SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Soliciting Material Under Rule
[_] Confidential, For Use of the 14a-12
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
BOUNDLESS CORPORATION
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
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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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BOUNDLESS CORPORATION
100 Marcus Boulevard
Hauppauge, New York 11788
January 31, 2002
TO OUR STOCKHOLDERS:
You are cordially invited to attend our 2001 Annual Stockholders' Meeting
to be held at our principal offices located at 100 Marcus Boulevard, Hauppauge,
New York, on February 28, 2002 at 10:00 a.m. local time. You are being asked to
elect directors, to approve the adoption of our 2001 Incentive Plan and to
ratify the appointment of independent auditors.
We have enclosed a Notice of annual meeting of stockholders and Proxy
Statement that discuss the matters to be presented at the meeting. For the
reasons set forth in the accompanying Proxy Statement, your Board of Directors
unanimously recommends that you vote for (i) Management's nominees for
directors, (ii) the adoption of our 2001 Incentive Plan and (iii) the
ratification of the appointment of BDO Seidman, LLP as our independent auditors.
In addition to acting on the matters listed in the Notice of annual meeting
of stockholders, we will discuss our progress, and you will be given an
opportunity to ask questions of general interest to all stockholders.
We have also enclosed a copy of a letter to you regarding year 2000 results
and recent developments and our Form 10-K for our fiscal year ended December 31,
2000.
We hope that you will come to the annual meeting in person. Those who are
interested in attending may contact Diane Metcalf (212-949-5600) to RSVP or to
make local hotel reservations at the preferred Boundless rate. Even if you don't
plan to come, we strongly encourage you to complete the enclosed proxy and
return it to us in the enclosed business reply envelope. Instructions are shown
on your proxy. If you are a stockholder of record and later find you can be
present or, if for any reason you desire to revoke your proxy, you can do so at
any time before the voting. Your vote is important and will be greatly
appreciated.
Joseph V. Joy, Jr.
Chief Executive Officer
BOUNDLESS CORPORATION
-----------------------------------
NOTICE OF 2001 ANNUAL MEETING OF STOCKHOLDERS
TIME.................. o 10:00 a.m., local time, on Thursday, February
28, 2002.
PLACE................. o Our principal offices located at 100 Marcus
Boulevard, Hauppauge, New York
PURPOSES.............. o To elect directors to serve until the next
stockholders' meeting.
o To approve the adoption of our 2001 Incentive
Plan, permitting the issuance of up to
284,000 shares of our common stock pursuant
to grants of stock options and stock awards
to our employees, directors and others.
o To ratify the appointment of BDO Seidman, LLP
as our independent auditors for the 2001
fiscal year.
o To transact any other business that properly
comes before the meeting or any adjournment
of the meeting.
RECORD DATE........... o You can vote if you were a stockholder of
record at the close of business on January
15, 2002.
By order of the board of directors,
Joseph Gardner
Vice President, Chief Financial Officer
January 31, 2002
Hauppauge, New York
YOUR VOTE IS IMPORTANT
Whether or not you plan to attend the meeting, we urge you to vote
as soon as possible.
PROXY STATEMENT
GENERAL INFORMATION ABOUT THE SOLICITATION
We are sending you these proxy materials in connection with the
solicitation by the board of directors of Boundless Corporation (Amex: BND) of
proxies to be used at the annual meeting of stockholders to be held on February
28, 2002, and at any adjournment or postponement of the meeting. "We", "our",
"us", the "Company" and "Boundless" all refer to Boundless Corporation. The
proxy materials are first being mailed on or about January 31, 2002.
Who may vote
You will be entitled to vote at the annual meeting only if our records show
that you held your shares on January 15, 2002. On January 15, 2002, a total of
5,688,037 shares of our common stock were outstanding and entitled to vote. Each
share of common stock has one vote.
Voting by proxy
If your shares are held by a broker, bank or other nominee, it will send
you instructions that you must follow to have your shares voted at the annual
meeting. If you hold your shares in your own name as a record holder, you may
instruct the proxy agents how to vote your shares by completing, signing,
dating, and mailing the proxy card in the enclosed postage-paid envelope. You
can always come to the meeting and vote your shares in person.
The proxy agents will vote your shares as you instruct. If you sign and
return your proxy card without giving instructions, the proxy agents will vote
your shares:
o FOR each person named in this Proxy Statement as a nominee for
election to the board of directors;
o FOR the adoption of the 2001 Incentive Plan, a copy of which is
attached to this Proxy Statement as Appendix B; and
o FOR ratification of the appointment of BDO Seidman, LLP as our
independent auditors for the fiscal year ending December 31, 2001.
How to revoke your proxy
You may revoke your proxy at any time before it is voted. If you are a
record stockholder, you may revoke your proxy in any of the following ways:
o by giving notice of revocation at the annual meeting,
o by delivering to the Chief Financial Officer of the Company, 100
Marcus Boulevard, Hauppauge, New York 11788, written instructions
revoking your proxy,
o by delivering to the Chief Financial Officer an executed proxy bearing
a later date, or
o by voting in person at the annual meeting.
How votes will be counted
The annual meeting will be held if a quorum, consisting of a majority of
the outstanding shares of common stock entitled to vote, is represented at the
meeting. If you have returned a valid proxy or attend the meeting in person,
your shares will be counted for the purpose of determining whether there is a
quorum, even if you wish to abstain from voting on some or all matters
introduced. Abstentions and broker "non-votes" will be included in the number of
shares represented at the meeting for the purpose of
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determining whether a quorum is present. A "broker non-vote" occurs when a
broker, bank or nominee that holds shares for a beneficial owner does not vote
on a particular proposal because the nominee does not have discretionary voting
power for that proposal and has not received voting instructions from the
beneficial owner.
If a quorum is not present at the annual meeting, a majority of the shares
present, in person or by proxy, has the power to adjourn the meeting from time
to time until a quorum is present. Other than announcing at the annual meeting
the time and place of the adjourned meeting, no notice of the adjournment will
be given to stockholders unless required because of the length of the
adjournment.
In the election of directors, votes may be cast in favor or withheld. Votes
that are withheld will be excluded entirely from the vote count and will have no
effect on the election of directors or on the outcome of any other matter voted
on. Directors will be elected by a plurality of the votes cast.
The affirmative vote of a majority of the votes cast is required to approve
all other matters voted on at the meeting. Abstentions and broker non-votes are
not counted for any purpose in determining whether a matter has been approved.
Cost of this proxy solicitation
We will pay the cost of the proxy solicitation. In addition, we may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation materials to such
beneficial owners. We expect that some of our officers and regular employees may
solicit proxies by telephone, facsimile, e-mail, or personal contact. None of
these officers or employees will receive any additional or special compensation
for doing this.
Deadline for receipt of stockholder proposals
Proposals that our stockholders would like to present at our 2002 annual
meeting of stockholders must be received by us no later than October 2, 2002 in
order to be considered for possible inclusion in the Proxy Statement and form of
Proxy relating to that meeting. However, if we hold our annual stockholders
meeting for 2002 prior to January 30, 2003, or after March 30, 2003, we will
announce in one of our quarterly reports on Form 10-Q or in another report the
deadline for the submission of stockholder proposals.
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1. ELECTION OF DIRECTORS
AND MANAGEMENT INFORMATION
General
Our Board of Directors has 7 members and each of whom serves until the next
annual meeting and until his successor is elected and qualifies. Of our current
Board members, J. Gerald Combs, J. Frank Stephens and Oscar L. Smith have been
nominated for re-election to the Board and Daniel Matheson, Jeffrey K. Moore,
Jack Murphy and Gary Wood will not stand for re-election.
Your proxy will be voted FOR the election of the 9 management nominees
named below unless you withhold authority to vote for all or any of the
nominees. Management has no reason to believe that a nominee will be unwilling
or unable to serve as a director. However, if a nominee is unwilling or unable
to serve, your proxy will be voted for any nominee designated by our board of
directors.
Director Nominees
The following table lists management's director nominees.
Name Age Director Since
----- --- --------------
Richard Bowman 41 Not Applicable
Gary Brooks 67 Not Applicable
J. Gerald Combs 52 May 1997
Anthony Giovaniello 46 Not Applicable
Joseph V. Joy, Jr. 48 Not Applicable
Safwan M. Masri 39 Not Applicable
John J. McGovern 46 Not Applicable
Oscar L. Smith 65 January 2002
J. Frank Stephens 50 July 2001
Richard Bowman is an executive consultant with extensive experience in
agribusiness, technology development and the financing of commercial
agri-processing projects in lesser developed countries. He presently serves as
an adviser to select agribusiness and environmental firms in North America,
consulting in the areas of production management, environmental compliance, and
options for environmentally based financing. He has traveled and worked
extensively outside of North America, primarily in South America, Africa and
Asia. From November 1998 to March 2000, Mr. Bowman served as the President,
Chief Executive Officer, and Corporate Director of the Global Livestock Group,
Inc. ("GLG"). The GLG is a world leader in the design, implementation and
marketing of carbon offset projects. Building on experience as a livestock
development program within its parent company, the GLG offers carbon offset
capabilities with pioneering feed and genetics technology. From May 1993 through
October 1998 Mr. Bowman served as the Director of the Livestock Division of
Appropriate Technology International ("ATI"), now known as EnterpriseWorks
Worldwide, Inc. ATI is a Washington D.C. based, non-governmental organization
which promotes commercially viable and environmentally sound applications of
innovative technology. The organization focuses on small scale producer
technology applications in lesser developed countries. Mr. Bowman graduated with
a Bachelor of Science degree in Animal Science/Agribusiness from the University
of Idaho in 1982.
Since 1998, Gary Brooks has served as the Chairman and Chief Executive
Officer of Allomet Partners, Ltd. Mr. Brooks is a Co-founder of Allomet
Partners, Ltd., a professional services firm providing
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consulting and interim management services to under-performing businesses. From
1985 until 1998, Mr. Brooks served as the President of Allomet Partners, Ltd.
