System Design and Implementation Fees
The Company did not incur any fees for professional services rendered in
information systems design and implementation during the 2000 fiscal year.
All Other Fees
The aggregate fees billed for services rendered in year 2000 by KPMG, other
than the services covered in the paragraph above headed Audit Fees totaled
$305,000.
Audit Committee Consideration
The Company's Audit Committee has considered whether KPMG's provision of
the services which generated the Audit and Other Fees reported above is
compatible with maintaining KPMG's independence as the Company's principal
independent accounting firm.
Work Performed by Principal Accountant's Full Time Permanent Employees
KPMG's services rendered in performing the Company's audits for fiscal year
2000 were performed by full time, permanent employees and partners of KPMG.
SUBMISSION OF SHAREHOLDER PROPOSALS
Shareholders are advised that any shareholder proposal intended for
consideration at the next Annual Meeting must be received by the Company at the
address set forth on the first page of this Proxy Statement no later than
January 20, 2002 to be included in the proxy material for next year's Annual
Meeting. It is recommended that shareholders submitting proposals direct them to
the Secretary of the Company and utilize certified mail, return-receipt
requested in order to ensure timely delivery.
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OTHER MATTERS
The Board of Directors knows of no matter to come before the Annual Meeting
other than as specified herein. If other business should, however, be properly
brought before such meeting, the persons voting the proxies will vote them in
accordance with their best judgment.
THE SHAREHOLDERS ARE URGED TO COMPLETE, SIGN AND PROMPTLY RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors,
/s/ Cathy L. Wood, Secretary
----------------------------------
Newport Beach, California
April 30, 2001
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Exhibit A
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS OF
EMERGENT INFORMATION TECHNOLOGIES, INC.
I. PURPOSE
The primary function of the Audit Committee (the "Committee") is to assist
the Board of Directors in fulfilling its oversight responsibilities with respect
to the financial reports and other financial information provided by the
Corporation to the stockholders and others, the Corporation's system of internal
control, and the Corporation's audit, accounting, and financial reporting
processes generally. In carrying out this function, the Committee shall appraise
the audit efforts of the Corporation's independent accountants and internal
audit department, if appropriate; and provide for open, on-going communication
among the independent accountants, financial and senior management, internal
audit department, and the Board of Directors concerning the Corporation's
financial position and affairs. To effectively perform his or her role, each
Committee member will obtain an understanding of the responsibilities of
Committee membership as well as the Corporation's business, operations and
risks.
II. MEMBERSHIP
----------
The Committee shall be comprised of at least three non-employee members of
the Board of Directors, as determined by the Board of Directors, each of whom
shall be an independent director as determined by Rule 4200(a)(15) of the
National Association of Securities Dealers' listing standards. The Board of
Directors shall also designate a chairperson of the Committee. Members of the
Committee are elected to serve for a term of one year. Each Committee member
shall be financially literate (i.e. be able to read and understand fundamental
financial statements, including a company's balance sheet, income statement and
cash flow statement) or become financially literate within a reasonable period
of time after his or her appointment to the Committee. At least one member of
the Committee must have accounting or related financial management expertise.
III. FUNCTIONS
---------
Without limiting the Committee's authority, the Committee shall carry out
the following specific activities:
A. Review of Documents and Reports
1. Review and reassess this Charter at least annually.
2. Review the Corporation's annual report on Form 10-K, including the
Corporation's year-end financial statements, sufficiently prior to
its release and consider whether the information is adequate and
consistent with members' knowledge about the Corporation and its
operations.
3. Review the Corporation's quarterly reports on Form 10-Q
sufficiently prior to their filing or prior to the release of
earnings and consider whether the information is adequate and
consistent with members' knowledge about the Corporation and its
operations
4. If appropriate, review the regular internal reports to management
prepared by the internal auditing function and management's
response.
B. Independent Auditors
1. Recommend to the Board of Directors the selection of the
independent auditors, considering their independence. On an annual
basis, the Committee shall require the independent auditors to
provide the Committee with a written statement disclosing all
relationships between the Corporation and the independent
auditors. The Committee should review and discuss these
relationships with the
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independent auditors to determine the auditors' independence. The
Committee shall take or recommend appropriate action to ensure the
independence of the independent auditors. The independent auditors
are accountable to the Board of Directors and the Committee.
2. Review with the independent auditors the intended scope and
approach of the annual audit and the audit methods and principles
being applied by the independent auditors, and the fees charged by
the independent auditors.
3. Review and discuss the results of the audit with both the
independent auditors and management.
4. Review with both management and the independent auditors
procedures established to prevent any fraud, illegal acts or
deficiencies in internal control, and ensure that the independent
auditors inform the Committee of any fraud, illegal acts or
deficiencies in internal control of which they become aware and
communicate certain required matters to the Committee.
5. Review with the independent auditors their performance and approve
any proposed discharge of the independent auditors when
circumstances warrant.
6. Direct and supervise special audit inquiries by the independent
auditors as the Board of Directors or the Committee may request.
C. Financial Reporting Processes
1. Review significant accounting and reporting issues, including
recent professional and regulatory pronouncements or proposed
pronouncements, and understand their impact on the Corporation's
financial statements.
2. In consultation with the independent auditors and the Chief
Financial Officer, review the integrity of the Corporation's
financial reporting processes, policies and practices, both
internal and external.
3. Consider the independent auditors' judgments about the quality and
appropriateness of the Corporation's accounting principles as
applied in its financial reporting.
4. Consider and approve, if appropriate, major changes to the
Corporation's auditing and accounting principles and practices as
suggested by the independent auditors, management or the internal
auditing function.
D. Process Improvement
1. Ensure that significant findings and recommendations made by the
internal and independent auditors are received and discussed on a
timely basis.
