SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. _____)
Check the appropriate box:
(X) Preliminary Information Statement
( ) Confidential, For Use of the Commission Only (as Permitted by Rule
14c-5(d)(2))
( ) Definitive Information Statement
SHOPSS.COM, INC.
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(Name of Registrant as Specified in Its Charter)
Payment of filing fee (Check the appropriate box):
(X) No fee required.
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
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(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction apply:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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(4) Proposed maximum aggregate value of transaction:
$
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(5) Total fee paid:
$
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( ) Fee paid previously with preliminary materials:
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( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, schedule or registration statement no.:
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(3) Filing party:
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(4) Date filed:
1
SHOPSS.COM, INC.
5201 Great America Parkway
Suite 320/3102
Santa Clara, CA 95054
INFORMATION STATEMENT
January 23, 2001
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A
PROXY. THE ACTION, DEFINED BELOW, HAVE ALREADY BEEN APPROVED BY WRITTEN
CONSENT OF HOLDERS OF A MAJORITY OF THE OUTSTANDING COMMON STOCK OF THE
COMPANY. A VOTE OF THE REMAINING SHAREHOLDERS IS NOT NECESSARY.
GENERAL
This Information Statement is first being furnished on or about January 23,
2001 to shareholders of record as of the close of business on December 18,
2000 (the "Record Date") of the common stock, $0.001 par value per share
(the "Common Stock") of Shopss.com, Inc. ("Shopss" or the "Company") in
connection with the following (the "Actions"):
1. Amendment of the Articles of Incorporation, as amended, changing
the name of the Company to AccessTel, Inc.
2. Amendment of the Articles of Incorporation, as amended, the total
number of shares of Capital Stock which Shopss shall have to
authority to issue from 50,000,000 to 120,000,000 of which
100,000,000 shall be common stock and 20,000,000 shares shall be
designated preferred stock, $1.00 par value per share (the
"Preferred Stock"); and
3. Adoption of a Stock Option Plan.
The Board of Directors has approved, and a majority of the shareholders
(the "Consenting Shareholders") representing 20,385,438 shares of the
31,416,140 shares outstanding of the Common Stock as of the Record Date
have consented in writing, to the Actions. Such approval and consent
constitute the approval and consent of a majority of the total number of
shares of outstanding of Common Stock and are sufficient under the Utah
Business Corporation Act and Shopss' By-Laws to approve the Actions.
Accordingly, the Actions will not be submitted to the other shareholders of
Shopss for a vote and this Information Statement is being furnished to
shareholders to provide them with certain information concerning the Action
in accordance with the requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act") and the regulations promulgated thereunder,
including Regulation 14C.
This Information Statement contains forward-looking statements which
involve risks and uncertainties. Shopss' actual results may differ
significantly from the results discussed in the forward-looking statements.
Shopss will pay all costs associated with the distribution of the
Information Statement, including the costs of printing and mailing. Shopss
will reimburse brokerage firms and other custodians, nominees and
fiduciaries for reasonable expenses incurred by them in sending this
Information Statement to the beneficial owners of Shopss's Common Stock.
FOR ADDITIONAL INFORMATION ABOUT SHOPSS, REFERENCE IS MADE TO SHOPSS'
QUARTERLY REPORT ON FORM 10-QSB.
2
The principal executive office of Shopss is located 5201 Great America
Parkway, Suite 320/3102, Santa Clara, CA 95054.
3
AMENDMENT TO THE CERTIFICATE OF INCORPORATION
TO CHANGE THE NAME OF THE COMPANY
The Board of Directors has unanimously adopted and the Consenting
Shareholders have approved an amendment to the Articles of Incorporation,
as amended, of Shopss (the "Name Amendment") to change the name of the
Company from "Shopss.com, Inc." to "AccessTel, Inc." The text of the Name
Amendment is attached as Appendix A and is incorporated herein by
reference.
In the judgment of the Board of Directors, the change of Shopss's corporate
name is desirable in view of the resent acquisition by Shopss pursuant to
the Share Exchange Agreement dated as of December 18, 2000 (the
"Agreement") by and among Shopss, AccessTel, Inc. ("AccessTel") and the
shareholders of AccessTel named therein. Pursuant to the Agreement, on
December 18, 2000 (the "Closing"), the Company acquired from the
shareholders of AccessTel all of the shares of AccessTel (the
"Acquisition") in exchange for an aggregate eighteen million one hundred
twenty four thousand two hundred and forty (18,14,240) shares of Common
Stock.
The Name Amendment will become effective upon the filing of a certificate
of amendment relating thereto with the Secretary of State of the State of
Utah, which will occur on or about February 15, 2001. Under federal
securities, laws, Shopss cannot file the certificate of amendment until at
least 20 days after the mailing of this Information Statement.