Nationally recognized as one of the most experienced practitioners in the field,
he has recently served as interim Chief Operating Officer at Ampco Metals, Inc.,
where he facilitated the analysis and implemented the program that served as the
basis for the company's financial and strategic direction. He has over 35 years
of diversified executive management and consulting experience. He served as the
National Chair of the Institute of Management Consultants (IMC). He is a
founding member of the Turnaround Management Association (TMA) and served as a
member of its Board of Directors for 8 years. His career affiliations include
the General Electric Company, Eastman Kodak, and as a Division Executive
managing a subsidiary of Scott Paper Company. Prior to the formation of Allomet
Partners, he managed the New York office of an international firm specializing
in strategic planning and technological forecasting, and served for 8 years as
Managing Principal of a major New England based turnaround consulting firm. He
lectures often on the many aspects of turnaround management and crisis
intervention. Gary Brooks has an MS in Chemical Engineering and Operations
Research from the University of Rochester and a BS in Biochemical Engineering
and Industrial Management from MIT.
J. Gerald Combs has served as Chairman of the Company since May 9, 1997 and
as Chief Executive Officer of the Company and its subsidiaries from such date
and until January 2002. From April 1997 to December 1999 Mr. Combs had been the
Chairman and CEO of Morgan Kent Group, which had been the largest shareholder of
the Company until approximately December 2000 or January 2001. Since 1992 Mr.
Combs has been Chairman and CEO of Merrico Corporation, a privately held
financial consulting firm. Mr. Combs also served as President of All-Quotes,
Inc., the predecessor of the Company, from October 1993 to December 1994.
Anthony Giovaniello has served as Executive Vice President, Business
Development, for Boundless Manufacturing Services, Inc. since August 1999; and,
since May 2001 as Vice President, Business Development, for the Company. Prior
to this, from April 1998 until August 1999, Mr. Giovaniello served as the
Director, Business Development, for Solectron Corporation. From February 1998
through April 1998 he was an independent consultant for the NCR Corporation and
Solectron Corporation. From February 1986 until February 1998, Mr. Giovaniello
held numerous executive and sales management positions at Boundless
Technologies, Inc. Mr. Giovaniello has been a professional in the high
technology area for over 20 years. Over that period he has amassed extensive
sales and sales management experience, both in corporate and indirect sales
activities.
Joseph V. Joy, Jr. was named CEO of Boundless Corporation effective January
7, 2002. Previously he has served as President and Chief Operating Officer,
Boundless Manufacturing Services, Inc. since September 1999; and, since March 9,
2001, as President and Chief Operating Officer of the Company. Mr. Joy has over
twenty-five years experience in the computer and computer peripherals
industries. Mr. Joy's experience includes general management, supply-base
management, marketing, quality assurance and engineering. He has extensive
experience in contract manufacturing from both the OEM customer and EMS provider
perspective. From March 1998 to September 1999 Mr. Joy was Vice President
Business and Supplier Development, Systems and Services Division, Solectron
Corp. Prior to that he served as the Vice President of Supplier Management and
Logistics for NCR's Computer Systems Group from March 1995 to March 1998. He
received his MBA from Columbia University and BA from Georgetown University.
Professor Safwan M. Masri joined the Management Science and Operations
Management Faculty at Columbia Business School in July 1988, and was appointed
Vice Dean of Columbia Business School in January 1993. He has served as a
Professor and Vice Dean of Columbia Business School since that time. Professor
Masri earned his Bachelor of Science degree in Industrial Engineering from
Purdue University in 1982; his Master of Science in Industrial Engineering also
from Purdue in 1984; and his Ph.D. in Industrial Engineering and Engineering
Management from Stanford University in 1988. Professor Masri was honored with
the Singhvi Professor of the Year for Scholarship in the Classroom Award in
1990. He has recently been awarded the Robert W. Lear Service Award in 1998 and
the Dean's Award for Teaching Excellence in a Core Course in 2000. Professor
Masri was a Visiting Professor at INSEAD in 1990 and in 1991. In addition, he
has held teaching positions at Stanford University and Santa Clara University.
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Professor Masri is active in consulting and executive education in the U.S.,
Latin America, Europe, and the Middle East. His consulting and executive
training clients have included Merrill Lynch, PaineWebber, Bristol-Myers Squibb,
Salomon Brothers, Deutsche Bank, Thomson Publishing, Bankers Trust, Citibank,
Ford Motor Company, NCR, Pfizer, IBM, Bahrain Institute of Banking and Finance,
and the United Nations. Professor Masri advises, and is a director of, a number
of international corporations, start-up ventures, and charitable foundations
that include ARAMEX International, the Nuqul Group, Aregon, Sage Global
Ventures, the Arab Bankers Association of North America, the Colbert Foundation,
and Friends for Life. He is Advisor to Her Majesty Queen Rania Al-Abdullah of
Jordan on education and information technology, and serves on the e-Government
and on the Human Resources Development Committees of His Majesty King Abdullah's
Economic Consultative Council. He is also a member of the Advisory Board for the
United Nations Development Programme Project for the Assessment of Arab
Universities. His most recent research interests concern the impact of the
Internet on the structure and efficiency of supply chains, focussing on the
emergence of e-commerce business-to-business trade relationships and industry
and market exchanges. Professor Masri has conducted extensive research in
technological change management and reengineering in the financial services
industry. His other research activities have included the study of manufacturing
flexibility and its impact on firm performance.
John J. McGovern is currently forming his own firm specializing in working
with troubled companies. Mr. McGovern previously has served as the Senior Vice
President & Chief Financial Officer of Multex.Com, Inc., from November 1999
until December 2001. Mr. McGovern was responsible for finance, legal, human
resources, strategic development, investor relations and administration of this
NASDAQ listed, industry leading internet based investment information and
technology provider to the financial services industry. Prior to this, from
August 1997 until November 1997, as Chief Financial Officer, and from December
1997 until April 1999, as President & Chief Executive Officer, Mr. McGovern was
employed by Northsound Music Group, Inc., a producer and marketer of C.D. and
cassette audio products to retailers, where he was responsible for the executive
management of the company reporting to the Board of Directors. From December
1995 until August 1997, Mr. McGovern was the Managing Director and founding
member of JJM Group, L.L.C., an investment banking firm specializing in
corporate financial advisory services in capital formation, financing and crisis
management to public and private emerging growth companies. Prior to JJM Group,
L.L.C., Mr. McGovern was President and Chief Executive Officer of Axel
Electronics Inc./Sigmapower, Inc. subsidiaries of FPBSM Industries Inc., a
defense electronics design and manufacturing firm. Mr. McGovern has also worked
for Merrill Lynch & Co. Inc. and Coopers & Lybrand. Mr. McGovern has served on
the Board of Directors of 15 companies and has extensive experience in
turnaround and crisis management, as well as experience in raising debt and
equity financing. He received his MBA from Columbia University and BS from
Monmouth College.
Oscar L. Smith is the sole director and shareholder of Unique Co-Operative
Solutions, Inc. ("UCSI"). Founded in 1988 by Mr. Smith, President & CEO, UCSI is
a value-added distributor of technology solutions addressing the needs of the
enterprise server-based computing environment. Mr. Smith has over 43 years of
various educational and work experiences in the electronics industry, beginning
in 1959, when Mr. Smith managed an engineering and consulting group that worked
on government contracts for the Atlas Missile and Gemini Space programs.
Following his experiences with working on government military contracts, in the
early 1970's, Mr. Smith founded two companies, Datamation and Circuit Analyzer
Test System, that provided programs and electronic systems to the aircraft and
aerospace industries. These products were sold to such companies as General
Dynamics, Lockheed, Grumman, Boeing, and McDonnell-Douglas as well as others in
the electronic industry. In 1976, Mr. Smith sold his interest in these companies
and joined the Savin Corporation, a leader in word processing equipment as the
director for their Kansas City operation. When the Savin division was sold, Mr.
Smith became a partner for a Kansas City company that specialized in selling
office automation systems. In 1987, he sold his partnership and started UCSI.
J. Frank Stephens has been a member of the Board since July 2001. Mr.
Stephens has over 28 years domestic and international experience in the
consumer, food service, and industrial ingredients channels. Since April 1997
Mr. Stephens has held the office of President, Capital Sigma Investments
("CSI"), a privately funded equity group focused in the health and soyfoods
category. Since April 1998, concurrent with CSI's acquisition of Quong Hop &
Co., a regional soy foods company, Mr. Stephens has
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served as the Chief Executive Officer of Quong Hop & Co. Prior to this, and from
August 1996 until March 1997, Mr. Stephens served as the Director of Strategic
Planning for Global Consumer Products, Inc., a company specializing in new
product development and branding for consumer-oriented companies.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF EACH NAMED NOMINEE.
Directors and Executive Officers
The following table lists our directors and executive officers.
Name Age Positions with Boundless
---- --- ------------------------
Joseph V. Joy, Jr. 48 President and Chief Executive Officer
Anthony Giovaniello 46 Executive Vice President - Boundless
Manufacturing Services, Inc. Services,
Inc.
Joseph Gardner 42 Vice President - Finance, Chief Financial
Officer
J. Gerald Combs 52 Director and Chairman of the Board of
Directors
Daniel Matheson 52 Director
Jeffrey K. Moore 32 Director
Jack Murphy 73 Director
J. Frank Stephens 50 Director
Oscar L. Smith 65 Director
Gary Wood 58 Director
Joseph Joy - See "Director Nominees".
Anthony Giovaniello - See "Director Nominees".
Joseph Gardner has served as Vice President- Finance and Chief Financial
Officer of the Company since October 31, 1997. Mr. Gardner has been employed by
Boundless Technologies, Inc. since April of 1990. Prior to October 31, 1997, Mr.
Gardner served as the Controller and Vice President- Quality Assurance of
Boundless Technologies.