2. Review any significant disagreement among management and the
independent auditors or the internal auditing function in
connection with the preparation of the financial statements.
3. Review with the independent auditors, the internal auditing
function, and management the extent to which changes or
improvements in financial or accounting practices, as approved by
the Committee, have been implemented. This review should be
conducted at an appropriate time subsequent to implementation of
changes or improvements, as decided by the Committee.
E. Ethical and Legal Compliance
1. Review management's monitoring of the Corporation's compliance
with the Corporation's code of ethical conduct.
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2. Review legal compliance matters with the Corporation's counsel.
3. Confer with the Chief Operating Officer concerning the
Corporation's insurance.
F. Reporting Responsibilities
1. Regularly update the Board of Directors about Committee activities
and make appropriate recommendations.
IV. MEETINGS
The Committee will meet from time to time whenever necessary or appropriate
in order to discharge the functions specified in this Charter. Minutes shall be
kept of each meeting of the Committee and will be provided to each member of the
Board of Directors. Any action of the Committee shall be subject to revision,
modification or rescission by the Board of Directors, provided that no rights of
third parties shall be affected by any such revision, modification or
rescission.
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Exhibit B
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
1. Purposes.
(a) The purpose of the Plan is to provide a means by which selected
employees, Directors and Consultants of the Company and its Affiliates, may be
given an opportunity to benefit from increases in value of the stock of the
Company through the granting of Incentive Stock Options and Nonstatutory Stock
Options, as defined below.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees, Directors or Consultants of the Company or its
Affiliates, to secure and retain the services of new Employees, Directors and
Consultants, and to provide incentives for such persons to exert maximum efforts
for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall,
in the discretion of the Board or the Committee, be either Incentive Stock
Options and Nonstatutory Stock Options. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and in such form as issued pursuant to Section 6, and a certificate or
certificates will be issued for shares purchased on exercise of such Options.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with Section 3(c) of the Plan.
(e) "Company" means Emergent Information Technologies, Inc., a
California corporation, (formerly known as SM&A Corporation).
(f) "Consultant" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services, provided that the term "Consultant" shall not
include Directors who are paid only a director's fee by the Company or who are
not compensated by the Company for their services as Directors.
(g) "Continuous Status as an Employee, Director or Consultant" means
the employment or relationship as an Employee, Director or Consultant is not
interrupted or terminated. Continuous Status as an Employee, Director or
Consultant shall be considered interrupted in the case of any leave of absence,
including sick leave, military leave or any other personal leave; provided,
however, that for purposes of Incentive Stock Options, any such leave exceeding
three (3) months shall be considered an interruption in the Continuous Status as
an Employee, Director or Consultant, as applicable, unless reemployment upon the
expiration of such leave is guaranteed by contract, Company policies or statute.
(h) "Director" means a member of the Board.
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(i) "Employee" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the value of the Common
Stock of the Company determined as follows:
(i) If the Common Stock is admitted to trading or listed on a
national securities exchange, the last reported sale price on that day regular
way, or if no such reported sale takes place on that day, the average of the
last reported bid and ask prices on that day regular way, in either case on the
principal national securities exchange on which the Common Stock is admitted to
trading or listed.
(ii) If not listed or admitted to trading on any national
securities exchange, the last sale price regular way on that day reported on the
Nasdaq National Market ("Nasdaq National Market") of the Nasdaq Stock Market
("NSM") or, if no such reported sale takes place on that day, the average of the
closing bid and ask prices regular way on that day.
(iii)If not traded or listed on a national securities exchange or
included in the Nasdaq National Market, the last reported sale price on that day
regular way, or if no such reported sale takes place on that day, the average of
the closing bid and ask prices regular way on that day reported by the NSM, or
any comparable system on that day.
(iv) If the Common Stock is not included in (i), (ii) or (iii)
above, the last reported sale price on that day regular way, or if no such
reported sale takes place on that day, the closing bid and ask prices regular
way on that day as furnished by any member of the National Association of
Securities Dealers, Inc. ("NASD") selected from time to time by the Company for
that purpose.
If the national securities exchange, Nasdaq National Market, NSM, or NASD as
applicable, are closed on such date, the "Fair Market Value" shall be determined
as of the last preceding day on which the Common Stock was traded or for which
bid and ask prices are available. In the case of an Incentive Stock Option,
"Fair Market Value" shall be determined without reference to any restriction
other than one that, by its terms, will never lapse.
(l) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(n) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "Option" means a stock option granted pursuant to the Plan.
(p) "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(q) "Optionee" means an Employee, Director or Consultant who is
granted Options.
(s) "Plan" means this Amended and Restated 1997 Stock Option Plan.
(t) "Rule 16b-3" means Rule 16b-3 under the Exchange Act or any
successor to Rule 16b-3.
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(u) "Securities Act" means the Securities Act of 1933, as amended.
3. Administration.
(a) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee.
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how Options shall be granted;
whether an Option will be an Incentive Stock Option or a Nonstatutory Stock
Option, the provisions of each Option granted (which need not be identical),
including the vesting schedule for the Options, and the number of shares
underlying such Options to be granted to each such person;
(ii) To interpret the Plan and Options granted under it, and to
establish, amend and revoke rules and procedures for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective;
(iii) To amend the Plan as provided in Section 12; and
(iv) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or advisable to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"),
provided, however, that the Board may administer the Plan for any grants to
Participants who are not subject to Code Section 162(m). The Board may remove
members from, or add members to, the Committee at any time. The Board may also
abolish the Committee at any time and revest in the Board the administration of
the Plan. To the extent possible and advisable, the Committee shall be composed
of individuals that satisfy Rule 16b-3 and Code Section 162(m). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board (and references in this Plan to the Board shall thereafter be to
the Committee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board.