AMENDMENT TO THE ARTICLES OF INCORPORATION
TO INCREASE THE AUTHORIZED SHARES OF
COMMON STOCK AND TO AUTHORIZE PREFERRED STOCK
The Board of Directors has unanimously adopted and the Consenting
Shareholders have approved an amendment to the Articles of Incorporation,
as amended, of Shopss (the "Authorized Shares Amendment") to increase the
total number of shares of capital stock which Shopss has the authority to
issue from 50,000,000 to 120,000,000 of which 100,000,000 shall be common
stock and 20,000,000 shall be Preferred Stock. The text of the Authorized
Shares Amendment is attached as Appendix B and is incorporated herein by
reference.
The Board of Directors has deemed it advisable and in the best interests of
Shopss to amend Article IV of the Articles of Incorporation, as amended, to
increase the authorized number of shares of Common Stock to 100,000,000 and
to authorize 20,000,000 of shares of Preferred Stock. The purpose of such
increase is to place Shopss in a position where it will continue to have a
sufficient number of shares of authorized and unissued Common Stock and the
availability of Preferred Stock which can be issued for or in connection
with such corporate purposes as may, from time to time, be considered
advisable by the Board of Directors. Having such shares available for
issuance in the future will give Shopss greater flexibility and will allow
such shares to be issued as determined by the Board of Directors of the
Shopss without the expense and delay of a special shareholders' meeting to
approve such additional authorized capital stock. Such corporate purposes
could include, without limitation: (a) issuance in connection with any
desirable acquisitions which may be presented to the Shopss, (b) the
payment of stock dividends or issuance pursuant to stock splits, (c) the
issuance of Common Stock upon exercise of options granted under a stock
option plan or in connection with other employee benefit plans, (d) the
issuance of Common Stock upon the conversion of any Preferred Stock, the
exercise of warrants or the conversion of other securities convertible into
Common Stock which may be outstanding from time to time, and (e) issuance
in connection with an offering to raise capital for Shopss.
The authorized shares of Common Stock and Preferred Stock will be available
for issuance at such times and for such purposes as the Board of Directors
may deem advisable without further action by the shareholders, except as
may be required by the Articles of Incorporation, as amended, and
applicable laws and regulations.
4
The Authorized Shares Amendment may have the result of making it more
difficult for any persons or group of persons, other than the current
principal shareholders and management, to acquire control of Shopss by
expanding the ability of Shopss to issue shares and thereby dilute the
voting power of any person or group that might accumulate shares in order
to attempt to effect a change in control. Although the Authorized Shares
Amendment might have such effect, the Authorized Shares Amendment has been
proposed by the Board of Directors for the reasons set forth above and not
for anti-takeover reasons. Shopss is not aware of any present effort to
accumulate shares of Common Stock or to attempt to change control of
Shopss.
The text of the Authorized Shares Amendment is attached as Appendix A and
is incorporated herein by reference. The Authorized Shares Amendment will
become effective upon the filing of a certificate of amendment relating
thereto with the Secretary of State ofthe State of Utah, which will occur
on or about February 15, 2001. Under federal securities, laws, Shopss
cannot file the certificate of amendment until at least 20 days after the
mailing of this Information Statement.
APPROVAL OF THE STOCK OPTION PLAN
Effective January 16, 2001, the Board of Directors adopted the Shopss Stock
Option Plan (the "Plan") and effective as of January 16, 2001 the
Consenting Shareholders approved the Plan.
The following summary describes the material features of the Plan.
PURPOSE
The purpose of the Plan is to promote the long-term success of Shopss by
attracting, motivating and retaining directors, officers and key employees
and consultants of Shopss and its affiliates (the "Participants") through
the use of competitive long-term incentives which are tied to shareholder
value. The Plan seeks to balance Participants' and shareholder interests
by providing incentives to the Participants in the form of stock options
which offer rewards for achieving the long-term strategic and financial
objectives of Shopss.
COMMON STOCK AVAILABLE
Subject to adjustment as described below, the maximum number of shares of
Common Stock which may be awarded under the Plan may not exceed an
aggregate of 20,000,000 shares over the life of the Plan. The Plan
provides for equitable adjustment of the number of shares subject to the
Plan and the number of shares of each subsequent award of stock thereunder
and of the unexercised portion of the stock option award described below in
the event of a change in the capitalization of Shopss due to a stock split,
stock dividend recapitalization, merger or similar event.
5
ELIGIBILITY
Persons who are eligible to receive stock options granted under the Plan
are those individuals and entities as a compensation committee or such
other committee appointed by the Board of Directors to administer the Plan
(the "Committee") in its discretion determines should be awarded such
incentives given the best interest of Shopss; provided, however, that (i)
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incentive stock options ("ISOs") may only be granted to employees of Shopss
and its affiliates and (ii) any person holding capital stock of Shopss or
any affiliate possessing more than 10% of the total combined voting power
of all classes of capital stock of Shopss or any affiliate will not be
eligible to receive ISOs unless the exercise price per share is at least
110% of the fair market value of the stock on the date the option is
granted.