Gary E. Wood has been a member of the Company's Board of Directors since
November 1996. Since January, 2001, Mr. Wood has been President of Collins
Financial Services, Inc. Since April 1997 he has been an officer of Collins,
serving as Executive Vice President prior to his recent promotion. Collins
purchases nationwide portfolios of consumer debt and either resells or collects
the accounts. Prior to joining Collins, and from April 1988 to December 1995,
Mr. Wood was Executive Vice President of the Texas Taxpayers and Research
Association. He has served as Staff Economist for Senator John Tower and as the
Chief Economist of the Republican Policy Committee of the U.S. Senate. He was
elected to two three-year terms on the Board of Directors of the Federal Reserve
Bank of Dallas, and served on the Regional Advisory Oversight Board of the
Resolution Trust Corporation. He has been a member of the Boards of The Capital
Network and the Mental Health Association of Texas. Mr. Wood has a PhD in
Finance from the University of Texas at Austin.
J. Gerald Combs - See "Director Nominees".
8
Jeffrey K. Moore has served as a member of the Company's Board and a Vice
President of the Company from January 1997 to January 2002. He joined the
Company in May 1996 as a financial analyst reporting to the Company's Chief
Financial Officer and President. From September 1996 to April 1997, he served as
President and Chairman of the Board, and from February 1999 to December 1999 had
served as Assistant Secretary and as a director, of Morgan Kent Group. In
December 1999 Mr. Moore was named Chairman of Morgan Kent Group, and during
January 2000 was named President of Merinta Inc..
Jack Murphy has served on the Board of Directors of the Company since June
2001. Mr. Murphy also served on the Board of Directors of the American
Physicians Service ("APS") Group, Inc. until 2001 and currently provides
consulting services to the American Physicians Insurance Exchange- a subsidiary
of the APS Group, Inc. From 1974 until his retirement in 1993, Mr. Murphy was
the founder, Chairman of the Board of Directors and Chief Executive Officer of
APS Group, Inc., a public company with subsidiaries providing various financial
services including medical and professional liability insurance, data processing
and facilities management for medical clinics, physician groups and medical
schools, and fixed income financial trading for banks and insurance companies.
J. Frank Stephens - See "Director Nominees".
Daniel Matheson has been a member of the Company's Board since August 1996.
Mr. Matheson received his JD with Honors from the University of Texas in 1974
and his BA from the University of Texas at Austin in 1971. Mr. Matheson's legal
experience has involved counseling and advice to emerging companies on choice of
entity structuring, venture financing, and corporate governance. He is a member
of the American, Texas and Travis County Bar Associations. Mr. Matheson is the
Past Chairman and a Member of the Board of Directors of The Capital Network,
Inc.; Immediate Past-Chairman and a Member of the Board of Directors of the
Mental Health Association of Texas; and a Member of the Board of Directors and
Executive committee of the Paramount Theater, Inc. He also serves as a Trustee
of the Texas Mental Health Foundation and is a member of the Austin Leadership
Council of the University of Texas "We're Texas" Capital Campaign.
Oscar L. Smith - See "Director Nominees".
Board Meetings and Committees
During 2000, our board of directors met ten times and had an audit
committee and a compensation committee.
Audit Committee. Our Board of Directors has adopted a written charter for
its audit committee, a copy of which is attached to this Proxy Statement as
Appendix A. The Audit Committee has the responsibility, under delegated
authority from our Board of Directors, for providing independent, objective
oversight of our accounting functions and internal controls. The Audit Committee
is composed of non-employee directors who are deemed to be "independent" under
American Stock Exchange rules. The Audit Committee consisted of two members,
Daniel Matheson and Gary Wood, during 2000 and four members as of July 2001 with
the addition of Jack Murphy and Frank Stephens. The audit committee met four
times during 2000.
Report of the Audit Committee
In connection with inclusion of the audited financial statements in our
2000 Annual Report on form 10-K, the audit committee:
o reviewed the audited financial statements with management;
o discussed with our independent auditors the materials required to be
discussed by SAS 61 (Communication with Audit Committees);
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o reviewed the written disclosures and the letter from our independent
auditors required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and discussed with
our independent auditors their independence; and
o based on the foregoing review and discussion, recommended to the board
of directors that the audited financial statements be included in our
2000 Annual Report on form 10-K.
AUDIT COMMITTEE
Daniel Matheson
Gary Wood
Jack Murphy (Joined in June 2001)
Frank Stephens (Joined in July 2001)
Report Of The Compensation Committee Of The Board Of Directors On
Executive Compensation
Our executive compensation program is administered by the Compensation
Committee of the Board of Directors. As of October 2001, the Committee consisted
of Daniel Matheson, Chairman of the Committee, Gary Wood, Frank Stephens and
Jack Murphy, none of whom are employees of the Company. Messrs. Murphy and
Stephens were named to the Compensation Committee in June and July, 2001,
respectively. The Compensation Committee is responsible for establishing, with
the approval of the Board of Directors, our compensation programs for all
employees, including executives. We apply a consistent methodology of
compensation for all employees, including executive officers. It is based on the
premise that our results are achieved through the coordinated efforts of all
individuals working towards meeting customer and stockholder expectations.
The goals of our compensation program are to align compensation with
business objectives and performance while enabling us to attract, retain and
reward employees who contribute to our long-term success. In all cases,
attention is given to fairness in the administration of compensation and to
assuring that all employees understand the related performance evaluation and
administrative process. We have taken careful steps in an effort to make
executive compensation consistent with that of other similar companies in the
industrial manufacturing industries and, when appropriate, contingent upon our
achievement of near- and long-term objectives and goals. For fiscal 2000, the
principal measures the Compensation Committee looked to in evaluating our
progress towards these objectives and goals were (1) achieving certain financial
performance levels, (2) increasing our economic value added ("EVA") in
accordance with the EVA program established by the Company and (3) the launch of
our subsidiaries, Merinta Inc. and Boundless Manufacturing Services, Inc..
For 2000, our executive compensation program included the following
components: (i) base salary, (ii) merit increases, (iii) annual incentives in
the form of cash bonuses and (iv) options to purchase shares of our Common
Stock.
Base Salary
Base salary is targeted toward the middle of the range established by
surveys of comparable companies in the industrial manufacturing industries. Base
salaries are reviewed to ensure that our salaries are competitive within the
target range.
10
Merit Increase
Merit increases are designed to encourage management to perform at
consistently high levels. Salaries for executives are reviewed by the
Compensation Committee on an annual basis and may be increased at that time
based on the Compensation Committee's conclusion that the individual's overall
contribution to our success deserves recognition. The base salaries paid to our
executive officers were increased in 2000 by amounts ranging from 0% to 30%,
reflecting primarily changed responsibilities and their contributions to our
near- and long-term strategic objectives set forth above.
Cash Bonuses
Bonuses for executives are considered to be "pay at risk" and as such are
used as an incentive to encourage management to perform at a high level or to
recognize a particular contribution by an employee or exceptional Company
performance. Generally, the higher the employee's level of job responsibility,
the larger the portion of the individual's compensation package that is
represented by a bonus. Whether a bonus will be given, and the amount of any
such bonus, is determined on a yearly basis. Any bonus earned in a particular
fiscal year is normally paid sometime after that fiscal year has expired.
For 2000, the Compensation Committee's objectives for the awarding of
bonuses to executives were to recognize and reward performance, to encourage
executives to exert maximum efforts to enable us to meet and exceed our or his
objectives, as well as to ensure that our compensation remains competitive to
enable us to hire and retain top-performing executives. At the beginning of
2000, the Compensation Committee and the Board of Directors reviewed and
approved our annual performance objectives. The actual cash bonus earned in 2000
by an executive officer depended upon the extent to which our objectives were
achieved.
For 2000, in awarding cash bonuses to executive officers, the Compensation
Committee evaluated our performance against the objectives set forth above as
follows: in fiscal 2000, we 1) launched two new operating subsidiaries, 2)
completed the acquisition of the manufacturing assets of Boca Research, Inc. and
secured a supply agreement from Boca Research, 3) completed the development of
the internet appliance software and began shipments to a large customer, 4)
negotiated an extension to the company's revolving line of credit with the Chase
Manhattan Bank, and 5) secured a $5,000,000 investment in our Merinta Inc.
subsidiary from National Semiconductor. In light of our success in achieving
important objectives in fiscal 2000, the Compensation Committee decided to award
bonuses to executives at 50% of their target levels, prorated for the time each
executive had been with us during the year. During 2000, our executive officers
were paid bonuses, earned in 1999, ranging from 18% to 48% of their base
salaries. Bonus awards are approved by the Chief Executive Officer, the
Compensation Committee and the Board of Directors in the case of executives
other than the Chief Executive Officer, and by the Compensation Committee and
the Board alone in the case of the Chief Executive Officer.
Stock Options
The Compensation Committee believes that stock ownership by management is
beneficial in aligning the interests of management and stockholders with respect
to enhancing stockholder value. Stock options are also used to retain executives
and motivate them to improve long-term stockholder value, Stock options are
granted at the prevailing market value and will only have future value if our
stock price increases. Generally, stock option grants vest 25% after the first
year and monthly thereafter in 36 equal amounts over three years.
The Compensation Committee determines the number of options to be granted
based upon the competitive marketplace, with a particular focus on determining
what level of equity incentive is necessary to retain a particular individual.
The Compensation Committee's recommendations in this regard are reviewed and
approved by the Board. Outstanding historical performance by an individual is
additionally recognized through larger than normal option grants. For 2000, our
executive officers received options to purchase Common Stock at levels ranging
from 40,000 to 125,000 shares.
11
Chief Executive Officer
The Compensation Committee used the same philosophy described above with
respect to other executive officers in setting the compensation for Mr. Combs,
who served as our Chief Executive Officer until January 2002. The base salary of
Mr. Combs was unchanged in 2000 as compared to 1999. Mr. Combs received a bonus
for 1999, payable in 2000, equal to 46% of his base salary . Despite missing
certain financial objectives in 2000, Mr. Combs did achieve other objectives, in
particular successfully raising $5,000,000 of equity funding for our Merinta
Inc. subsidiary; and, as a result, Mr. Combs was awarded a bonus of 23% of his
base salary for 2000. In addition, the Compensation Committee approved a grant
of options to Mr. Combs in fiscal 2000 to purchase 125,000 shares of Common
Stock.