4. Shares Subject to the Plan.
(a) Subject to the provisions of Section 11 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Options shall
not exceed in the aggregate Four Million (4,000,000) shares of the Company's
Common Stock (or such lesser number of shares as is permitted under Section
260.140.45 of Title 10 of the California Code of Regulations, if applicable, or
other comparable or applicable state law, if any). The maximum number of shares
of the Company's Common Stock that may be issued to a single Optionee is Five
Hundred Thousand (500,000).
(b) If any Option shall for any reason expire or otherwise terminates,
in whole or in part, without having been exercised in full, the stock not
acquired under such Option shall revert to and again become available for
issuance under the Plan.
(c) If an Optionee surrenders any shares of stock issued pursuant to
Options as payment of the purchase price of other shares of stock acquired
pursuant to Options, the shares so surrendered shall revert to and again become
available for issuance under the Plan.
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(d) If the Company reacquires any shares of stock issued pursuant to
Options or withholds any shares of stock issued pursuant to Options to pay
withholding taxes in connection with the exercise of Options, the shares so
acquired or withheld shall revert to and again become available for issuance
under the Plan.
5. Eligibility.
(a) Incentive Stock Options may be granted only to Employees.
Nonstatutory Stock Options may be granted to Employees, Directors or
Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates ("Ten Percent Owner") unless the exercise price of such
Incentive Stock Option is at least one hundred ten percent (110%) of the Fair
Market Value of such stock at the date of grant and the term of such Incentive
Stock Option is no more than five (5) years.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted. The date of grant of an Option will be
the date on which the Board or the Committee makes the determination to grant
such Option, unless a later date is otherwise specified by the Board or the
Committee.
(b) Price.
(i) No Option shall have an exercise price that is less than
eighty-five percent (85%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted.
(ii) The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Incentive Stock Option on the date the Incentive Stock Option is
granted and one hundred ten percent in the case of a Ten Percent Owner.
(iii) The exercise price of each Option granted to the Chief
Executive Officer of the Company or any employee whose total compensation for
the fiscal year in which such Option is granted is required to be reported to
shareholders under the Exchange Act by reason of such employee being among the
four (4) highest compensated officers (other than the Chief Executive Officer)
of the Company for such fiscal year shall be not less than one hundred percent
(100%) of the Fair Market Value of the Stock subject to the Option on the date
the Option is granted., if it is intended that the Option be exempt from the
million dollar compensation deduction limitation of Code Section 162(m).
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, (ii) at the
discretion of the Board or the Committee, either at the time of the grant or
exercise of the Option, by delivering to the Company other shares of Common
Stock of the Company (provided that the shares have been held for the period
required (if any) to avoid a charge to the Company's reported earnings), (iii)
at the time of the exercise of the Option, by delivering to the Company all or
any part of an Option granted under this Plan for a cashless exercise (provided
that such cashless exchange will not result in a charge to the Company's
reported earnings), or (iv) by tendering any other form of legal consideration
that may be acceptable to the Board. For the purposes of this paragraph, a
"cashless exercise" shall be effected by one of the following methods:
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(i) through a "same day sale" commitment from the Optionee and a
broker-dealer that is a member of the National Association of Securities Dealers
(an "NASD Dealer") whereby the Optionee irrevocably elects to exercise the
Option and to sell a portion of the shares so purchased sufficient to pay the
total exercise price for all shares so purchased, and whereby the NASD Dealer
irrevocably commits upon receipt of such shares to forward such total exercise
price directly to the Company; or
(ii) through a "margin" commitment from the Optionee and an NASD
Dealer whereby the Participant irrevocably elects to exercise the Option and to
pledge the shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the total exercise
price for all shares so purchased, and whereby the NASD Dealer irrevocably
commits upon receipt of such shares to forward such total exercise price
directly to the Company.
(d) Transferability. An Option shall not be transferable except by
will or by the laws of descent and distribution, and shall be exercisable during
the lifetime of the person to whom the Option is granted only by such person.
(e) Vesting. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). However, any Optionee who is not an Officer or Director of, or a
Consultant to, the Company shall have the right to exercise such Option at the
rate of at least twenty percent (20%) per year over the five years from the date
the Option is granted, subject to reasonable conditions such as continued
employment. The Option Agreement may provide that from time to time during each
of such installment periods, the Option may become exercisable ("vest") with
respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. Notwithstanding any vesting
provided for in the Option Agreement, no Option may be exercised for (i) less
than One Hundred (100) shares of Common Stock of the Company or, if less, the
remaining number of shares available under the Option, or, if less, or (ii)
fractional shares of Common Stock of the Company.
(f) Termination of Employment or Relationship as a Director or
Consultant. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
such period of time ending on the earlier of (i) the date ninety (90) days after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant (or such longer period specified in the Option Agreement), or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, at the date of termination, the Optionee is not entitled to exercise his or
her entire Option, the shares covered by the unexercisable (unvested) portion of
the Option shall revert to and again become available for issuance under the
Plan. If, after termination, the Optionee does not exercise his or her Option
within the time specified in the Option Agreement, the Option shall terminate,
and the shares covered by such Option shall revert to and again become available
for issuance under the Plan.
(g) Disability of Optionee. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within such period of time ending on the earlier of (i)
the date six (6) months following such termination (or such longer period
specified in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable (unvested) portion of the Option shall revert to
and again become available for issuance under the Plan. If, after termination,
the Optionee does not exercise the vested portion of his or her Option within
the time specified herein, the Option shall terminate, and the shares covered by
the vested portion of such Option shall revert to and again become available for
issuance under the Plan.