ADMINISTRATION
The authority to control and manage the operation and administration of the
Plan is vested in the Committee appointed by the Board of Directors from
time to time. Members of the Committee shall serve at
the pleasure of the Board of Directors. The Committee may from time to time
determine which officers, directors and key employees and consultants of
Shopss and its affiliates may be granted options under the Plan, the terms
Thereof (including, without limitation, determining whether the option is an
ISO and the times at which the option shall become exercisable), and the
Number of shares for which an option or options may be granted. If rights of
Shopss to repurchase stock are imposed, the Board of Directors or the
Committee may, in its sole discretion, accelerate, in whole or in part, the
time for lapsing of any rights of Shopss to repurchase shares or forfeiture
restrictions. The Board of Directors or the Committee has the sole
authority, in its absolute discretion. to adopt, amend and rescind such
rules and regulations, consistent with the provisions of the Plan, as, in
its opinion, may be advisable in the administration of the Plan, to
construe and interpret the Plan, the rules and regulations, and the
instruments evidencing options granted under the Plan and to make all other
determinations deemed necessary or advisable for the administration of the
Plan. All decisions, determinations and interpretations of the Committee
are binding on all option holders under the Plan.
GRANT AND EXERCISE OF OPTIONS
All ISOs will have option exercise prices per option share not less than
the fair market value of a share on the date the option is granted, except
in the case of ISOs granted to any person possessing more than 10% of the
total combined voting power of all classes of stock in which case the price
will be not less than 110% of such fair market value. The term of each
option may not be more than 10 years, except that the term of each ISO
issued to any person possessing more than 10% of the voting power of all
classes of stock may not be more than five years.
The vesting schedule for any option granted under the Plan, will be
determined by the Board of Directors or the Committee and will be set forth
in a specific option agreement. To the extent not exercised, installments
will accumulate and be exercisable, in whole or in part, at any time after
becoming exercisable, but not later than the date the option expires. The
Committee has the right to accelerate the exercisability of any option.
Each ISO granted pursuant to the Plan is exercisable, during the optionee's
lifetime, only by the optionee or the optionee's guardian or legal
representative. Neither the option nor any right to purchase stock may be
transferred, assigned or pledged other than by will under the laws of
descent and distribution. Payment of the purchase price is by (i) cash, (ii)
check, (iii) at the discretion of the Committee, by delivery to Shopss of
the option holder's promissory note, (iv) such other consideration as the
Committee, in its sole discretion, determines and is consistent with the
Plan's purpose and applicable law, or (v) any combination of the foregoing.
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AMENDMENT AND TERMINATION
The Board of Directors may at any time suspend or terminate the Plan, and
may amend it from time to time in such respects as the Board of Directors
may deem advisable. Unless terminated by the Board of Directors earlier,
the Plan shall terminate on the earlier of January 16, 2010.
MARKET VALUE OF UNDERLYING SECURITIES
On January 16, 2001 the closing bid price for Shopss's Common Stock on the
over-the-counter Electronic Bulletin Board was $.94.
FEDERAL INCOME TAX INFORMATION
Under the terms of the Plan, options may be granted as either ISOs under
Section 422 of the Internal Revenue Code of 1986, as amended, (the "Code")
and the regulations thereunder or non-incentive stock options ("NSOs"). In
general, an optionee does not recognize taxable income upon grant or
exercise of an ISO and Shopss is not entitled to any business expense
deduction with respect thereto. However, upon the exercise of an ISO, the
excess of the fair market value on the date of exercise of the shares
received over the exercise price of the shares is treated as an item of
adjustment for purpose of calculating alternative minimum taxable income.
In order for the exercise of an ISO to qualify for the foregoing tax
treatment, the optionee generally must be an employee of Shopss or a
subsidiary (within the meaning of Section 422 of the Code) from the date
the ISO is granted through the date three months before the date of
exercise (one year before the date of exercise in the case of an optionee
who is terminated due to disability).
If the optionee has held the shares acquired upon exercise of an ISO for at
least two years after the date of grant and for at least one year after the
date of exercise, upon disposition of the shares by the optionee, the
difference, if any, between the sales price of the shares and the exercise
price of the option is treated as long-term capital gain or loss. If the
optionee does not satisfy these ISO holding period requirements (a
"Premature Disposition"), the optionee will recognize ordinary income at
the time of the disposition of the shares, generally in an amount equal to
the excess of the fair market value of the shares at the time the option
was exercised over the exercise price of the option. The balance of the
gain realized, if any, will be long-term or short-term capital gain,
depending on the holding period. If the optionee sells the shares prior to
the satisfaction of the ISO holding period requirements, but at a price
below the fair market value of the shares at the time the option was
exercised, the amount of ordinary income is limited to the amount realized
on the sale over the exercise price of the option. Upon a Premature
Disposition, Shopss and its subsidiaries is allowed a business expense
deduction to the extent the optionee recognizes ordinary income.