COMPENSATION COMMITTEE
Daniel Matheson, Chairman
Gary Wood
Jack Murphy (Joined in June 2001)
Frank Stephens (Joined in July 2001)
Compensation Committee Interlocks and Insider Participation
Mr. Combs and Mr. Jeffrey Moore, who served as executive officers of
our company during 2000, were also members of our Board of Directors during such
times and participated in deliberations concerning executive officer
compensation. Their joint deliberations gave rise to conflicts of interest,
which could have affected their compensation, and the number of stock options
granted to them individually and as a group. Mr. Moore was also a member of the
board and an officer of Morgan Kent Group during 2000 which had certain
relationships, and entered into certain transactions, with us during 2000.
Executive Compensation
The table below discloses all cash compensation awarded to, earned by
or paid to our Chief Executive Officer and our four most highly compensated
executive officers who earned more than $100,000 for services rendered in all
capacities to us during the fiscal year ended December 31, 2000 (collectively,
the "named executive officers"). In addition, it provides information with
respect to the compensation paid by us to the named executive officers during
1999 and 1998.
Summary Compensation Table
Long-Term
Annual Compensation Compensation
---------------------------------------- ------------
Name and Principal Other Annual All Other
Position Year Salary Bonus Compensation Options(#)(4) Compensation
-------- ---- ------ ----- ------------ ----------- ------------
J. Gerald Combs(1) 12/31/00 $325,000 $150,000 - 125,000 -
Chairman and Former CEO 12/31/99 $325,000 $50,000 - 50,000 -
12/31/98 $291,462 $150,000 - 150,000 -
Jeffrey K. Moore(2) 12/31/00 $145,198 $70,000 $9,500 105,000 -
Former Vice President, 12/31/99 $112,500 $25,000 - 50,000 -
Corporate Development 12/31/98 $90,719 - - - -
Kenneth East(3) Former 12/31/00 $167,887 $50,000 - - -
CTO, Merinta Inc. 12/31/99 $164,640 $50,000 - 20,000 -
12/31/98 $137,489 $35,000 $17,130 30,000 -
12
Long-Term
Annual Compensation Compensation
---------------------------------------- ------------
Name and Principal Other Annual All Other
Position Year Salary Bonus Compensation Options(#)(4) Compensation
-------- ---- ------ ----- ------------ ----------- ------------
Joseph Gardner 12/31/00 $155,196 $62,500 - 40,000 -
Vice President-Finance 12/31/99 $140,193 $40,000 - 20,000 -
Chief Financial Officer 12/31/98 $140,962 $25,000 - - -
Joseph V. Joy (5) 12/31/00 $158,702 $25,000 - - -
President, Chief
Operating Officer
------------------
(1) Options representing 10% of the outstanding capital stock of Boundless
Manufacturing Services, Inc. and 6.5% of the outstanding capital stock of
Merinta Inc. were granted in 1999 to Mr. Combs, which options were
exercised by Mr. Combs during 1999. Mr. Combs resigned as our Chief
Executive Officer in January 2002.
(2) Other Annual Compensation includes a car allowance of $9,500 in 2000.
Options representing 10% of the outstanding capital stock of Boundless
Manufacturing Services, Inc. and 6.5% of the outstanding capital stock of
Merinta Inc. were granted in 1999 to Mr. Moore, which options were
exercised by Mr. Moore during 1999. Mr. Moore resigned as our Vice
President in January 2002.
(3) Other annual compensation consisted of relocation expense reimbursement.
(4) Options granted in July 2000 to each of Messrs. Combs and Moore for the
purchase of 65,000 shares of Common Stock have a exercise price of $4.50
per share of Common Stock. All other grants to the named executive officers
in 2000 have a strike price of $1.50 per share of Common Stock. All options
granted in 1999 to the named executive officers have a strike price of
$5.00 per share of Common Stock. With the exception of the 150,000 options
granted to Mr. Combs in 1998, which have a strike price of $4.88 per share
of Common Stock, we repriced the exercise price of all outstanding employee
options on May 18, 1998 to $5.63 per share of Common Stock.
(5) Mr. Joy has been our Chief Executive Officer since January 17, 2002.
1995/ 1997/ 2000 Incentive Plans
Our 1995 Incentive Plan covered the issuance of up to 600,000 shares of
Common Stock. The Board adopted the 1997 Incentive Plan in July 1997 which
covers the issuance of up to 1,000,000 shares of Common Stock. In December 2000
the Board created the 2000 Incentive Plan which covers up to 1,000,000 shares of
Common Stock. The number of option shares granted on a calendar year basis under
the 2000 Incentive Plan is limited to 5% of the total number of shares of Common
Stock outstanding, or 10% in any five-year period.
Option Grants in 2000 Fiscal Year
The following table sets forth information, as of December 31, 2000,
regarding the outstanding options to purchase our Common Stock granted in 2000
under either our 1995, 1997 or 2000 Incentive Plans to the named executive
officers:
13
Number of Potential Realizable
Securities Percent of Total Value at Assumed
Underlying Options/SARs Exercise or Annual Rates of Stock
Options/SARs Granted under Base Price Expiration Price Appreciation for
Name Granted (#) Incentive Plans ($/Sh) Date Option Term
---- ----------- --------------- ------ ---- -----------
5% ($) 10% ($)
------ -------
J. Gerald Combs (1) 65,000 15.6% $4.50 7/13/05 80,812 178,574
Jeffrey K. Moore(1) 65,000 15.6% $4.50 7/13/05 80,812 178,574
J. Gerald Combs(2) 60,000 14.4% $1.50 12/27/05 24,865 54,946
Jeffrey K. Moore(2) 40,000 9.6% $1.50 12/27/05 16,577 36,631
Joseph Gardner(2) 40,000 9.6% $1.50 12/27/05 16,577 36,631
---------------
(1) Options were granted 7/13/00 and vest over a three-year period at a rate of
50%, 25% and 25% respectively, per year, on the anniversary of the date of
grant.
(2) Options were granted 12/28/00 and vest immediately.
Aggregated Option Exercises in 2000 Fiscal Year
and Fiscal Year-End Option Values
---------------------------------
The following table provides information on the value of the named
executive officers' unexercised options to purchase shares of Common Stock at
December 31, 2000.
Value of Unexercised
Number of Unexercised Options at In-the-Money Options at
December 31, 2000 (#) December 31, 2000 ($)(1)
--------------------- ------------------------
Shares
Acquired on Value
Name Exercise(#) Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
J. Gerald Combs 0 $0 340,000 140,000 $- $-
Kenneth East 0 0 29,166 20,834 - -
Jeffrey K. Moore 0 0 115,000 90,000 - -
Joseph Gardner 4,500 $10,688 65,248 26,252 - -
---------------
(1) The last sale price of our Common Stock on December 29, 2000, as reported
by The American Stock Exchange, was $1.44.
Director Compensation
During 2000, non-employee members of our Board of Directors received $1,000
per month, and $500 for each Board meeting attended, as compensation for
services rendered to us in their capacity as our directors. In addition,
non-employee members of our Board of Directors received $6,500 in 2000 for
services provided as a member of either the Audit or Compensation Committees. On
December 28, 2000, we granted to each of Messrs. Matheson and Wood options to
purchase 40,000 shares of Common Stock. The options vest immediately, expire
December 27, 2005, and have an exercise price of $1.50 per share of Common
Stock.
14
Employment Agreements and Change-in-Control Arrangements
We had entered into employment agreements with Mr. Combs, our former
Chairman of the Board and Chief Executive Officer, Mr. Jeffrey K. Moore, our
former Vice President, Corporate Development, and Mr. East, the former Chief
Technology Officer of Merinta Inc.. The employment agreements with Mr. Combs and
Mr. Moore were terminated effective January 2002 as part of our severance
arrangement with each of them. Mr. East's employment agreement was terminated as
of June 2001.
With respect to Mr. Combs, the agreement was entered into March 1, 2000 and
had an expiration date of February 27, 2003. The agreement called for an annual
salary of $325,000, subject to an annual review by the Compensation Committee of
the Board of Directors, as well as the grant of 65,000 options to purchase
shares of our Common Stock, such shares to vest pro rata on an annual basis over
a three-year period. Should Mr. Comb's employment with us have been terminated
without cause, Mr. Combs would have been entitled to deferred payments totaling
thirty-six month's salary and bonus. In the event of a change-in-control, as
defined in the agreement, Mr. Combs would have been entitled to immediate
payments totaling the annual base salary, plus the previous year's annual bonus
multiplied by three, as well as immediate vesting of all options.
Mr. Moore's employment agreement was entered into March 1, 2000 and had an
expiration date of February 27, 2003. The agreement called for an annual salary
of $150,000, subject to an annual review by the Compensation Committee of the
Board of Directors, as well as the grant of 65,000 options to purchase shares of
our Common Stock, such shares to vest pro rata on an annual basis over a
three-year period. Should Mr. Moore's employment with us have been terminated
without cause, Mr. Moore would have been entitled to deferred payments totaling
thirty-six month's salary and bonus. In the event of a change-in-control, as
defined in the agreement, Mr. Moore would have been entitled to immediate
payments totaling the annual base salary, plus the previous year's annual bonus
multiplied by three, as well as immediate vesting of all options.
We and Boundless Manufacturing Services, Inc. entered into employment
agreements with Messrs. Joseph Joy and Anthony Giovaniello, the President of
Boundless Manufacturing Services, Inc. and Executive Vice President, Business
Development of Boundless Manufacturing Services, Inc., respectively. The terms
and conditions of the agreements for each of Messrs. Joy and Giovaniello are
substantially similar, having an initial term of approximately four years and
expiring July 1, 2003, unless sooner extended or terminated as provided for in
the agreements.