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(h) Death of Optionee. In the event of the death of an Optionee
during, or within a period specified in the Option after the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to Section 6(d), but
only within the period ending on the earlier of (i) the date twelve (12) months
following the date of death (or such longer period specified in the Option
Agreement), or (ii) the expiration of the term of such Option as set forth in
the Option Agreement. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
(unvested) portion of the Option shall revert to and again become available for
issuance under the Plan. If, after death, the vested portion of the Option is
not exercised within the time specified herein, the Option
shall terminate, and the shares covered by the vested portion of such Option
shall revert to and again become available for issuance under the Plan.
7. Cancellation and Regrant of Options.
The Board or the Committee shall have the authority to effect, after
taking into account the possible adverse accounting consequences, at any time
and from time to time, (i) the repricing of any outstanding Options under the
Plan, and/or (ii) with the consent of the affected holders of Options, the
cancellation of any outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of stock, but having an exercise price per share not
less than one hundred percent (100%) of the Fair Market Value in the case of an
Incentive Stock Option or, in the case of a Ten Percent Owner not less than one
hundred ten percent (110%) of the Fair Market Value, determined in accordance
with the rules in Code Section 424(h) and the regulations thereunder.
8. Covenants of the Company.
The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options. However, this
undertaking shall not require the Company to register under the Securities Act
either the Plan, any Options, or any stock issued or issuable pursuant to any
such Options. If the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance and sale of stock under the Plan, the Company shall be
relieved from any liability for failure to issue and sell stock upon exercise of
such Options unless and until such authority is obtained.
9. Use of Proceeds from Stock.
Proceeds from the sale of Common Stock upon exercise of the Options
shall constitute the general funds of the Company.
10. Miscellaneous.
(a) Neither an Optionee nor any person to whom an Option is
transferred under Section 6(d) shall be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares subject to such Option
unless and until such person has satisfied all requirements for exercise of the
Option pursuant to its terms.
(b) Nothing in the Plan or any Option granted pursuant thereto shall
confer upon any Employee, Director, Consultant or other holder of Options any
right to continue in the employ of the Company or any Affiliate (or to continue
acting as a Director or Consultant) or shall affect the right of the Company or
any Affiliate to terminate the employment or relationship as a Director or
Consultant of any Employee, Director, Consultant or other holder of Options with
or without cause.
(c) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
granted are exercisable for the first time by an Optionee during any calendar
year under all plans of the Company and its Affiliates exceeds One Hundred
Thousand Dollars
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($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(d) To the extent provided by the terms of an Option Agreement, the
person to whom an Option is granted may, at the discretion of the Board, satisfy
any mandatory federal, state or local tax withholding obligation relating to the
exercise or acquisition of stock under an Option by any of the following means
or by a combination of such means: (i) tendering cash payment; (ii) authorizing
the Company to withhold shares from the shares of the Common Stock otherwise
issuable to the Optionee as a result of the exercise or acquisition of stock
under the Option provided that such arrangement will not result in a charge to
the Company's reported earnings; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock of the Company that have been held for
the period required (if any) to avoid a charge to the Company's reported
earnings. The exercise of the Option shall be conditioned upon the receipt by
the Company of satisfactory evidence of the Optionee's satisfaction of any
withholding obligations.
11. Adjustments Upon Changes in Stock.
(a) Subject to any required action by shareholders, the number of
shares which may be purchased upon the exercise of each outstanding Option shall
be proportionately increased or decreased upon the occurrence of any change,
increase or decrease in the number and type of issued shares of Common Stock of
the Company without receipt of consideration by the Company, that results from a
stock split, a reverse stock split, a stock dividend, a merger, consolidation,
reorganization or reincorporation, a recapitalization, a combination or
reclassification of shares, change in corporate structure or other like capital
adjustment, so that upon the exercise of each Option the holders of such Options
shall receive the number and type of securities which the holders would have
received had the Options been exercised on the date preceding such change,
increase or decrease. In the event of any such adjustment, the exercise price
for each share shall be likewise adjusted in inverse proportion to the increase
or decrease in the number of shares purchasable.
(b) In the event of: (i) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (ii) a merger or consolidation
in which the Company is not the surviving corporation; or (iii) a reverse merger
in which the Company is the surviving corporation but the shares of the
Company's Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise, then to the extent permitted by applicable law:
(A) any surviving corporation shall assume any Options outstanding under the
Plan or shall substitute similar Options for those outstanding under the Plan,
or (B) such Options shall continue in full force and effect. In the event any
surviving corporation refuses to assume or continue such Options, or to
substitute similar options for those outstanding under the Plan, then, with
respect to Options held by persons then performing services as Employees,
Directors or Consultants, the time during which such Options vest shall be
accelerated so that on the third (3rd) business day prior to such event such
Options become fully exercisable. Any Options subject to such accelerated
vesting shall terminate upon the happening of such event if not exercised prior
to such event.
12. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan,
provided that the implementation of such amendment complies with all applicable
law.
(b) Without the approval of the majority of the shareholders of the
Company, the Board may not amend the provisions of this Plan regarding:
(i) The class of individuals entitled to receive Incentive Stock
Options; or
(ii) The maximum number of shares of Common Stock that may be
issued under the Plan, except as provided in Section 11 of this Plan.
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(c) Rights and obligations under any Option granted before amendment
of the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Option was
granted, and (ii) such person consents in writing.
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13. Termination or Suspension of the Plan.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on October 1, 2007. No Options may
be granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent to the person to whom the Option was granted.
14. Financial Information.
The Company will provide to each Optionee financial statements of the
Company at least annually in accordance with Section 260.140.46 of Title 10 of
the California Code of Regulations.
15. Notice of Disqualifying Disposition.
An Optionee must notify the Company if the Optionee disposes of stock
acquired pursuant to the exercise of an Incentive Stock Option issued under the
Plan prior to the expiration of the holding periods required to qualify for
long-term capital gains treatment on the disposition.