In general, an optionee to whom a NSO is granted recognizes no income at
the time of the grant of the option. Upon exercise of a NSO, an optionee
recognizes ordinary income and Shopss is entitled to a deduction in an
amount equal to the excess of the fair market value of the shares on the
date of exercise over the exercise price of the option. Shopss's deduction
is conditioned upon its reporting the income amount.
The foregoing summary of the Plan is subject to the provisions of the Plan
which is included as Appendix B to this Information Statement.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
PERSONS ENTITLED TO NOTICE
The Record Date for the determination of the shareholders entitled to
notice of and to consent to the Action has been fixed as of the close of
business on December 18, 2000. As of December 18, 2000, there were
outstanding 31,416,140 shares of Common Stock, each of which was entitled
to one vote.
Since the Action has been duly approved by the Consenting Shareholders
holding a majority of the outstanding Common Stock, approval or consent of
the remaining shareholders is not required and is not being solicited
hereby or by any other means.
7
The Utah Business Corporation Act does not provide for dissenters
rights in connection with the adoption of the Actions.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
ownership of the Common Stock as of December 18, 2000 by: (i) each
director; (ii) each of the executive officers; (iii) all executive officers
and directors of Shopss as a group; and (iv) all those known by Shopss to
be beneficial owners of more than 5% of the Common Stock. Unless otherwise
stated in the notes to the table, each person named below has sole
authority to vote and dispose of the shares shown. Under Rule 13d-3(d)(1)
of the Securities Exchange Act of 1934, as amended, in calculating
percentage ownership, each person named below is deemed to beneficially own
securities that such person has the right to acquire within sixty days
through the exercise of any option or warrant or through the conversion of
any security, but securities subject to options, warrants or conversion
rights owned by others (even if exercisable or convertible within sixty
days) are not deemed to be outstanding shares. The address of those
individuals for which an address is not otherwise indicated is 5201 Great
America Parkway, Suite 301/3102, Santa Clara, CA 95054.
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BENEFICIAL OWNERSHIP
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Number of Percentage
SHARES OWNERSHIP
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DIRECTORS AND OFFICERS
Lawrence Liang 7,032,500 19.44
Stuart Bockler 6,192,000 17.12
All Directors and Executive 13,224,500 35.56
Officers (2 persons)
5% OR MORE BENEFICIAL OWNERSHIP
None
BY ORDER OF THE BOARD OF DIRECTORS
Date: January 23, 2001 By: /s/ LAWRENCE LIANG
-----------------------------
Lawrence Liang
President
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FORM 10-QSB
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A COPY OF SHOPSS'S FORM 10-QSB AS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO SHAREHOLDERS AS OF
THE RECORD DATE UPON WRITTEN REQUEST TO STUART BOCKLER, CHIEF FINANCIAL
OFFICER AND SECRETARY, SHOPSS.COM, INC., 5201 GREAT AMERICAN PARKWAY, SUITE
320/3102, SANTA CLARA, CA 95054.
10
Appendix A
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
SHOPSS.COM, INC.
a Utah Corporation
The undersigned certify that:
1. They are the president and the secretary, respectively, of Shopss.com,
Inc.
2. Article I of the Articles of Incorporation of this corporation is
amended to read as follows:
"The name of this corporation shall be: AccessTel, Inc."
3. Article IV of the Articles of Incorporation of this corporation is
amended to read as follows:
"The total number of shares of capital stock which the Corporation has
authority to issue is 120,000,000 shares, of which (i) 100,000,000 shares
shall be designated Common Stock, having a par value of $0.001 per share,
and (ii) 20,000,000 shares shall be designated Preferred Stock, having a
par value of $1.00 per share. The Board of Directors shall have authority
to fix by resolutions the designations and powers, voting rights,
preferences, conversion and other rights and the qualifications,
limitations or restrictions of such Preferred Stock, including the number
of shares of any series, to the full extent permitted by the Utah Business
Corporation Act."
4. The foregoing amendments of Articles of Incorporation has been duly
approved by the board of directors and a majority of the shareholders of
this corporation.
We further declare under penalty of perjury under the laws of the
State of Utah that the matters set forth in this certificate are true and
correct of our own knowledge.
DATE: January ,2001
--
By:
----------------------------------
Lawrence Liang
Chief Executive Officer and President
DATE: January ,2001
--
BY:
----------------------------------
Stuart Bockler
Chief Financial Officer and Secretary
1
Appendix B
SHOPSS.COM, INC.
STOCK OPTION PLAN
1. Establishment, Purpose and Definitions.
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(a) The Stock Option Plan (the "Plan") of Shopss.com, Inc., a Utah corporation
(the "Company"), is hereby adopted. The Plan shall provide for the
issuance of incentive stock options ("ISOs") and nonqualified stock options
("NSOs") to purchase the Stock of the Company.
(b)The purpose of this Plan is to promote the long-term success of the Company
by attracting, motivating and retaining directors, officers and key
employees and consultants of the Company and its Affiliates (the
"Participants") through the use of competitive long-term incentives which
are tied to shareholder value. The Plan seeks to balance Participants' and
shareholder interests by providing incentives to the Participants in the
form of stock options which offer rewards for achieving the long-term
strategic and financial objectives of the Company.