The agreements call for the purchase, by each of Messrs. Joy and
Giovaniello, of 12.5% of Boundless Manufacturing Services, Inc. issued and
outstanding common stock which purchases have been made by them. These shares
may be repurchased by Boundless Manufacturing Services, Inc. in a manner as
defined in the agreements, should that company fail to meet defined minimum
performance standards. The agreements call for annual salaries of approximately
$155,000, subject to an annual review; and a cash bonus of up to $100,000
annually determined by achievement of specified objectives. Pursuant to their
employment agreements, Mr. Joy and Mr. Giovaniello will each have the option,
upon attainment of certain defined performance standards, to convert his shares
of Boundless Manufacturing Services, Inc. into up to 300,000 shares of our
Common Stock.
In the event either of Messrs. Joy or Giovaniello is terminated for failure
to attain the minimum performance standards, as defined, he would be entitled to
continuation of base salary for a period not to exceed six months. In the event
of termination without cause, or if either Messrs. Joy or Giovaniello resigns as
a result of a change of control of our company, he would be entitled to
continuation of base salary for a period not to exceed 18 months. In addition,
in the event of termination without cause or resignation resulting from a change
of control, the employee is entitled to payment of the pro rata portion of the
cash bonus the employee would have been entitled to had he remained continuously
employed through the end of the year within which termination occurs.
15
Certain Transactions
During April 1999, we entered into a one-year consulting agreement with
CrossRoads Capital Corporation ("Cross Roads") for financial advisory and
investment banking services. The President of CrossRoads, Mr. Fred Schulman, is
also the President of the Morgan Kent Group. Fees associated with this contract
were $10,000 per month. During March 2000 the consulting agreement was extended
for an additional one-year period. In June 2000, we retained CrossRoads to
provide investor relations services. This second agreement, which was terminated
on December 31, 2000, called for aggregate fees of $150,000 plus expenses. We
paid to CrossRoads $120,000 in 2000 under the financial advisory and investment
banking services agreement and $133,500 in 2000 under the investor relations
services agreement.
In 1999, Morgan Kent Group paid us $2,000 in interest accruing on a $50,000
loan from us to Morgan Kent Group. The note evidencing such loan was entered
into July 18, 1997 and had been extended but has not been repaid.
On March 6, 2001, Unique Co-Operative Solutions, Inc., an entity entirely
owned by Oscar L. Smith, who became a member of our Board of Directors in
January 2002, filed a Schedule 13D with the Securities and Exchange Commission
in connection with its acquisition, over a period of time ending March 6, 2001,
of 233,200 shares of our Common Stock. This company has since acquired
additional securities of Boundless. During the past years Unique Co-Operative
Solutions, Inc. has acted as a reseller of our thin client products. For the
year ended December 31, 2000, we recorded sales of approximately $128,000 to
Unique Co-Operative Solutions, Inc. on terms substantially similar to our terms
with other sellers of our products.
Section 16(a) Beneficial Ownership Reporting Compliance
A review of the Forms 3 and 4 filed or due in 2000 relating to our
securities indicates that the filings made with the Commission were submitted on
time.
Security Ownership Of Certain Beneficial Owners And Management
The following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding Common Stock as of January 15, 2002, by
(i) each of the Company's directors and "named executive officers," (ii)
directors and executive officers of the Company as a group and (iii) each person
believed by the Company to own beneficially more than 5% of its outstanding
shares of Common Stock. Except as indicated each such person has sole voting and
investment powers with respect to his and her shares. The address of Goldplate
Holdings, LTD. is 241 Fifth Avenue, Suite 302, New York, NY. The address of
Unique Co-Operative Solutions Inc./ Oscar L. Smith is 9185 Bond, Overland Park,
KS 66214. The address of Neoware Systems, Inc. is 400 Feheley Dr., King of
Prussia, PA 19406.
Number of Shares Percentage of
Name of Beneficial Owner Beneficially Owned Outstanding Shares
------------------------ ------------------ ------------------
Unique Co-Operative Solutions, 977,389(1) 17.1%
Inc./ Oscar L. Smith
J. Gerald Combs 525,923(2)(3) 8.5%
Neoware Systems, Inc. 383,335(4) 6.7%
Goldplate Holdings, LTD 307,502(5) 5.1%
Jeffrey K. Moore 205,000(3)(6) 3.5%
Gary Wood 141,188(3) 2.4%
Joseph Gardner 97,074(3) 1.7%
Daniel Matheson 92,291(3) 1.6%
Joseph V. Joy, Jr 66,393(3) 1.2%
Anthony Giovaniello 39,022(3) *
16
Number of Shares Percentage of
Name of Beneficial Owner Beneficially Owned Outstanding Shares
------------------------ ------------------ ------------------
Frank Stephens 30,485(3) *
Kenneth East 0(7) *
All current directors and
executive officers as a group 2,174,765(3)(5) 31.8%
(nine individuals)
* Less than 1%.
(1) Includes 41,667 shares issuable upon the exercise of a warrant. The warrant
was granted June 4, 2001, in connection with a sale of our common stock.
The common shares underlying the warrant vest immediately, have an exercise
price per share of common stock of $1.30, and expire five years following
the date of grant. Prior to our sale of the Windows-based terminal product
line in June 2001, Unique Co-operative Solutions, Inc. had been a reseller
of our products. Sales of products to Unique Co-operative Solutions, Inc.
during the past three years were not material to the results of our
operations.
(2) Resigned as the Chief Executive Officer of the Company effective January
2002.
(3) Includes or consists of shares of Common Stock issuable upon exercise of
options as follows: Mr. Combs: 480,000; Mr. Wood: 82,291; Mr. Matheson:
92,291; Mr. Moore: 205,000; Mr. Gardner: 77,666; Mr. Joy: 1,000; and Mr.
Giovaniello: 1,000. Includes or consists of shares of Common Stock issuable
upon exercise of warrants as follows: Mr. Combs: 5,834; Mr. Wood: 3,473;
Mr. Gardner: 1,945; Mr. Joy: 8,042; Mr. Ryan: 19,195; Mr. Stephens: 6,097;
and Mr. Giovaniello: 2,917.
(4) Includes 50,001 shares issuable upon the exercise of a warrant. The warrant
was issued June 29, 2001, in connection with a sale of our common stock.
The common shares underlying the warrant, have an exercise price per share
of common stock of $1.10, and the warrant expires five years following the
date of grant. In June 2001 Neoware Systems Inc. purchased our
Windows-based terminal product line for $1,600,000. As part of the
transaction, we secured an agreement to manufacture certain products for
Neoware Systems, Inc.
(5) Includes 307,502 shares underlying the warrants held by Goldplate Holdings,
LTD. to purchase shares of Common Stock at an exercise price of $7.50 per
share
(6) Excludes 217,500 shares beneficially owned by Morgan Kent Group. Under a
stockholders agreement, holders of the majority of Series B Preferred stock
of Morgan Kent Group have the power to elect three of the five directors
constituting Morgan Kent Group's entire board of directors which has the
sole voting power and, with the stockholders of Morgan Kent Group, shares
the investment power with respect to the Common Stock owned by Morgan Kent
Group. Messrs. Jeffrey K. Moore and Matthew R. Moore (the "Moore Brothers")
together own a majority of the outstanding shares of the Series B
Preferred. Each of the Moore Brothers disclaims beneficial ownership of the
other's shares of Morgan Kent Group's Series B Preferred.
(7) Employment terminated June 2001, with respect to Mr. East.
17
Date Boundless Amex U.S. Amex Industrial Mfg.
---- --------- --------- --------------------
12/31/95 100 100 100
12/31/96 55.27 101.55 93.20
12/31/97 22.31 127.26 113.11
12/31/98 17.01 136.58 89.53
12/31/99 28.49 179.36 114.83
12/31/00 4.89 168.46 141.44
18
2. ADOPTION OF THE COMPANY'S
2001 INCENTIVE PLAN
The Board believes that the 2001 Incentive Plan (the "2001 Plan") will
benefit our company by (i) assisting in the recruiting and retaining employees
and non-employee directors, advisors and independent consultants with ability
and initiative, (ii) providing greater incentive for the employees and
consultants of our company and related entities, and (iii) associating the
interest of employees and consultants with the interests of our company and our
stockholders through opportunities for increased stock ownership.
Summary of the 2001 Plan
The Board will administer the 2001 Plan. The Board may, but has no current
intention to, delegate its authority to administer the 2001 Plan to a committee
of the Board or to one or more of our officers. As used in this summary, the
term "Administrator" means the Board and any delegate, as appropriate.
Each employee, director, advisor or independent consultant of our company
or a related entity is eligible to participate in the 2001 Plan. The
Administrator will select the individuals who will participate in the 2001 Plan
("Participants"). The Administrator may, from time to time, grant stock options
or stock awards to Participants.
Options granted under the 2001 Plan may be qualified incentive stock
options ("ISOs") or non-qualified stock options ("NSOs"). A stock option
entitles the Participant to purchase shares of Common Stock from us at the
option price. The option price will be fixed by the Administrator at the time
the option is granted, but the price cannot be less than the fair market value
of the stock on the date of grant in the case of an ISO, or 75% of that amount
in the case of a non-qualified stock option. The option price may be paid in
cash, with shares of Common Stock, with a combination of cash and Common Stock,
in installments or by "cashless exercise" (i.e. by allowing us to deduct from
the number of shares of Common Stock, deliverable upon exercise of the option, a
number of such shares which has an aggregate fair market value on the date of
exercise of the option equal to the aggregate option exercise price). Grants of
a non-qualified stock option may constitute compensation expense to us, and
therefore, negatively affect our earnings.
Participants may also be awarded shares of Common Stock pursuant to a stock
award. The Administrator, in its discretion, may prescribe that a Participant's
rights in a stock award shall be nontransferable or forfeitable or both unless
certain conditions are satisfied. These conditions may include, for example, a
requirement that the Participant continue employment with us or a related entity
for a specified period or that we, a related entity or the Participant achieve
stated objectives.
The 2001 Plan provides that in certain circumstances outstanding options
will become exercisable and outstanding stock awards will be earned in full and
nonforfeitable in the event of a "change in control" of our company (as defined
in the 2001 Plan).