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Exhibit C
AMENDED AND RESTATED
EMPLOYEE STOCK PURCHASE PLAN
Emergent Information Technologies, Inc., a California corporation (the
"Company"), originally adopted an Employee Stock Purchase Plan effective as of
March 1, 1999, and amended the plan effective as of July 1, 1999. The Plan was
amended again on November 1, 2000. This Amended and Restated Employee Stock
Purchase Plan (the "Plan") is effective as of March 21, 2001.
ARTICLE 1
PURPOSE OF THE PLAN
1.1 Purpose. The Company has determined that it is in its best interest to
provide incentives to attract and retain employees and to increase employee
morale by providing a program through which employees of the Company, and the
Company's subsidiaries as the Company's Board of Directors (the "Board of
Directors" or the "Board") may from time to time designate (each a "Designated
Subsidiary," and collectively, "Designated Subsidiaries"), may acquire a
proprietary interest in the Company through the purchase of shares of the Common
Stock of the Company ("Company Stock"). The Plan is hereby established by the
Company to permit employees to subscribe for, and purchase directly from the
Company, shares of the Company Stock at a discount from the market price and to
pay the purchase price in installments by payroll deductions. The Plan is
intended to qualify as an "employee stock purchase plan" under Section 423 of
the Internal Revenue Code of 1986, as amended from time to time (the "Code").
Accordingly, the provisions of the Plan shall be administered, interpreted, and
construed in a matter consistent with the requirements of that section of the
Code. The Plan is not intended to be an employee benefit plan under the Employee
Retirement Income Security Act of 1974, and therefore is not required to comply
with that Act.
ARTICLE 2
DEFINITIONS
2.1 Compensation. "Compensation" means wages, tips, overtime pay, bonuses,
commissions, and other Compensation reported on Form W-2. Compensation shall
include any amounts contributed by the Employer pursuant to a salary reduction
agreement that is not currently includible in the Participant's gross income by
reason of the application of Code Sections 125, 402(e)(3), 402(g)(3),
402(h)(1)(B), 403(b), 414(h)(2), or 457(b). Compensation excludes the sum of all
of the following items, even if otherwise includible in gross income: (i)
reimbursements or other expense allowances; (ii) cash and noncash fringe
benefits; (iii) moving expenses; (iv) deferred compensation; and (v) welfare
benefits.
2.2 Eligibility Date. "Eligibility Date" means ninety (90) calendar days
from an Employee's initial date of employment with the Company or any of its
Designated Subsidiaries.
2.3 Employee. "Employee" means each person currently employed by the
Company or any of its Designated Subsidiaries, any portion of whose income is
subject to federal withholding of income or employment taxes, but excluding any
persons employed by the Company or any Designated Subsidiary on a part-time
(less than 20 hours per week) or temporary basis.
2.4 Enrollment Date. "Enrollment Date" means the first day of each Offering
Period (January 1 and July 1) under the Plan. However, for the first Offering
Period, the Enrollment Date shall be July 1, 1999 and shall extend through July
31, 1999.
2.5 Five Percent (5%) Owner. "5% Owner" means an Employee who, immediately
after the grant of any rights under the Plan, would own Company Stock and/or
hold outstanding options to purchase Company Stock possessing five percent (5%)
or more of the total combined voting power of all classes of stock of the
Company. For purposes of this Section, the ownership attribution rules of Code
Section 425(d) shall apply.
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2.6 Offering Period. "Offering Period" means either of the six-month
periods from January 1 through June 30 and July 1 through December 31 of each
year. The first Offering Period shall commence on July 1, 1999 and shall end
December 31, 1999.
2.7 Participant. "Participant" means an Employee who has satisfied the
eligibility requirements of Section 3.1 and has become a participant in the Plan
in accordance with Section 3.2.
2.8 Purchase Date. "Purchase Date" means the last day of each Offering
Period (i.e., June 30 or December 31).
ARTICLE 3
ELIGIBILITY AND PARTICIPATION
3.1 Eligibility. Subject to limitations imposed by Section 423(b) of the
Code, each Employee of the Company or any Designated Subsidiary may become a
Participant in the Plan on the Enrollment Date coincident with or next following
the Eligibility Date.
3.2 Participation. An Employee who has satisfied the eligibility
requirements of Section 3.1 may become a Participant in the Plan upon his
completion and delivery to the Company's stock purchase coordinator, as
designated by the Company, of an election notice form provided by the Company
(the "Election Notice Form") authorizing payroll deductions. Payroll deductions
for a Participant shall commence on the Enrollment Date coincident with or next
following the filing of the Participant's Election Notice Form and shall remain
in effect until revoked by the Participant by the filing of a notice of
withdrawal from the Plan under Article 8 or by the filing of a new Election
Notice Form providing for a change in the Participant's payroll deduction rate
in accordance with Section 5.
3.3 Special Rules. Under no circumstances shall:
(a) A 5% Owner be granted a right to purchase Company Stock under the
Plan;
(b) A Participant be entitled to purchase Company Stock under the Plan
which, when aggregated with all other employee stock purchase plans of the
Company, exceed an amount equal to the Aggregate Maximum. "Aggregate Maximum"
means an amount equal to $21,250 worth of Company Stock (determined using the
fair market value of such Company Stock at each applicable Enrollment Date)
during each calendar year; or
(c) The number of shares of Company Stock purchasable by a Participant
on any Purchase Date exceed 5,000 shares, subject to periodic adjustments under
Section 10.4.
ARTICLE 4
OFFERING PERIOD
The initial grant of the right to purchase Company Stock under the Plan
shall occur on July 1, 1999 and terminate on December 31, 1999. Thereafter, the
Plan shall provide for Offering Periods commencing on each Enrollment Date and
terminating on the next following Purchase Date.