(c)The Plan is intended to provide a means whereby Participants may be given
an opportunity to purchase shares of Stock of the Company pursuant to (i)
options which may qualify as ISOs under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"), or (ii) NSOs which
may not so qualify.
(d)The term "Affiliates" as used in this Plan means, in the case of an ISO,
parent or subsidiary corporations, as defined in Section 424(e) and (f) of
the Code (but substituting "the Company" for "employer corporation"),
including parents or subsidiaries which become such after adoption of the
Plan, and in all other cases, any entity which is controlled by or which
controls the Company.
2. Administration of the Plan.
---------------------------
(a)The Plan shall be administered by the Board of Directors (the "Board") or
such other committee appointed by the Board to administer the Plan (the
"Committee") or in the absence of a Committee, by the Board acting in such
capacity, in which case reference herein to the Committee shall mean the
Board.
(b)The Committee may from time to time determine which Participants (each an
"option holder") shall be granted options under the Plan, the terms thereof
(including without limitation determining whether the option is an ISO and
the times at which the options shall become exercisable), and the number of
shares of Common Stock for which an option or options may be granted.
(c)If rights of the Company to repurchase Stock are imposed, the Board or the
Committee may, in its sole discretion, accelerate, in whole or in part, the
time for lapsing of any rights of the Company to repurchase shares of such
Stock or forfeiture restrictions.
(d)If rights of the Company to repurchase Stock are imposed, the certificates
evidencing such shares of Stock awarded hereunder, although issued in the
name of the option holder concerned, shall be held by the Company or a
third party designated by the Committee in escrow subject to delivery to
the option holder or to the Company at such times and in such amounts as
shall be directed by the Board under the terms of this Plan. Share
certificates representing Stock which is subject to repurchase rights shall
have imprinted or typed thereon a legend or legends summarizing or
referring to the repurchase rights.
(e)The Board or the Committee shall have the sole authority, in its absolute
discretion, to adopt, amend and rescind such rules and regulations,
consistent with the provisions of the Plan, as, in its opinion, may be
advisable in the administration of the Plan, to construe and interpret the
Plan, the rules and regulations, and the instruments evidencing options
granted under the Plan and to make all other determinations deemed
necessary or advisable for the administration of the Plan. All decisions,
determinations and interpretations of the Committee shall be binding on all
option holders under the Plan.
1
3. Stock Subject to the Plan.
--------------------------
(a)"Stock" shall mean the Common Stock of the Company or such stock as may be
changed as contemplated by Section 3(c) below. Stock shall include shares
drawn from either the Company's authorized but unissued shares of Common
Stock or from reacquired shares of Common Stock, including without
limitation shares repurchased by the Company in the open market.
(b)Options may be granted under the Plan from time to time to eligible persons
to purchase an aggregate of up to 20,000,000 shares of Stock.
Stock options awarded pursuant to the Plan which are forfeited, terminated,
surrendered or cancelled for any reason prior to exercise shall again
become available for grants under the Plan (including any option cancelled
in accordance with the cancellation regrant provisions of Section 6(f)
herein).
(c)If there shall be any change in the Stock subject to the Plan, including
Stock subject to any option granted hereunder, through merger,
consolidation, recapitalization, reorganization, reincorporation, stock
split, reverse stock split, stock dividend, combination or reclassification
of the Company's Stock or other similar events, an appropriate adjustment
shall be made by the Committee in the number of shares and/or the option
price with respect to any unexercised shares of Stock. Consistent with the
foregoing, in the event that the outstanding Stock is changed into another
class or series of capital stock of the Company, outstanding options to
purchase Stock granted under the Plan shall become options to purchase such
other class or series and the provisions of this Section 3(c) shall apply
to such new class or series.
(d)The Company may grant options under the Plan in substitution for options
held by employees of another company who become employees of the Company as
a result of merger or consolidation. The Company may direct that
substitute options be granted on such terms and conditions as deemed
appropriate by the Board or the Committee.
(e)The aggregate number of shares of Stock approved by the Plan may not be
exceeded without amending the Plan and obtaining shareholder approval
within twelve months of such amendment.
4. Eligibility.
------------
Persons who shall be eligible to receive stock options granted under the
Plan shall be those Participants referred to in Section 1(b) above;
provided, however, that (i) ISOs may only be granted to employees of the
Company and its Affiliates and (ii) any person holding capital stock
possessing more than 10% of the total combined voting power of all classes
of capital stock of the Company or any Affiliate shall not be eligible to
receive ISOs unless the exercise price per share of Stock is at least 110%
of the fair market value of the Stock on the date the option is granted.