All stock options and stock awards granted under the 2001 Plan will be
evidenced by written agreements between the Company and the Participant. Under
the 2001 Plan, the maximum aggregate number of shares of Common Stock which may
be issued is 284,000 which is less than 5% of the total shares of our Common
Stock outstanding as of January 15, 2002. Common stock issued under the 2001
Plan, other than on exercise of an ISO with an option price equal to or less
than the fair market value of the Common Stock on the date of grant, will
constitute compensation expense to us and will negatively affect our earnings.
No option or stock award may be granted and no stock awards may be awarded
under the 2001 Plan more than ten years after the 2001 Plan is adopted by the
Board of Directors. The Board may terminate the 2001 Plan sooner without further
action by stockholders. The Board also may amend the 2001 Plan, except that no
amendment may adversely affect the rights of Participants without their consent.
19
No options or shares have yet been granted under the 2001 Plan.
Federal Income Tax Consequences
The following is a general and brief summary of the federal income tax
treatment of stock options and stock awards granted under the 2001 Plan. This
discussion is not complete and its application may vary in particular
circumstances or as a result of changes in federal income tax laws and
regulations.
A Participant generally will not incur any U.S. federal income tax
liability as a result of the grant of an ISO, NSO or stock award, if the stock
subject to the award is forfeitable.
ISOs. A Participant generally will not recognize any income for federal
income tax purposes upon exercise of an ISO, although certain Participants may
be subject to the federal alternative minimum tax upon exercise of an ISO. A
Participant will recognize income (or loss) upon the subsequent sale of shares
of our common stock acquired upon exercise of an ISO. If the Participant sells
the shares before the later of one year after exercise or two years after the
grant of the ISO (a disqualifying disposition), the Participant will recognize
ordinary income in an amount equal to the fair market value of the stock
determined on the date of exercise of the ISO (or, if lower, the amount received
upon sale of the stock) reduced by the amount the Participant paid for the
stock. The difference between the amount received upon the sale of the stock and
the amount treated as ordinary income in a disqualifying disposition will be
considered a capital gain. If the Participant does not sell the shares within
one year after exercise or two years after grant, the difference between the
amount received upon the sale of the stock and the amount the Participant paid
for the stock will be considered a capital gain or loss.
Although designated as ISOs, options will be deemed NSOs to the extent the
shares, underlying all ISOs granted to the same person and that become initially
exercisable during a calendar year, have an aggregate fair market value
exceeding $100,000 as of the date such options were granted.
NSOs. A Participant will recognize ordinary income for federal income tax
purposes when the Participant exercises an NSO. The amount of income recognized
upon exercise of an NSO is the fair market value of the shares of our common
stock acquired upon exercise (determined as of the date of exercise) reduced by
the amount the Participant paid for the shares. The Participant's tax basis in
the shares will equal the fair market value of the shares on the date of
exercise and Participant's holding period will begin on the day after the date
of exercise. Any gain or loss upon sale of the shares will be treated as a
capital gain or loss. The capital gain or loss will generally be treated as
long-term gain or loss if the shares are held for more than one year.
Stock Awards. Unless a Participant makes an election pursuant to Section
83(b) of the Internal Revenue Code, a Participant generally will not recognize
income upon the grant of the stock award. The fair market value of the stock
award at the time the restrictions on such stock lapse and the stock becomes
non-forfeitable is taxed as ordinary income. The holding period of the awarded
stock will begin the day after the shares become non-forfeitable. When such
shares are later sold, the difference between the amount received upon sale of
the shares and the amount previously included in the Participant's income when
the shares became non-forfeitable, is considered capital gain or loss. If the
shares are held for more than one year after they become non-forfeitable, the
long-term capital gain rate will apply; if the shares are held for one year or
less after they become non-forfeitable, the ordinary income tax rates will
apply.
A Section 83(b) election will result in ordinary income on the date of
grant in an amount equal to the fair market value of the stock award as of the
date of grant (determined without regard to the restrictions) and the
Participant's holding period will begin the day after the date of grant. The
Participant's tax basis in such stock will be the amount included in his or her
ordinary income.
Company Deductions. We are generally entitled to a business expense
deduction on our federal income tax return with respect to stock options and
stock awards in the same amount and at the same time
20
that a Participant recognizes ordinary income with respect to the stock option
or stock award. Amounts treated as capital gain to the Participant are not
deductible by us.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ADOPTION OF THE 2001
INCENTIVE PLAN.
3. RATIFICATION OF APPOINTMENT OF
INDEPENDENT AUDITORS
With the approval of the audit committee, our Board of Directors has
appointed BDO Seidman, LLP, independent auditors, to audit our consolidated
financial statements for our fiscal year ending December 31, 2001. BDO Seidman
has served as our independent auditors since January 1997. You are being asked
to ratify this appointment at the annual meeting. Notwithstanding this
appointment, the Board of Directors, in its discretion, may appoint new
independent auditors at any time during the year, if the Board of Directors
feels that such a change would be in the best interests of our company and its
stockholders.
Audit fees. We were billed a total of approximately $268,000 by BDO Seidman
for its services rendered for the audit of our fiscal year 2000 financial
statements and for reviewing our financial statements included in our forms 10-Q
during 2000 and for other services relating to our filings with the SEC.
Financial information systems design and implementation fees. No services
were billed to us by BDO Seidman during 2000 relating to direct or indirect
services for financial implementation systems design or implementation.
All other fees. The fees billed by BDO Seidman for services rendered to us,
other than the services described above under "Audit Fees" for the 2000 year,
were $77,000, which included $61,000 for tax preparation services and $16,000
for the audit of the Company's 401K Deferred Compensation Plan. The audit
committee has determined that the provision of these non-audit services by BDO
Seidman is compatible with maintaining the independence of BDO Seidman.
Representatives of BDO Seidman are expected to be present at the annual
meeting with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF BDO
SEIDMAN AS OUR INDEPENDENT AUDITORS.
OTHER MATTERS
We know of no other matters to be submitted to the annual meeting. If any
other matters properly come before the annual meeting, it is the intention of
the persons named in the enclosed form of proxy to vote the shares they
represent as the Board of Directors recommends.
By order of the Board of Directors,
Joseph Gardner
Vice President, Chief Financial Officer
January 31, 2002
21
APPENDIX A
BOUNDLESS CORPORATION
Audit Committee Charter
1.0 Organization
This charter governs the operations of the audit committee. The committee
shall review and reassess the charter at least annually and obtain the approval
of the Board of Directors (sometimes referred to as the "Board"). The committee
shall be appointed by the Board of Directors annually with membership coinciding
with the shareholder vote electing such directors to the Board. The committee
shall be comprised of at least three directors, each of whom are independent of
management and the Company. Members of the committee shall be considered
independent if, in the view of the Board, they have no relationship that would
interfere with the exercise of their independence from management and the
Company. All committee members shall be financially literate, or shall become
financially literate within a reasonable period of time after appointment to the
committee. At least one member of the committee shall have accounting expertise,
a professional certification in accounting or any other comparable experience or
background which results in the person's financial sophistication.
2.0 Statement of Policy
The audit committee shall exist as a committee of the Board of Directors to
assist it in fulfilling its oversight responsibility to the shareholders,
potential shareholders, the investment community and others, relating to the
Company's financial statements and the financial reporting process and the
systems of internal accounting and financial controls. In so doing, it is the
responsibility of the committee to maintain free and open communication between
the committee, the Company's independent auditors, the internal auditors and
management of the Company and in discharging its oversight role, take such
actions as it deems appropriate including retaining outside counsel or other
experts to assist the committee.
3.0 Responsibilities and Processes
The primary responsibilities of the audit committee are to oversee the
Company's financial reporting process on behalf of the Board and to report the
results of their activities to the Board. Management is responsible for
preparing the Company's financial statements, and the independent auditors are
responsible for auditing those financial statements. The committee should take
appropriate actions to set the overall corporate "tone" for quality financial
reporting, sound business risk practices, and ethical behavior. In carrying out
its responsibilities, the committee believes its policies and procedures should
remain flexible, in order to best react to changing conditions and
circumstances.
The following shall be the principal recurring processes of the audit
committee in carrying out its oversight responsibilities. The processes are set
forth as a guide and the committee may change them, from time to time, as it
deems appropriate.
o The committee shall have a clear understanding with both management and the
independent auditors that the independent auditors are ultimately accountable to
the Board and the audit committee, as representatives of the
22
Company's shareholders. The committee shall discuss with the auditors the
auditor's independence from management and the Company and shall review and
discuss with the independent auditors the formal written statement of the
auditors delineating all relationships between the auditors and the company as
required by the Independence Standards Board Standard 1. The committee shall
take such appropriate action, or recommend that the full Board take appropriate
action, to oversee the independence of the outside auditors.
o Annually, the committee shall review financial management's recommendation
with respect to changes in external auditors and bring a full recommendation to
the Board regarding the selection of the Company's independent auditors, which
shall be subject to shareholders' approval. The committee shall have the
ultimate authority and responsibility to evaluate and, where appropriate,
recommend to the Board the replacement of the independent auditors.
o The committee shall discuss with financial management and the independent
auditors the overall scope and plans for their respective annual audits
including the adequacy of staffing and compensation.
o The committee shall discuss with financial management and the independent
auditors the adequacy and effectiveness of the Company's accounting and
financial controls, including the Company's system to monitor and manage
business risk where material financial exposure exists.
o The committee shall review and discuss the results of the annual audit and any
other matters required to be communicated to the committee by the independent
auditors under generally accepted standards including SAS 61. The committee
shall meet at least annually with the independent auditors in a private session
without management present to discuss the results of its annual audit.
o The committee shall review the interim financial statements with management
and the independent auditors prior to the filing of the Company's Quarterly
Reports on Form 10-Q. Also, the committee shall discuss the results of the
quarterly review and any other matters required to be communicated to the
committee by the independent auditors under generally accepted auditing
standards. The chair of the committee may represent the entire committee for the
purpose of this review.
o The committee shall review with management and the independent auditors the
financial statements to be included in the Company's Annual Report on Form 10-K
(or the annual report to shareholders if distributed prior to the filing of Form
10-K), including their judgment about the quality, not just acceptability, of
accounting principals, the reasonableness of significant judgments, and the
clarity of the disclosures in the financial statements.