ARTICLE 5
PAYROLL DEDUCTIONS
5.1 Participant Election. Upon completion of the Election Notice Form, each
Participant shall designate the amount of payroll deductions to be made from his
or her paycheck to purchase Company Stock under the Plan. The amount of payroll
deductions shall be designated in whole percentages of Compensation, not to
exceed 15%. The amount so designated upon the Election Notice Form shall be
effective as of the next payroll period and shall continue until terminated or
altered in accordance with Section 5.2 below.
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5.2 Changes in Election. A Participant may terminate participation in the
Plan at any time prior to the close of an Offering Period as provided in Article
8. A Participant may increase or decrease the rate of payroll deductions once
during each Offering Period by completing and delivering to the Company's stock
purchase coordinator a new Election Notice Form setting forth the desired
change. A Participant may also terminate payroll deductions and have accumulated
deductions for the Offering Period applied to the purchase of Company Stock as
of the next Purchase Date by completing and delivering to the stock purchase
coordinator a new Election Notice Form setting forth the desired change. Any
change under this Section shall become effective on the next payroll period (to
the extent practical under the Company's payroll practices) following the
delivery of the new Election Notice Form.
5.3 Participant Accounts. The Company shall establish and maintain a
separate account ("Account") for each Participant. The amount of each
Participant's payroll deductions shall be credited to his or her Account. No
interest will be paid or allowed on amounts credited to a Participant's Account.
All payroll deductions received by the Company under the Plan are general
corporate assets of the Company and may be used by the Company for any corporate
purpose. The Company is not obligated to segregate such payroll deductions.
ARTICLE 6
GRANT OF PURCHASE RIGHTS
6.1 Right to Purchase Shares. On each Purchase Date, each Participant shall
have the right to purchase at the price determined under Section 6.2 that number
of shares (including fractional shares) of Company Stock that can be purchased
or issued by the Company based upon that price with the amounts held in his or
her Account, subject to the limits set forth in Section 3.3. In the event that
there are amounts held in a Participant's Account that are not used to purchase
Company Stock, such amounts shall remain in the Participant's Account and shall
be eligible to purchase Company Stock in any subsequent Offering Period.
6.2 Purchase Price. The purchase price for any Offering Period shall
be the lesser of:
(a) 85% of the Fair Market Value of Company Stock on the Enrollment
Date; or
(b) 85% of the Fair Market Value of Company Stock on the Purchase
Date.
6.3 Fair Market Value. "Fair Market Value" shall be determined as
follows:
(a) If the Company Stock is then listed or admitted to trading on the
NASDAQ National Market or a stock exchange which reports closing sale prices,
the Fair Market Value shall be the closing sale price on the date of valuation
on the NASDAQ National Market or principal stock exchange on which the Company
Stock is then listed or admitted to trading, or, if no closing sale price is
quoted or no sale takes place on such day, then the Fair Market Value shall be
the closing sale price of the Company Stock on the NASDAQ National Market or
such exchange on the next preceding day on which a sale occurred.
(b) If the Company Stock is not then listed or admitted to trading on
the NASDAQ National Market or a stock exchange which reports closing sale
prices, the Fair Market Value shall be the average of the closing bid and asked
prices of the Company Stock in the over-the-counter market on the date of
valuation.
(c) If neither (a) nor (b) is applicable as of the date of valuation,
then the Fair Market Value shall be determined by the Administrator (see Section
7.2) using any reasonable method of valuation, which determination shall be
conclusive and binding on all interested parties.
ARTICLE 7
PURCHASE OF STOCK
7.1 Purchase of Company Stock. A Participant who does not, prior to a
Purchase Date, notify the Company that such Participant does not want to
purchase any shares of Company Stock pursuant to the Plan or that such
Participant wants to purchase fewer than the maximum number of shares available
for purchase, shall be deemed
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to elect to purchase the maximum number of shares of Company Stock (including
fractional shares) purchasable with the amounts held in such Participant's
Account, at the purchase price determined under Section 6.2 above and, on each
Purchase Date, the Plan shall purchase such shares on behalf of such
Participant. In the event that there are amounts held in a Participant's Account
that are not used to purchase Company Stock, all such amounts shall be held
in the Participant's Account and carried forward to the next Offering Period.
The Board or a Committee may, in its discretion, limit the purchase of Company
Stock to only whole shares and not fractional shares.
7.2 Delivery of Company Stock.
(a) Company Stock acquired under the Plan shall be issued directly to
a contract administrator (the "Administrator") engaged by the Company to
administer the Plan under Article 9. All Company Stock so issued ("Plan Held
Stock") shall be held in the name of the Administrator for the benefit of the
Plan. The Administrator shall maintain accounts for the benefit of the
Participants that shall reflect each Participant's interest in the Plan Held
Stock. Such accounts shall reflect the number of shares of Company Stock
(including fractional shares) that are being held by the Administrator for the
benefit of each Participant.
(b) For share withdrawals, only whole shares of Company Stock will be
issued to a Participant. The time of issuance and delivery of shares may be
postponed for such period as may be necessary to comply with the registration
requirements under the Securities Act of 1933, as amended, the listing
requirements of any securities exchange on which the Company Stock may then be
listed, or the requirements under other laws or regulations applicable to the
issuance or sale of such shares. A payment will be made to a Participant for any
fractional shares of Company Stock owned by the Participant. This payment shall
be computed using the Fair Market Value of a share of Company Stock on the date
the withdrawal is processed by the Company's stock purchase coordinator. For
shares of Company Stock sold by a Participant from his or her account maintained
by the Administrator, the Participant shall receive credit for all whole and
fractional shares at the actual price for which the shares were sold.