5. Exercise Price for Options Granted under the Plan.
--------------------------------------------------
(a)All ISOs will have option exercise prices per option share equal to the
fair market value of a share of the Stock on the date the option is
granted, except that in the case of any option granted to any person
possessing more than 10% of the total combined voting power of all classes
of stock of the Company or any Affiliate (a "Ten Percent Shareholder") the
price shall be not less than 110% of such fair market value. The option
exercise prices per option for NSO's shall be as determined by the
Committee, provided that NSO's shall have an exercise price that is not
less than 85% of such fair market value except that the exercise price
shall be 110% of such fair market value in the case of NSO's granted to any
Ten Percent Shareholder. The price of ISOs or NSOs granted under the Plan
shall be subject to adjustment to the extent provided in Section 3(c)
above.
2
(b)The fair market value on the date of grant shall be determined based upon
the closing price on an exchange on that day or, if the Stock is not listed
on an exchange, on the average of the closing bid and asked prices in the
Over the Counter Market on that day.
6. Terms and Conditions of Options.
--------------------------------
(a)Each option granted pursuant to the Plan shall be evidenced by a written
stock option agreement (the "Option Agreement") executed by the Company and
the person to whom such option is granted. The Option Agreement shall
designate whether the option is an ISO or an NSO.
(b)The term of each ISO and NSO shall be no more than 10 years, except that
the term of each ISO issued to any person possessing more than 10% of the
voting power of all classes of stock of the Company or any Affiliate shall
be no more than 5 years.
(c)In the case of ISOs, the aggregate fair market value (determined as of the
time such option is granted) of the Stock to which ISOs are exercisable for
the first time by any individual during any calendar year (under this Plan
and any other plans of the Company or its Affiliates if any) shall not
exceed the amount specified in Section 422(d) of the Internal Revenue Code,
or any successor provision in effect at the time an ISO becomes
exercisable.
(d)The Option Agreement may contain such other terms, provisions and
conditions regarding vesting, repurchase or other similar provisions as may
be determined by the Committee and not inconsistent with this Plan. If an
option, or any part thereof, is intended to qualify as an ISO, the Option
Agreement shall contain those terms and conditions which the Committee
determine are necessary to so qualify under Section 422 of the Internal
Revenue Code.
(e)The Committee shall have full power and authority to extend the period of
time for which any option granted under the Plan is to remain exercisable
following the option holder's cessation of service as an employee or
consultant, including without limitation cessation as a result of death or
disability; provided, however, that in no event shall such option be
exercisable after the specified expiration date of the option term.
(f)The Committee shall have full power and authority to effect at any time and
from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant
in substitution new options under the Plan covering the same or different
numbers of shares of Stock with the same or different exercise prices.
(g)As a condition to option grants under the Plan, the option holder agrees to
grant the Company the repurchase rights as Company may at its option
require and as may be set forth in the Option Agreement or a separate
repurchase agreement.
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(h)Any option granted under the Plan may be subject to a vesting schedule as
provided in the Option Agreement and, except as provided in this Section 6
herein, only the vested portion of such option may be exercised at any time
during the Option Period. Options shall become exercisable at the rate of
at least 20% per year over five years from the date the option is granted,
subject to reasonable conditions such as continued employment. However, in
the case of an option granted to officers, directors or consultants of the
Company or any of its Affiliates, the option may become fully exercisable,
subject to reasonable conditions such as continued employment, at any time
or during any period established by the Company or any of its Affiliates.
All rights to exercise any option shall lapse and be of no further effect
whatsoever immediately if the option holder's service as an employee is
terminated for "Cause" (as hereinafter defined). The unvested portion of
the option will lapse and be of no further effect immediately upon any
termination of employment of the option holder for any reason. Unless
employment is terminated for Cause, the right to exercise an option in the
event of termination of employment, to the extent that the Participant is
otherwise entitled to exercise an option on the date employment terminates,
shall be:
(i)at least six months from the date of termination of employment if
termination was caused by death or disability;
(ii)at least 90 days from the date of termination if termination of
employment was caused by other than death or disability; and
(iii)but in no event later than the remaining term of the option.
There shall be "Cause" for termination as set forth in any applicable
employment or consulting agreement or, in the absence of such agreement if
(i) the option holder is convicted of a felony, (ii) the option holder
engages in any fraudulent or other dishonest act to the detriment of the
Company, (iii) the option holder fails to report for work on a regular
basis, except for periods of authorized absence or bona fide illness,
(iv) the option holder misappropriates trade secrets, customer lists or
other proprietary information belonging to the Company for the option
holder's own benefit or for the benefit of a competitor, (v) the option
holder engages in any willful misconduct designed to harm the Company or
its shareholders, or (vi) the option holder fails to perform properly
assigned duties with a failure to cure after 20 days notice.
(i)No fractional shares of Stock shall be issued under the Plan, whether by
initial grants or any adjustments to the Plan.
7. Use of Proceeds.
----------------
Cash proceeds realized from the sale of Stock under the Plan shall
constitute general funds of the Company.