23
Appendix B
BOUNDLESS CORPORATION
2001 INCENTIVE PLAN
ARTICLE I.
DEFINITIONS
Section 1.01. Administrator means the Board and any delegate of the Board
that is appointed in accordance with Article III.
Section 1.02. Agreement means a written agreement (including any amendment
or supplement thereto) between the Corporation and a Participant specifying the
terms and conditions of a Stock Award or Option granted to such Participant.
Section 1.03. Board means the Board of Directors of the Corporation.
Section 1.04. Change in Control shall mean an event or series of events
that would be required to be described as a change in control of the Corporation
in a proxy or information statement distributed by the Corporation pursuant to
Section 14 of the Exchange Act in response to Item 6(e) of Schedule 14A
promulgated thereunder or otherwise adopted. The determination whether and when
a change in control has occurred or is about to occur shall be made by the Board
in office immediately prior to the occurrence of the event or series of events
constituting such change in control.
Section 1.05. Code means the Internal Revenue Code of 1986, and any
amendments thereto.
Section 1.06. Common Stock means the common stock, $.01 per value, of the
Corporation.
Section 1.07. Corporation means Boundless Corporation.
Section 1.08. Control Change Date means the occurrence of the event or
series of events constituting a Change in Control as determined by the Board.
Section 1.09. Exchange Act means the Securities Exchange Act of 1934, as
amended and as in effect on the date of this Plan.
Section 1.10. Fair Market Value means, (i) if the Common Stock is publicly
traded, the closing price (or, if there is none, the average of the closing bid
and asked price) of the Common Stock, on any given day, on such quotation system
or principal securities exchange on which the Common Stock is traded on such
day, or, if the Common Stock is not so traded on such day, then on the next
preceding day that the Common Stock was traded, all as reported by such source
as the Administrator may select and (ii) if the Common Stock is not publicly
traded, as determined in the sole and absolute discretion of the Corporation's
Board.
Section 1.11. Forfeitable Shares shall have the meaning set forth in
Section 9.04 of this Plan.
Section 1.12. Non-Employee Director means a member of the Board who is not
an employee of the Corporation or a Related Entity.
Section 1.13. Option means a stock option that entitles the holder to
purchase from the Corporation a stated number of shares of Common Stock at the
price set forth in an Agreement.
Section 1.14. Option Exchange Program shall mean a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.
Section 1.15. Participant means an employee of and non-employee director,
advisor and independent consultant to the Corporation or a Related Entity,
including an employee who is a member of the Board, who satisfies the
requirements of Article IV and is selected by the Administrator to receive a
Stock Award, an Option or a combination thereof.
Section 1.16. Plan means the Corporation's 2001 Incentive Plan.
Section 1.17. Related Entity means any entity that directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Corporation.
Section 1.18. Stock Award means Common Stock awarded to a Participant under
Article IX.
Section 1.19. Stockholders means the stockholders of the Corporation.
ARTICLE II.
PURPOSES
Section 2.01. General. The Plan is intended to assist the Corporation and
Related Entities (i) in recruiting and retaining employees, directors, officers,
consultants and advisors, and in compensating such individuals by enabling such
individuals to participate in the future success of the Corporation and the
Related Entities and (ii) to associate their interests with those of the
Corporation and its Stockholders. The Plan is intended to permit the grant of
Stock Awards and the grant of non-qualified Options. In the event this Plan is
approved by the Stockholders in accordance with Article XV hereof, Options
qualifying under Section 422 of the Code ("incentive stock options"), as
determined by the Administrator at the time of grant, may also be granted. The
terms in this Plan relating to incentive stock options shall not be effective or
applicable unless and until such Stockholder approval is obtained. No Option
that is intended to be an incentive stock option shall be invalid for failure to
qualify as an incentive stock option. The proceeds received by the Corporation
from the sale of Common Stock pursuant to this Plan shall be used for general
corporate purposes.
Section 2.02. Payment of Salaries or Fees in Securities. A Participant may
elect to receive all or a portion of his or her salary or fees from the
Corporation in the form of cash, Options or Stock Awards or a combination
thereof, as determined by the Administrator. Such Options and Stock Awards shall
be issued under the Plan. The number of Options and Stock Awards to be granted
to Participants in lieu of salary and fees that would otherwise be paid in cash
shall be calculated in a manner determined by the Administrator. The terms of
such Options or Stock Awards shall also be determined by the Administrator. Any
reference in this Plan to a "grant" or "award" of Options or Stock Awards shall
include the issuance for consideration of Options or Stock Awards as
contemplated in this Section 2.02.
2
ARTICLE III.
ADMINISTRATION
The Plan shall be administered by the Administrator. The Administrator
shall have authority to grant Stock Awards and Options upon such terms (not
inconsistent with the provisions of this Plan) as the Administrator may consider
appropriate. Such terms may include conditions (in addition to those contained
in this Plan) on the exercisability of all or any part of an Option or on the
transferability or forfeitability of a Stock Award, including by way of example
and not limitation, conditions on which Participants may defer receipt of
benefits under the Plan, requirements that the Participant complete a specified
period of employment with or service to the Corporation or a Related Entity,
that the Corporation achieve a specified level of financial performance or that
the Corporation achieve a specified level of financial return. Notwithstanding
any such conditions, the Administrator may, in its discretion, accelerate the
time at which any Option may be exercised, or the time at which a Stock Award
may become transferable or nonforfeitable. In addition, the Administrator shall
have complete authority to determine Fair Market Value, to interpret all
provisions of this Plan, to institute an Option Exchange Program, to prescribe
the form of Agreements, to adopt, amend, and rescind rules and regulations
pertaining to the administration of the Plan and to make all other
determinations necessary or advisable for the administration of this Plan. The
express grant in the Plan of any specific power to the Administrator shall not
be construed as limiting any power or authority of the Administrator. Any
decision made, or action taken, by the Administrator or in connection with the
administration of this Plan shall be final and conclusive. Neither the
Administrator nor any member of the Board shall be liable for any act done in
good faith with respect to this Plan or any Agreement, Option or Stock Award.
All expenses of administering this Plan shall be borne by the Corporation.
The Board, in its discretion, may appoint a committee of the Board and
delegate to such committee all or part of the Board's authority and duties with
respect to the Plan. The Board may revoke or amend the terms of a delegation at
any time but such action shall not invalidate any prior actions of the Board's
delegate or delegates that were consistent with the terms of the Plan.
ARTICLE IV.
ELIGIBILITY
Section 4.01. General. Any employee, director, officer, consultant or
advisor to the Corporation or a Related Entity (including a corporation that
becomes a Related Entity after the adoption of this Plan) is eligible to
participate in this Plan if the Administrator, in its sole discretion,
determines that such person has contributed significantly or can be expected to
contribute significantly to the profits or growth of the Corporation or a
Related Entity. Directors of the Corporation or a Related Entity may be selected
to participate in this Plan.
Section 4.02. Grants. The Administrator will designate individuals to whom
Stock Awards and Options are to be granted and will specify the number of shares
of Common Stock subject to each award or grant. All Stock Awards and Options
granted under this Plan shall be evidenced by Agreements which shall be subject
to the applicable provisions of this Plan and to such other provisions as the
Administrator may adopt. No Participant may be granted incentive stock options
(under all incentive stock option plans of the Corporation and any Related
Entity) which are first exercisable in any calendar year for stock having an
aggregate Fair Market Value (determined as of the date an Option is granted)
that exceed the limitation prescribed by Code section 422(d). The preceding
annual limitation shall not apply with respect to Options that are not incentive
stock options.
ARTICLE V.
STOCK SUBJECT TO PLAN
Section 5.01. Shares Issued. Upon the award of shares of Common Stock
pursuant to a Stock Award, the Corporation may issue shares of Common Stock from
its authorized but unissued Common Stock or reacquired Common Stock. Upon the
exercise of any Option, the Corporation may deliver to the Participant (or the
Participant's broker if the Participant so directs), shares of Common Stock from
its authorized but unissued Common Stock or reacquired Common Stock.
Section 5.02. Aggregate Limit. The maximum aggregate number of shares of
Common Stock that may be issued under this Plan shall not exceed 284,000 shares.
Section 5.03. Reallocation of Shares. If an Option is terminated, in whole
or in part, for any reason other than its exercise, or if a Stock Award is
forfeited in whole or in part, the number of shares of Common Stock allocated to
the Option or Stock Award or portion thereof may be reallocated to other Options
and Stock Awards to be granted under this Plan. Such reallocated shares shall
not be included in calculating the percentages set forth in Section 5.02.
ARTICLE VI.
OPTION EXERCISE PRICE
The price per share for Common Stock purchased on the exercise of an Option
shall be determined by the Administrator on the date of grant; provided,
however, that the price per share for Common Stock purchased on the exercise of
an Option shall not be less than 75% of the Fair Market Value on the date the
Option is granted and provided further that the price per share for Common Stock
purchased on the exercise of an Option that is an incentive stock option shall
not be less than the Fair Market Value on the date the Option is granted.
ARTICLE VII.
EXERCISE OF OPTIONS
Section 7.01. Maximum Option Period. The maximum period in which an Option
may be exercised shall be determined by the Administrator on the date of grant,
except that no Option that is an incentive stock option shall be exercisable
after the expiration of ten years from the date such Option was granted. The
terms of any Option that is an incentive stock option may provide that it is
exercisable for a period less than such maximum period.
Section 7.02. Nontransferability. Any Option granted under this Plan shall
be nontransferable except by will or by the laws of descent and distribution or
with the written consent of the Administrator. In the event of any such
transfer, the entire Option must be transferred to the same person or person(s).