ARTICLE 8
WITHDRAWAL
8.1 In Service Withdrawal. At any time prior to the Purchase Date of an
Offering Period, a Participant may withdraw the amounts held in his or her
Account by executing and delivering to the Company's stock purchase coordinator
written notice of withdrawal on the form provided by the Company. In such a
case, the entire balance of the Participant's Account shall be paid to the
Participant, without interest, as soon as is practicable. Upon such
notification, the Participant shall cease to participate in the Plan for the
remainder of the Offering Period in which the notice is given. An Employee who
has withdrawn under this Section 8.1 at least thirty (30) days prior to the
Purchase Date of an Offering Period shall be excluded from participation in the
Plan for the remainder of the Offering Period, but may then be reinstated as a
participant for a subsequent Offering Period by executing and delivering a new
Election Notice Form to the Company's stock purchase coordinator. An Employee
who has withdrawn under this Section 8.1 less than thirty (30) days prior to the
Purchase Date of an Offering Period shall be excluded from participation in the
Plan for the remainder of the Offering Period and for one (1) subsequent
Offering Period, but may thereafter be reinstated as a participant for a
subsequent Offering Period by executing and delivering a new Election Notice
Form to the Company's stock purchase coordinator.
8.2 Termination of Employment. In the event that a Participant's employment
with the Company terminates for any reason, the Participant shall cease to
participate in the Plan on the date of termination. As soon as is practical
following the date of termination, the entire balance of the Participant's
Account shall be paid to the Participant, without interest.
ARTICLE 9
PLAN ADMINISTRATION
9.1 Plan Administration.
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(a) The authority to control and manage the operation and
administration of the Plan shall be vested in the Board of Directors or a
committee ("Committee") thereof. The Board or the Committee shall have all
powers necessary to supervise the administration of the Plan and control its
operations.
(b) In addition to any powers and authority conferred on the Board or
Committee elsewhere in the Plan or by law, the Board or the Committee shall have
the following powers and authority:
(i) To designate agents to carry out responsibilities relating to
the Plan;
(ii) To administer, interpret, construe and apply the Plan and to
answer all questions which may arise or which may be raised under the Plan by a
Participant, his beneficiary or any other person whatsoever;
(iii) To establish rules and procedures from time to time for the
conduct of its business and for the administration and effectuation of its
responsibilities under the Plan; and
(iv) To perform or cause to be performed such further acts as it
may deem to be necessary, appropriate, or convenient for the operation of the
Plan.
(c) Any action taken in good faith by the Board or the Committee in
the exercise of authority conferred upon it by this Plan shall be conclusive and
binding upon a Participant and his beneficiaries. All discretionary powers
conferred upon the Board shall be absolute.
9.2 Limitation on Liability. No Employee or member of the Board or
Committee shall be subject to any liability with respect to his or her duties
under the Plan unless the person acts fraudulently or in bad faith. To the
maximum extent permitted by law, the Company shall indemnify each member of the
Committee and every other member of the Board, as well as any other Employee
with duties under the Plan, against all liabilities and expenses (including any
amount paid in settlement or in satisfaction of a judgment) reasonably incurred
by the individual in connection with any claims against the individual by reason
of the performance of the individual's duties under the Plan. This indemnity
shall not apply, however, if: (a) it is determined in the action, lawsuit, or
proceeding that the individual is guilty of gross negligence or intentional
misconduct in the performance of those duties; or (b) the individual fails to
assist the Company in defending against any such claim. The Company shall have
the right to select counsel and to control the prosecution or defense of the
suit. The Company shall not be obligated to indemnify any individual for any
amount incurred through any settlement or compromise of any action unless the
Company consents in writing to the settlement or compromise.
ARTICLE 10
COMPANY STOCK
10.1 Limitations on Purchase of Shares. The maximum number of shares of
Company Stock that shall be made available for sale under the Plan shall be
950,000 shares, subject to adjustment under Section 10.4 below. The shares of
Company Stock to be sold to Participants under the Plan will be issued by the
Company. If the total number of shares of Company Stock that would otherwise be
issuable pursuant to rights granted pursuant to Section 6.1 of the Plan at the
Purchase Date exceeds the number of shares then available under the Plan, the
Company shall make a pro rata allocation of the shares remaining available in as
uniform and equitable manner as is practicable. In such event, the Company shall
give written notice of such reduction of the number of shares to each
participant affected thereby and any unused payroll deductions shall be returned
to such participant if necessary.
10.2 Registration of Company Stock. Shares to be delivered to a Participant
under the Plan will be registered in the name of the Participant.
10.3 Changes in Capitalization of the Company. Subject to any required
action by the shareholders of the Company, the number of shares of Company Stock
covered by each right under the Plan which has not yet been exercised and the
number of shares of Company Stock which have been authorized for issuance under
the Plan but
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have not yet been placed under rights or which have been returned to the Plan
upon the cancellation of a right, as well as the Purchase Price per share of
Company Stock covered by each right under the Plan which has not yet been
exercised, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Company Stock resulting from a stock split, stock
dividend, spin-off, reorganization, recapitalization, merger, consolidation,
exchange of shares or the like. Such adjustment shall be made by the Board of
Directors for the Company, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Company Stock subject
to any right granted hereunder.
10.4 Merger of Company. In the event that the Company at any time proposes
to merge into, consolidate with, or enter into any other reorganization pursuant
to which the Company is not the surviving entity (including the sale of
substantially all of its assets or a "reverse" merger in which the Company is
the surviving entity), then, to the extent permitted by applicable law: (i) any
surviving corporation shall assume the rights theretofore granted or substitute
for such rights new rights covering the shares of a successor corporation, with
appropriate adjustments as to the number and kind of shares and prices, or (ii)
the Plan and the rights theretofore granted shall continue in full force and
effect. In the event any surviving corporation refuses to assume or continue the
Plan, or to substitute similar options for those under the Plan, then the Board
of Directors or its committee shall cause written notice of the proposed action
to be given to the persons holding rights not less than 10 days prior to the
anticipated effective date of the proposed transaction and, concurrent with the
effective date of the proposed transaction, such rights shall be exercised
automatically in accordance with Section 7.1 as if such effective date were a
Purchase Date of the applicable Offering Period unless a Participant withdraws
from the Plan as provided in Section 8.1.