8. Amendment, Suspension or Termination of the Plan.
-------------------------------------------------
(a)The Board may at any time suspend or terminate the Plan, and may amend it
from time to time in such respects as the Board may deem advisable provided
that (i) such amendment, suspension or termination complies with all
applicable state and federal requirements and requirements of any stock
exchange on which the Stock is then listed, including any applicable
requirement that the Plan or an amendment to the Plan be approved by the
shareholders. The Plan shall terminate on the earlier of (i) ten (10)
years from April 6, 2000, (ii) the date on which no additional shares of
Stock are available for issuance under the Plan, or (iii) ten years after
the date the Plan is approved by the Company's shareholders.
(b)No option may be granted during any suspension or after the termination of
the Plan, and no amendment, suspension or termination of the Plan shall,
without the option holder's consent, alter or impair any rights or
obligations under any option granted under the Plan.
(c)The Committee, with the consent of affected option holders, shall have the
authority to cancel any or all outstanding options under the Plan and grant
new options having an exercise price which may be higher or lower than the
exercise price of cancelled options.
9. Assignability of Options and Rights.
------------------------------------
(a)Subject to Subparagraph (b), no Option issued under the Plan shall be
assignable or transferable by an option holder other than by will or the
laws of descent and distribution. An Option awarded to an option holder
during such option holder's lifetime shall be exercisable only by an option
holder or his or her guardian or legal representation.
(b)Notwithstanding Subparagraph (a), in the case of an NSO, an option holder
shall be permitted to transfer the Option to the option holder's spouse,
adult lineal descendants, adult spouses of adult lineal descendants and
trusts for the benefit of the option holder's minor or adult lineal
descendants (a "Related Transferee") if the Option Agreement under which
the Option is granted so specifies. If the Option is transferred to a
Related Transferee pursuant to the preceding sentence, the Related
Transferee shall, upon exercise of the Option, hold the Stock subject to
all the provisions of the transferor's Option Agreement in the same manner
as the transferor and shall execute and deliver to the Company such
instruments as the Company shall require to evidence the same.
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10. Payment Upon Exercise.
----------------------
Payment of the purchase price upon exercise of any option or right to
purchase Stock granted under this Plan shall be made by giving the Company
written notice of such exercise, specifying the number of such shares of
Stock as to which the option is exercised. Such notice shall be
accompanied by payment of an amount equal to the Option Price of such
shares of Stock. Such payment may be (i) cash, (ii) by check drawn against
sufficient funds, (iii) at the discretion of the Committee, by delivery to
the Company of the option holder's promissory note, (iv) such other
consideration as the Committee, in its sole discretion, determines and is
consistent with the Plan's purpose and applicable law, or (v) any
combination of the foregoing. Any Stock used to exercise options to
purchase Stock (including Stock withheld upon the exercise of an option to
pay the purchase price of the shares of Stock as to which the option is
exercised) shall be valued in accordance with procedures established by the
Committee. Any promissory note used to exercise options to purchase Stock
shall be a full recourse, interest-bearing obligation secured by Stock in
the Company being purchased and containing such terms as the Committee
shall determine. If a promissory note is used to exercise options the
option holder agrees to execute such further documents as the Company may
deem necessary or appropriate in connection with issuing the promissory
note, perfecting a security interest in the stock purchased with the
promissory note and any related terms the Company may propose. Such
further documents may include, without limitation, a security agreement and
an assignment separate from certificate. If accepted by the Committee in
its discretion, such consideration also may be paid through a broker-dealer
sale and remittance procedure pursuant to which the option holder (I) shall
provide irrevocable written instructions to a designated brokerage firm to
effect the immediate sale of the purchased Stock and remit to the Company,
out of the sale proceeds available on the settlement date, sufficient funds
to cover the aggregate option price payable for the purchased Stock plus
all applicable Federal and State income and employment taxes required to be
withheld by the Company in connection with such purchase and (II) shall
provide written directives to the Company to deliver the certificates for
the purchased Stock directly to such brokerage firm in order to complete
the sale transaction.
11. Withholding Taxes.
------------------
(a)Shares of Stock issued hereunder shall be delivered to an option holder
only upon payment by such person to the Company of the amount of any
withholding tax required by applicable federal, state, local or foreign
law. The Company shall not be required to issue any Stock to an option
holder until such obligations are satisfied.
(b)The Committee may, under such terms and conditions as it deems appropriate,
authorize an option holder to satisfy withholding tax obligations under
this Section 11 by surrendering a portion of any Stock previously issued to
the option holder or by electing to have the Company withhold shares of
Stock from the Stock to be issued to the option holder, in each case having
a fair market value equal to the amount of the withholding tax required to
be withheld.
12. Corporate Transactions.
-----------------------
(a)For the purpose of this Section 12, a "Corporate Transaction" shall include
any of the following shareholder-approved transactions to which the Company
is a party:
(i)a merger or consolidation in which the Company is not the surviving entity,
except for a transaction the principal purpose of which is to change the
State of the Company's incorporation; or
(ii)the sale, transfer or other disposition of all or substantially all of the
assets of the Company in liquidation or dissolution of the Company.
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(b)Upon the occurrence of a Corporate Transaction, if the surviving
corporation or the purchaser, as the case may be, does not assume the
obligations of the Company under the Plan, then irrespective of the vesting
provisions contained in individual option agreements, all outstanding
options shall become immediately exercisable in full and each option holder
will be afforded an opportunity to exercise their options prior to the
consummation of the merger or sale transaction so that they can participate
on a pro rata basis in the transaction based upon the number of shares of
Stock purchased by them on exercise of options if they so desire. To the
extent that the Plan is unaffected and assumed by the successor corporation
or its parent company a Corporate Transaction will have no effect on
outstanding options and the options shall continue in effect according to
their terms.
(c)Each outstanding option under this Plan which is assumed in connection with
the Corporate Transaction or is otherwise to continue in effect shall be
appropriately adjusted, immediately after such Corporate Transaction, to
apply and pertain to the number and class of securities which would have
been issued to the option holder in connection with the consummation of
such Corporate Transaction had such person exercised the option immediately
prior to such Corporate Transaction. Appropriate adjustments shall also be
made to the option price payable per share, provided the aggregate option
price payable for such securities shall remain the same. In addition, the
class and number of securities available for issuance under this Plan
following the consummation of the Corporate Transaction shall be
appropriately adjusted.
(d)The grant of options under this Plan shall in no way affect the right of
the Company to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
13. Loans or Guarantee of Loans.
----------------------------
(a)The Committee may, in its discretion, assist any option holder in the
exercise of options granted under this Plan, including the satisfaction of
any income and employment tax obligations arising therefrom by
(i) authorizing the extension of a loan from the Company to such option
holder, (ii) permitting the option holder to pay the exercise price for the
Stock in installments over a period of years or (iii) authorizing a
guarantee by the Company of a third party loan to the option holder. The
terms of any loan, installment method of payment or guarantee (including
the interest rate and terms of repayment) will be upon such terms as the
Committee specifies in the applicable option or issuance agreement or
otherwise deems appropriate under the circumstances. Loans, installment
payments and guarantees may be granted with or without security or
collateral (other than to option holders who are not employees, in which
event the loan must be adequately secured by collateral other than the
purchased Stock). However, the maximum credit available to the option
holder may not exceed the exercise or purchase price of the acquired shares
of Stock plus any Federal and State income and employment tax liability
incurred by the option holder in connection with the acquisition of such
shares of Stock.
(b)The Committee may, in its absolute discretion, determine that one or more
loans extended under this financial assistance program shall be subject to
forgiveness by the Company in whole or in part upon such terms and
conditions as the Committee may deem appropriate.
14.Regulatory Approvals.
---------------------
The obligation of the Company with respect to Stock issued under the Plan
shall be subject to all applicable laws, rules and regulations and such
approvals by any governmental agencies or stock exchanges as may be
required. The Company reserves the right to restrict, in whole or in part,
the delivery of Stock under the Plan until such time as any legal
requirements or regulations have been met relating to the issuance of
Stock, to their registration or qualification under the Securities Exchange
Act of 1934, if applicable, or any applicable state securities laws, or to
their listing on any stock exchange at which time such listing may be
applicable.
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15. No Employment/Service Rights.
-----------------------------
Neither the action of the Company in establishing this Plan, nor any action
taken by the Board or the Committee hereunder, nor any provision of this
Plan shall be construed so as to grant any individual the right to remain
in the employ or service of the Company (or any parent, subsidiary or
affiliated corporation) for any period of specific duration, and the
Company (or any parent, subsidiary or affiliated corporation retaining the
services of such individual) may terminate or change the terms of such
individual's employment or service at any time and for any reason, with or
without cause.
16. Miscellaneous Provisions.
-------------------------
(a)The provisions of this Plan shall be governed by the laws of the State of
California, as such laws are applied to contracts entered into and
performed in such State, without regard to its rules concerning conflicts
of law.
(b)The provisions of this Plan shall inure to the benefit of, and be binding
upon, the Company and its successors or assigns, whether by Corporate
Transaction or otherwise, and the option holders, the legal representatives
of their respective estates, their respective heirs or legatees and their
permitted assignees.
(c)The option holders shall have no dividend rights, voting rights or any
other rights as a shareholder with respect to any options under the Plan
prior to the issuance of a stock certificate for such Stock.
(d)With respect to grants to non-U.S. residents, options may be granted
hereunder which may vary from the terms of the Plan but which are
consistent with the terms hereof to the extent necessary or appropriate to
comply with foreign laws including but not limited to tax laws.
(e)Any option exercised before shareholder approval is obtained shall be
rescinded if shareholder approval is not obtained within 12 months before
or after the Plan. Such shares shall not be counted in determining whether
such approval is obtained.
(f)The Company shall provide annual financial statements of the Company to
each Participant holding an outstanding option under the Plan.
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