During the lifetime of the Participant to whom the Option is granted, the Option
may be exercised only by the Participant or his transferee if such transfer is
approved by the Administrator. No right or interest of a Participant in any
Option shall be liable for, or subject to, any lien, obligation, or liability of
such Participant.
Section 7.03. Employee Status. For purposes of determining the
applicability of Section 422 of the Code (relating to incentive stock options),
or in the event that the terms of any Option provide that it may be exercised
only during employment or within a specified period of time after termination of
employment, the Administrator may decide to what extent leaves of absence for
governmental or military service, illness, temporary disability, or other
reasons shall not be deemed interruptions of continuous employment.
4
Section 7.04. Change in Control. If not sooner exercisable under the terms
of the applicable Agreement, a Participant's Option shall be fully exercisable
(i) as of his termination of employment if his employment terminates after a
Control Change Date and he is terminated without cause or (ii) as of the date
that there is a material reduction in the Participant's compensation or duties
if such reduction occurs after a Control Change Date. For purposes of the
preceding sentence the term "cause" means a willful neglect of responsibilities
to the Corporation or a Related Entity.
ARTICLE VIII.
METHOD OF EXERCISE
Section 8.01. Exercise. Subject to the provisions of Articles VII and XI,
an Option may be exercised in whole at any time or in part from time to time at
such times and in compliance with such requirements as the Administrator shall
determine. An Option granted under this Plan may be exercised with respect to
any number of whole shares less than the full number for which the Option could
be exercised. A partial exercise of an Option shall not affect the right to
exercise the Option from time to time in accordance with this Plan and the
applicable Agreement with respect to the remaining shares subject to the Option.
Section 8.02. Payment. Unless otherwise provided by the Agreement, payment
of the Option exercise price shall be made in cash. If the Agreement provides,
or in the discretion of the Board, payment of all or part of the Option price
may be made by surrendering shares of Common Stock to the Corporation, including
by allowing the Corporation to deduct from the number of shares of Common Stock
deliverable upon exercise of the Option, a number of such shares which has an
aggregate Fair Market Value, determined as of the day preceding the date of
exercise of the Option, equal to the aggregate Option exercise price. If Common
Stock is used to pay all or part of the Option price, the shares surrendered
must have a Fair Market Value (determined as of the day preceding the date of
exercise) that is not less than such price or part thereof.
Section 8.03. Installment Payment. If the Agreement provides, and if the
Participant is employed by the Corporation on the date the Option is exercised,
payment of all or part of the Option price may be made in installments. In that
event the Corporation may, if so determined by the Administrator, lend the
Participant an amount equal to not more than 90% of the Option price of the
shares acquired by the exercise of the Option. This amount shall be evidenced by
the Participant's promissory note and shall be payable in not more than five
equal annual installments, unless the amount of the loan exceeds the maximum
loan value for the shares purchased, which value shall be established from time
to time in the sole and exclusive discretion of the Board. In that event, the
note shall be payable in equal quarterly installments over a period of time not
to exceed five years.
The Participant shall pay interest on the unpaid balance at the minimum
rate necessary to avoid imputed interest or original issue discount under the
Code. All shares acquired with cash borrowed from the Corporation shall be
pledged to the Corporation as security for the repayment thereof. In the
discretion of the Administrator, shares of stock may be released from such
pledge proportionately as payments on the note (together with interest) are
made. While shares are so pledged, and so long as there has been no default in
the installment payments, such shares shall remain registered in the name of the
Participant, and the Participant shall have the right to vote such shares and to
receive all dividends thereon.
Section 8.04. Shareholder Rights. No Participant shall have any rights as a
stockholder with respect to shares subject to an Option until the date of
exercise of such Option.
5
ARTICLE IX.
STOCK AWARDS
Section 9.01. Awards. In accordance with the provisions of Article IV, the
Administrator will designate each individual to whom a Stock Award is to be made
and will specify the number of shares of Common Stock covered by such awards.
Section 9.02. Vesting. The Administrator, on the date of the award, may
prescribe that a Participant's rights in the Stock Award shall be forfeitable or
otherwise restricted for a period of time set forth in the Agreement. By way of
example and not of limitation, the restrictions may postpone transferability of
the shares or may provide that the shares will be forfeited if the Participant
separates from the service of the Corporation and its Related Entities before
the expiration of a stated term or if the Corporation and its Related Entities
or the Participant fails to achieve stated objectives.
Section 9.03. Change in Control. Section 9.02 to the contrary
notwithstanding, after a Control Change Date each Stock Award will become
transferable and nonforfeitable in accordance with the terms of the applicable
Agreement. If not sooner transferable and nonforfeitable under the terms of the
applicable Agreement, a Participant's interest in a Stock Award shall be
transferable and nonforfeitable (i) as of his termination of employment if his
employment terminates after a Control Change Date and he is terminated without
cause or (ii) as of the date that there is a material reduction in the
Participant's compensation or duties if such reduction occurs after a Control
Change Date. For purposes of the preceding sentence the term "cause" means a
willful neglect of responsibilities to the Corporation or a Related Entity.
Section 9.04. Stockholder Rights. If all or any portion of a Stock Award is
forfeitable pursuant to the Agreement, at all times prior to a forfeiture
thereof, a Participant will have all rights of a Stockholder with respect to
forfeitable shares of the Stock Award (the "Forfeitable Shares"), including the
right to receive dividends and vote the Forfeitable Shares; provided, however,
that (i) a Participant may not sell, transfer, pledge, exchange, hypothecate, or
otherwise dispose of the Forfeitable Shares, (ii) the Corporation shall retain
custody of the certificates evidencing the Forfeitable Shares, and (iii) the
Participant will deliver to the Corporation a stock power, endorsed in blank,
with respect to the Forfeitable Shares. The limitations set forth in the
preceding sentence shall not apply after the Forfeitable Shares are no longer
forfeitable.
ARTICLE X.
ADJUSTMENT UPON CHANGE IN COMMON STOCK
The maximum number of shares as to which Options may be granted under this
Plan shall be proportionately adjusted, and the terms of outstanding Stock
Awards and Options shall be adjusted, as the Board shall determine to be
equitably required in the event that (a) the Corporation (i) effects one or more
stock dividends, stock split-ups, subdivisions or consolidations of shares or
(ii) engages in a transaction to which Section 424 of the Code applies or (b)
there occurs any other event which, in the judgment of the Board necessitates
such action. Any determination made under this Article X by the Board shall be
final and conclusive.
The issuance by the Corporation of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Corporation convertible into such shares or other securities, shall not
affect, and no adjustment by reason thereof shall be made with respect to,
outstanding Stock Awards or Options.
6
The Board may make Stock Awards and may grant Options in substitution for
performance shares, phantom shares, stock awards, stock options, stock
appreciation rights, or similar awards held by an individual who becomes an
employee of the Corporation or a Related Entity in connection with a transaction
described in clause (ii) of the first paragraph of this Article X.
Notwithstanding any provision of the Plan (other than the limitation of Article
V), the terms of such substituted Stock Award(s) or Option grant(s) shall be as
the Board, in its discretion, determines is appropriate.
ARTICLE XI.
COMPLIANCE WITH LAW AND
APPROVAL OF REGULATORY BODIES
No Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under this Plan except in compliance with all applicable federal and
state laws and regulations (including, without limitation, withholding tax
requirements), any listing agreement to which the Corporation is a party, and
the rules of all domestic stock exchanges on which the Corporation's shares may
be listed. The Corporation shall have the right to rely on an opinion of its
counsel as to such compliance. Any share certificate issued to evidence Common
Stock when a Stock Award is granted or for which an Option is exercised may bear
such legends and statements as the Administrator may deem advisable to assure
compliance with federal and state laws and regulations. No Common Stock shall be
issued, no certificate for shares shall be delivered and no payment shall be
made under this Plan until the Corporation has obtained such consent or approval
as the Administrator may deem advisable from regulatory bodies having
jurisdiction over such matters.
ARTICLE XII.
GENERAL PROVISIONS
Section 12.01. Effect on Employment. Neither the adoption of this Plan, its
operation, nor any documents describing or referring to this Plan (or any part
thereof) shall confer upon any individual any right to continue in the employ or
service of the Corporation or a Related Entity or in any way affect any right
and power of the Corporation or a Related Entity to terminate the employment or
service of any individual at any time with or without assigning a reason
therefor.
Section 12.02. Disposition of Stock. A Participant shall notify the
Administrator of any sale or other disposition of Common Stock acquired pursuant
to an Option that was an incentive stock option if such sale or disposition
occurs (i) within two years of the grant of an Option or (ii) within one year of
the issuance of the Common Stock to the Participant. Such notice shall be in
writing and directed to the Secretary of the Corporation.
Section 12.03. Rules of Construction. Headings are given to the articles
and sections of this Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation, or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
Section 12.04. Limitation on Awards. Notwithstanding any other provision of
the Plan, if any award under this Plan, either alone or together with payments
that a Participant has the right to receive from the Corporation or a Related
Entity, would constitute a "parachute payment" (as defined in section 280G of
the Code), all such payments shall be reduced to the largest amount that will
result in no portion being subject to the excise tax imposed by section 4999 of
the Code.
7
ARTICLE XIII.
AMENDMENT
The Board may amend or terminate this Plan from time to time; provided,
however, that no amendment shall, without a Participant's consent, adversely
affect any rights of such Participant under any Stock Award or Option
outstanding at the time such amendment is made.
ARTICLE XIV.
DURATION OF PLAN
No Stock Award or Option may be granted under this Plan more than ten years
after the date the Plan is adopted by the Board.
ARTICLE XV.
EFFECTIVE DATE OF PLAN
Stock Awards and Options may be granted under this Plan upon its adoption
by the Board, provided that no incentive stock option may be granted unless this
Plan is approved by a majority of the votes entitled to be cast by the
Stockholders, voting either in person or by proxy, at a duly held Stockholders'
meeting or by the consent of stockholders owning more than 50% of shares of the
Common Stock within twelve months of such adoption.
8