ARTICLE 11
MISCELLANEOUS
11.1 Amendment and Termination. The Plan shall terminate on December 31,
2008. Since future conditions affecting the Company cannot be anticipated or
foreseen, the Company reserves the right to amend, modify, or terminate the Plan
at any time. Notwithstanding the foregoing, no such amendment or termination
shall affect rights previously granted, nor may an amendment make any change in
any right previously granted which adversely affects the rights of any
Participant. In addition, no amendment may be made without prior approval of the
shareholders of the Company if such amendment would:
(a) Increase the number of shares of Company Stock that may be issued
under the Plan;
(b) Materially modify the requirements as to eligibility for
participation in the Plan; or
(c) Materially increase the benefits that accrue to Participants under
the Plan.
11.2 Benefits Not Alienable. Benefits under the Plan may not be assigned or
alienated, whether voluntarily or involuntarily. Any attempt at assignment,
transfer, pledge or other disposition shall be without effect, except that the
Company may treat such act as an election to withdraw funds in accordance with
Article 8.
11.3 No Enlargement of Employee Rights. The Plan is strictly a voluntary
undertaking on the part of the Company and shall not be deemed to constitute a
contract between the Company and any Employee or to be consideration for, or an
inducement to, or a condition of, the employment of any Employee. Nothing
contained in the Plan shall be deemed to give the right to any Employee to be
retained in the employ of the Company or to interfere with the right of the
Company to discharge any Employee at any time.
11.4 No Additional Rights. Neither the adoption of the Plan nor the
granting of any right to purchase stock hereunder shall affect or restrict in
any way the power of the Company to undertake any corporate action otherwise
permitted under applicable law. Furthermore, no Employee shall have any rights
as a Stockholder with respect to shares to be purchased under the Plan until
time at which the Fair Market Value of the Common Stock is determined on the
Purchase Date. Finally, except as provided in Section 10.4, no adjustments will
be made for
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cash or stock dividends or other rights relating to Company Stock for which the
record date is prior to the Purchase Date.
11.5 Governing Law. To the extent not preempted by Federal law, all legal
questions pertaining to the Plan shall be determined in accordance with the laws
of the State of California.
11.6 Non-business Days. When any act under the Plan is required to be
performed on a day that falls on a Saturday, Sunday or legal holiday, that act
shall be performed on the next succeeding day which is not a Saturday, Sunday or
legal holiday. Notwithstanding the above, Fair Market Value shall be determined
in accordance with Section 6.3.
11.7 Compliance With Securities Laws. Notwithstanding any provision of the
Plan, the Committee shall administer the Plan in such a way to ensure that the
Plan at all times complies with any requirements of Federal Securities Laws.
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PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
EMERGENT INFORMATION TECHNOLOGIES, INC.
The undersigned appoints Steven S. Myers and Cathy L. Wood, and each of
them, with full power of substitution, to vote all shares of Common Stock of any
class of Emergent Information Technologies, Inc. ("EITI") held of record by the
undersigned as of April 13, 2001, at the Annual Meeting of Shareholders of EITI
to be held at the Sutton Place Hotel, at 4500 MacArthur Boulevard, Newport
Beach, California, on Wednesday, June 6, 2001 at 10:00 a.m. local time, and at
all adjournments thereof, (the "Annual Meeting") upon the following matters,
which are described in EITI's Proxy Statement for the Annual Meeting.
[X] Please mark your votes as in this example.
1. FOR APPROVAL OF AMENDMENT TO THE BYLAWS:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. ELECTION OF DIRECTORS:
[ ] FOR ALL NOMINEES LISTED [ ] WITHHOLD AUTHORITY NOMINEES:
AT RIGHT (EXCEPT AS TO VOTE FOR ALL NOMINEES LISTED Steven S. Myers
MARKED TO THE CONTRARY AT RIGHT J. Christopher Lewis
BELOW) Luther J. Nussbaum
Albert S. Nagy
John R. Woodhull
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
the nominee's name on the lines immediately below)
--------------- --------------- ---------------
--------------- --------------- ---------------
- --------------------------------------------------------------------------------
3. FOR APPROVAL OF AMENDMENT TO AMENDED 4. FOR APPROVAL OF AMENDMENT TO AMENDED AND
1997 STOCK OPTION PLAN. RESTATED EMPLOYEE STOCK PURCHASE PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN [ ] FOR [ ] AGAINST [ ] ABSTAIN
5. TO ACT UPON ALL OTHER MATTERS THAT PROPERLY COME BEFORE THE MEETING.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF ANY NOMINEE NAMED ABOVE DECLINES OR IS UNABLE TO
SERVE AS A DIRECTOR, THE PERSONS NAMED AS PROXIES SHALL HAVE FULL DISCRETION TO
VOTE FOR ANY OTHER PERSON WHO MAY BE NOMINATED.
PLEASE DATE, SIGN, MAIL AND RETURN THIS PROXY
IN THE ENCLOSED ENVELOPE.
54
NOTE: Please sign exactly as your name appears
herein. If the stock is registered in the name of
two or more persons, each should sign. Executors,
administrators, trustees, guardians, attorneys and
corporate officers should add their titles.
Date
----------------------------------------------
--------------------------------------------------
Signature(s)
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS